Ukraine’s Economic Future: Investment, Resilience, and Opportunity

Welcome to Develop This, the number one podcast for economic and community development professionals, with your host, Dennis Frazee. Welcome back to another edition of the Develop This podcast. It's Dennis, and today we're going to go someplace on Develop This that we have not gone before. We don't normally go, and that's going to be Ukraine. I think when most of us, myself included, Americans here in Ukraine, we immediately think about, of course, the war that's going on.

But behind those headlines, there's something else that businesses are still operating. People are still going to work. Companies are still hiring. Communities are still trying to attract investment. And businesses are making decisions today about what Ukraine might look like in 5, 10, or 20 years from now. So my guest today has had a front row seat to that story. So Bruce Talley is a founder and CEO of Destination Ukraine and Destination Moldova, and a partner in Avalon Capital.

He's been doing business in post-Soviet regions since 2002. So Bruce, welcome to Develop This. Thank you very much. I'm glad to be here. Yeah. Hey, Bruce, I'm really, I have to tell you, this is probably one of the interviews I've been looking forward to the most on Develop This because, you know, I think we just have to start right with the obvious question. What's it like in Ukraine right now? Well, I think, you know, for your listeners to, what I would say is it's not homogenous.

You know, Ukraine is roughly the size of Texas, about 90% the size of Texas. And so if you're in far Western Ukraine, maybe around Lviv or someplace, you're something like 800 kilometers from the front. So it's not, and I don't think that the media is mischaracterizing things that are happening there. It's just not what happens in Krematorsk or happened in Bakhmut may not be happening in Ivano-Frankivsk or Trinitsky.

So very recently, of course, it's been really the Russians hit, have hit Kyiv very, very hard. So that's, that's suffered more damage. There's been more civilian casualties in July and August than there had been for quite a while, but people are getting up and they're going to work. Ukrainians, like humans, most places are very resilient people. Yeah, I find this to be just, just fascinating, right?

Because it's hard for us to probably even wrap our head around what that must feel like. But when you wake up in the morning and you go about conducting business, you know, for, for the average Ukrainian, I guess it just depends on geography. Is that kind of what you're saying, depending on where you live, how far you are from the front, et cetera? Yeah, I think so. I think that's a big part of it.

And then again, Kyiv has probably had a tougher time of it more recently than it, well, definitely, you know, and I don't want to minimize that in any way. But they've, they have gone after civilian infrastructure and homes and, you know, churches and, and cathedrals, priceless historical architecture in the country. So, yeah, it makes a lot of difference. If you're in Zaporizhzhia, that has been, been kind of tough.

And then, of course, some of the cities on the front line, this sort of belt of steel that Ukrainians have really successfully held for a long time. And the Russians, maybe, it depends on who's counting, but I think last month that one of the agencies that, or one of the organizations pays really close attention, thought that maybe the Russians in the month had gained a total of five square miles.

Wow. Yeah, it's hard. I mean, I saw the news the other night that said that how much of the war is being, you know, propagated with, with drones. I mean, it's just really just a very interesting, just interesting time. So, so let me ask you this, Bruce, can you really conduct something resembling normal business while the war is still taking place? Well, I think so. And again, it depends greatly where you are.

You know, there are a number of factories that have been put up in Ukraine and are, are being put up. There's a, a big glass, glass factory that's going up in Kyiv Obelis that will start construction later this year. They're projected to finish in 2028. We'll produce 27 million square meters of glass per year. They're spending 260 million euros on that, and that's going up. Nestle's got a plant there.

Kingspan, which is a big, you know, they make the building panels. They have a factory that they will start. I talked to their folks just a couple of weeks ago, and I think that they're going to wait until the fighting is over to start manufacturing. But that's not true of everybody. There are people doing everything from stone to food processing that are getting started right now. Yeah, very interesting.

So, Bruce, before we get deeper into Ukraine, I want our listeners to understand your story. You're an American who spent more than 20 years doing business in this part of the world. So how did that happen? I mean, I think you said you're from South Dakota. Yeah, I was born in South Dakota. Grew up on my father's farm in eastern South Dakota. After college, I went to Southern California. I worked in investment banking in the bond business for many years, eventually led West Coast sales for a period of time.

You know, we bought, sold, traded bond issues, and I worked. We did commercial lending, sold loan participations to community banks for a lot of commercial projects, including Native American casinos. And then earlier, I went to Southern California. Early in the 2000s, I had this idea that Russia was going to develop the rule of law and become a responsible member of the community of nations. I know it seems criminally naive now, but that was

kind of my thought. And so I went to, I lived in Southern Russia for almost a decade and I bought and sold commercial land there and some very good results. It's very difficult place to operate for a lot of reasons. And as one of them, I got a lot of attention from the security, from the FSB, which is basically the KGB under new branding. And then I developed a destination services company in Sochi, and we provided services to about 45 Olympic broadcasters, partners, and sponsors.

So for a few years there, we did a lot of workforce relocation, together financial management of the contracts. I think we housed more than a thousand people. We provided television studios to both rights-holding, non-rights-holding broadcasters. We did sponsor houses. We did laundry, transportation system, interpreters, staffing, HR, you know, if you name it, we were doing it. I made a joke at the

time. Well, if you see me washing underwear in the Black Sea, you know that something's gone wrong in Sochi. Yeah. Wow. What a company. I mean, that's just fascinating. We could spend a whole show just talking about what you did there. But so, okay, but here's a pivotal question, right? In 2014, Russia seizes Crimea, and you make the decision to leave Russia. So talk about that, because you'd been there, I think you said a decade. So that's really a fascinating story, but things changed in

a hurry, didn't they? Well, yeah. As I said, the FSB regularly pulled me in and talked to me and questioned me, questioned everybody around me. They suspected that I worked for the CIA, which sounds sort of laughable, but that was their belief. And maybe a person with a little lower risk tolerance than I have would have departed the scene after a couple of those conversations. But eventually, I was very

transparent, and I just told them what I'm doing. And so eventually, I was just proceeding with my projects. Of course, I had a family. I had contracts. I had customers. I had lots of things that I was doing by this point. So it wasn't really an option in my mind to leave anyway. But 2014 rolls around. And, you know, as you mentioned, things began to change in Ukraine. There were hundreds of thousands

of people out in Independence Square, and this revolution of dignity happened. And been some very credible allegations that FSB or maybe other elements of the Russian government were shooting people from the rooftops. And, you know, there were school teachers going hundreds of miles to protest for their rights and for their government. And it was kind of an inspiring thing to see, especially living in Russia, which was quite oppressive at the time. So after the games were over, they asked my

opinion. And I said, well, I think Ukraine should be left to make their own decisions without Russian interference. And I was planning to go to Brazil anyway. I had a contract there. We had contracts there. But it really sped the process up because I realized walking out of the meeting that I was going to be a target. I'd been in the media quite a bit. And while I was not on the cover of Time Magazine, I was certainly sort of prominent locally. And so it's just a matter of time until somebody

slipped a flash drive in my luggage, claimed I was a spy, put me in prison and used me as leverage against the United States government. I didn't want that to happen. I certainly didn't want to wind up in a Russian prison. So I got out of there. It was just, you know, they seized Crimea. It's time to go. Yeah. It's just hard to understand everything that happened. And gosh, the pressure you must have been under. So, okay, let's fast forward to today, right? You've gone from watching Western

companies enter the post-Soviet market to helping companies make investment decisions in Ukraine. And help me out. I say Moldavia, but how do you actually pronounce the name of this country? Moldova. It's a former Soviet republic. And so a lot of people speak Romanian, which they're kind of ethnic Romanian. A lot of folks are ethnic Romanian. There are some ethnic Russians and Bulgarians and some other groups there, but it's changed hands several times. But it was one of the Soviet republics when

the Soviet Union died. And so the same week that Ukraine declared its independence in 1991, three days later, Moldova did. Yeah, very interesting. So let's talk, talk to me about, give me your economic developers assessment, because that's our audience, obviously. What is the current state of the Ukrainian economy? I mean, what does being this protracted war and all this going on, how has that affected the economy? Or what do things look like?

Great question. And a lot of people ask me that. For instance, last year, I think economic growth was around 2, 2.4%. And the year before it was even stronger. The first year there was a major contraction, of course. But, you know, so the economy is growing. I think the World Bank or the IMF, rather, I think that they're projecting a one or one and a half percent growth rate this year. So things are happening. You know, people are getting up, going to work. It's not, everything hasn't

absolutely stopped. Yeah, really. Yeah. Just, yeah. Again, I'm just trying to wrap my head around all this. So, you know, but what part of, parts of ukraine is ukraine's economy have really been surprisingly resilient i mean is it manufacturing or you know so ukraine my understanding is uh is a very agricultural center i mean it's kind of like i mean i think it's been called the bread basket of europe so you know is logistics energy i mean

what things are actually pretty resilient yeah you know agriculture is a big part of the economy and so they've gotten successful at there have been issues with exporting grain from the country they're they're one of the problems that they've had in ukraine is that their inputs have become more expensive they used to bring a lot of potash in from belarus but they can't they're obviously not doing that anymore so yeah agriculture you know services i think it is important and here's the

thing that i would like your listeners to focus on is one of the things i guess would be defense so they were making there was something like a million dollars in 2023 that was spent or built yes that was spent in drone manu that was invested in drone drone manufacturing companies from outside that number increased over 100 times last year and so there are several companies that are very active in that sector that are supporting the ukrainian drone and and robotics and water water waterborne

drones and and of course the ugvs yeah the use of drones is really fascinating to me so you know talk to me about the workforce so what i think it's every economic developer no matter where you are really deals with workforce issues but what has the war done to ukraine's uh labor market it's it's tough i mean the the there's a real cost arbitrage for labor between ukraine and poland or ukraine and

romania or germany the the wages are maybe half of what they are in romania third of what they are in poland and probably sixth of what they are in germany but as you point out it's thin there there aren't there are many more positions advertised than there are available so the issue is how do you find skilled folks and i think for for outside companies that's set up it's going to be a factor about training and then diaspora are going to return internal you know the diaspora the refugees i think

that you'll start seeing a lot refugees returning they want all return that's you know this has gone on for over four and a half years but yeah it's you know that is an issue is that the constraint is how many folks are available cost arbitrage is there yeah i can see where that's a real issue so so bruce take me through what happens when a western ceo or a board ask you the question you probably ask constantly

you know bruce why would i invest in ukraine before the war is over i mean does that make any sense for people yeah it's a great question and people do ask me that all the time because what's going to happen and we touched on this just a moment ago is capacity so the moment that the war ends and really before that when there are stronger signals that you know it's things are stopping prices are going

to rise quickly there are constraints on industrial land it's a it's a consequential process that can't be done by a foreign company to buy agricultural land and switch it to industrial usage so existing industrial land will be at a premium there's not a there's not massive amounts of it available right now so i see land is a i think that immediately landowners are going to say that you know we want much higher prices same thing with labor as soon as things kick off the the the folks

that are available are going to be snapped up wages are will go up quickly and then of course you deal with constraints on construction materials there's going to be a lot of building they need hundreds of thousands of housing units not just because of the ones that are maybe destroyed in the big cities where a lot of people have been but there's been a starting in 2011 there was a population movement

from southeastern ukraine to kiev in the west and so there's been a big internal change we tend to think of european countries is sort of static in the way at least i did in the way the population is distributed but in ukraine even before the escalation in 2022 happened there are obviously a lot of people moving from southeastern ukraine to kiev and lviv and and other cities in the west so there the house a lot of the

housing in some of those cities and towns in the southeast is probably not going to be rebuilt so what happens more housing is going to be needed where the jobs are going to be kiev is about 20 of ukraine's economy and that's similar to what you know russia has no right to be killing ukrainians and trying to take their land but there are some systemic similarities and that's kind of similar to moscow moscow's got something like 20 or 25 of the gdp of of russia in it and it is a gravitational

center for the whole country and so i see that folks are going to be moving to kiev there are going to be companies setting up it their financial services you know all kinds of things are going to happen. I foresee that Kiev is going to be the hot city, the cool city in the next decade in Europe. And so anyway, my long-winded answer for you is that costs are going to rise. And it's very difficult in my estimation to pick your timing. You're

either early or you're going to be late. And there's a massive tax that you're going to pay for being late. So whether that's identifying your location and buying it and building it, or maybe just identify it and buying it, be prepared because there's going to be a rush there. And there are huge advantages, a lot of things that are going to happen in Ukraine. I think that gravity economically for Europe is going to shift towards Ukraine in the coming

decade because of two things. And we've already hit on those. You mentioned agriculture and food processing and defense. So Ukraine is going to be the arsenal for Europe. They're proving it in the battlefield every day. They're iterating. They're moving very quickly. And then, and I think this is an underrated story. We talk about food in Ukraine, but much of Ukraine's raw food materials are exported unprocessed. For instance, something like 95% of their berries are frozen and shipped out of

the country. They're losing 80% of the value chain by doing that. There's a tremendous advantage for them to start processing their own, you know, walnuts and their own dairy. They've got a shortage really of dairy internally. So they probably for some time won't even be exporting, but they need to be, you know, processing their own fruits and, and their own vegetables. And, and, you know, it's, it's an issue. They, they raise way more cabbage and potatoes than they, than they consume. But

because of shortage in cold storage, much of it gets dumped very cheaply at this time of year. And then five months from now, they're forced to import this. So there are opportunities in, in logistics and cold storage as well. Yeah. Really a complex situation is, I mean, when you take, take all that into account, what's going on. So talk to me about, you know, is there an equivalent to like, in the United States, we have

state and regional economic development organizations. We have IDC that we're very accustomed to kind of leading the conversation on economic development. So since our audience consists largely of economic development professionals, who actually does economic development in Ukraine? Is it people like you? Is it private industry? Is there, is there such a thing as an organization? There is. There's Ukraine Invest and Moldova's got Invest Moldova and they do an excellent job.

Ukraine Invest is about ready to open an, an external office, the first one in, in New York. And some of the regions, some of the obelists, we would call it roughly analogous to a state, some of the obelists have local investment promotion offices, but not all of them. And so it's a, you know, a little bit uneven there, but there are a lot of projects that Ukraine has identified and they're bringing folks in all the time. There are, I think one of the things that I,

I hear from people in the United States is, well, gee, is anybody really going in there? They are, they're going in there every day. There are folks going in from Germany and Finland and the Netherlands, looking at opportunities. Yeah. So it sounds like, I mean, in their own right, they have a fairly sophisticated economic development infrastructure that's really helping to bring these projects to fruition. Is that,

is that a true statement? They do. They absolutely do. Yeah. And there are, there are, they're involved in many of the rebuilding Ukraine events that are taking place across Europe. As we, almost as we speak, there are events all the time in, not only outside of Ukraine, but within. Yeah. I find this to be just, you know, just a fascinating conversation. Let's talk about industrial parks, right? You mentioned that there's kind of maybe a shortage, like a lot

of communities, wherever you are, there's always a need for land, but Ukraine offers significant incentives for qualifying industrial park investment. So how important are these industrial parks to the, to the country's economic development strategy? Well, I think they, they view it as really central to it. There are, I believe, 121 or 123 identified parks right now, but a lot of them exist on paper. They haven't been developed yet. But the, the,

the country is, Ukraine is offering investment into infrastructure 50, 50 with the park developers. And then you mentioned the incentives. If a company invested in, in one of the industrial parks, you know, builds a dairy processing facility or something like that, they get a 10 year tax holiday if they keep their profits within the country. And a corporate income tax is 18%, so it's fairly reasonable anyway. Bruce, talk to me about what does Ukraine need to get better at if it wants to

compete successfully for Western manufacturing investment? You know, I think the biggest issue is energy. Their energy infrastructure has been hit really hard by the Russians. And in, in Kyiv last winter, they faced 10 to 14 hour shortages, outages, blackouts. So, and I think. Everyone's expecting that maybe this winter will be something similar. So energy. But they're doing lots of things to try and rebuild energy infrastructure.

In fact, we've taken several companies in there. They're building solar and wind parks across the country. And another issue, of course, is logistics. As we mentioned, they don't have the cold chain logistics, and there are shortages of logistic parks, which the Russians have also hit. Yeah, absolutely. Bruce, let's make this tangible. What kind of projects are coming through Destination Ukraine today?

I mean, do you have, is it just kind of a real mix of projects, or are there certain types of projects that are more prevalent? You know, that's a great question. And I don't know that the statistical sample is large enough to give you a clear picture of where things are headed, but I'm talking to a lot of people in food processing. I did a cost projection for a 350-employee dairy manufacturing facility recently.

And other things that people are talking about are modular construction, different kinds of alternative energy, cold chain logistics. Yeah, and certainly construction. Investment in housing. We've had some folks that have talked to us about that. I think housing is going to be a really big deal in what, in post-war scenario, I project are the three most important cities, Kiev, Lviv, and Odessa. Kharkiv has been hit really, really badly by the war.

It's very close to the Russian border and not far from the front lines. So, yeah, I think that those are areas that people are starting to talk about. And, you know, then every once in a while, it's something else that you don't think about, conveyor belts or, you know, pumps or something like that. So, and I think that companies are going to be, yeah, I think companies are going to be really involved in food processing, maybe the vertical chain.

You know, dairy is really an interesting case in Ukraine. They've got maybe a million and a quarter dairy cattle, but they've only got about 400,000 of them in commercial dairies. So, they need larger herds, they need efficient collection, and they need dairy processing. They've got all the food feed. You know, Ukraine is exporting grain and importing ice grain. And it really, keep the value chain in Ukraine, and your investors can help do that.

Yeah, you can see where connecting these dots is going to be so important to Ukraine in the future. So, walk me through a typical project. A Western manufacturer calls you and says, hey, Bruce, we're interested in Ukraine. So, what happens next? I mean, where do you even begin in this scenario? Yeah, great question. So, we do trips. We have an itinerary. We bring folks in, typically from Poland. Warsaw's got really good international connections.

You can come in and out of Chisinau, Moldova, where I am right now. Chisinau is very close to Odessa. So, for folks that want to go to Odessa, it's handy. But a good route that we've done several times is folks coming into either Warsaw or Krakow, Poland. Warsaw, the train, there's a direct train. It takes about 18 hours because you have to change the gauge. When you cross into Ukraine, it's still on the Soviet gauge system.

So, we take folks through there and then, based upon their interests and their company, they might spend some time in Kiev. They might go to Biela Tsertva or Chernice, Ivano-Frankivs, Lviv, and then down to Odessa, which is, of course, their seaport. And then, sometimes we wind up in Chisinau, Moldova. And we've also gone out of Bucharest, Romania, which has got some very charming parts and is quite an interesting city.

So, we do a site tour. We do, you know, location tours and site visits. And we meet the economic, the investment promotion offices. We meet with property developers. We meet with folks in the industry. We go to see the ports. We go to see the border crossings. We see the industrial parks. You know, maybe we look at what's available that's happening in their industry. And then, we take them on out.

So, yeah. Well, that's a fascinating site tour. That's for sure. So, what are Western companies most likely to misunderstand about doing business in Ukraine right now? I think that there is business going on in Ukraine. I think that's the first thing that people probably miss, that things haven't just stopped just because the war is going on. Perfect. So, talk to me about Avalon Capital. That's your company.

You're not simply investing. You're not simply advising investors. You're actually investing in Ukraine and Moldavia, the companies there. So, what opportunities are attractive enough that you're willing to put your own capital at risk? Yeah. Well, so, we're raising capital through development banks. And this is a growth fund. So, we're looking to invest. There's kind of a missing middle in both Ukraine and Moldova.

And by that, I mean that there are several large funds, private equity funds, that are investing in the largest companies in both countries. But there are smaller companies that are very well- Well, we've been able to invest in there are more than 1 million companies. run and managed. But their balance sheet might not be strong enough. The banking system in Moldova is very conservative. There was a scandal that took about 10% of the GDP out about 12 years

ago. So the banks are really, really careful there. And it's difficult for a small, medium-sized enterprise to access capital to grow. So we think that by minority stakes in some of these companies that are, you know, and especially in Moldova, the sectors that they've identified, they're somewhat similar, similar to Ukraine. It's, again, it's food processing, it's IT, automotive manufacturing, renewable energy, you know, logistics. So, you know, in those areas, there are

some really good companies. And again, you see this all across both Moldova and Ukraine, that 70 to 80% of the value chain is exported out of the country. In Ukraine, it's fascinating. In Jatoma Robles, they have a lot of these stone, labradite it's called, that's used in countertops. They sell it out of the country in cubic meter blocks that go out for 450 or 500 euros. It gets across into Poland. They slice the blocks up, polish them. And then, you know, that block in a store in

Southern California is worth $25,000 when it's sliced and polished and sold. And you see that in the same thing with berries. We mentioned that, you know, similar things with a number of food products in these countries. And something like 70% of Moldova's food production is sent out of the country in its raw form. And I think it's about 50% in Ukraine. The reason it's a bit lower in Ukraine is there's a,

there's some large flour milling done and there's, they process a lot of sugar beets. And in both countries, they process quite a bit of sunflower oil. Yeah, just fascinating. So help me out here. You know, I'm one of those probably typical Americans, you know, couldn't find Moldova on a map necessarily. I did have to look it up. I kind of knew probably roughly where it might be, but so you've also founded, you know, we've talked about Ukraine a lot, but you've also founded

Destination Moldova, which is very interesting. So give us a 60-second economic development pitch for Moldova. Yeah, so Moldova's about the size of Maryland. It's got two and a half million, little more than, or a little less than two and a half million people. And it's, Ukraine is roughly 25% of Ukraine's land is in the Black Earth Belt, some of the best land in the world. I think Ukraine has got more of it than anyone does. Moldova doesn't have as much, it's much smaller.

But 78% of its land is in Black Earth. And it kind of, you know, for folks that have spent time in Tuscany, it looks a little bit like this beautiful rolling hills, not high elevation. It's bounded on the east by the Nesta River and the west by the Prut. It's got an 800-meter port on the Danube River. And roughly a third of the population lives either in or around Moldova or in and around Kishinov. And the advantages, there are some real advantages here because

both Ukraine and Moldova have largely duty-free access to the EU. So inputs are much less expensive. Labor is much less expensive. Although there are constraints on how many people there are, you may have to train some folks. Moldova's got a great guest worker program, in my estimation, to bring folks in to help out with the labor supply. So again, labor is a similar cost here in Moldova as what it is in Ukraine. Out the door, it's, you know, as I said, maybe not quite

half of Romania, a third of Poland, and maybe a sixth or even less of Germany. So that you've got the labor arbitrage, and then you're right on the doorstep. And at the same time, some really fascinating things are happening. They're improving the infrastructure here. So there are power elements coming in from Romania. Romania and the EU are building roads, building a major road at Ungen and a new rail crossing there. And eventually they want to put a high-speed European-gauge rail

from the border to Kishinau. And then they want to extend the highway all the way down from Ungen through Kishinau to Odessa. So lots of infrastructure improvements. And then the other thing you've got to look at is Moldova sits, and I know I've gone way over my 60 seconds here, I'm sorry. Moldova sits on the west side of Ukraine, and it's also got a short northern border with Ukraine. And on the west side

of Moldova is Romania. So there's a chunk of Ukraine that borders Romania to the south of it, not so wide, and then again to the north of it. So it's basically surrounded by Romania and Ukraine. Well, what does that mean? Moldova is a bridge to Ukraine. Ukraine is going to be the world's largest construction project here in the not-too-distant future. And so anything moving in or out of that part of Ukraine that's

close to Moldova is going to go through Moldova. Moldova is a bridge to that. And the Moldovan and Romanian and Ukrainian governments have, they realize they have a lot in common. They have a, you know, similar threat from a similar source to the east. They are moving in the same direction economically. And Moldova's on the fast track to EU accession. And I was at the Moldova business conference in early June, and the EU commissioner for enlargement, Marta Coase, said, Moldova's at the head of the class.

And I think that if you got somebody from the Moldovan government cornered and said, when do you think this is really going to happen? I think folks will tell you, we expect to be in before 2029 into the EU. So, wow, you know, there are lots of reasons why you might want to take a very hard look at setting up shop in Moldova. There are great tech, there are good schools here. They're now developing in the medical and dental tourism field a very significant presence.

And, you know, I just think Moldova's got so much to offer. Yeah, and actually that's where you are today, right, as we're doing this interview? Yeah, that's where I am today. I've been here for the last couple of weeks and really enjoy my time here. You know, I was first in Chisinau in 2008, and it's changed so much since that point in time. You know, maybe I shouldn't say this in the air, but I thought, gee, this place looks like the Soviet Union gave up on Italy in 1950 when I was first here.

Looking back here, it's quite pleasant. And the interesting thing is there's so much room to grow in both these countries. Poland has got a GDP of roughly 20, I'm sorry, Ukraine is roughly 20% of the GDP of Poland. It is going to, in my estimation, it's going to do what Poland has done over the last 30 years, but on the next 10, because hundreds of billions of dollars are going to go into reconstruction there.

And lots of companies are going to set up shop. Moldova doesn't have the war. They do have an issue with a separatist enclave in the east, but it's not very large, and it's economically failing. It succeeded, if you could call it, succeeded for a long time simply because it had free gas from Russia, but that's changed. And a lot of folks are traveling back and forth every day to work in Moldova property, any property anyway, so that's probably going to be solved.

But yeah, I think if you look at the location, you asked me about this, but you look at the location where Moldova is on the map, and you see, wow, this makes a lot of sense as a transit, as logistics, as a corridor between the much larger Ukrainian economy and the rest of the EU. And so I think both these countries will do well. I expect that there's going to be a manufacturing corridor in western Ukraine that is going to be very, very sizable.

They're already talking about infrastructure improvements in the area around Lviv and the border crossings. There are eight of them between Poland and Ukraine. And I think, well, I know companies are looking at locations right now, and companies are building. There are a number of projects that are ongoing or even completed. Yeah, and Bruce, I want to pick up on one thing you talked about. Yeah, that's the reconstruction of Ukraine, you know, as hopefully soon when the war is over.

But some estimates have that number pushing $600 billion in needed, if you will, just, you know, repairs and just kind of rebuilding things. So that's hard to get your head around that. So where does economic development fit in this reconstruction? Do you think it's going to go hand-to-hand with that? Yeah, I do. I think that in some cases it may move faster. You know, companies are sometimes a little more nimble on their feet than these big development institutions and the banks, you know, the foreign policymakers, decision makers.

So I do. I think there's going to be a lot of money invested in Ukraine. You know, when you go to these events, you see a lot of people walking, many, many, many people walking around looking at what the opportunities are and making connections. So, you know, maybe I should have had a more complicated answer, but yes. No, no. Well, it's interesting because, you know, we're not just talking about rebuilding roads and bridges and buildings and power plants, but the whole challenge is actually rebuilding an entire economy.

I mean, this is going to be a heavy lift, isn't it? I think so. So, but you have a very motivated population and this war has pushed, in my estimation, the mentality of the people 20 years towards Europe. You know, so many people have been crossing the border, going back and forth between Poland and Ukraine and Romania and, you know, Slovakia. So I think that everybody sees the future as Europe. And this is my very subjective attitude, my very subjective opinion.

But from attending a lot of events and talking to a lot of people in the last four and a half years, my impression in the beginning was, well, from the Europeans as well, you know, we want Ukraine. And, of course, Moldova's got to come along, too. We want them in the EU. But I think that it has shifted. And I think that two things have really shifted. shifted that. Energy costs have gone up related to the war in Iran. Obviously, energy is a big

issue in Ukraine. And of course, the Russian sources of energy are, this is problematic as well. So I think people are thinking about food security, and I think they're thinking about defense. And if you look what's happening, the hundreds of companies that are providing drones in Ukraine that are really doing just an amazing job. These entrepreneurs are in their basements and garages, and they're building state-of-the-art and iterating as we speak. And this is what's made

the difference. The Ukrainians say there are more drones now than there are Russian soldiers. And the Russians are losing more soldiers every month than they're able to replace. So I really think that the center of gravity is kind of shifting in Europe towards Ukraine. And I think that in a decade, it's going to be a medium-sized European economy. Yeah. Bruce, this has just been a tremendous conversation. Are you up for some rapid-fire

questions to end the day? I think so. So let's start out, Bruce, with the biggest misconception Americans have about Ukraine right now. Ukraine's waiting for the war to end. It's got a running economy. The economy has grown the last several years. And there are folks out there, there are opportunities competing for investment, building factories right now. Excellent. So what's the biggest misconception about Moldavia?

Yeah, I kind of think there's two. One is that nobody knows what it is. Not nobody, but a lot of people don't. And that it's kind of this sad, neglected, smaller neighbor. It's a fascinating place with a mix of cultures and a lot of motivated people. And it's a country, the candidate country for the EU, that's probably going, may very well likely join the EU even before Ukraine does. Excellent. So what's the most promising Ukrainian industry, do you think, over the next decade?

Well, the kind of no-brainer answer is defense. But my second one, quieter, is food processing, you know. Gotcha. Okay. So what's the most overlooked opportunity in Moldavia? Again, I think it's food and beverage value added on. I can give you a lot of examples of inputs that are going out of the country, you know, inexpensively and coming back in consumer form. Perfect. Okay. So what's the biggest risk right now for an investor?

Of course, I sort of hate to say this, but I absolutely have to be honest. It's governance and rule of law. You've got to be careful about that. But here's my but for that, is that both countries are working hard to solve those issues. I can't tell you that it's perfect yet. But they understand that investment and integration rely on that. And they're making progress. You know, take a look at the transparency rankings. And both countries have improved significantly.

Perfect. So what's the biggest risk, getting into Ukraine too early or getting there too late? Oh, it's too late. It's coming in too late. You're going to miss it. You're going to miss the show. Yeah, I shouldn't say you're going to miss it. There will be people coming and investing in Ukraine for decades, just like there are companies moving into Poland right now. But gosh, wouldn't it have been better if they would have been there a couple of decades

ago, you know? So I don't mean that there won't be opportunity, but the people that are in there early are going to do very, very well. And here's something else for the audience is that early in the war, the American government was really supportive of Ukraine. And there's a lot of residual goodwill towards the United States in both these countries, and in Poland as well. So I think as Americans, people are going to be very friendly.

Wonderful. So let's say, Bruce, let's finish up with this question. Put yourself 10 years in the future. It's 2036. What do you believe the Ukrainian economy looks like in 2036? Yeah, a medium-sized European economy that has sectors like defense and food processing booming that has rebuilt its energy infrastructure and has one of the most dynamic capitals in Europe. And here's another one. We haven't touched on this, but this is the secret that most people

don't realize. Ukraine had, I believe it was over 14 million tourists in 2021. Well, that number is basically, you know, it's a, if you want to count me as a tourist, that's sort of it. You know, there are no, there are no tourists there, but go to Lviv. Lviv is Krakow and Prague's beautiful, you know, post-Austro-Hungarian cousin. It is just a fantastic, beautiful Kabulsan street city. There are very few places like it. It's not over-touristed. It hasn't had, you know, the

Ryanaires and the EasyJets bringing in hordes of tourists who are, you know, overwhelming it. It's a really beautiful city. And then Kyiv, for capital city, it also is amazingly beautiful. Walk up and down Khrushchev and go to Independence Square. Amazing. And as a person who spends a lot of time and has great affection for Ukraine, I will add that when you go to Independence Square, there is a flag for every lost life, hundreds of thousands of little flags in the square in this,

in this area. It's growing all the time. But, you know, that's not really a tourist issue. But, you know, Keeve has tremendous appeal as a city for tourism. You know, there are magnificent architectural monuments and a great walking center. And then Odessa, if you go down there, the pedestrian center of Odessa is beautiful. They've got the Potomacan Steps. They've got sandy beaches, which are almost unheard of in the Black Sea.

So it's kind of a little secret is that when this kicks off, you're going to have so many folks within some period of time coming in for tourism as well. That's going to be something that people really aren't talking about. Yeah, wonderful. Bruce, this has been just a tremendous conversation. Like I said, I've really been looking forward to this and didn't disappoint at all. I mean, I appreciate you helping us understand this.

I think all of us that are watching things unfold over there, certainly our hearts go out to the people of Ukraine. You know, this is just such a terrible thing that's happening. So I appreciate you being able to kind of pull back the curtain and help us understand really what's going on. Well, thanks. It's a pleasure being here. And if somebody wants to learn or come over about Ukraine and or Moldova, we've got staff.

We're ready to take people around and show them what's happening, where the opportunities lie. Perfect. Thank you so much. He's Bruce Talley. Obviously, a great resource and just a fascinating career, Bruce. Thank you so much for taking the time to join me and develop this today. To our listeners, you know, we wouldn't be here without you. We continue to be humbled every time you tune in, and we will talk to you soon.

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