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‘Motor Sich Will Always Be a Ukrainian Company at the Territory of Ukraine’, Wang Jing

JSC Motor Sich is a Ukrainian aircraft building company. A group of Chinese investors acquired the corporate rights of the enterprise back in 2016.

Beijing Xinwei Technology Group, as part of the disclosure of material information about its activities, announced on the Shanghai Stock Exchange that the associated Beijing Skyrizon company and the Ukrainian DCH group owned by Aleksandr Yaroslavskyi, the Ukrainian businessman, together with its affiliated companies, submitted a new application to the Antimonopoly Committee of Ukraine (the AMCU) on the purchase of Motor Sich shares in early August 2020.

However, during all these years, Chinese investors, neither themselves nor in partnership, can enter into ownership since the deal is blocked, the shares are arrested on the initiative of the SSU, the AMCU does not permit the concentration, and the Prosecutor General's Office imposed an additional arrest several weeks ago.

Wang Jing is a key shareholder of Beijing Xinwei Technology Group and Beijing Skyrizon. Due to his high-profile, large-scale high-tech projects, journalists call him the Chinese Elon Musk.

In his first interview for the Ukrainian media, the beneficiary of the companies told RBC-Ukraine about the real interests of Chinese investors in Ukraine, what he thinks about the Motor Sich’s case, what the future holds for the enterprise and what are the prospects for an investment dispute with Ukraine as a state.

– There is almost no personal information about you. Tell us a little about yourself, family, career path, start in business, and its development.

– I am a citizen of China. I grew up in an ordinary family in Beijing. I started to work in the investment business early and made contributions to many countries around the world. The projects I invested in and the industries I participated in are hard to count. My life philosophy is to conscientiously do what I like and be a person who is responsible for history. I am eternally grateful to my family and friends for their unconditional support. 

– It is known from public reports that since the acquisition of Xinwei in 2010, you have been involved in an extensive range of business areas, including high-tech industries such as communications, aviation and aerospace, and invested in numerous large-scale infrastructure projects. Why did you choose high technologies rather than consumer goods, for instance?

– The listed areas seem to be vastly different. But if you look closely at the nature of these industries, they have one thing in common. They are all infrastructure for development and supporting elements in relation to a society that strives for progress. Under the Olympic spirit, we strive for peace and equality, to become ‘higher, faster and ber’ than yesterday. Thus, I believe that the development of high-tech industries will contribute to the progress of humanity, ensuring the stability of the upward trend of growth through continuous innovation. At the same time, from a business perspective, such a constant innovation, and the demand for innovative products and services, will continuously enhance economic collaboration, reduce costs, and improve efficiency.

Your company went global a long time ago. What countries do you work in? What achievements are you proud of? 

– Xinwei Group is a leading Chinese communications equipment manufacturer and provider of advanced communications network management services. We have consistently developed numerous SCDMA, TD-SCDMA, McWiLL (ITU international standard) broadband multimedia trunking systems and many other national and international communication standards.

My ‘worldwide imprint’ in the business world includes over 200 companies operating in over 30 countries and regions of the world, including Asia, Europe, Africa and Latin America. I invested in telecommunications equipment manufacturers, satellite providers, infrastructure projects, sports, culture etc.

– Your company has been for quite a long time in Ukraine. What projects have been implemented during this time?

– According to preliminary estimates, over the past seven years personally I, Skyrizon and my partners have invested more than USD 1 billion in business in Ukraine.

I reached an agreement with Ukrainian partners on the development of a deep-water port construction project and the creation of an economic development zone in Crimea back in 2013. However, after changing the status of the peninsula, I dropped these plans. At the same time, I continue to consider the possibility of implementing the project but on the mainland of the country.

Xinwei Group began to provide mobile broadband multimedia services to Ukrainian users in 2014.

Skyrizon reached an agreement with Motor Sich, Ivchenko-Progress Design Bureau and other enterprises to deepen the cooperation in 2015. In the same year, to help Ukrainian aircraft engine manufacturers to enter the Chinese market faster and more fully, Skyrizon, using its funds, began to create a warranty service base for Ukrainian aircraft engines in China.

My investment partners from China,and I jointly invested in PJSC Motor Sich and provided an unsecured loan of $100 million with a low-interest rate in 2016.

– What were the advantages of the appearance of Chinese investors for Motor Sich? What could be regarded as disadvantages or risks of the deal?

– If we say that the $100 million loan we provided Motor Sich with in 2016 is bad news, if we consider that our purchase of products and equipment from Motor Sich is a mistake, if our help to Motor Sich in bringing new models of aircraft engines to the Chinese market is a mistake, if we consider the fact that the employees of Motor Sich saved in their jobs thanks to our investments, if we consider it nonsense that we helped other Ukrainian aircraft manufacturing companies to get more income... If so, there are indeed many disadvantages to the collaboration.

But actually, thanks to the appearance of Chinese investors at the enterprise, a hurricane under the name Motor Sich swept through the PRC market. More and more Chinese users and more investors have rethought the commercial significance of the Ukrainian aviation industry. Moreover, they have more reliably and correctly formed an opinion about Ukraine. This process has already gone beyond the scope of one enterprise and has played a positive role in promoting mutually beneficial, long-term, and transparent cooperation between the two countries. This is what we are incredibly happy about and proud of.

– Could you please tell us when and why did you become interested in Motor Sich? What was your strategy in relation to the enterprise? How did cooperation develop? 

– I have known about Motor Sich for a very long time. It was more than ten years ago. At that time, I was doing in-depth research on enterprises in this industry around the world to enter the aviation industry. Since then, the name Motor Sich has been firmly imprinted in my mind. I admire the company's centuries-old history, first-class products, and solid corporate culture. But the matter turned into practice only in 2014, when the first contacts and a discussion of cooperation took place.

The huge and constant demand in the Chinese aviation market and sufficient funding guarantees, a history of long-term friendly cooperation between China and Ukraine, a high degree of correspondence between Motor Sich products and the demand in the Chinese market is the complex of all these factors that led me to believe that this is a must to be mutually fruitful, beneficial and successful cooperation. I saw my role in bringing them together in the most effective way, making them even more dynamic and valuable. It was and is my task; everything is obvious...

Alas, subsequently, the survival of the enterprise, its further development, the continuation of the glorious history of Motor Sich and the movement forward to the next 100th anniversary became very problematic for the well-known reasons.

– Are the Motor Sich’s products really in demand in the Chinese market?

– According to the analysis of open-source data, the total market demand for aircraft engines and ground gas turbines in China will reach $1 trillion in the next 20 years. Based on the analysis of the real situation, Ukraine is one of the largest foreign suppliers of engines to China, and more than 1200 engines are still in operation in China. The technological paths and technical standards have a high level of compliance, and the production base and the product supply chain are largely complementary in the aviation industry in China and Ukraine. Besides the products trade, both sides also have a broader and more durable space for cooperation in new product development, intellectual property sharing, supply chain, etc.

But at the same time, I must emphasize that if we speak only from the point of view of products and technical progress, even the unique worldwide D-18T turbojet engine manufactured by Motor Sich, the powerful D-136 turboshaft engine and the most classic turboshaft engine of the series TB3-117 will soon face serious competition from Chinese and global equivalents. And if you do not take this chance now, do not focus on the huge Chinese market and follow the needs of users, do not modernize products in the shortest possible time and improve the technological component, in the next few years the advantages that Ukrainian aircraft engine building companies have in the Chinese market will just lose its relevance...

– There are many options for cooperation with Motor Sich. Why was the direct investment way chosen?

– Because of confidence and trust. Confidence means my full recognition of the product capabilities, technology level and corporate culture of Motor Sich. Trust is my full recognition of the rule of law in Ukraine, as well as its vision of prospects and ability to protect investments, develop the economy and contribute to the development of its society. Of course, purely trading is safer and more profitable from a commercial point of view. But my partners and I hope for long-term cooperation on mutually fruitful and beneficial terms, and based on two components – confidence and trust, we decided that we are ready to invest considerable amounts in Ukraine.

– Five years have passed since the beginning of cooperation with Motor Sich. How do you assess the situation today?

– We suffered enormous losses due to unforeseen circumstances that should not have happened.

– Does it mean that your plan concerning Motor Sich has not yet been implemented? What are the reasons? How do you evaluate the result? What actions are you taking?

Any commercial activity has its own risks. We were fully prepared to run them. But in the case of Motor Sich, it is unexpected that the setbacks, blows and pressure we suffered from do not come entirely from the commercial sphere. And even more surprisingly, they have been continuing to the present day. Of course, we have put in a lot of effort and made many attempts to eliminate these influences that come from outside the business rules, but the effect is minimal.

Everyone knows that when the business environment and business rules are almost completely violated; confidence, trust and reputation are quickly destroyed. And the process of restoring these primary business conditions is extremely difficult and costly. 

– Chinese investors bought Motor Sich’s shares in 2016. Still, today they have not entered the company's management structure. What is the reason for it?

– It is an excellent and interesting question. Probably, we would have learned the answer to it in the fantastic scenario where a meeting of shareholders would be convened for the first time in all these years. After all, we still do not know why we were unreasonably deprived of our legal rights without any clear explanation.

– How much have you already invested in Motor Sich? What is your relationship with Mr Boguslaev, who has been heading the company since the early 90s?

It is a generally accepted fact in the world that aircraft engine building is a high-tech industry with large investments, high risks, and a long-term cycle. We were fully prepared for it when starting the cooperation. As of today, we have already invested more than $1 billion in the Motor Sich project, and of course, this is just the beginning. 

And Mr Boguslaev is a respected person who I greatly admire. He is the national hero of Ukraine and one of the symbols of aircraft engine building. I admire his fundamental professionalism, deep feelings for the company, b commercial acumen and extensive management experience.

– It was previously known that you would cooperate with UkrOboronProm concern on the Motor Sich’s project and transfer 25% of the shares to it. Have you given up on this idea?

– It is deeply upsetting that cooperation with UkrOboronProm did not take place. But we cannot turn back time; everything is already in the past…

We had a year with UkrOboronProm to discuss and extend the cooperation agreement, but Ukroboronprom did not use this opportunity for unknown reasons. I cannot transfer 25% of the shares to them without a valid contract.

– Why did you subsequently choose DCH as a partner? What do you expect to get from this partnership?

– Aleksandr Yaroslavskyi owns a large and diverse business and is successfully developing it. It was enough to prove that he is a wise, energetic, forward-looking person, whose reputation has long stepped beyond the borders of Ukraine. We understand and respect each other, we have shared values ​​and ideals, common direction and goal of the struggle. The most important thing is that we firmly trust each other and are ready to work together, regardless of any difficulties and obstacles. Therefore, we started cooperation with DCH on Motor Sich.

– There is an expert opinion that without the sale of 1000 engines per year, MS will not be able to provide the required level of profitability and will go bankrupt. Are you ready to guarantee the order of at least the same volume? 

The process of accurately calculating its break-even point is complicated for the enterprise with a century-old history, especially in a situation where it is necessary to consider the possibility of investing additional resources to modernize and improve the infrastructure of the enterprise, equipment capabilities and staff qualifications. As far as I know, many years ago, when the market demand for Motor Sich's products was high and stable, the annual sales of engines were about 1000 units, while the company's profitability was very good.

In the case of stable production and operation of the enterprise and if all production and technological indicators are normal, then the demand in the Chinese market today is sufficient for Motor Sich to have the required number of orders. But at the same time, I am worried whether the enterprise will have enough production capacity by that time? Can an uninterrupted supply chain be guaranteed? Are the technological level and the level of organizational management of the production process sufficiently modern? And will there be enough specialists to carry out research and production tasks? 

– What are your thoughts on the future development of the Motor Sich enterprise?

– When all the problems are resolved properly, and Motor Sich resumes regular operation, I will be fully and completely confident in the future of the enterprise. 

– What do you think about the development of other, non-Chinese, directions of product export and other forms of MS expansion? For example, Turkey, Israel, etc.

– Motor Sich will always be a Ukrainian company, and at the same time, it must go to the world level and become global. Based on the principles of the rule of law, respect for business partners and adherence to business rules, we bly encourage and support all ways and methods that contribute to the development of the enterprise. 

– It is said the reduction of almost 8 thousand jobs at Motor Sich is due to the fact that you took out the personnel to work at your Chinese plant, and you plan to close the Ukrainian plant. Is it true? Is it actually possible to transfer the production of aircraft engines from Ukraine to China?

– Your first question is a joke, isn’t it? I think that this fact is extremely easy to verify, and it is not even worth talking about it.

Otherwise, anyone who is familiar with the aircraft engine industry understands that the relocation of production facilities for the production of aircraft engines is initially impossible in terms of both economic and time costs, as well as technical aspects of implementation, except for force majeure such as war or natural disasters.

I would like to officially declare once again that we have never even thought about closing a plant in Ukraine, not to mention any plans for a hypothetical transfer of production. Motor Sich will always be a Ukrainian company and will always be at the territory of Ukraine. There should be no doubt about that at all!

– Ukraine fears an uncontrolled transfer of aircraft manufacturing technologies if you purchase Motor Sich. How would you comment on this opinion? What guarantees can you give that it will not happen?

– As far as I know, the Ukrainian government has a perfect system of control over the import and export of technologies. And this system has been effectively and regulatively performing its functions for many years; while promoting international cooperation, it primarily protects the national interests of the state of Ukraine. 

Our top priorities are strict compliance with laws, including tax obligations and labour laws; respect, protection and continuous development of intellectual property and technology; respect for partners, mutual benefit, and long-term development.

– Modernization of Motor Sich and the development of high-tech businesses, in general, requires significant investments. The US and the EU are not interested in investing in the development of high technologies in Ukraine. Is your company ready for it? What scale of investment could we talk about?

According to the market demand and consumer needs, as well as based on reasonable control over costs, continuous investment in technological transformation of the enterprise is a prerequisite to ensure that Motor Sich can maintain its advantages and develop in the long term. Especially in the aircraft engine industry and in the face of such fierce challenges and competition that exist in the modern world. We clearly understand it.

As for the main issues related to making business decisions in the company, we need to negotiate with our partners and make a final decision at the general meeting of the company's shareholders. There is no doubt that in the future, investments in enterprise modernization and in research and development of products and technologies will never be lower than the current level of investment. Moreover, I believe that the size of our investments will be much larger.

– In your opinion, can any state, not only Ukraine, have grounds for opposing the deal between two private companies?

– In any democratic state governed by the rule of law, the law is the only standard for maintaining social justice and order, as well as the highest instance.

– What are the consequences of Motor Sich’s case for your business in China and other countries?

– Huge losses have been suffered, and we will resolutely defend our legal rights and interests.

– There is information that you and other investors, represented in Ukraine by Skyrizon, are filing a claim against the state of Ukraine for $3.5 billion due to the arrest of the stakes in PJSC Motor Sich made the effect of a bomb. Please tell us why it was decided to go this way.

We believe in the fairness and impartiality of the law. We believe in the integrity and impartiality of the judiciary. So, we need to take legal action to protect our legitimate rights and interests. It is our right.

– Is there a possibility that you will engage in any other investment projects in Ukraine if the case does not go to the international arbitration and the situation is settled?

– Ukraine is a beautiful and kind country with a solid foundation for development and unlimited development potential. Of course, when I am convinced that the legitimate rights and interests of investors can be effectively protected, I am ready to look for additional business opportunities. Ukraine and China complement each other very well in all sectors, be it industry, agriculture, infrastructure construction, finance, culture, or other areas. I passionately believe in the wisdom and courage of the Ukrainian people and sincerely wish your country prosperity and wealth.

– And in case you win an investment dispute with Ukraine, will you still be interested in investing in the economy of our country?

Winning in court does not always mean victory. My understanding of victory is to share the joy of success with Ukraine. I sincerely hope that we and Ukraine will be able to come to mutual benefit, mutual victory, and joint development. It is the result that we should get.