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SOVEREIGN MAN

A city in transition… sort of.

September 27, 2010
Kiev, Ukraine

The last time I was here in Ukraine, I left after just one day, in disgust.

This doesn’t happen too often for me– I’m hardened and patient enough with any country’s problems to stick it out for a while. But my last encounter a few years ago went something like this:

* Chaos at the airport. Upon arrival, it took well over 3-hours to clear immigration and get my passport stamped. I would estimate close to 1,000 passengers crammed into the small arrivals hall, each withering from the suffocating heat and mind-numbing inefficiency of immigration officials.

08 23 07 1334 A city in transition... sort of.

* there were twice as many people behind me when I took this...

* Bait-and-switch. I booked a flat (as is normal here) and asked for their driver to pick me up from the airport. Halfway towards the city, the manager called to inform me that my flat was no longer available, and that the only other was three times the price. If that was not acceptable, she would have the driver leave me on the side of the road.

* Taxi rides. I think just about every taxi I hopped into literally drove around in circles, assuming that, as a foreigner, I was too dumb to notice.

* The coup-de-grace was when an employee at an airline ticket office refused to sell me a ticket unless I paid a completely ridiculous bribe.

I could go on, but I don’t want to dwell on the negative. Bear in mind, that was not my first time to Ukraine. I used to own a business here, and I’m very seasoned in Eastern Europe… so corruption and bureaucracy does not ruffle me in the least.

But after many trips to Ukraine over the years and experiencing the post-Soviet transformation first hand (including the Orange Revolution), my ultimate conclusion after my last trip a few years ago was this: the transition in Ukraine is so slow, it’s barely noticeable.

Conversely, other Eastern bloc countries like Estonia and Slovakia made rapid strides towards efficiency, development, and sustainable growth. Ukraine was clearly the laggard in the group.

As it had been a few years since my last visit, I’ve been teasing the idea of visiting Ukraine once more to re-check my conclusion. After receiving several requests from local student groups to come lecture about multiple flags and entrepreneurship, I now had a good reason to do so.

And so… I arrived once again to Boryspol International Airport in Kiev this weekend, and I was pleasantly surprised at my first impression– the immigration queue had been efficiently redesigned, and the old Byzantine landing forms were no longer required.

The city itself hasn’t changed much; there is a flurry of new construction thanks to Ukraine being chosen to co-host next year’s UEFA European football championship next year along with Poland.

Apparently the Ukrainians are far, far behind schedule, and the whole of Europe is concerned that they won’t be ready in time. “Not to worry,” reply the Ukrainians, “the stadiums will be operational for kick off.”

The thing is, football stadiums are the least of the problems. Ukraine has a massive shortage of clean, mid-range hotels… something like an Ibis or Holiday Inn Express.

The vast majority of hotels in Ukraine are woefully substandard. The precious few that are modern, clean, and well organized are marquee brands like the Intercontinental and Hyatt, or the local Premier Palace hotel.

Guests pay a high price for this class of hotel; the Hyatt here in Kiev is more expensive than in New York City or Hong Kong, and this issue is actually emblematic of the wider economy.

For just about everything in Ukraine– schools, restaurants, hotels, gyms, groceries, retail shops, salons, etc., there are two classes… quite simply, “good” and “bad”. The vast majority are ‘bad’ and quite cheap. The few ‘good’ masquerade as luxury, and they are seriously, seriously pricey.

This is due to the immense gap between rich and poor here, and the relative lack of middle class. The well off in Ukraine are very rich and price insensitive. Below that, there is a narrow middle class, and the rest of the population that wallows in poor quality products and services.

As an example, on the streets you’ll see a lot of European super cars and luxury Japanese models, or 1970s Soviet sedans that are falling apart… but little in between.

Other former Soviet states succeeded by freeing up their markets, privatizing state-owned businesses, eliminating bureaucracy, and loosening regulation. These measures created very large middle classes across the region, and made the contributing entrepreneurs very wealthy.

In oligarchy countries like Ukraine, a small handful of people became enormously wealthy after the end of Communism, often by theft, bribery, and coercion. Everyone else was trapped by the bureaucracy that remained.

This is largely a cultural issue, which means that it will be phased out over subsequent generations. I actually have high hopes for the newest batch of youths in Ukraine. They study English and free market economics, and they are some of the most impressively brilliant young minds I’ve ever met.

More to follow, I’m off to the lecture.

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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • http://twitter.com/MikeSmarr Cali Mike

    Simon,

    So did you opt for the higher priced flat? And how did you handle the bribe over the plane ticket?

    Cheers to the newest batch of youths in the Ukraine! They will brighten its future.
    .
    .

  • Jenny

    Sounds like it might finally be a good place for us to invest in…

  • Lucasjim43

    Simon,
    Are there opportunities in the Ukraine for US citizens ?

  • Funkyronster

    Simon, I am in Ukraine, in fact, by co-incidence I’ve almost been following you around, Poland, Slovakia (not Dallas of course)….and I have been touring Ukraine for the last 6 weeks, not Kiev, yet, but Odessa and mainly Crimea, which is well worth a visit. I remember your comments a while ago when you were in southern Italy, you would certainly enjoy the wines and “Champagnes”.

    Your comments are as usual spot on, and echo what my Ukrainian girlfriend and I have been observing and talking about, and she lived through the worst of the transition.

    But things are definitely on the up and up, although it will take a while. I have no intention of planting a flag here, but I would if I had to. A middle class will emerge, and with it business opportunities a plenty. I have had several cash offers for my camper van (RV to you!) well above it’s EU value!

    I have found Ukrainians in general very helpful and friendly, and honest. They don’t smile much, and they drink too much vodka, but as the old guard die off and the youngsters come up to speed, the place will surely take off.

    And it is chock full of ex soviet hardware and unfinished buildings, some of which, here in the Crimea, are in lovely locations.

    All the best

    Ron

  • Godspeed52

    For the last 17 years I have been leading a dental team to Ukraine to care for orphans and have been subject to all you have said. The fact that you were able to take the photo in the article is testimony to the fact that they didn’t see you take it. I took one just like it and the Customs agent came and took the card out of my camera.
    Through the years there have been many times I have become depressed over the state of the country and the corruption at all levels of government. Each time the answer comes back the same; the answer is Christ. Not the Christ of fake religions and TV evangelists but the Christ of widespread moral and ethical change, of love for others and treating others better than yourself. Nothing could be further from reality in Ukraine at present but that is why I am returning in October, to tell the youth and especially the orphans that there is another way to live. Blessings on the end of your trip!

  • Bob

    Frighteningly I see the US heading in the Ukraine/oligarchy direction :(

  • Cajunspartan

    Simon, I am reading a lot of success stories about Georgia. What do you think of Europe’s supposed top reformer?

  • Guest

    Could you pass along the name of the bait-and-switcher or mention a website where you can get a good apartment booking, or is that just for paying customers? ;) I was considering traveling to Ukraine at some point.

  • EuropeTraveller

    just came back to Ukraine for studies at the weekend
    I probably have met you somewhere in the airport ;)

    after having 1 week vacation in the UK, albeit having been living in ukraine for 6 years, I still have a slight “cultural” shock

    Both sounds alike…UK and Ukraine but UK is definitely too good to compare with Ukraine

    Ukraine is still very far from world standards, and most of these ukrainians need to change their old “soviet” mindset and learn some manners

    to add in,
    be careful of those people at airport terminals who will try to get some money off you with claims on your luggages and so on as well as this question “How much money do you have with you now?”

    to handle bribe,
    indirectly ask them how much they want in cash, cut it down to no more than 150 griven (10-20usd), it’s enough for them to be happy to get a few bottles of cognac / vodka or
    genuine branded fragrance / cosmetics the ladies have longed for

    down the street,
    beware of policemen and avoid going out at night, even if you are in a big group of people

    it’s not an uncommon thing for us to see our friends with abrasions and bruises on their faces, they dont fight among themselves, it’s the locals who don’t welcome foreigners

    I, too, live in Crimea, and I find most crimeans are very hot tempered and lack of some basic manners, confirmed by my local friends, people in Kiev are slightly better

    I also know some really good ukrainian people, but overall, I won’t give a good rating

    I’m not saying all ukrainians are bad people, it’s just when money is involved, it’s totally another story, especially most of them are stuck in poverty

    The good news for me now is I am leaving this country very soon and I am super happy for it

    There’re much better countries out there in eastern europe other than Ukraine, that you can consider having a business, much easier and less hassle

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