SCM CEO Oleg Popov addresses SCM businesses: recovery begins with the industry

SCM CEO Oleg Popov addresses SCM businesses: recovery begins with the industry

DTEK29 April 2020

The world is waiting for a coronavirus vaccine and developing herd immunity, while looking for the ways to overcome the economic crisis and for the new recipes of economic health.

The pandemic and the lockdown have caused a global slowdown. Managing Director of the International Monetary Fund Kristalina Georgieva has expressly said that the coronavirus pandemic will bring the worst economic fallout since the Great Depression of 1929. The global economy is expected to contract by at least 3% in 2020. Ukraine's outlook is even more depressing with 8%.

Today's hardest challenge is to get over the uncertainty.

Nobody has any off-the-shelf solutions, only forecasts and scenarios. The economists and business community explicitly state that the recession is going to be deep and long. After all, for the first time in 100 years, the world is facing a crisis of this nature and magnitude. A crisis that could sink the entire industries. 

The uncertainty has already spread beyond the economy to become a social phenomenon. The uncertainty is so strong that no one can handle it on their own. People are gripped by fear. To snap out of consternation and move forward, we need to find the footholds. 

The first step is to accept the new reality (both the pandemic and the extreme economic slowdown) and start working in it. We have embarked on very extensive efforts to support the government in the fight against COVID-19. We have done our best to keep our employees secure and our operations uninterrupted (in every decision, we have prioritised the stability of business and the care about our employees). We have stepped up with the initiative to commence the development of an economic strategy for the country amidst the global crisis, which has found support with other businesses and the government. 

I am confident that business, namely the industrial business, will be the key to overcoming the uncertainty, the main driver of growth, and the main foothold, both globally and in Ukraine. The real sector of economy is going to create a new certainty. The recovery of the industry will lead the way for the small and medium businesses, services, and creative economy. 

Why is it the industrial business that gives certainty? For the economy to recover, it should rely on the most sustainable players. Now it is clearer than ever that the national economy will survive only if the steel industry, energy, and the agricultural sector can overcome the crisis. They are the pillars of Ukraine's economic recovery. Just as doctors are at the front line of the COVID-19 battle (supported by businesses and philanthropists), so steel makers, miners, power engineers, farmers, and machine builders are working at the front line of the fight against poverty. 

The economic recovery starts with industry.

Our recovery plan for Ukraine is to push the industry forward that will give small and medium-sized businesses a chance to recover. We are following this plan. We believe in it and invest into it. What exactly are we doing? 

On the one hand, we continue to work, run business “as usual”, which really means making a heroic effort at the moment. Our enterprises have switched to a special mode of operation and introduced new H&S standards. On the other hand, we are taking great efforts to preserve liquidity in order to be able to pay salaries to our employees and make payments to our contractors. Most importantly, we continue to invest in our key projects, primarily in production businesses. 

The experience of China shows that, with the right government policy, it is the most effective to start with the industry. Chinese industry has almost recovered, while the services sector has barely reached 40% of the pre-crisis level. However, they have put the wheel in motion to start the growth plans, and the alignment of sectors is just a matter of time. Basic industries are like locomotives pulling trains: they help other sectors to catch up. It is vital for us to repeat this scenario. SCM is more than just the heavy industry and energy sector. It is also banking and insurance, telecommunications, as well as other businesses. We are all in the same boat. 

SCM is a large, creative, and sustainable business that provides jobs and pays salaries to employees, contributes to the national budget, and enables the development of small and medium-sized enterprises. This makes SCM an important element of Ukraine’s economic foundation. The more stable the foundation is, the sooner we will rebuild the economy. 

Why is it so? The economic truth is exposed in turbulent times: only those businesses that honestly pay salaries and taxes serve as a financial backbone of the State. This is especially true about Ukraine with its high share of the shadow economy. Rinat Akhmetov's business is a key legitimate business and the biggest taxpayer in the country. Taxes are the sole source of national budget revenues. Our taxes mean salaries, pensions, roads, education, defence, and medicine.

How to accelerate the economic recovery?

It will take more than two weeks or even two months. To speed up the process, three principles should be strictly observed at the governmental and national level:

1. Solidarity and mutual assistance. The sooner the country can concentrate all its forces on this objective, the faster the recovery starts. We should get united to save the economy, just the way we have united to fight COVID-19. 

2. Professionalism. Now there is no room for empty populism and opportunistic slogans. For Ukraine to survive the crisis, we need a professional dialogue between the government and business. Today the national economy needs a clear focus on the core sectors and on the recovery and growth drivers. We all need a clear-cut plan and a lot of work.

3. Economic patriotism. The pandemic and the global “all-in fight” for medical supplies and protective equipment have shown that we have not only the social distancing between people, but also the economic distancing between entire countries. It is a sort of an economic quarantine. Economically, every country is now for itself. The governments of the biggest countries are intensifying measures to protect domestic manufacturers. Supporting the inland production is a global trend today that is gaining momentum. This means that Ukraine should rely on itself as much as possible to restore and preserve the economic health. For the Ukrainian economy to recover at all levels, it is necessary to stimulate domestic production, from municipal procurements to nationwide programmes. This does not mean that we must close Ukrainian markets for other countries. This means that we must develop the national business, from small businesses to systemically important companies.

The world is changing, and so are we. At these difficult times, we need more than just solutions. We need working solutions. And we will find them together. 

Profile

DТЕК is the largest private investor in Ukraine’s energy sector.

DTEK Group produces coal and natural gas, generates electricity at thermal, solar and wind power plants, distributes electricity, supplies electricity to end consumers, provides energy efficient solutions and develops a network of EV charging stations.
In 2019, DTEK’s capital investments totalled UAH 23 bln. Moreover, the company paid UAH 23.4 bln of taxes. DTEK employs 70 thousand people.

The company is 100% owned by SCM Limited. Ultimate beneficial owner – Rinat Akhmetov.

 

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