Ukrainian developers turn into migrant workers

Photo: Konstantin Melnitskiy

Having lost the hopes to make money in Ukraine, developers are exploring foreign markets. Two months ago the Altis-Holding Development Corporation opened an office in Georgia and a month ago – in Kazakhstan, said Chairman of the Supervisory Board Oleksandr Hlymbovskiy in a conversation with Capital. “Currently, we are formalizing documents to operate in Moldova,” he says.

The example of Altis-Holding was followed by other developers engaged in provision of main contract services – construction of buildings and structures by orders of investors. President of the Hertz Group Oleksandr Rotov says he plans to open a representative office in Kazakhstan. “We are also considering the possibility of working abroad,” said General Director of the Lviv construction company TKS Ivan Torskiy. He withheld from any further comments. Altcom, which won the tender for construction of the airport in Turkmenabat, as well as a railway and a highway bridge across the Amu Darya River, is currently operating in Uzbekistan. The total cost of the works is estimated at US $700 mn.

Motionless market

Developers are forced to assimilate in the construction markets of other countries due to domestic problems in Ukraine, says Deputy Development Director at Stokman Serhiy Ovchynnikov. “There are almost no orders now, only social housing is under construction,” he explains. In January–September the number of orders decreased by 80%. “We used to work with foreign companies, but now they have frozen their investments in our country,” adds Rotov. Primary contractors cannot profit from low-cost apartments – they make just enough to pay construction workers, he says. This is due to the fact that the costs of construction materials increased much more than the prices of housing.

Many developers tried to survive at the expense of public contracts. But it is very difficult to find money for the fulfillment of such orders, says a director of a major construction organization on condition of anonymity. “We need to construct a building with our own money and then wait for payment. But we have no such financial capacity,” says the source. For example, in late July CEO of the TMM Development Company Mykola Tolmachev said that the government debt for the construction of administrative buildings of the Supreme Economic and Supreme Administrative Courts in Kyiv was approximately UAH 7 mn. At that time, the developer has not received the money for its work in March and had to continue the work at its own expense. The company was paid in August.

Pitfalls

Developers will not manage to make a lot of money abroad. “In CIS countries primary contractors are paid 5–7% of the estimated cost of construction for their works,” says Rotov. That is why in recent years Ukrainian developers remained idle abroad – they had enough orders in Ukraine. Hlymbovskiy acknowledges that foreign customers pay for provided services on time.

Competition abroad is very tough, so it will be difficult to win tenders, says Ovchynnikov. At the same time, Ukrainian developers may face a shortage of staff: “In our country there are problems with engineers - the average age of our professionals is 60 and they do not want to work abroad”.