Following months of preparation and dozens of meetings involving Ukrainian government officials, the European Bank for Reconstruction and Development, the US Agency for International Development, and the American Chamber of Commerce in Ukraine, a Memorandum of Understanding was signed on June 8 for the NEXT-UA initiative, which aims to help buttress Ukraine’s market infrastructure.
The memorandum fixes the intentions of the main stakeholders over the next three years to create an integrated multi-asset infrastructure including trading, clearing, and settlement functionalities to enhance market liquidity and promote capital and organized commodity markets in Ukraine.
Developing capital market infrastructure is one of the highest strategic priorities for business and is among the 10 Steps for Ukraine’s Economic Recovery and Growth 2021 identified by AmCham Ukraine.
For many years, Ukraine has been seeking more advanced capital and organized commodity markets including electricity, gas, oil, and agricultural products. Ukrainian commodity markets with transparent and liquid financial instruments are necessary to ensure competitive price formation while reducing risks and transaction costs for producers, traders, and end users.
Ukrainian capital markets will be able to provide efficient sources of finance for companies and hedging mechanisms through transparent markets in the energy, agriculture, and other sectors. They will operate in line with the best corporate governance standards and in accordance with European Union legislation. NEXT-UA will also help develop financial services based on best global practices and innovative financial instruments.
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In the words of Warren Buffett, “Risk comes from not knowing what you’re doing.”
The Ukrainian private sector has a clear understanding of the promising opportunities created by this initiative, and now also has a well-defined road map of how to move forward. As a next step, a project management unit will be established in the near future to implement NEXT-UA, and a detailed implementation plan will be developed.
The mood within Ukraine's business and investment communities towards this initiative is upbeat, as there is a consensus that modern trading and post-trade infrastructure can enable the country to achieve significant economic growth. At this stage, NEXT-UA is no longer a dream. It can soon become a wealth-generating tool for all Ukrainians.
Lenna Koszarny, Chair of AmCham Ukraine Board of Directors, Founding Partner and CEO of Horizon Capital: The development of Ukraine’s capital and organized commodity markets is a strategic priority for the business community and is included in AmCham’s “10 Steps for Ukraine’s Economic Recovery and Growth” initiative. One inspirational moment last September speaking with Ukraine’s Prime Minister Denys Shmyhal and AmCham President Andy Hunder on the state of capital markets in Ukraine led to joining forces with the European Bank for Reconstruction and Development (EBRD), and the United States Agency for International Development (USAID) to develop a bold vision on capital markets build-out in Ukraine.
More than 40 meetings and consultations with all stakeholders, including Ukraine’s National Securities and Stock Market Commission and the National Bank of Ukraine along with the country’s ministries of economy and finance, culminated in the signing of an historic Memorandum of Understanding to develop Ukraine’s capital and commodity markets. This will buttress the country’s trading and post-trade infrastructure.
I am personally passionate about this project because Ukraine deserves modern capital and organized markets to leverage its strength in agriculture, commodities, tech and much more. Ukrainian companies deserve strong domestic markets to access capital. Ukrainians deserve to invest, earn residual income, and save for their future through stocks and financial instruments.
Ukrainians who currently dream of owning Apple or Amazon stock may one day add “made in Ukraine” IPO champions to this list. I am confident that in the years to come, we will look back at this moment and trace multiple blockbuster success stories to this day. Now the real work begins.
EURASIA CONGRESSIONAL FELLOWSHIP
The Atlantic Council’s Eurasia Congressional Fellowship Program aims to educate Congressional staff on current events in the Eurasia region and engage staff with the Council’s latest research. The program connects Congressional fellows with our larger community, which includes leading experts on Ukraine, Russia, Central Asia, and the South Caucasus.
Applications are open! For questions about the program, please contact Shelby Magid.
Matteo Patrone, Vice-Chair of the AmCham Ukraine Board of Directors, Managing Director for Eastern Europe and the Caucasus, European Bank for Reconstruction and Development: Our goal is to help Ukraine develop and to support the country’s economic growth. We are very ambitious for Ukraine and ambitious goals require bold and decisive actions that all partners will need to take as we move forward with implementing the NEXT-UA initiative.
Our focus so far has been on foreign direct investment and, following a decade of technical assistance and policy dialogue in support of financial markets development in Ukraine, we are now looking for ways to further encourage and attract foreign portfolio investment to Ukraine.
Along with foreign direct investment, foreign portfolio investment is an important source of funding for most economies. Portfolio investment is more accessible for the average investor than direct investment because it requires far less investment capital and research.
More developed, less fragmented capital markets and organized commodity markets can and will attract investors in stocks, bonds, mutual funds, exchange-traded funds, and others. At the same time, they will allow Ukrainian companies and citizens the chance to share in their country’s economic growth, as domestic markets become better integrated with the global financial ecosystem.
Alexander McWhorter, Vice-Chair of AmCham Ukraine Board of Directors, Country Officer and Corporate Banking Head of Citi Ukraine: Talking to investors on a daily basis, we clearly observe that they want to see macroeconomic stability and continued engagement with international financial institutions, along with a commitment to continued execution of reforms.
We saw great demand from international investors for the local market when we started to act as cash correspondent bank and local operator of Clearstream’s account at the National Bank of Ukraine. We help to enable them to bring the international investment community to the Ukrainian market and help add liquidity to the market. We are keen to continue making positive changes, and I strongly believe the recent initiative will be an irreplaceable part of this process.
Andy Hunder is President of the American Chamber of Commerce in Ukraine.
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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.
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