Case 6: Yuriy Fomichev, Director General, SKS
The company was established in 1999 to provide services of construction and erection work, and complex repairs to various premises. The company conducts a whole range of construction work from development of design-models using modern computer technologies to finishing work and equipment installation.
At the beginning of SKS operations, the company’s clients were private individuals. Over the course of the enterprise development, the list of its clients has considerably changed. Through promotion activities, SKS received contracts to conduct work at the facilities of the Slavutich Laboratory of International Research and Technologies, the International Radio-Ecological Laboratory, etc.
The enterprise has managed to increase its production volume through improvement and development of various stages of its production processes, the introduction of advanced construction technology, and through the use of construction materials of high quality, which are certificated in Ukraine. The company uses equipment made by leading foreign companies. The company’s market share is 1.8%
In 2001 the company had 18 employees.
Yuriy Fomichev presentation
The impression of American construction methods and the organization of construction I got is tremendous. Within such a short period of time we managed to see and to try to understand not only the system of construction industry operations in the United States, but the way the society in this country operates.
On the basis of everything that I have seen it would not be right to say that I am going to implement some improvement directly in a week, for example, because we could not possibly do it. Of course, there are many new ideas that can be potentially implemented, but we need to analyze them, to review them, to get them all together and discuss them with other people. In the course of this discussion we might get a whole chain of other ideas and other opinions which will help us in the long run to organize some substantial innovation. The main thing that I want to stress is that we have had a development concept for a long time in Slavutich and we now have seen it here in the States in such a functioning and perfect operation.
We want to establish our own association of construction companies on the basis of the example of the Allied Construction Industries Association. It will be good to exchange information, to help each other to get necessary information and data about contracts, and to know what is going on in the construction industry.
Such an association would be very good in terms of facilitating reemployment of the staff of the nuclear power plant in Slavutich. There are a lot of construction companies that are working on various types of projects and there are also ongoing international projects right now. If we have an association it would be easier for us to find our niche, to find our place in this market and to win bids. Because in this period, when we have international companies working on our projects, if approached properly, it would help us lay the foundation to become known to the whole construction market in Ukraine, because we in Slavutich right now are rather limited and somewhat separated from the rest of Ukraine.
As for the issue of establishing new production facilities in Slavutich, this is a much more complicated issue because we still don’t have a law about land ownership in Ukraine. Of course no investor or any person will at present buy land and then build a production facility because of the lack of existing proper laws.
If I were able to apply and implement everything I learned that I want to do right now I can estimate that I would be able to reduce the period of construction, the regulated, the normally agreed period of construction in Ukraine by at least up to 7 to 10%. As for the financial impact, unfortunately I would have to say that we have to totally change the whole existing credit system because our system of extending credit and of giving loans, for construction companies to conduct their construction projects does not work at all right now. And the same can be said about our system of leasing. Unfortunately leasing doesn’t work properly. I think that probably the way leasing is done here in the United States is the second most important thing I learned. I observed this in the U.S. and I’m going to try at least to change the leasing procedures in Ukraine.
I am interested in Bobcat equipment and it was very good that we discovered that representatives of this company can be found not only in Western Europe but also in Eastern Europe and in particular in Russia. This gives us the possibility of establishing a production facility as well as a distribution center in Slavutich, all without substantial transportation and shipping costs.
I am not talking about Bobcat production facilities right now because of the land and plant investment issues. I am talking about establishing a distribution center which would primarily deal not only with selling but also with leasing because that is the big problem in the Ukraine. There are a lot of companies who own equipment. If they needed other additional equipment I can only sell it to them because it is not profitable for me to lease it. But the customer would rather rent than buy.
There is a great demand for Bobcats even though labor cost is still low in a lot of big cities in Ukraine, and in particular in Slavutich. The members of our group from Slavutich saw how much you can reduce expenses and how much you can accelerate the finishing of construction projects using this type of mechanical device. We have a great demand for this type of machine. Of course, we have other equipment that we are currently using because we cannot avoid using it. This equipment works and we use it on a regular basis but it actually costs us much more to store and maintain it. We have to pay two people to operate it because it is a very big and complicated machine. We can maneuver the smaller Bobcat equipment very well and that is what we need. The things I liked most on the tour were the visits to the Marvin Windows and Bobcat companies. In Kiev they have a machine similar to a Bobcat, but it is not a Bobcat. Not Bobcat, but others.
I learned much from the visit to the reinforced precast concrete plant, the Ohio Valley Precast Company. It was great. Personally I think that if we will give this pre-cast concrete information to the right people it is highly possible we will be able to establish such a plant in Ukraine because the startup cost of a new plant is not that high. We know that firms are using comparable equipment from Finland. And another factor is that this Finnish equipped pre-cast concrete assembly line is actually operating with new equipment. So it is highly possible that a plant similar to Bobcat can be organized in Ukraine. However, this can only be done after the land and credit problem have been solved. But this plant should be the first to be established.
You can now lease land if you are organizing a firm for assembling, such as some device or mechanized parts for houses. But if you are talking about the plant like Ohio Valley Precast where a company needs to make a substantial capital investment, it is much better to wait until the land problem has been solved and then start building it. Of course, right now we can start by leasing land and possibly establishing a small assembly company. But the precast concrete plant is going to have to wait.
Right now you cannot even expect Ukrainians to invest in Ukraine. At present in the current situation there are people who are ready to invest their money but they just don’t invest because they don’t know what is going to come out of it. There are still some vacant buildings in the smaller cities. This is the least of our problems. We also have a problem trying to prepare the required leasing documentation. Banks don’t have the cash to lease plus it’s a very bureaucratic and disappointing process seen in our attempt to lease a place for a warehouse. We actually did it but it took us forever. You can get a nervous breakdown trying to prepare all the documents. Unfortunately it works very slowly right now but hopefully it will change. In this case it is the bureaucracy, not the money availability. In order to finish the documentation you have to get at least 20 signatures and everybody tells you they will give it to you at the last minute just go to somebody else first.
There are fewer problems with the tax police in Slavutych because it is a fairly small city and everybody knows everybody so it would be difficult to hide things. It’s much simpler and the fact that Slavutich is a special economic zone also plays a favorable role.
There are two types of information I am going to disseminate. The first is my view of American social life, about the way of living, about traditions, and about socially related factors. The second one is about production and industrial information that I am going to share with my colleagues. This can be practically used throughout the future.
I will be contacting about 100 people. And, of course, those people will share it with others, but the number of my direct contacts is going to be about 100.