November 2015
Why Ukraine is like a taxi driver, who drives the “tin Lizzie”.
Column of the investment banker Igor Mazepa
Imagine a world where our country is a taxi driver, making his living on the “tin Lizzie”, inherited from his grandfather. In addition to a rusty car, he inherited a lot of bad habits (in our words, corruption). Because of bad habits, he feels ill often and cannot work – good customers used to ignore a rusty and smoke-filled car. He has to drive a lot to somehow make both ends meet. In addition, he has run into so many debts that no one wants to lend him for two years.
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In this contingent world, a taxi driver has a neighbor – an owner of the nearest gas station, who calls a taxi driver his brother. Showing his fraternal feelings, the neighbor even agreed to lend him money when no one did it. But he lent for a while, and upon the condition of mutual fraternal sympathy. But reciprocity did not work, and this neighbor has beaten the taxi driver – so much that he cannot drive now as much time as before. And a pay date approaches…
What to do? To sell an old car to clear the debt, but lose the source of income? Fortunately, in the next block, he found a banker (let’s call it the IMF), which offered a credit to the taxi driver and agreed with his friends that they did not press a taxi driver for a debt for several years. In addition, the banker makes the taxi driver get rid of bad habits, and not to spend more than he earns. So, after having got the medical treatment and repaired his car with the money of the banker, as well as having quitted smoking and brushed the interior, the taxi driver had the opportunity to service more sophisticated, but also more generous clients from the neighboring quarter. These customers after seeing some prospects of the taxi driver have found money for him to buy a foreign-made car (let it be in the real world investments in the Ukrainian economy). The new car allowed him to not only reduce fuel consumption, but also to get the premium clientele. Thus, in time, the taxi driver easily settled with the banker and his friends, returned investment in their cars and bought a new, straight from the salon. In general, it reached a new level of life.
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That should be the prospects of Ukraine after managed to restructure international loans with the aid of IMF. We all obtain savings of $ 4.6 billion from the debt restructuring only this year, and another 8.8 billion dollars in the next three years. Yes, the government has convinced creditors that we need a grace period that we are ready to reforms and will be able to fully recover all debts over time. Yes, we’ve received sympathy, trust, and loans from creditors, but to repay credits and have a better life, we will need a lot more money – for modernization of our economy. A new level is to attract a more expensive and more demanding capital. And we not only need to get rid of bad habits, but also to gain self-confidence, to show our prospects – to change the investment climate.
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Thus, the most important thing that gives the end of the debt transaction is an opportunity to begin our credit history, and our life from scratch. That is, Ukraine could again become a reliable borrower in the international market, as a label of bankrupt country affixed to us in the summer of 2013 has virtually been removed. And we cannot miss this chance; otherwise, a bankrupt label will stick forever.
And you ask, what about the neighbor? He did not want to postpone the debt repayment, saying that he is the special and the closest man to a taxi driver. And besides, he’s already made concessions to the taxi driver – since yesterday, he has been selling gasoline with no extra charge to the price of other stations. The neighbor even complained to a banker – say, the taxi driver is an unreliable friend. But there it was – a banker and his friends decided that the neighbor is no better than all of them – either he helps them with the taxi driver, or goes to court to demand repayment. And the taxi driver will file a counter-claim for bodily injury.
Director General of the Investment Company
http://finance.liga.net/economics/2015/11/17/opinion/45811.htm
