Broker Markets Ukraine to Firms : Newbury Park: Competitive Strategies International sets up joint ventures between the former Soviet republic and Western business interests.

Frederick C. Sayle has been a worldwide marketing executive for International Business Machines Corp., and a computer systems specialist for aerospace contractors such as Boeing Co. and ITT Corp. But he is now, among other things, a salesman. His product: Ukraine.

Sayle is president of Competitive Strategies International in Newbury Park, which he founded in 1988 as a marketing and consulting company. For the past year, the firm has specialized in brokering joint ventures between Ukraine and Western businesses, taking advantage of some close ties with Ukrainian government officials. Sayle’s company now has offices in Britain and the Ukrainian capital, Kiev.

So far, Sayle said, Competitive Strategies has helped open a woodworking machine plant in Ukraine, and is now working with several big companies that are exploring business opportunities there.

Among those are cigarette maker R. J. Reynolds Tobacco Co., which Sayle said is close to agreeing to open a cigarette factory in Ukraine. Other potential Ukrainian investors are industrial and defense contractor Raytheon Co. and VMF Stork, a Dutch manufacturing and engineering services group. Competitive Strategies has also paved the way for smaller companies such as Optica, a Royal Oak, Mich., optical company with $6.5 million in annual revenues that is considering starting an eyeglass facility in Ukraine.

Competitive Strategies uses its Ukrainian contacts to receive speedy government approval for the joint ventures, helps find Ukrainian partners and locates plant sites. It also obtains information on Ukrainian industry, the availability of skilled workers and sources of raw materials. For its services, Competitive Strategies receives stakes of up to 30% in the ventures, or a flat fee.

Sayle, who is on his fourth trip to Ukraine, is so certain of Ukraine’s potential for money-making that he predicts Competitive Strategies’ revenues will bolt to at least $100 million in the next 18 months. “Most American business people immediately think, ‘Russia,’ ” Sayle said. But, “Ukraine is a much better place to do business with than Russia.”

Among the steps Ukraine has taken to facilitate new business: It recently became a member of the International Monetary Fund; it is introducing a fully convertible currency--the hrivna--later this year, and it has adopted several laws favoring joint ventures.

To be sure, Ukraine--like other former Soviet republics--is still a risky place to do business. Just last week the Ukrainian Cabinet threatened to resign in a dispute with Parliament over the country’s economy. Lawmakers plan to debate the ultimatum today.

What’s more, the Ukrainian economy continues to slide. Production is down, prices are rising, inflation is rampant and its budget deficit is growing.

The country also faces enormous environmental problems. It is still recovering from the Chernobyl disaster, and most of its energy comes from high-sulfur coal that pollutes the air.

Some joint ventures currently operating in Ukraine have run into logistical problems. S. C. Johnson Wax in Racine, Wis. started a soap-making factory there in November, 1990--the venture is not connected to Competitive Strategies--but the company has had difficulty securing high-quality materials. Also, the Ukrainians still have a hard time understanding such concepts as worker participation, said Johnson Wax spokesman Jim May.

Nonetheless, May said Johnson Wax plans to stay in Ukraine. “Everything we make, we sell,” he said.

Several other American concerns have also begun operations there, including Tambrands, the maker of Tampax, and AT&T;, which has teamed with the Dutch telephone company and Ukraine to build and operate a new long-distance telephone service.

Part of the attraction of Ukraine, Sayle said, is “they don’t come over here with their hands out. They want to do business.”

For example, Ukrainian joint ventures will not be taxed for the first five years and for the next five years they will be taxed at a rate of 17.5%--half the current corporate rate in Ukraine. Also, there are no taxes on capital gains, and no duties on exported goods produced in Ukraine.

Ukraine has other virtues as well. It has 10 ports and 16 border crossings with the West. Formerly the Soviet Union’s breadbasket, the country has a large agricultural and industrial base. Coal, steel, gold, silver and titanium are produced there.

The Texas-sized nation’s 52 million people are relatively well-educated--Ukrainian officials boast that there is no illiteracy in their country. Formerly the center of much of the Soviet Union’s aerospace industry, Ukraine now has many idle engineers and technicians.

For Sayle, these factors spell opportunity. Sayle’s partners in Competitive Strategies are British business contacts Peter Bullard and Mike Baker, and Shelby Morley, a Santa Barbara-based management consultant. The company has about 20 employees.

Competitive Strategies’ primary contact in Ukraine is Serhiy Buryak, a well-connected entrepreneur and adviser to President Leonid Kravchuk’s government. Through Buryak, Sayle and his partners have become acquainted with Ukraine’s deputy prime minister, Vladimir Grynev, and trade minister, Boris Sobolev.

During an April visit to the United States, Sayle introduced the officials to executives at several American companies interested in setting up shop in Ukraine.

Competitive Strategies began working in Ukraine last year through Bullard’s involvement in a joint venture to modernize a woodworking machine plant there. The Ukrainians, Bullard said, insisted that Americans be part of the project. “They hear about Silicon Valley and Hollywood,” he said. “They think the center of the world is Los Angeles.”

Enter Sayle, who knew a friend of Bullard’s. Sayle then helped plan and computerize the plant, while Bullard’s British company, Norwood Ltd., provided the woodworking equipment and a Ukrainian industrial cooperative provided the plant.

The operation is now running, and Sayle expects it to generate $5 million to $8 million in revenue annually. Competitive Strategies will receive a percentage of those sales, but Sayle would not say how much.

The firm’s entree to VMF Stork came through Morley, who represents the Dutch conglomerate in the United States. Morley said VMF Stork sees Ukraine as a good candidate for the manufacture and sale of its water flow measurement instruments because of growing calls to clean the region’s polluted waterways.

Competitive Strategies is compiling a list of potential Ukrainian partners for VMF Stork, and plans a trip with company officials in September to look at existing plants that could be converted, Morley said.

Meanwhile, Sayle sees plenty of other opportunities for Western businesses in Ukraine. The country is hoping to upgrade its roads and ports, convert military bases to commercial airports and computerize antiquated industries. Ukrainians want cable television, modern telecommunications and new hotels.

“We think we can lend a big helping hand to American business,” Sayle said. “And we can make a lot of money at this game.”