UKRAINE – INVESTMENT ATTRACTIVENESS OF CRIMEA (BLACK SEA)

There is nothing better than mountains… When the mountains are combined with amazingly beautiful sea, fresh healthy air, vast Ukrainian steppes and tender sun – such natural miracle is called Crimea, Autonomous Republic in East European country called Ukraine.

Its history is a mixture of East and West, the history of Ancient Greeks and Golden Horde. Here, the churches of early Christians are located next to Muslim Mosques. In Crimea, it is possible to find traces of the most archaic traditions and wonderful monuments of ancient art. However, it is impossible to tell the story of this peninsula in details. It is only possible to feel it while visiting in Crimea.

Local government notes that every year the volume of investments into the peninsula’s development grows: Ukrainian and foreign investors realized financial attractiveness and further potential for development of this region.

Real estate market is the most dynamic market in Crimea. In January-March of this year, construction companies increased their turnover by 10%. This witnesses that the real estate market in Crimea in general is rather active, in general and that demand has not been satisfied fully yet. Experts believe that investment potential of West Crimea soon is going to get ahead of many recognized world resorts, such as places in France, Greece, Italy and UAE (Dubai). For instance, International Commercial Bank and a number of construction companies recently signed a joint investment agreement for the amount in excess of 300 million euro, into construction of residential complexes. Overall duration of this project is 3 years and cost of future apartments is $850-950 per 1 square meter. In addition to this project, the parties review the possibility of commercial construction of residential complexes in Chernomorsky region.

While in the past the investors into the real estate were represented mostly by Ukrainian businessmen. Today the situation has changed and foreign investors show real interest towards this field. Possibly, quite soon, there would be new buildings in Arab style on the Black Sea shore that are similar to the worldwide known complexes Dubai Marina and Madinat Jumeira in Dubai. Investors from United Arab Emirates (Abu Dhabi, Dubai), such as Emaar, Dubai World and others became interested in the autonomous republic and in the autumn of 2007, they are going to arrive for negotiations on joint construction and investment. The participants would include representatives from the Government of Moscow, St. Petersburg, Kazakhstan and Austria. According to the General Director of Ukrainian Trade Center in the Gulf Countries Sergey Pachkovskiy, who initiated the visit of the Emirates sheikhs to Ukraine, the Arab investors are only interested in major projects – at least $100 – 200 million. For instance, Emirates companies Emaar, Rustar, Limitless are willing to study the possibility of financing of one of the priority projects on development of the Autonomous Republic of Crimea, such as West Crimea, which are to become a kind of Las Vegas or Monte Carlo in Ukraine. Implementation of this project would allow construction of more than 20,000 hotel rooms.

It is planned that by 2010, Crimea would host up to 11 million tourists annually. For reference:

Dubai (UAE) with only 1.2 million inhabitants is visited every year by 6 million tourists.

The table quoted below provides an idea on the development of Dubai over the past 10 years and on the effect such development had on its trade and tourism.

To comment this table, it is necessary to note significant role of the Government of Dubai both in proposing a number of projects and in their legalization by means of introduction of proper changes into the legislation. It also would be desirable to describe the role of trade in development of tourism in greater detail. Trade always has played a major role in development of tourism in the whole world. Thus, in Japan, there is an interesting tradition. If someone goes on a tourist trip to foreign parts, on the eve of the journey he invites relatives, friends and colleagues and all of them give money to the tourist and wish him a pleasant trip. In turn, the tourist has to buy gifts for them for the equivalent of the gifted money.

It is known that the following factors form the foundation for modern tourism:

• access to goods and services, which are absent in the consumer’s country;
• lower prices for a number of goods, as compared to those in the consumer’s country;
• entertainment, new impressions, familiarization with other cultures.

In turn, the priorities of the tourist spending his money are determined by his focus, i.e. by the things the tourist wishes to get from his vacation Speaking of Dubai, here the trade always was one of the best tourist attractions, primarily due to the temperature factor that makes tourists roam the supermarkets for hours instead of just walking in the streets of parks.

However, Dubai has already created projects capable of satisfying the wishes of even the pickiest modern tourists, such as Dubailand and Bavadi and focused mostly on entertainment and leisure, while trade plays only secondary role here. In Crimea, similar projects could be developed on Belyaus spit. In the nearest future, investment into such complexes in Ukraine is going to reach the level of $7 billion. In these huge “Disneylands”, largely due to the favorable climate, trade would be only one of many elements of entertainment industry, because fresh air and walking around Crimean historical places diversify the vacations, as compared e.g. to Dubai, where in the summertime the temperature reaches 47 degrees Celsius.

Today, Crimea looks at the possibility of implementation of 32 investment projects in the resort and recreation area, with overall cost in excess of $3 billion. Such projects provide for reconstruction of health centers in the peninsula and for construction of five-star hotels with European service level, as well as development of entertainment industry. Construction project for the first class autobahn Sympheropol – Bakhchisaray - Yalta is being discussed.

Construction of this highway was required by the investors who require maximum travel time from the airport to the resorts not to exceed 40 minutes. State Department of Tourism of Ukraine participates actively in the development of a concept of yachting tourism on Crimean peninsula: Black Sea Navy Fleet Yachting club is being reconstructed, construction project for yachting marina in Belyaus is to begin soon (this one goes 11 km deep into the continent and the waterway is 8 to 18 m deep). The project of development of a network containing at least ten yachting ports along the coast is to open new prospects for yachting tourism, which is really fashionable now around the world. According to the experts, establishment of a few FEZ would have a positive effect on the development of Crimea. For instance, establishment of such FEZ in Dubai as Jebel Ali, Internet City, Media City, etc., caused the inflow of intellectual workforce and, therefore, formed a richer class of population, which in turn caused construction boom and growth of trade, as well as the establishment of financial center in Dubai (Dubai International Financial Center).

Industry of the Autonomous Republic of Crimea contains more than 255 large and medium enterprises employing more than 75 thousand people, as well as 1,800 small enterprises employing 16 thousand more people.

Extracting industry is focused on utilizing the mineral resources of the peninsula. Provision of mineral resources is estimated, as follows:

• adsorption clay, raw materials for cement production, coating and saw stones and lime stones – more than 100 years;
• chalk, construction rocks and sand, haydite;
• at least 50 years.

Estimated resources of the extracted carbohydrates of the Azov – Black Sea region equal 1.5 – 2.5 trillion cubic meters in gas equivalent, which contributes to 30% of the aggregate carbohydrate resources of Ukraine.

Crimea has rather unique (on the condition of ecologically substantiated extraction level) resources of salt lakes brine, carbonate raw materials, salt, curative mud, mineral and thermal water and other minerals (Yevpatoriya and Chernomorsky regions).

On the territory of the autonomous republic, there is a number of chemical enterprises making unique products:

• titanium dioxide and mineral fertilizers (ammophos);
• soda ash;
• liquid bromine, ferrous bromine, dibrompropane, bromine salt.

Machine building industry is represented by 9 scientific institutions and 50 enterprises. Additionally, in Crimea, there are 12 scientific research and design and development organizations.

At the contemporary stage of development of the Autonomous Republic of Crimea, the main goal of industrial and investment policy is represented by formation of production potential to be competitive on the domestic and international markets, as well as creation of favorable conditions for investments into the real sector of economy. It is worth noticing that 62 Crimean enterprises take part in international investment cooperation.

Food industry of the region practically covers fully the population of Crimea and tourists providing food products and even has serious export potential. Products of Crimean winemaking industry (dessert vintage wine and sparkling wine) are worldwide known. Essential oils of Crimea enjoy well-deserved excellent reputation.

Animal breeding industry of Crimea is to provide the locals and tourists with diet-grade, ecologically pure animal food products.

Agroindustrial complex is one of the most important spheres of Crimean economy. The main purpose of agriculture is the provision of quality foods to the population and guests of the peninsula, as well as creation of stable raw material base for food companies and increase of export potential.

An important efficiency factor of the agroindustrial complex is the correspondence of its branches to the social and economical importance of the region, focusing on maximum use of unique natural and bioclimatic potential of Crimea. In the future, the peninsula is to become one of the most important recreational areas in Eastern Europe and Northern Asia.

Due to this fact, the Autonomous Republic of Crimea pays serious attention to the development of traditional industries with their main criteria (economic, ecological, biological, etc.) fitting the diversity of climatic conditions and satisfying the people’s need in quality food products and various goods. Such branches include winegrowing, tobacco and essential oil plants growing and winemaking. Local natural conditions are favorable for growing fruits, berries and grapes on the most part of the peninsula’s territory.

Economic potential of Crimea is huge – both in industrial and tourist sectors. South Coast of Crimea is developing at the highest pace.

However, in any event, its example will be soon followed by other regions of the peninsula.

Therefore, now is the best time to invest into Crimea. There is a saying “Make haste slowly”, though it looks like the time has come for decision-making.