Business in Ukraine withstands and adapts
Funikulaari Kiovassa. Kuva:
Doing business in Ukraine is currently all about balancing between the risks and possibilities. It’s better to be cautious when joining the forthcoming recovery of Ukrainian economy, but on the other hand, there’s not much time for hesitating.
Text Patrik Saarto
Over a year and a half of Russia’s devastating war in Ukraine has not stopped the local business. The war has taken something from everyone and everything from some, but everyone has tried to adapt to changing conditions within the limits of opportunities. This has been noticed in the European Business Association EBA, which has in Ukraine 900 member companies.
– We have observed enormous resilience from our member companies. We are really proud to say that 99% of our big and medium sized companies continue to work and are fully operational. The situation in the small and micro sized companies is a little bit worse, because 7% of these companies had to close, says Anna Derevyanko, the Executive Director of EBA.
“99% of our big and medium sized companies are fully operational.”
The war has narrowed Ukraine’s market, but companies have compensated their losses by seeking growth and partners from around the world. A positive trend is evident from EBA’s survey results – 58% of EBA members expect their business to grow in 2024, while only 13% expect it to shrink. Growth prospects have strengthened after the previous survey, which showed 47% of EBA members expecting growth in 2023. The proportion of companies planning investments has also increased from 19% to 26%.
Challenges in a country at war are naturally significant. The near future is difficult to plan, a large part of the labour is fighting or has left the country, and risks make financing difficult. Transparency is still a big challenge in Ukraine as well. The focus should be on the most promising perspective – the reconstruction and the EU membership process. Ukraine is also geographically easily accessible for logistics.
– It’s important to learn challenges and opportunities, to analyze local environment, but nevertheless, the decision to cooperate with Ukraine should not be postponed. As some might say, it’s risky to invest now in Ukraine, but it’s even more risky not to invest in Ukraine. The competition is really growing, because everyone is looking at the opportunities in Ukraine, countries are starting to implement different instruments to support their companies, Derevyanko says.
Being prepared is vital
One of the companies that recently invested in Ukraine is the pharmaceutical company Bayer. The company announced a €60 million investment in its seed production site in Pochuiky, Zhytomyr region, in the spring. Besides equipment and storage facilities, the investment included two bomb shelters.
– Investing is possible. We are convinced, we can manage the risks. It’s the right moment, you will have now the opportunity to hire good people. Once the war is over and everybody starts to rush in the country, there might be more difficulties to get qualified people, says Oliver Gierlichs, SBR and CEO of Bayer Ukraine.
“It’s the right moment.”
In uncertain situations, the importance of preparedness is emphasized. Fujikura Automotive Ukraine, a company that produces automotive components located in Lviv, made a plan for operating in emergency situations in 2021 when Russia began to concentrate troops near Ukraine. The core of the plan was to ensure the safety and evacuation of personnel when required. To continue business operations, necessary components and backup power sources were procured.
– Despite all the challenges, we are able to keep our operations under control. We are also able to satisfy the customer demand, says Andriy Matsyuhin, the Managing Director of Fujikura Automotive Ukraine.
The business environment in Ukraine is currently affected by the martial law. Currency controls have been tightened and some payment transactions have been restricted, but the restrictions have since been gradually lifted. In taxation, Ukraine is gradually moving towards pre-war rules, which means the tax monitoring is increasing. New taxes to increase state revenues are possible.
– The government had in mind, first of all, making sure that this distressed situation doesn’t cause unnecessary capital outflow, that the banks are functioning and the business is given opportunity to get self-organized, taking in account the limited ability of authorities, especially the tax authorities, to act, describes the Tax and Law Leader of EY Ukraine Vladimir Kotenko.
Derevyanko, Gierlichs, Matsyuhin and Kotenko were speaking in the Doing Business in Ukraine in today’s circumstances webinar of EastCham Finland on 4th October.