Restoration plans for Mykolaiv Oblast — interview with governor Kim

14 August 2023, 11:00 PM

Exclusive

On his special NV Radio program on Aug. 9, head of the Transformation Office Maxim Bakhmatov spoke to Mykolaiv regional governor Vitaly Kim about how the restoration of the region is taking place during and what plans he has to develop it and attract investment after the end of the war.

Bakhmatov: What needs to be done for Mykolaiv Oblast and the south-eastern region as a whole for it to flourish? I'm sure you had plans to develop it. Let's start with what has been destroyed, and then move on to plans.

Kim: About 14,000 objects have been destroyed or damaged in the oblast. As of now, about 23% have been urgently restored in one way or another. The oblast has been lucky in this regard, as there has been a lot of media attention.

We were able to organize a back office for interaction with foreign donor partners, volunteer organizations, and non-governmental international organizations. We have established transparent work, and now there are already a number of results in the region.

I won’t even say that it’s a lot, but most of the objects are now being rebuilt using [the money received from this] assistance, and not at the expense of the state. For state-financed projects, 10 large, important objects are already in the process [of being rebuilt]. These include seven educational facilities and three medical facilities.

Therefore, Mykolaiv Oblast has been lucky in this regard. We are working with international organizations and volunteers specifically for restoration, and I am very, very grateful to them for this. They cannot legally help the military, so all their attention is focused on civil reconstruction, in particular in our region.

Bakhmatov: And who are these partners? Who is the main investor in recovery today?

Kim: There are no main ones. I can provide a list so that I don’t forget anyone, but they include all international organizations, such as the UN, UNDP , the Red Cross, Denmark, Moldova, Poland ... We have a dozen countries and 11 international state companies and volunteer organizations [involved].

For example, we have direct interactions with businesses in Kazakhstan, in Latvia, with Riga, and with individual cities. The list is very large. We discuss, develop, and sign off on projects to be directly implemented by communities, districts, and localities, so that they themselves continue to follow [the projects] and work directly.

Therefore, there are a lot of projects, and we need to bring everything together to show results. But now I can’t even tell you in numbers — it’s a lot.

I can give you an example: 20 national, local, and municipal-level bridges have been destroyed in our country. 17 of them have been restored. And we spent six million in state and regional funds for this, with everything else coming from UNITED24 and directly from donors. This is the combination of factors that is now allowing us to quickly restore infrastructure in Mykolaiv Oblast.

Bakhmatov: I read your interview in Deutsche Welle. You say that almost everyone — 400 thousand people — has returned to Mykolaiv after they had left. The situation is even better in the oblast. But at the same time, 50% of businesses have shut down. 90% of the country's recovery will rely on private domestic and foreign investments. Business investment attractiveness depends, in particular, on the head of the oblast. How would you comment on this?

Kim: I understand this, and I am betting on creating favorable conditions for investors. Of course, there are restrictions right now, because there are very big military risks, but we are preparing projects which, after victory, will not need a year and a half of planning, but will be shovel-ready.

We have a case during the war, when DTEK and the Danish company Vestas completed a wind farm project. It provides an additional 114 MW of energy. They completed it between September 2022 and May 2023 — right during the active phase [of the war].

As a business person, I understand perfectly that it is necessary to create conditions for business. It is very difficult, but I was an investment consultant before the war. My primary task was to accompany investors so that no one would put a stick in their wheels and would not ask anything from them. Just help them to create jobs.

Nothing has changed. I work with investors. I can say that I will accompany all large businesses personally. This is my task. Lots of meetings. Everyone is being held back by [ongoing] hostilities and [military] risks. But this will change at some point, and Mykolaiv Oblast will endure.

Bakhmatov: We talked with the large concrete manufacturer and developer Kovalska. They always try to build everything transparently. They are very, very attentive to the legality of their actions. Despite this, the Obolon district prosecutor's office in Kyiv has been circling them and even filed a suit. Have you, as a leader, experienced such situations when law enforcement is hostile towards investors?

Kim: I'm not in the loop on this investigation, so I can't comment. Perhaps Kovalska, with all due respect, violated something and they are objectively doing something there. I don’t want to [say] in absentia “I didn’t read it, but I condemn it.”

When I was in business and the then-authorities tried to take [it] away from me, I went to the highest court. I understand business perfectly well, and what the authorities do and in what ways. And I'm trying to use this experience in the opposite direction, when we work and accompany business as government officials.

Bakhmatov: According to a survey of businesses, approximately 65% ​​of them have faced pressure from various law enforcement agencies. That is why a special assistance committee was created, which includes Rostislav Shurma, deputy head of the President's Office, where these cases are analyzed, where these raids have been unfair, and where they have been fair. But 65% is a lot. Why am I saying this? As soon as Mykolaiv Oblast shows that its share of this sort of pressure is minimal, businesses will immediately understand that it is possible to work and develop there. How would you rate this story, how critical is it?

Kim: The horizon of business planning for investments is much longer than the term of my tenure in power, or that of law enforcement agencies, or even the leadership of the country. These indicators are important, but above all, these are conditions and risks that can be eliminated at the planning stage. Further, it will be more difficult for the security forces to interact and ask for something there if everything is formalized and done in accordance with the law. In other words, there will be nothing to cling to.

We are in a state of war, and war affects different regions a little differently. Mykolaiv business, even when it has moved, is helping here with everything. Some businesses have lost a lot in terms of equipment, premises, and staff who have gone to war; but still continue to carry out tasks and help the army.

Now my task is to restore these companies so that they are at least breaking even. Local businesses have agreed to work just breaking even until victory, and then talk about profits. I am very grateful to them for this position.

For international companies, we are preparing sites that will be of potential interest to them once there are no risks. And these things will be worked out from the point of view of minerals, human resources, logistics... I can't do much, but I can create the conditions — connecting electricity, allocating land, and transparent licenses on resource extraction. There's a lot of everything needed. Previously, it was

Bakhmatov: What exactly are you doing? What advice would you give to other regions? What can you share, given that the war may last a long time?

Kim: Are we talking about domestic business, or foreign?

Bakhmatov: I would just talk about numbers and turnover, realizing that we need a lot of money. Ukrainian money, too, of course. But it will be limited. We’ll also need Western money.

Kim: The situation varies by region. I can't give advice, because businesses that have relocated to the west of our country are working there, the amount of taxes has been increased there, and the like. This is logical.

Regarding the conditions that are here. When I was in business, I said: “I don’t need help from the state, just don’t bother me.” This is the basis. We must not interfere in business affairs.

But for specific cases. The large enterprise Agrofusion is the world leader in the production of tomato paste. It had four factories, two in Kherson Oblast, and two in ours. Two are under occupation now, and one is very significantly damaged. The Russians stole only 600 million euros in turnover. And this tomato paste is now sold throughout Russia.

Helping this company means having meetings with leaders in the government and having programs. Not everything is going smoothly, but the plant has almost recovered. There is the lack of pressure from regional energy companies, installments, compensation, extension of contracts — a lot of things. This is our current work. We didn’t have a recipe for what to say or what order to issue to make everything go. That would have been done a long time ago. It is necessary to spend time and delve into the problems of each enterprise separately.

For example, we helped the company conclude a land lease agreement, with which it could grow seedlings on thousands of hectares, which was essential for its plant. The issue was timing. And they are still paying more than market value. This kind of support means protecting business interests, from an administrative point of view.

Bakhmatov: If you look at countries that have been tested by war, it was quite difficult, but, of course, in terms of the moral and volitional qualities of the leadership and the support of society, they handled it.

Kim: Let me comment on what I'm counting on. I won't name any more examples, as there are a lot of them.

There is an erroneous opinion that the war will be over once we win ... We still do not understand when that would be, or that we will have a problem with guys returning from the frontlines, with psychological issues they will face, and so on.  These will only be problems for those who have not worked directly towards the victory. And I'm betting that it is these guys who will return from the war who will be the basis of fair changes in the country. Because they have higher [expectations] of justice. They're there because they think it's the right thing to do, and they're going to be the basis for these changes. Because it will be impossible to steal, as there will be a lot of people who came from the war. And they will justly demand that everything be fair.

Therefore, on the contrary, I am betting on all these people returning back to the region, in particular to us, and participating in the socio-political life of the region and the country.

Bakhmatov: And what to do with those military registration and enlistment offices? To date, 112 proceedings have been opened by the SBI (State Bureau of Investigations) for corruption. The war does not prevent them from engaging in criminal corruption.

Kim: I would not want a shadow to fall over the entire military because of some bad apples, because there are 200,000 people in the army, and there are 112 high-profile cases. Anything can happen, and there is no perfect system.

This will be an ongoing issue. Even in European countries, there is a level of corruption, and there are also such cases. I’m not too worried about this. If someone plunders, he goes to jail, and his property is confiscated, it's okay, it happens. But it's all about change.

Bakhmatov: Is there any strategic planning going on today, during martial law? What will happen in a year, two, three, or five? Is someone doing this?

Kim: During martial law, nothing bad will happen, because there is an over fulfillment of the budget for personal income tax revenues. The big question is the solvency of business, so that it develops, and it survives. As well as a lack of loans and access to cheap money.

Regarding strategy: we are an agricultural region, and we are a shipbuilding region. We are currently working on a naval strategy in cooperation with the Navy, the General Staff, the Defense Ministry, the Ministry of Strategic Industry, and defense contractors. Now there are things that we want to start here. We are organizing and coordinating actions to restart shipbuilding [in the region].

What is the near-term, five-year target? In 2010, 23,000 people were involved in shipbuilding in Mykolaiv Oblast. Add in subcontractors, and you multiply that by seven — more than 100,000. And in 2020 there were just 7,000.

It was a huge fall. The task is to return to the capacities of 2010. I have a plan to return at least 23,000 people to shipbuilding. This is a difficult task in terms of strategic planning.

You just need to do those things that will be useful for the future. It's about strategy. Solutions for specific problems which fix things — this is something everyone should do. This is a mandatory thing. But to return production is another matter. This is a very difficult task. We have lost a lot, including because of the Russians, who for 30 years have been buying up factories and bankrupting them intentionally in order to kill shipbuilding here. But we have what we have. Our task is to work in the conditions that we have.

Bakhmatov: Regarding businesses that have not yet opened. Are there any support programs for them from the state or from foreign partners?

Kim: There are grants for starting a business for those who have returned from the war, and there is an extended loan program for farmers. I'm talking about what the whole country, the entire Cabinet of Ministers, the government, the parliament are working on this. They are all working on these programs. But these are many elements that should lead to a climate that is good for business.

Bakhmatov: ArcelorMittal issued a press release that its metal production has halved due to the lack of water for the operation of Kryvorizhstal. As far as I understand, this will be the most critical problem in the region, in this region as a whole, after the [Kakhovka HPP] dam was blown up. Explain what needs to be done to help you?

Kim: I spoke with [Head of the Kryvyi Rih City Administration Oleksandr] Vilkul and put his deputy in touch with my colleague in restoring the water supply in Kryvyi Rih, reiterating our warnings about how this would affect Mykolaiv Oblast.

But I must tell you that we had this problem a year and a half ago because the Russians deliberately destroyed the Dnipro-Mykolaiv water canal. We have been living with this problem for a long time. And we solved this problem. I don't want to reveal the details so that the enemy does not know what we are doing and continue to do, primarily with the help of the Office of the President and the Cabinet of Ministers, which have allocated money to eliminate this problem.

I'll tell you from a technical point of view. This is a problem due to the point of water intake — at what level it is, given that the Kakhovka HPP has been destroyed. The water level fell in the Kakhovka reservoir, which Dnipro and Kryvyi Rih drew from, but it remained the same at the point where Mykolaiv was drawing water from. That is to say, this situation will not significantly affect us.

Bakhmatov: Let's talk about the risks and solutions in the event of an accident at the Zaporizhzhya NPP. To what extent is the region ready for terrorist attacks that the Russian Federation could commit? What should be done, and what should we and the people of Mykolaiv be aware of?

Kim: We are also lucky here. The ZNPP is 130 kilometers away from Mykolaiv, perhaps even 150.

We have the South Ukrainian nuclear power plant in our region. And since the beginning of the war, we have worked out all the types of measures that would be needed in case there is a man-made disaster. Therefore, when the issue arose with the Zaporizhzhya NPP, we already had plans to work with, and we finalized them. We are potentially in the affected zone if the wind blows in our direction. But we have not only worked out this theoretically. We have had exercises, and we have been preparing for this. Therefore, as always, there will be panic, but we will be ready to respond. But I don't think it will come to that.

Bakhmatov: Why do you think so?

Kim: But because it has no military purpose and will not affect [the war]. The Russians, I think, are also analyzing how this or that action will globally affect the events in Ukraine. I think that this will only embitter Ukraine and Ukrainians more. And there will be no compromise.

Bakhmatov: And how much did the destruction of the dam help them in realizing their intentions?

Kim: I’ll offer my subjective point of view so that it is not construed as analysis. I think that this was deliberately done in order to flood part of the left bank and complicate the advance of our troops here. So that they can remove most of these troops and send them to the Zaporizhzhya front. They needed reserves, but they could not cover a large section of the front. They blew up the dam, removed the troops and sent them to Zaporizhzhya.

Bakhmatov: Mykolaiv Oblast is preparing an investment map for natural resources, labor resources, and logistical advantages. And you have a program for industrial parks. Is this all for development?

Kim: Yes. These efforts have updated data from 30 years ago. Some data was from 2010 for minerals that were available to investors. A feasibility study is being worked out for an industry which could potentially be a driver for local development.

There are very large projects, which I don’t even want to talk about, so that no one jinxes it. I would now talk about what has already been implemented. Our Danish partners in humanitarian demining say, "What can we do?" I say: "Create 500 jobs with a salary of UAH 25,000 in order to teach people how to clear mines, and they will teach others." They said, "Good idea." Now 300 people are working and are financed by Denmark. That is, 300 jobs were created at once, helping to clear territory in the Snihurivka area. There are many such examples. We can talk about them because they are being implemented.

As for strategic plans... First, they have not yet been implemented. Second: God willing, they will be. Third: I need to coordinate, because everything is being discussed at a very high level. And I'm not a genius here doing it alone. This is being done together with the government and the Office of the President.

Bakhmatov: About the aluminum (the largest in Europe or in the world) plant owned by Russian oligarch Oleg Deripaska.

Kim: It doesn't belong to him anymore. It is now state-owned.

Bakhmatov: Is it operating now?

Kim: No, it is not.

Bakhmatov: The Mykolaiv area is ready for its ports to be unblocked. As you said, "Ochakiv and Mykolaiv ports are 40% of the economy." What can you tell us about this that isn’t classified?

Kim: Our ports are ready. And our operators are ready to resume work here. The only question is that the occupied Kinburn Spit and right bank of the Dnipro are not far away, about four to seven kilometers. That is, the Russians control this section of the sea. And we cannot move ships, because they can fire at them with the simplest weapons. They threaten everyone now with ballistic missiles and everything else. But the passage is very narrow. We cannot do this without de-occupation.

We are ready to join the Black Sea Grain Initiative, but we understand that this will not change anything strategically, because the Russians are also metering the number of ships that depart from Ukraine. There are geopolitical agreements on the quantity traveling through this corridor.

If there is an additional port, logistics will be a little easier and Mykolaiv Oblast will start generating revenue. But for Ukraine, this will not change anything globally, because the Russians limit the amount of grain that leaves. There is a bottleneck.

Bakhmatov: What would encourage Ukrainians to return in general and to Mykolaiv Oblast in particular?

Kim: We have a lot of people coming back. I'll give my opinion. I believe that more than 90% [of people] will go back at least once to see what has changed, what has become better after and during the war, what happened to their property, and so on. When people return and see that it makes sense to stay here, they will stay. There is another problem. A lot of people have never traveled outside their region or country before.

Bakhmatov: 90% of people in Ukraine had never left their oblast.

Kim: It is very difficult for them to get up and do something. This is the biggest problem in bringing back people, particularly older ones.

The youth can find work. They are very active and adapt quickly. So: in order to bring everyone back, we need to be better than before. I am confident in the patriotism of our people. They are ready to do this as soon as there is feedback from the state and from the authorities. If the government meets the needs of the people, then people will return. Therefore, it is necessary to respond to these needs.

Bakhmatov: Speaking of the needs of the people: 96% are directly afraid of war. 89% are afraid of the kind of corruption — Ukrainian or international — that may prevent them from creating the kind of state they would like.

Kim: As long as salaries are higher and expenses are lower somewhere else, then no one will return. I think that Ukraine will be very promising. It is a very promising country, but after the war it will rebuild and become better than it was before. All the experts say it will be. Therefore, the demand from investors and entry into Ukrainian markets will be massive.

In order [for investors] to come here, there needs to be a local workforce. And, for example, if a factory opens in a village or in a community, then a person will return to their place. Because they understand that this is a guaranteed place of work with social protection and with confidence for the next 10 years, with social guarantees. And they will come back and work. Therefore, it is necessary to create jobs and competition. And with competition, corruption will disappear. Corruption hinders open competition.

Bakhmatov: In the Transformation Office, we work a lot on corruption cases. We have information, according to the State Bureau of Investigation, that every third hryvnia in Kyiv is stolen. And we also understand that the State Bureau of Investigation, NABU, and the SAPO cannot cover all these tens, hundreds of thousands of potentially corrupt officials. We came to the conclusion that an effective, decent manager with a good reputation, can, by their own decisions, create a model of public management that will make corruption disappear. What’s your view on this?

Kim: I agree with it. The thing is, I think it all depends on the leader. The Ministry of Digital Transformation, in my subjective opinion, is one of the most effective ministries in this regard. Everything is digitalized. And Ukraine is now leading the world in the implementation of digitalization, and digitalization strongly diminishes the corruption component.

But with regard to NABU (National Anti-Corruption Bureau of Ukraine), SAPO (Special Anti-corruption Prosecutor’s Office) and SBI. They can do their jobs. They're just working [with big criminals] right now. And when they are done with that, they will go one level deeper. The government and President Volodymyr Zelenskyy have created conditions for the transparent operation of these institutions. This is still changing. That is, these tools will continue to work.

We have more high-profile cases now than a decade ago.

Bakhmatov: I'm not saying it's not being investigated. I just understand that the volume is very large.

Kim: This is an evolutionary process. We need to look not at what is wrong with us now, but to compare every year [with what] it was before.

When I look at what I have done in a year, what the state has done in a year, I always evaluate by parameters. We have a lot of cases that have been brought to fruition in Mykolaiv Oblast. One traitor is in prison for life. This is the first such verdict in history. That is, everything is changing.

Regarding the [head of the] Supreme Court [being arrested and charged with corruption] — this has not happened in history, or at all in other countries. Therefore, ‘untouchables’ do not exist. This is the position of the president. I clearly understand this and completely agree. If you want to work, do so. If you don’t, goodbye.

These are obvious changes. It is impossible to miss them. You must either take part in them, or disagree with them and say goodbye.

Gradual steps are being [taken] that make it possible to change attitudes towards corruption in broad circles. If we add to this conditionally 300,000–500,000 troops who will return from the war, who will demand that everything be done without corruption, this combination will provide for rapid changes in the country.

Bakhmatov: A formula emerges: half a million military plus digitalization means an efficient country without corruption. Right?

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