Turk­ish con­struc­tion firm stays put af­ter 15 years

Kyiv Post - - Business Focus - BY I LYA TIMTCHENKO [email protected]

Although orig­i­nally from Turkey, Emre Karaah­me­toglu may know Ukraine bet­ter than many Ukraini­ans.

As the re­gional di­rec­tor for con­struc­tion com­pany Onur, Karaah­me­toglu has been in Ukraine for 15 years and re­main happy to have stayed in busi­ness. The Lviv res­i­dent also over­sees op­er­a­tions in Be­larus and Moldova.

Onur en­tered Ukraine just as it was fac­ing the 2004 Orange Revo­lu­tion that over­turned a rigged elec­tion and brought Pres­i­dent Vik­tor Yushchenko to power.

The com­pany suc­cess­fully com­pleted its first test project in Odesa Oblast de­spite the tur­moil. A year later, in 2005, it started an­other project in Lviv, win­ning a ten­der held by the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment to con­struct 90 kilo­me­ters of the Brody-Lviv high­way.

Now, Onur has about 20–25 projects in its pipe­line, keep­ing Karaah­me­toglu trav­el­ing all over the na­tion.

Fam­ily his­tory

Eastab­lished in 1981, Onur Group is Karaah­me­toglu’s fam­ily busi­ness. It was launched by his un­cle and since then has op­er­ated in 10 coun­tries.

And although Onur Group also of­fers ser­vices in air­port and dam con­struc­tion projects, it mainly con­cen­trates on road con­struc­tion and main­te­nance in Ukraine. It owns sand and lime­stone quar­ries as well as a con­crete busi­ness in Lviv Oblast and an ag­gre­gate quarry in Vin­nitsa Re­gion. And re­cently it also in­vested in the agri­cul­ture sec­tor, buy­ing the rights to lease up to 5,000 hectares of land near Lviv.

Al­to­gether, Onur em­ploys 3,500 full-time em­ploy­ees and is ex­pect­ing to bring that num­ber up to 4,000 this year. With sub­con­trac­tors, the fig­ure can reach 5,000 work­ers. And of the roughly 4,500 fleet that the group owns, a third is in Ukraine.

Right now Onur is pre­par­ing its equip­ment and or­ga­niz­ing its team to make sure it hits the ground run­ning at the end of March, when the new con­struc­tion sea­son be­gins.

The com­pany saw one of the peak pe­ri­ods in Ukraine in the runup to the 2012 UEFA Euro­pean Cham­pi­onship as the coun­try pre­pared its in­fra­struc­ture for Western guests. But soon the EuroMaidan Revo­lu­tion hit the coun­try, oust­ing Krem­lin-backed Pres­i­dent Vik­tor Yanukovych in 2014.

Onur was hit hard by the eco­nomic re­ces­sion that fol­lowed the revo­lu­tion and the start of Rus­sia's war.

“Af­ter that for two years there were no in­fra­struc­ture projects,” Karaah­me­toglu said.

Most in­ter­na­tional com­pa­nies were con­sid­er­ing whether or not they should stay.

Onur bet on stay­ing. The bet paid off, and now the com­pany has more projects lined up than be­fore the revo­lu­tion.

In Ukraine alone, the com­pany’s rev­enues for 2018 were Hr 7 bil­lion, com­pared to Hr 5 bil­lion in 2017.

“We didn’t give up, we tried to keep all of (our col­leagues and work­ers), and then af­ter 2014, stepby-step, we started projects in the coun­try.”

Ukraine’s new­found course to­wards Euro­pean in­te­gra­tion has driven the rise in busi­ness: af­ter its as­so­ci­a­tion agree­ment with the EU came into force in 2017, Ukraine de­cided to im­prove its roads to EU lev­els.

“The gov­ern­ment started to al­lo­cate higher bud­gets for in­fra­struc­ture projects,” Karaah­me­toglu said. “Un­til 2014 we were work­ing in just three re­gions — in Lviv, Kyiv and Poltava oblasts. Most of the projects were con­nected to in­ter­na­tional con­tracts, fi­nanced by the loans from the Euro­pean Bank for Re­con­struc­tion and De­vel­op­ment and World Bank. But af­ter 2014, we started to par­tic­i­pate in lo­cal bud­get-funded projects as well, and started to ex­pand our busi­ness all over in the coun­try.”

And even though Onur is now con­sid­er­ing en­ter­ing the Pol­ish mar­ket, it is cau­tious about ex­pand­ing into other coun­tries and, af­ter 15 years in Ukraine, finds it has a com­pet­i­tive ad­van­tage.

“At the mo­ment we’re very happy to work in Ukraine, we don’t want to work in many coun­tries,” Karaah­me­toglu said. “We want to work in a few coun­tries where we feel com­fort­able and can have big vol­umes.”

There’s plenty of work to be done in Ukraine. Al­to­gether, Ukraine has about 160,000 kilo­me­ters of roads, and more than 90 per­cent of them are out of shape. Ukraine has re­paired up to 10 per­cent of the roads in the last three years.

“If Ukraine wants to at­tract in­vestors to the coun­try, they have to in­vest first in in­fra­struc­ture. But the (in­fra­struc­ture) bud­get size is still low com­pared to other coun­tries,” he said.

De­cen­tral­iza­tion

It helps that Ukraine is de­cen­tral­iz­ing its sys­tem of gov­ern­ment — more pow­ers are be­ing al­lo­cated to the re­gional and mu­nic­i­pal lev­els, and more money too.

“Start­ing from last year the re­gions started to lo­cate some small amounts of money… and this year the bud­get is al­most dou­ble what it was last year, thanks to de­cen­tral­iza­tion,” Karaah­me­toglu said.

Euro­pean in­te­gra­tion

Most Ukraini­ans still as­so­ci­ate the road con­struc­tion in­dus­try with cor­rup­tion and non-trans­parency. In the past, it was typ­i­cal for con­trac­tors to steal money from a project by not com­plet­ing it or do­ing it poorly.

But Karaah­me­toglu says this more dif­fi­cult to do.

Ukraine’s In­fra­struc­ture Min­istry has brought in two in­de­pen­dent or­ga­ni­za­tions to over­see road con­struc­tion. The first is the Con­struc­tion Sec­tor Trans­parency Ini­tia­tive, estab­lished with the help of the Bri­tish gov­ern­ment and the United Na­tions, while the sec­ond is the In­ter­na­tional Fed­er­a­tion of Con­sult­ing Engi­neers, or FIDIC, an in­ter­na­tion­ally rec­og­nized as­so­ci­a­tion of in­de­pen­dent engi­neers.

Each com­pany that wins a ten­der now has to hire a FIDIC en­gi­neer to over­see the con­struc­tion and take re­spon­si­bil­ity for the road’s qual­ity.

An­other help­ful tool has been the ProZorro pub­lic e-pro­cure­ment sys­tem, which makes the bid­ding pro­ce­dure for gov­ern­ment con­tracts much more trans­par­ent.

And a third sig­nif­i­cant im­prove­ment has been the re­form of Ukravtodor, Ukraine’s state roads agency, which is now run by Sla­womir No­vak, Poland’s for­mer in­fra­struc­ture min­is­ter.

There are still other headaches, such as the highly bu­reau­cratic process of re­ceiv­ing per­mits to ex­ploit de­posits of raw ma­te­ri­als.

"Some­times we have dif­fi­culty get­ting quarry per­mits, and it can take a lot of time com­pared to the terms of con­tract,” Karaah­me­toglu said. “We ask the gov­ern­ment to get in­volved and help with such prob­lems, be­cause in the end it’s a gov­ern­ment project and we’re just try­ing to fin­ish it on time.”

But over­all, “things are go­ing good” in Ukraine for Onur, Karaah­me­toglu said. “I cross my fin­gers that it will con­tinue like this.” is

Work­ers of road con­struc­tion com­pany Onur Group re­pair a road in cen­tral Kyiv on May 5, 2017. (Kostyan­tyn Ch­er­nichkin)

Emre Karaah­me­toglu, gen­eral co­or­di­na­tor at Onur Group

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