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New Approaches to Growth in Ukraine

New Approaches to Growth in Ukraine. E&E Bureau Regional Competitiveness Conference Kyiv, Ukraine June 16, 2009. What Typically Drives Growth. Capital investment Labor productivity Use of technology

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New Approaches to Growth in Ukraine

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  1. New Approaches to Growth in Ukraine E&E Bureau Regional Competitiveness Conference Kyiv, Ukraine June 16, 2009

  2. What Typically Drives Growth • Capital investment • Labor productivity • Use of technology • Successful growth over the last eight years in Ukraine, as well as CEE, was mainly attributed to debt-financed expansion, little attention paid to productivity • Productivity in CEE is typically between one to two fifths of that in the West Economic Growth

  3. Productivity Levels • Measured as GDP per hour worked in current prices, USD • Source: OECD estimates,of productivity levels, http://stats.oecd.org/WBOS/index.aspx; for Russia – McKinsey estimates of productivity level • State Statistical Committee of Ukraine

  4. Poor management Accounts for 30-80% of the productivity gap with the US Productivity – Why Low? • Lack of technology Accounts for 20-60% of the gap with the US • Source: OECD, STAN Bilateral Trade Database 2006/I and OECD calculations based on OECD ITCS database. Sep. 2007 • http://www.oecd.org/document/20/0,3343,en_2649_34833_39106836_1_1_1_1,00.html

  5. Productivity Gains Crucial • Increasing productivity is key to sustainable economic growth • Make better use of the resources companies already have • Bring in new technology by attracting foreign direct investment (FDI) • According to Raiffeisen, CEE will outperform the developed world for at least the next decade • Central and Eastern European countries will grow about 4.3% for the next five-eight years, then slow to 3.2%.

  6. Horizon Capital • Over $600 million under management in three funds: • Emerging Europe Growth Fund II (2008) • $390 million fund • $15-40 million deal size • Consumer good/services, B2B, financial services • Currently investing • Emerging Europe Growth Fund (2006) • $132 million fund • 11 investments in the region, one full and one partial exit • Making follow-on investments in existing portfolio only • Western NIS Enterprise Fund (1995) • $150 million fund size • 10 investments in the region outstanding • Invested $151 million in 118 companies • Making follow-on investments in existing portfolio only

  7. HCA Working toward Growth • Providing capital for investing into modern technology and equipment • Focusing efforts to reduce costs within portfolio companies as appropriate to increase productivity • Stress testing portfolio companies in light of local currency devaluation, with a focus on minimizing currency exposures and ensuring liquidity • Focusing on sustaining profitability and fundamental operational improvements, with less emphasis on revenue growth • Identifying those investment cases that are built to withstand the cycle

  8. Contact information: Natalie A. Jaresko Co-Managing Partner Horizon Capital 4 Rayevskoho st. Kyiv 01042 Ukraine tel. +380 44 490 5580 fax +380 44 490 5589 e-mail: njaresko@horizoncapital.com.ua www.horizoncapital.com.ua

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