The appointment of Pavel Vugelman to the recently created vice mayoral post for investment and economic development is an important milestone for the history of the city’s governance. The creation of this position is also a positive signal from the mayor’s office. Still in his mid-30’s, the deputy mayor is quite accomplished for his age. Vugelman first entered politics at a young age and is part of the first generation of truly post-Soviet civil servants and political elites. Vugelman was educated in Ukraine and Canada and also garnered his modern world view while taking part in professional training in Europe and Israel. This interview took place at his office in the City Hall building on the Dumskaya Square.
Odessa Review (OR): Thank you for joining us. Can you tell us about your current responsibilities?
Pavel Vugelman (PV): Thank you for coming! As vice mayor of the city, that is as a deputy mayor, I deal with investments, the particulars of the economy, issues pertaining to Euro-integration and also new projects devoted to the development of the city.
OR: You were a city councilman before you were offered this position.
PV: Yes, and before that I was a student mayor and the deputy of the student city council. After being a councilman, I became the Head of the Budgeting and Finance Commission. After the last elections, I was approached by the Mayor and asked to join his team and to begin working on the investment portfolio and economy of the city.
OR: What are differences you’ve noticed between being a city councilman and a vice mayor?
PV: Well, when you are a city councilman, you have much less responsibility as you can imagine. Councilmen imagine specific projects and are constantly discussing issues. When you are a representative with executive power you have to work much harder, everything that you say is taken at face value and you have to stand by it. You have to know what it is you mean exactly and also understand that every public declaration means something. All the responsibility is ‘on your neck’ as the saying goes.
OR: Can you speak about the current state of investment in Odessa?
PV: Yes. We can finally speak of some success stories. Last year, we obtained more than one and a half billion dollars in investment for the city. We have stopped the capital flight situation and we now have a huge number of projects and programs in which the European Union, American corporations and Chinese companies have begun investing in Odessa. We have a good situation where all of our investment ratings show marked improvement and indicate that we have huge potential. Forbes magazine has put us on the table and we have been ranked number one in doing business out of the major cities of Ukraine. Last year we paid off all of our debts to international donors and banks as well as to all Ukrainian banks. We are now debt free.
OR: What are you doing about improving the business climate and making market access easier? About simplifying the process for starting a business and clearing away the remnants of Soviet -style over regulation and red tape? Because some would say that Odessa is not a great business environment at the moment. Others say that vast improvements need to be made.
PV: For many years, many investors did, indeed, face serious problems when they invested in the city. But, today the position of the mayor and his team is to work very hard to improve the quality of the investment experience. That is why one of our primary investment strategies is trust, because we know that investors, tourists, Odessans believe in results when they feel that trust. We believe in our executive power and we trust in Odessa’s businesses, whose representatives are working for the best interests of the Odessa region. Every day, exemplary representatives of big business are doing good deeds for Odessa’s economy and social sphere. This is the only way to make our inhabitants and visitors believe in our city and it’s potential for economic growth. But, when you look at all the economic indicators in Odessa, with the help of tourism, logistics, our fantastic geographical location, emerging IT-technology companies, and real estate & development companies, we are emerging as a world-class destination for foreign investment. All these indicators are growing exponentially. For example, the price of our workers is very inexpensive, the labor market is very competitive, even better than China’s labor. That is why many foreign investors are taking a close look at the possibility of developing enterprises in Ukraine. This is especially true of the case in Odessa, which is a great logistics and regional hub. Our task is to create a welcoming atmosphere for the investor. That is why, if one wants to build a new building or a logistics park or to invest in any other sphere, we will gather all the needed representatives of municipal power in one room to assist in doing so. We have an open office, where one can get all the information, necessary permits and get their investment approved in a one stop shop.
OR: So, what are the incentives for foreign investors at this point in time?
PV: The last time these things were measured we recorded a medium return of 30% for our investors which is a high indicator for many foreign investors. That is why we are sure that the relationship between potential returns and political risk is very attractive. That is to say that potential returns on investment are better than whatever risk issues might exist in the country. The mayor’s office is fulfilling our responsibilities towards our partners and investors.
OR: Tell us about the big upcoming investment and business forum? Who will participate?
PV: Thank you for asking about that. We are about to present the first annual iteration of our Odessa 5T Summer Business Days Forum. There will be more than 300 participants, including large investors and potential investors to the Odessa region. We will take this opportunity to present the concept of our special Odessa product/portfolio – ‘Odessa 5T: Transport, Tourism, Technology, Trade and Trust’. The conference was decided to be held by the Odessa City Council in full partnership and agreement with the mayor and the city’s executive power. We will present our services as well as the most interesting municipality projects in the Odessa region.
OR: What about the mayor’s relationship with the governor’s team, despite all the public tension, are you cooperating with governor Saakashvili on the issue of investment?
PV: Unfortunately, we are not cooperating at the moment. We are totally independent from their decisions and work, because we as the executive power (that is the mayor and the city deputies) are elected by the citizens of Odessa – they gave us the mandate for us to do our work. So we must do our work well every day for the good of the city and its inhabitants.
OR: So how long have you been in your position?
PV: I have been working here for three months already.
OR: What do you think you’ve gotten done in those first 100 days?
PV: We have had success stories in all the spheres of the ‘5Ts’, enough to feel satisfied with our accomplishments. Not long ago we hosted an ‘International Transport Week’ in Odessa. Also, we have had a major transportation forum that deals with the employment prospects of sailor. Every September we host a huge IT-forum in which up to 600 companies take part.
OR: Have you been successful in bringing foreign companies to invest in last 3 months?
PV: We are working on multiple city programs. A primary priority is modernizing Odessa city lightning. Other initiatives that we are focusing on include elevator production, electronic tickets, and equipment for the Odessa municipal hospital. There is the construction of a new clean energy and automated waste disposal compound. We have received a positive response from European investment banks on two of our tenders for investment in city infrastructure. All of these projects are at varying levels of completion.
OR: What can you tell us about the future of the city. Kiev for example, in the two years after the Maidan, has instituted a system of recycling done according to Western standards.
PV: One of our primary demands of one of our new investors is that they assist us in switching over to separating garbage from recyclables. They are interested in doing this because it is economically efficient. Next year we will be launching a soundless express trolley to connect the Poselok Kotovskogo (ed: ‘Kotovsky Settlement’, a suburb of the city) to the center of the city. There are also plans to launch modern buses that run on electricity, and to fully refurbish the trolley fleet. Later this year, an Odessa company by the name of ‘Tatra’ is planning to put out the latest generation of trolley, one that would make even Western Europeans jealous. We also plan to get all the city parks and squares cleaned up and replanted to the highest standards. By next year we hope to connect all the parts of the ‘Route of Health’ (ed: a strip of pedestrian land that runs along the sea and is used for jogging) so that it is up to 17 kilometers long, which would be twice the current length.
OR: What are the biggest problems for the city and the biggest challenges from your point of view?
PV: Well, whenever I appear at international investment forums and funds and make appeals to local businessmen they give me a very warm welcome, and ask me why no one has ever spoken with them before because they have so many ideas! They tell me that no one ever invited us to participate. My position has never existed before, but today it is of absolute and critical importance for the city. We had an economic development department in city hall, but its makeup has radically shifted with the arrival of an energetic and young team. We are also keen to create a communal project – an Investment and Promotion Agency – where a potential investor can come and see the whole picture of future investment projects as well as see all offers from the city. All the technical, legal, financial and statistical details will be clearly provided with all the offers. Also, this agency would be responsible for promoting Odessa in other cities and all around the world.
OR: Can you speak about the security situation for investment? Which is, of course, a crucial issue from the standpoint of investor confidence.
PV: Over the duration of the last several years there have not been any serious disturbances. 2005 had the armed takeover of the ‘Uspeh’ market as well as the illegal capture of 3 hectares of private land belonging to private investors. Recently, they have all won their court cases. We have around 500 people working for the mayor’s office who specialize in security issues. We are in the process of bringing law and order to the city – businessmen who have illegally purchased land in the city simply cannot privatize it.
OR: Is there anything else that you would like to discuss in conclusion, in terms of your future plans for the city?
PV: Well, it seems to me that of any city in all of Ukraine, Odessa has some of the best potential. Our city has a tremendous fund of educational facilities ranging from highly rated universities to private schools. Also, our cultural opportunities are numerous – we have film festivals, the ‘Golden Violin’ festival, marathons, economic forums and gatherings. We are positioning Odessa as a city where something is taking place 365 days a year. We are opening an investment opportunity by constructing a congress hall, which will host sports events and large scale concerts – perhaps on the level of Madonna. Just two weeks ago we had a meeting with the director of the Vera Holodnaya film center (ed: it is named for the renowned Soviet silent film actress) and she gave us a private tour. The Odessa film studio (where the film center is located) is government property and we asked them how the city can be of use. They told us that the studio needs investments in order to bring it up to international standards and once again make it the equal of Hollywood. I hope we can find those investments real soon.
Also, I forgot to mention that the city government of Istanbul continues work on our ‘Istanbul Park’, and that we are finishing work on a passage way under the Potemkin staircase to connect it to the greenery of the newly restored ‘Greek Park’. Little by little we are fulfilling our obligations on all our projects and the Istanbul park is slated for opening on September 2nd, the day of the city.