Mohammad Zahoor: Ukraine is most accessible country for international manufacturers

Editor's Note: The following is an English-language translation of an interview with Kyiv Post publisher Mohammad Zahoor, published on Feb. 4.

The original article was published here by Analyticheskaya Slyzhba Novosti

The founder of the ISTIL group and one of the country’s richest businessmen, Mohammad Zahoor, has lived in Ukraine for more than 40 years. He started a metallurgical business in Donetsk, then sold it and concentrated on other areas of business. A native of Pakistan, he has long considered himself a Ukrainian, and even now, in difficult times, he has no plans to leave the country. In an interview with ACH, Zahoor spoke about what assets he lost in the East, the impact of the free trade zone on Ukrainian business and how corruption hinders the attraction of investors. Below is an English translation of the interview by the Kyiv Post.

We’re
having a hard time right now in Ukraine, just like everybody else.
Therefore, we are holding onto the
assets we already have, and even trying to
get rid of some things. What do we have
now? In Kyiv, we have some property, real
estate. A lot of our plans had to be
revised. For example, planning for the
Panorama cinema to be
turned into a big club or shopping center. But, given that
people have practically no money now,
this investment would be excessive. There
were also plans to build a French school, and that project is
suspended. As is construction of a
hotel. The European Bank for Reconstruction and Development, with whom we had an agreement, has
denied funding for this project because of
a huge decline in the influx of tourists. So, we are
negotiating with other partners. In principle, they are right about
that, if businessmen are not visiting here, why
build a hotel? In addition, we still have a commercial
property that we rent for offices. That still
works, but there is a very low rent
due to the overall situation in business.

Everything
is really that bad?

In
actuality, it’s very bad. That concerns large businesses no less than
it does others. Major
oligarchs are also losing huge money. They are going from
billionaires to millionaires. If, let’s say, Akhmetov had 20 billion
and now he has 5 or 6 billion. So he lost about 75% of his assets.

As far
as I know, you’ve also lost a lot in the east?

Yes,
we have a coal refining plant in Luhansk Oblast and there was
infighting. People just think differently. One person came, then
others, then still others, and they couldn’t make up their minds
about who was the owner. In Donetsk there are office buildings, land
plots, apartments, and in our hotel there are people living,
apparently from the leadership of the so-called Donetsk People’s
Republic.

You think there’s no point in fighting
for these assets?

Well no one has taken them. They are
just closed, under lock and key. Some of our people are sitting there
and working. Some of our offices in Donetsk, the accountants are
still there, though others have left.

In financial terms, how much have you
lost?

Tens of millions of dollars.

Obviously, the business climate in Ukraine
isn’t the best. What factors are influencing this, both objective and
subjective?

The first thing causing harm is
corruption. If you read the report by the U.S. ambassador and other
Western representatives, then it turns out, it is precisely
corruption that is enemy number one. And war, or Russia, is in second
place. The internal enemy is the scariest one. Every businessman
knows that as soon as he enters the Ukrainian market, they will start
to siphon off money from him. For every permit, for every square
meter, and so on. Officials do their own business.

So the declarations by the prime
minister and his team about conditions for business being simplified
– was that only words?

No, they are being simplified. We can
say that out of 100 certificates now only 50 are required. But that’s
still a lot!

But large
businesses have always been the biggest lobbyists. Why can’t all the
major entrepreneurs gather together and push for the necessary
amendments to legislation?

(Lawmaker Serhiy) Taruta is working on that. He gathered
businessmen, tried to do something, signed a declaration. But, you
understand, is the people sitting in parliament aren’t interested,
they put the brakes on every bill that hinders their interests. And
they either take a long time to pass bills, or they pass them in such
a way that the legislation remains arbitrary somehow.

The free
trade zone with the European Union has been in effect since January.
It’s possible that will have a positive influence.

So far, there aren’t any especially
positive changes. The problem is that the business working here was
built a long time ago. Even when we introduced a lot of new things at
our own enterprises, we counted on the post-Soviet space. Now we are
trying to shift to Europe’s standards. For example, I have a factory
that manufactures plastic pieces. We received an ISO certificate,
accreditation for quality, but everything now hinges on the
impossibility of selling the product.

And where was it sold before?

Earlier, half of it went to Russia and half was sold
on the domestic market. Now, Russia has imposed tariffs. As soon as
the war started, we began to look for other sales markets, including
in Europe. And we couldn’t sell a single item. Because all the major
stores where the products could have been sold already have their own
trusted suppliers, with whom they have been working for years. Why
should they switch suppliers? Just because we signed the association
agreement? The agreement was signed by the EU and others. But not
every supermarket will buy our products just because of that. Sure,
we have no tariffs from the EU, but just try to sell something! I
think that because of the re-orientation of sales markets, Ukraine
has lost a great deal. The volume of trade deals with Russia fell,
including because of the reduced price on gas. But for many products
that Ukraine used to supply to Russia and Russia to Ukraine, there
are now tariffs. And some products are prohibited altogether. It’s a
myth that the West is waiting for us with open arms.

Your second home is Donbas. What do you
think should be done with that region? Is there any way for a win-win
solution in the current circumstances?

No. So much blood has already been spilled
that we can’t just hug and make up. Now the main thing is stopping
the bloodshed. I have always said, though I have been criticized for
saying it, that in the given situation Donbas and Ukraine are like a
husband and wife who have gotten into a fight. And if there is
disagreement between the husband and wife and they don’t want to live
together in the same house, then no matter what kind of mediators try
to get them to make up, their separation is inevitable. That is why I
have always said let them go. They won’t
live any better that the remaining part of Ukraine. And I think they
will regret their decision. But what we are doing right now is
turning them into our enemies. They won’t regret breaking off from
Ukraine, even if they live in really bad conditions. I think we
should have let them go two years ago. What would Ukraine have lost?
Some industry, a few mines. But then we could have saved all the
efforts spent on war, and become a truly European nation and
developed our competitive edge. We are so
close to the Polish, Slovakian and Hungarian borders. We can build
something, make something. Some Western companies have already
started sewing products in Ukraine. Our work force is twice as cheap
as that in China. Because of the decline of the currency, Ukraine has
become the most accessible country for any manufacturer that wants to
open his own enterprise. For instance, techno parks are opening in
Lviv, Ivano-Frankivsk. Kyiv is a bit further from Europe, we don’t
have such things yet. In that case, the
residents of Donetsk who stayed to live in the old times would say,
‘What fools, why did we leave? We could have lived well.’ Right now
they don’t think that way. Their moods are different: let us live
badly as long as we aren’t with Ukraine.

Have you thought about leaving the country? You
must have somewhere to go.

A lot of people ask me that: why are
you sitting here? But I don’t think I should cut ties and leave. I
hope that Ukraine will be part of Europe sooner or later. On the
other hand, a campaign in the Netherlands has been held for a
referendum in April: did the EU do the right thing by signing the
association agreement with Ukraine? If they say no, that will mean
there really is no democracy in Europe. If it turns out that the
people were against it but Brussels signed the agreement anyway. That
will be a bad sign. Europe is losing interest in Ukraine right now.
They are sick of us. It’s someone else’s suffering and the taxpayers
don’t understand why they should pay for it. Europeans don’t
understand why we aren’t fighting corruption, why reforms aren’t
being conducted, why (Prosecutor General Viktor) Shokin is still in his post. The president has
stood firm for him! I don’t know what this person has done for him,
so that the whole country says one thing and the president insists
that without this person, Ukraine will simply disappear.

Our president also stands firmly behind
the head of the National Bank.

She (Valeria Gontareva), at least, is doing some work,
trying to control the currency. And I have heard various opinions
about her. Yes, many people criticize her, but at least some people
praise her. But I have never heard anyone speaking positively about Shokin. Apart from the president.

And no one can influence that.

Because new anti-corruption agencies
are being set up, but who is choosing them? Shokin! And for some
reason we think that in Europe, they see nothing and don’t
understand, as if the news doesn’t get past Kyiv. The West is not
made up of fools. They read everything and think: we are trying on
their behalf, and nothing is changing there with them. So I wouldn’t
be surprised if Europe raises the issue of lifting sanctions against
Russia. France made it very clear that they may stop sanctions by the
summer. They lost a huge market. And Russia stopped purchasing in
Europe, and started in Argentina, Brazil and India.

Tell us about the media business. How
would you assess the level of free speech in Ukraine and the
professionalism of journalists?

I own the newspaper Kyiv Post, and we
are very proud that we toughed it out, that nobody bought us or
closed us, although they did try to sue us. For example, Dmytro Firtash sued
us in England, but we managed to fend him off. There were threats
under Yanukovych – indirect ones, through another one of our
businesses. They made us understand that if we don’t do this or that,
we will have problems. But we always remained independent. And they
left us alone. And moreover, Yanukovych’s team even flaunted our
newspaper when they were criticized about infringing on free speech.
They got out the Kyiv Post and said, ‘Look! Here is a newspaper that
writes what it wants.’ Nobody has touched us now. We supported Maidan
earlier and now write critical materials about the current
authorities – and against (Prime Minister Arseniy) Yatsenyuk, (Kyiv Mayor Vitali) Klitschko and (Ukrainian President Petro) Poroshenko. I am
against oligarchs. In general, we have stayed an opposition
newspaper. Not in the sense that we belong to a specific political
force – I am independent in politics and I have no agenda. We just
criticize those who, in our opinion, deserve it. We don’t influence
the editorial policy. The journalists write what they consider
necessary. As for your question about whether there is still a
practice of buying our journalists in Ukraine, there was a
sociological study done on this. Of course, it is hard to blame the
journalists: all publishing houses are divided up among owners. And
those journalists who try to tell the truth just get fired. And they
leave and either open up something of their own or write blogs.

Do you have any plans to buy new media
assets?

No. If I had political ambitions and wanted
to run for mayor or president, then maybe I’d start buying up media
assets. (Laughing)

Tell us please, which Ukrainian oligarchs are you
friendly with or do you conduct business with?

None of them. I have normal relations –
though I can’t say a friendship – with (Serhiy) Taruta. From back when he
was at AzovSteel. I have met with (Rinat) Akhmetov in a hotel. I have a good
attitude toward him, as he does toward me. But I can’t call it a
friendship. And the others, I haven’t even seen.