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The ongoing war has already taken thousands of lives, destroyed millions of families and homes, and caused enormous economic losses. Post-war reconstruction and support of the national economy is an extremely difficult and important challenge. Does a favourable environment exist in Ukraine for Western investors who have already invested €360 million in national production, paid more than a billion UAH of taxes and donated more than UAH 90 million for humanitarian purposes?

According to various estimates, the cost of Ukraine`s post-war reconstruction ranges from $349 billion to $1.1 trillion – investments are required both at the national level and at the level of specific communities and industries. These can be grants, financial support or loans. Whereas we need to wait for help, bank loans for business can be raised right now, despite the war.

Access to capital markets has traditionally been a challenge for large industrial companies.

The war factor has significantly increased the cost of borrowed funds for domestic businesses, as banks consider all possible risks in the interest rate for using a loan.

Lower-interest loans can be obtained from international financial institutions, which offer more favourable interest rates but finance only certain investment projects.

Providing credit support to Ukrainian companies, European financial institutions set a number of requirements on the financial condition and transparency of a potential partner’s business activities, and the borrower’s international reputation is also an important condition. Therefore, any reputational scandals that arise around a company significantly reduce chances of receiving such financing.

Kyiv Cardboard and Paper Mill has experienced it.

Kyiv CPM has a long and successful history of cooperation with Ukrainian and foreign banks, as well as international institutions. Thanks to this cooperation, the company has implemented a number of projects to modernise and develop new directions. The cooperation has resulted in hundreds of new jobs and an increase in budget contributions to a billion UAH per year.

Even now, despite the war, Kyiv CPM continues to modernise its production, as some of the equipment is rather outdated and needs replacement.

However, unexpected obstacles have arisen on the way to modernisation: over the past 18 months, the mill has been under unreasonable pressure from certain law enforcement agencies.

In addition to the pressure, a smear campaign was launched that negatively impacted the manufacturer’s image, which ultimately led to problems with attracting external financing.

This included the reopening of a criminal investigation by the Economic Security Bureau and the National Police several years ago, which Kyiv CPM has repeatedly refuted in court, and attempts to seize the group’s property. The company considers such actions of the Ukrainian security forces as manipulative, and the Austrian Embassy in Ukraine has even expressed its concern over this matter.

However, the company is not slowing the pace: an investment programme to modernise its equipment is also planned for 2024.

Kyiv Cardboard and Paper Mill is a part of the Austrian Pulp Mill Holding, which complies with European principles of management, reporting and business transparency. Overall, the Austrians have already invested more than EUR 360 million in Kyiv CPM, and the western investor carefully monitors the company’s operations.

The Austrian owner Pulp Mill Holding, despite the above-mentioned unfavourable factors and the war, continues to support the company, and modernisation plans for €12 million in 2024 were approved this autumn. However, this time, Kyiv CPM will rely only on its own funds and those of the parent company to implement the programme because of the above-mentioned reasons. However, this approach carries a high risk of failure, as external factors (unstable energy and raw material prices, import blocking, etc.) may negatively affect Kyiv CPM`s financial capabilities. So when may the Austrian owner of Kyiv Cardboard and Paper Mill expect the investment climate to improve?

The actions of government are crucial to attract funds from international donors for creation a favourable environment for foreign investors and avoidance of indiscriminate sanctions pressure on businesses, including European ones. After all, the received loans generate new jobs for Ukrainians and tax revenues to the budget.

In the situation with Kyiv Cardboard and Paper Mill, unfortunately, conditions were artificially created that directly contradict both the interests of the company and the national interests of the country that is bearing the burden of war, as our country finances defence spending at its own expense, and taxes are the main source of budget revenues.

Based on the material of BUSINESS CENSOR.

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