By Serhiy Syrovatka, Den
Kiev, Ukraine, in Russian 26 Feb 04; p 1
BBC Monitoring Service, UK, in English, Feb 26, 2004

Poland's refusal to sell a major steelworks to a corporation from eastern Ukraine should serve as a lesson in how to do business abroad, a daily has said. Despite making the highest bid for the enterprise, another competitor with connections to the Polish government won the tender, the article said. Ukrainian business must learn to publicize and lobby itself in order to succeed, the daily concluded.

The following is the text of the article by Serhiy Syrovatka, entitled "Ukrainian capital will have to learn how to lobby on foreign markets", published in the Ukrainian newspaper Den on 26 February:

Privatization of the Polish giant steelworks Huta Czestochowa promises to turn into a noisy international scandal involving the European Union, Ukraine and several other countries. Kiev reacted very sharply to the decision of the Polish government to announce that the winner of the tender was the Indian-Dutch-British LNM holding, leaving the Ukrainian IUD [Industrial Union of Donbas] corporation with nothing. The financial offer by the Donetsk company (118m euros) initially looked impressive.

The Ukrainian Foreign Ministry has already expressed its bewilderment concerning Warsaw's choice. Deputy Minister Oleksandr Chalyy does not rule out the possibility that the incident will become a subject for official investigation in the European Commission: from 1 May Poland will become an EU member. Suspicions of corruption of Warsaw officials are strengthened by information denied by no-one about an informal meeting between LNM representatives and the Polish government that took place on 19 February. The IUD corporation claims that it was precisely after those talks that the definitive choice was made in favour of "the Indians".

Meanwhile, the Polish deputy minister of state property [should be undersecretary of state at the ministry of the treasury], Ignacy Bochenek, speaking at a news conference in Kiev on 24 February, denied charges that the decision was unfair. He said that the government had evaluated the proposals by investors according to very many criteria, and the financial one was not determining. Consideration was taken of social guarantees for the workforce, preserving jobs and solving ecological problems.

It is curious that the expert commission consisting of seven people made conclusions according to those criteria. And it defined the IUD on the short list as the main candidate to buy Huta Czestochowa. Nevertheless, Bochenek gave an assurance that in choosing the investor, the government was guided exclusively by economic considerations. "We relied on concrete figures," he said.

But what economic motives could have convinced the Polish side to give preference to the Indians at the last moment? The LNM holding has been working on the Polish market for a fairly long time, buying fireproof materials for their plants. It is known to have not bad connections with Polish politicians, based precisely on the choice of LNM in favour of Polish fireproof goods. During the privatization competition for Huta Czestochowa, the holding held talks regarding prices for the purchase of Polish raw materials. It was a question of lowering them by 50 per cent. Naturally, that did not suit the Polish side at all. It is not ruled out that the sale of the steelworks into "reliable hands" was a compromise that suited both sides.

It must be noted that Polish privatization legislation differs considerably from Ukrainian. The Polish Cabinet of Ministers has the right, at its own discretion, to declare the winner of the competition the investor that not only offers the highest price, but also corresponds to state interests. From that viewpoint, it is difficult to challenge Warsaw's choice.

Currently the Donetsk-based IUD has asked the Polish government for all the documents that determined its decision, and, so far as can be judged, is preparing a lawsuit. Meanwhile, the struggle between the Ukrainians and Indians is moving into the information space. The IUD press service delivered a preemptive strike, stating that it was aware of LNM plans to start a campaign in the Polish press to discredit the corporation. Apparently a series of publications is to be expected about the "Donetsk mafia" and the story of the origins of the biggest Ukrainian industrial corporation.

True, in informal meetings, Polish journalists report the existence of paid material precisely from the LNM rivals. Articles are appearing very vigorously in the Warsaw press sharply criticizing the outcome of the Huta Czestochowa competition. There are frequent quotes from an interview that the Polish deputy minister for state property [should be secretary of state at the ministry of the treasury], Andrzej Szarawarski, gave to the Polish PAP news agency, where, regarding the outcome of the competition, he said: "We are playing in the premier league in steel-making, not with some sort of chance investors."

To speak of interim conclusions, the attempt by the IUD to acquire the Polish steelworks clearly showed the main weak point of Ukrainian capital. There is an extremely specific opinion in the West about its origin. The image of a mafioso trying to launder his ill-gotten money is typical of the whole of big business in the former Soviet Union.

It has already been shown in the West how to counter that image by the Russian companies Yukos, TNK and a number of others, which have made their work as public and transparent as possible, and were soon able to attract serious Western partners. And this process started with banal visits by heads of companies to representative business forums on a European and world scale and public speeches at conferences on problems now facing the economy of their country and the whole continent.

Ukrainian companies so far feel that this work is superfluous. Businessmen do not represent the interests of business at a single major international forum. In the best case, officials from the Union of Industrialists and Entrepreneurs and heads of Ukrainian missions at various international organizations speak for them. Our capitalists will have to learn to be Europeans. And then it will be more difficult for foreign corrupt people to justify themselves by the fact that they are saving the country from the "Ukrainian mafia".