EBRD FEATURE STORY
Ukraine skipper steers toward success
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Striding
briskly into his spartan office in the headquarters of Ukraine’s largest
shipping company, Pavel Podlesnyi has the bearing of a naval admiral,
resplendent in a deep blue officer’s coat, all gold braid and gleaming brass
buttons. While
maritime tradition is important in Ukrrichflot, the Kiev-based shipping firm
is anything but hidebound. Modernity is the byword of the fast-growing firm
which is owned by its workers. It’s not just the rapidly-improving fleet that
is at the cutting edge: the company has, with EBRD encouragement and finance,
also adopted superior management and corporate governance practices. The results
are impressive. Ukrrichflot today carries twice the amount of cargo it did in
1999. The company has raised four loans from the EBRD (the latest for $28 million)
to finance construction of 16 ships, 11 of which have been already delivered.
Navigating
uncertain waters Sitting
ramrod straight at a gigantic wooden table, Mr Podlesnyi describes how he
learned to navigate not just seas and rivers but also the shoals of
government, business and finance. “At age 14 I
started at the Kiev River Shipping Trade School, studying to be a captain’s
assistant. By age 34, in 1979, I became head of Chernigiv port, the youngest
port head ever.” By the age of
40, he was the first deputy head of Ukrrichflot, a state agency encompassing
40 enterprises that managed ports, shipbuilding yards and shipping.
Ukrrichflot’s ships and barges could winkle almost any product out of
virtually any corner of the country thanks to the skein of navigable rivers
cutting deep into the country and linking it to the Black Sea and beyond. The
company was unusual in having the sea craft and the staff capable of handling
both rivers and oceans. Grain, metals, clay, timber and the products of the
country’s vast heavy industrial sector, mainly machinery and chemicals,
filled Ukrrichflot vessels on their way to Russia and other destinations
south and west. “In Soviet
times we travelled through the Black Sea and on to Mediterranean countries,
visited different ports and we knew how life was on the outside. It was
probably our main advantage” when the time came to take Ukrrichflot out of
state hands after the Soviet Union dissolved in 1991. Privatising
Ukrrichflot Initially,
the state property fund agreed to sell just 49 per cent to Ukrrichflot
workers. “We were
worried that ongoing state majority ownership would mean heavy state
interference,” said Mr Podlesnyi. “The EBRD succeeded in convincing the
government that partial privatisation was no privatisation at all. The Bank
said it would only finance Ukrrichflot if the state held no more than 20 per
cent. “So the
government reduced its ownership to 20 per cent and EBRD immediately agreed
to finance us. It would have been difficult for us to succeed without the
EBRD, it would have taken years longer, if we managed at all.” The EBRD
brought more than just money. It built into its loan agreements the
requirement that Ukrrichflot upgrade its information technology systems and
adopt international accounting standards. The first western-style audit was
funded with 300,000 Ecus (a forerunner to the euro) provided by donors via
the EBRD. The Bank also ensured that Ukrrichflot made provision to protect
minority shareholders. No one holds a majority block in the company whose
shares are widely held, mainly by current and former staff. “In order to
invest in the expansion of our fleet, the EBRD insisted that shipbuilding
regulations be improved,” Mr Podlesnyi recalled. Until recently, shipbuilding
orders were filled in Romania, but today’s new fleet is under construction in
a Dutch-owned Ukrainian dockyard, helping to revitalise the country’s
shipbuilding industry which was hard-hit by foreign competition in the 1990s.
No
boundaries There are no
national borders on the map in Mr Podlesnyi’s office, simply the rivers and
seas that define the continent of Europe and connect its constituent parts.
With a heavy red line marking a route from Kiev to London, the map reveals
the company’s determination to further exploit prospects to the west. “At our own
shipyards we’re constructing barges with capacity of 2,000 tonnes for use on
the Danube. They will meet European Union standards and respect the rules of
navigation set for the Danube and Rhine. We must observe these standards if
we wish to do more business in western Europe, as is our plan. “If we hadn’t
reformed the company all the way along, Ukrrichflot would not exist today.
The reforms would not have been possible without the EBRD and without, I feel
confident in saying, the management we have which, unlike many other
privatisations, did not seek to cannibalise assets but instead opted to build
on them.” Comments
Olivier Descamps, the EBRD Business Group Director responsible for Ukraine:
“It’s been gratifying watching Ukrrichflot change and grow over the years,
even though its transition from a state entity to a player in the competitive
international shipping market has not been easy. They have very committed
managers and a good reputation. The company’s future is promising.” By Kate
Dunn, Senior Communications Adviser |
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Online version at: http://www.ebrd.com/new/stories/2006/060823.htm