Identifier
Created
Classification
Origin
07KYIV1184
2007-05-18 05:11:00
UNCLASSIFIED
Embassy Kyiv
Cable title:  

UKRAINE'S KREMENCHUK: NOT YOUR TYPICAL POST-

Tags:  ECON PGOV EAID UP 
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VZCZCXRO9130
PP RUEHDBU RUEHLN RUEHVK RUEHYG
DE RUEHKV #1184/01 1380511
ZNR UUUUU ZZH
P 180511Z MAY 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC PRIORITY 2347
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNCIS/CIS COLLECTIVE
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHDC
RUEHBI/AMCONSUL MUMBAI 0037
UNCLAS SECTION 01 OF 02 KYIV 001184 

SIPDIS

SIPDIS

STATE FOR EUR/UMB
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
MUMBAI FOR WKLEIN

E.O.: 12958: N/A
TAGS: ECON PGOV EAID UP
SUBJECT: UKRAINE'S KREMENCHUK: NOT YOUR TYPICAL POST-
SOVIET, INDUSTRIAL EYESORE

KYIV 00001184 001.2 OF 002


UNCLAS SECTION 01 OF 02 KYIV 001184

SIPDIS

SIPDIS

STATE FOR EUR/UMB
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
MUMBAI FOR WKLEIN

E.O.: 12958: N/A
TAGS: ECON PGOV EAID UP
SUBJECT: UKRAINE'S KREMENCHUK: NOT YOUR TYPICAL POST-
SOVIET, INDUSTRIAL EYESORE

KYIV 00001184 001.2 OF 002



1. Summary: Kremenchuk, an industrial city of 232,000 in
central Ukraine, is home to several thriving enterprises.
A visit to a local meat plant revealed a company
transforming itself from a post-Soviet mess to a modern,
competitive facility. The city administration is focused
on a series of major infrastructure projects, and
desperately wants to build a new bridge to link the city's
two parts. The city also boasts an active civil society;
we were particularly impressed with a local youth group.
Econoff found that Kremenchuk, whose economy is growing
thanks to a diverse group of medium-sized enterprises, was
a counterpoint to the negative stereotypes of Ukraine's
industrial regions. End Summary.


2. Econ Officer and Assistant visited the city of
Kremenchuk April 26-27 to attend the tenth annual trade
show "Chumatskiy Shliakh," the city's largest showcase of
local producers. The annual event is organized by an NGO
headed by a recent participant in an International Visitors
Program focusing on investment promotion.

Kremenchuk Background
--------------


3. Kremenchuk, located in central Ukraine on the banks of
the Dnieper River, is a city of only 232,000 inhabitants,
but is nonetheless the industrial center of Poltava Oblast.
The city dates to 1571, when Polish King Sigismund II
decided to build a fortress at the site to protect the
region from Cossack and Tatar intrusion. Over time,
Kremenchuk developed as a commercial center thanks to its
location at the crossroads of two trade routes. Today the
city is home to a number of successful enterprises,
including the Ukrtatnafta oil refinery and the large truck
producer AutoKrAZ. The stock of foreign direct investment
(FDI) into Kremenchuk stood at USD 148 million as of
January 1, with 72 percent coming from Russia and 17.4
percent from the Netherlands.

Thriving Medium-Sized Enterprises
--------------


4. Atypical for an industrial city in Ukraine, Kremenchuk
boasts an attractive, green center. Kremenchuk also
differs from the norm in that it is no longer a "company

town" with a single firm dominating the local economy,
although the refinery now owned by Ukrtatnafta may have at
one time played that role. The local service sector
appears to have taken off, and a number of successful,
medium-seized enterprises, active in a diverse range of
economic activities, are driving the city's economic
growth.


5. The Ukrtatnafta oil refinery, one of the country's
largest, is nonetheless still central to the local economy.
It combines oil extraction, processing, and retail sales
under one roof. The refinery has not operated at full
capacity since the early 1990s, however. Part of the
refinery's problems probably lie in the overcapacity and
market conditions that hamper all Ukraine's refineries, but
local observers noted this may be abetted in Kremenchuk's
case due to an ongoing dispute among its owners: the
government of Ukraine, the government of Tatarstan in
Russia, and private investors. (Note: Company infighting
continues despite press reports back in 2004 that the
dispute had been resolved. Ukrtatnafta management declined
Econoff's request for a meeting to discuss the current
situation. End Note.)


6. Local meat producer Kremenchukmiaso in many ways
symbolizes the city's successful economic transition.
Kremenchukmiaso struggled to survive the national economic
collapse of the 1990s, but a bankruptcy ruling in 1998,
followed by an injection of financing from a Kyiv bank,
paved the way for the company's rehabilitation. It now
produces nearly 200 different meat products, and, largely
thanks to the successful branding of its popular "Doctor"
sausages, has captured 5 percent of Ukraine's market for
meats. The company also exports to Georgia and Russia.
During a tour of the facility, Econoff found the top two
floors of the main plant facility impeccably clean and
modern, complete with German-produced equipment. The
ground floor, meanwhile, with crumbling flooring and blood-
stained walls, looked like something from Upton Sinclair.
Irina Drozdova, Deputy Director of Kremenchukmiaso, told us

KYIV 00001184 002.2 OF 002


that the company had so far managed to renovate and upgrade
70 percent of the plant. The physical plant, therefore,
served as a visual metaphor for the firm's progress to
date, and its potential for growth.

City Priority #1 - A New Bridge
--------------


7. Deputy Mayor Volodymyr Onyschenko and other city
officials briefed foreign businessmen and diplomats on the
city's economic development. The city, he said, was
seeking financing for a series of major infrastructure
projects, from a waste management facility to a new,
environmentally-friendly city district. All city officials
agreed, however, that most important for Kremenchuk was the
construction of a new bridge over the Dnieper river to link
the city's left and right banks. The current bridge was
frequently unusable due to structural deficiencies, slowing
transportation between the two halves of the city and
creating uncertainty for local businesses. A group of
Slovak investors present at the conference expressed
interest in the project. Econoff noted that the Millennium
Challenge Corporation's (MCC) compact program could be used
for infrastructure projects that would alleviate poverty
through economic growth. He encouraged Kremenchuk to
contact Ukraine's MCC points of contact to discuss the
city's priorities.

Active Youth NGO
--------------


8. Local government officials boasted of the city's active
civil society and included representatives of youth
organizations in their briefing. Econoff met both with
Maksim Levchuk, a graduate student who doubles as a member
of the oblast council, and with a group of about 20 members
of the Kremenchuk Youth Parliament. The young men and
women, including high school seniors and college students,
displayed an impressive degree of community engagement.
The group is active in areas as diverse as protecting the
environment, aiding the local prison population, and
promoting women's rights (by founding a local soccer team
for women, who are often denied a chance to play given
Ukraine's patriarchal view of the sporting world).

Comment: A Different View of the Regions
--------------


9. The attractive and relatively prosperous city of
Kremenchuk offers an interesting look into the economy of
one of Ukraine's regions, which outsiders usually view
through the prism of preconceived notions of East vs. West,
or industrial vs. agricultural. Kremenchuk is benefiting
from a diversified economy, with medium-sized enterprises
leading the way, and an apparently healthy civil society.
The city is still poor by European standards, of course,
but from what we saw in our visit, appears to be headed in
the right direction.

TAYLOR