VZCZCXRO7585
RR RUEHIK RUEHLN RUEHPOD RUEHVK RUEHYG
DE RUEHKV #2985/01 3440726
ZNR UUUUU ZZH
R 100726Z DEC 07
FM AMEMBASSY KYIV
TO RUEHC/SECSTATE WASHDC 4516
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUCNCIS/CIS COLLECTIVE
RUEHKW/AMCONSUL KRAKOW 0007
RUEHZG/NATO EU COLLECTIVE
UNCLAS SECTION 01 OF 03 KYIV 002985
SIPDIS
SIPDIS
SENSITIVE
STATE FOR EB/IFD/OIA AND EUR/UMB
STATE PLEASE PASS TO USTR FOR PBURKHEAD
USDOC FOR 4201/DOC/ITA/MAC/BISNIS
USDOC FOR 4231/ITA/OEENIS/NISD/CLUCYCK
E.O. 12958: N/A
TAGS: EINV ETRD EAID EFIN PGOV PL UP
SUBJECT: UKRAINE: PLANNING FOR EURO 2012 SOCCER CHAMPIONSHIP
LAGGING
REF: WARSAW 01332
KYIV 00002985 001.2 OF 003
Sensitive But Unclassified. Not for Internet Distribution.
1. (SBU) Summary: The 2012 European Soccer Championship (Euro
2012), to be co-hosted with Poland, offers Ukraine opportunities to
attract USD billions in foreign investment, improve the business
climate, and make needed infrastructure upgrades. The event, which
attracts an immense following in Europe, also offers Ukraine the
opportunity to showcase itself as a modern European country. So
far, however, the GOU has taken few steps to surmount the myriad
challenges it faces in preparation for the championships. The
European soccer body organizing the event has even threatened to
relocate the championship game from Kyiv because of a dispute over
the construction of a shopping mall near the city's main stadium.
The Executive Director for the European Business Association (EBA)
at a recent EBA meeting noted that the government may be able to
attract investment more effectively and move Euro 2012 plans forward
once the political dust settles from the September Rada
(parliamentary) elections. A new government, and the President,
will need to make Euro 2012 a top priority. Ukraine is not in
danger of losing the event, but the risk could emerge if the current
lack of focus drags on far into 2008. Such an embarrassment would
be bad for Ukraine's political image in Europe and represent a
wasted chance for needed investment and economic reform. End
Summary.
Ambitious Investment Goals
--------------------------
2. (U) Ukraine will co-host the 2012 European soccer championships
with Poland (reftel). Games are planned in Kyiv, Dnipropetrovsk,
Donetsk and Lviv, with Odesa and Kharkiv serving as reserve
locations. Thousands of soccer fans from throughout Europe are
expected for the three week spectacle. The championship is an
immensely popular sporting event in Europe, ranking only behind the
Olympics and the soccer World Cup, and will give Ukraine the most
media exposure it has experienced among ordinary Europeans since
independence.
3. (U) On November 29, EconOff attended a Euro 2012 Task Force
Meeting sponsored by the European Business Association (EBA). Anna
Derevyanko, EBA Executive Director, gave an overview of Ukraine's
latest preparations for the event. The GOU has acknowledged that
Ukraine will need investment topping UAH 100 billion (USD 20
billion) for improving and expanding transportation infrastructure,
renovating and building new stadiums, and building more than 80 new
hotels. The GOU hopes that about 90 percent of the investment will
come from private sources, both domestic and foreign.
Planning Still Lacks Focus
--------------------------
4. (SBU) To date, however, the GOU's efforts to boost private
investment for 2012 have been minimal. Derevyanko said that few
preparations had been made, despite looming deadlines. The only
concrete step she mentioned was approval of legislation to take
effect on January 1 exempting imports earmarked for Euro 2012
projects from customs duties. She also highlighted coordination
problems, noting two coordinating committees had been formed, one
under the Presidential Secretariat, the other under the Prime
Minister. The extent to which both committees cooperate is unknown.
In addition to the two committees, a national agency responsible
for coordinating Euro 2012 issues under the Ministry of Youth,
Family, and Sports will begin work on January 1, assuming the Rada
passes the 2008 budget on time before yearend. The lack of a single
central authority already has created problems. For example,
preparations have been moving forward faster in Odesa than in
Donetsk, Dnepropetrovsk, and Kyiv even though Odesa is only a
reserve venue.
Investment Forums Held, Interest Only Lukewarm
--------------------------------------------- -
5. (U) Euro 2012 investment forums have been held in Lviv, Kyiv and
Odesa. So far, a total of only eleven companies, however, have
registered for Euro 2012 tenders. Interested companies, according
to Derevyanko, are required to submit registration applications to
the Ministry of Economy. There was agreement among the EBA
meeting's participants that one of the major stumbles in Ukraine's
bid was that the GOU had failed to make its tender procedures
public. A Citibank representative added that aspects of the tender
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process for lenders remain unclear. Another common complaint is
that tenders are required even for small projects, worth less than a
few thousand dollars. According to a participant at the EBA
meeting, however, winning a tender is easier than obtaining funding
from the GOU because Ukrainian civil servants make direct government
funding procedures very difficult.
Stadium Construction Challenges Remain
--------------------------------------
6. (SBU) Alexander Litkovskyy, Siemens Program Manager, stated at
the EBA meeting that a minimum of two years is needed to build all
of the necessary stadiums. The GOU will have problems completing
the stadiums by 2010, a Euro 2012 deadline, if construction does not
begin by March 2008, according to Litkovskyy. (Note: President
Yushchenko in late October made similar statements, and mentioned
that prospects for hosting Euro 2012 would diminish if sports
infrastructure is not ready in two years. End Note.)
7. (SBU) Preparations for Kyiv's Olympic Stadium, where group
games, a quarter final game and the championship game are planned,
have lagged due to disputes over construction of a nearby shopping
and entertainment complex, which limits the stadium's seating
capacity and reduces its safety by reducing the number of exits in
an emergency. The Union of European Football Associations (UEFA),
the organizer of Euro 2012, considers the shopping complex a safety
hazard and threatened to remove the stadium from the list of venues
scheduled to host games. Yushchenko's August 31 presidential decree
banned further construction near the Olympic Stadium, but razing the
partially finished complex is likely to be an uphill battle for the
GOU, the City of Kyiv, and UEFA. The Yudzhyn (Eugene) construction
company is financing the construction of the complex, 50 percent of
which is controlled by "Smart Holding Ltd," itself owned by
well-connected Russian businessman Vadim Novinsky. On December 6
the Kyiv City Council voted to move forward with the construction of
the shopping complex and suggested building a new stadium on the
outskirts of the city.
8. (SBU) On an optimistic note, Austrian Commercial Attache Clemens
Machal noted at the EBA meeting that after the Euro 2008
Championships end in Austria on June 29, UEFA will establish an
office in Kyiv. Machal predicted UEFA would "rule with an iron fist"
to move things forward.
Hotels, Transportation Upgrades Needed
--------------------------------------
9. (SBU) One of the participants at the EBA meeting mentioned that
Ukraine's hospitality industry and airports need overhauling to
prepare for Euro 2012. Private investment particularly will be
needed to address the lack of hotel rooms in Ukraine. The GOU
expects 82 three star hotels to be built, but so far no plans have
advanced largely due to private investors' concerns that these
projects are not economically viable. In addition, airports and
transportation capacity between airports and city centers need to be
upgraded to accommodate the large number of soccer fans who will
visit. Managing the flow of thousands of fans across the border
with Poland will pose an additional administrative challenge, since
Poland is due to join the EU's Schengen visa regime on January 1,
2008, and this could complicate movement of some fans (particularly
Ukrainians) from Ukraine to Poland.
Comment
-------
10. (SBU) Euro 2012 will give Ukraine a chance to showcase itself
as a modern European country to an attentive European audience, as
thousands will descend on the country and millions more throughout
Europe will hear about Ukraine regularly via the media in the months
before and during the championship. The event could also attract
the largest surge in foreign investment in Ukraine's history. We
would also expect that the games will give the GOU clout to push
through many of the economic reforms that are needed to attract the
high levels of FDI. For example, the World Bank has pointed to Euro
2012 as an impetus for reforming Ukraine's government procurement
process immediately. To date, however, the GOU has said all the
right things about Euro 2012 but taken very little concrete action,
and any action it has taken has been poorly managed and coordinated.
It is not too late for the GOU to change course, but it must do so
soon after the new government takes office. Ukraine is not now in
danger of losing the championship, but the risk could emerge if the
current slow pace of preparations continues far into 2008. Such an
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embarrassment would be bad for Ukraine's political image in Europe
and represent a wasted chance for needed investment and economic
reform. End comment.
TAYLOR