Published on April 27th, 2015 | by Alexandra LACROIX | Credit: roman-gp user from DeviantArt1
Doing Business in Ukraine; Facts, Figures and Tips
Mr. Vyacheslav Dotsenko is the Financial Director of Promote Ukraine, a Brussels-based organisation that promotes Ukrainian civil society worldwide. We have recently interviewed him and had the chance to ask him some questions on business in his country.
Read this interview and you will discover all the opportunities his country has to offer!
Key Facts and Figures:
Population: 45 million
Borders: Belarus, Poland, Slovakia, Hungary, Romania, Moldova, Russia
Official language: Ukrainian
GDP Per Capita: US$ 8,240 (2014)
Economic growth: 5.2% GDP growth (2011)
Currency: Hryvnia (UAH)
How should European businessmen, and particularly potential investors, view the current social and political situation in Ukraine?
Ukraine is getting more and more ready for business. In terms of politics Ukraine is changing for the better, the needed reforms are being slowly, but steady, implemented. For the entrepreneurs and investors this situation of pre-change can deliver an advantage to start networking now. This can in time deliver the opportunities to have a first mover advantage to conduct business when the circumstances are optimal. Political situation is slowly getting stabilized, but in terms of long term investments the integration towards the EU is moving at its certain pace. Several treaties concerning trade and investments are already been passed and the other ones are in preparation. Concerning the internal politics of Ukraine anti-corruption committee has just started its activity and is preparing their cases and anti-corruption laws are being prepared to tackle the existing mentality of corruption.
In terms of the ongoing armed conflict it can be said that only 20 percent of the country is occupied with war (incl. Crimea) and the other 80 continues to live at the usual pace. The image, which investor sees in the news, has a scaring effect, while the real situation is different.
What are the top 5 reasons to do business in Ukraine?
- Natural Resources – Ukraine can offer resources such as land, water, wood and agriculture; all this in the near proximity of Central Europe.
- Geographic location of Ukraine allows conducting logistics from the Far East. Ukraine could become a land bridge from China or Caucasus to West Europe.
- Well educated population – many high skilled engineers and IT specialists.
- Fight against corruption – many reforms are being implemented in terms of e-commerce, anti-corruption and e-Governance.
- Rising middle class – Ukraine is experiencing an increasing in the numbers of middle class.
Which segments of the Ukrainian market currently offer the most opportunities for European exporters?
To our opinion the most promising sectors are automotive industry, IT and electronics, industrial construction and machinery, chemicals and consumer goods.
Are there any industries which are particularly promising especially for small and medium-sized companies from the EU?
Ukraine’s IT industry, over $5 billion in value, has over 500 outsourcing companies, over 100 global R&D centers, over 100 e-commerce companies and more than 2000 startups. The most promising developments for Ukraine’s IT sector in 2014 came not in the form of deals closed though, but in changes to the political and business environment.
As an example of the changes in the political and business environment a startup accelerator can be mentioned. It is an investments fund that trains and mentors startups in exchange for equity. The accelerator, called Carrot, sparked a flurry of interest in Ukrainian hardware startups.
If these measures succeed, Ukraine’s IT industry will be set up for a promising year in 2015. It is time to start networking and getting to know Ukrainian IT-sector more closely before it is too late to make an advantage out of it.
What are some of the challenges that European SMEs encounter there? How can they be overcome?
Ukrainian business is still struggling with a high level of corruption. There are so many official departments that need to give approval when starting a business and during exploitation of the existing business. The mentality of corruption is slowly changing, but you need to know in advance with whom you are dealing with and deal only with officials. The mentality is slowly shifting and everyone needs to take their responsibility to report the misdoings of some officials as fast as possible to the anti-corruption committee.
What advice do you have for European SMEs seeking to invest or do business in Ukraine? What would be the first thing you would recommend?
The biggest mistake made by foreign-based companies is generally not doing enough homework on the culture, practical methods of working and regulatory conditions here in Ukraine. Promote Ukraine is an ideal contact for any needed advice or information regarding starting up business in Ukraine.
Do you have any tips on how to do business with Ukrainian business people?
Those who are just getting started in Ukraine search for support from official organizations. This kind of cooperation provides the foundation for civilized society, forms good conditions for development and helps to avoid corruption
It could work to have your company abroad and workers in Ukraine. In that manner you can avoid dealing with the politics and have an affordable, quality labor. Absence of logical thought processes and if prices were standardized for everyone, who wanted to be in business, it would be easier to startup companies in Ukraine.
Proper Ukrainian business etiquette is essential to gain new partners and clients in the Ukrainian business community. It is easy to gain the respect of and impress your Ukrainian colleagues when you are know what they value and collaborate in their refined sense of etiquette, all of which will improve your entry into the Ukrainian world of business.
What is the role of Promote Ukraine?
Promote Ukraine is taking the role of “Business Hub”. Promote Ukraine is the ultimate contact point for advice about visiting Ukraine and building your network with trustworthy Ukrainian companies, partners and officials. Our organization will provide contact details for legal and administrative assistance in terms of visa’s, business, starting up companies and etc. We have already contacted our sister organization in Ukraine for B2B-cooperation. A network of Ukrainian SME’s, who are willing to cooperate with the investors/entrepreneurs in the EU, has already been created.
Promote Ukraine is also assisting in legal documents and translations as an intermediary or negotiator partner. Promote Ukraine is functioning as an intermediary between the interested investors and the companies or institutions who help investors and entrepreneurs to start up in Ukraine. Another goal of Promote Ukraine is to establish dialog and networking between the interested parties in Europe and Ukraine by organizing conferences and B2B network events or participating in the existing ones.