Polish top manager in Ukraine says the country has vast potential
Stefan Perkowski is the president and CEO of Alfa Asset Management, the Ukrainian branch of Moscow’s Alfa Group. The Polish native also serves as president of the Polish Entrepreneurs’ Association in Ukraine and has nearly two decades of financial markets experience in developing economies. In this Kyiv Post interview, Perkowski says that while the economic potential of Ukraine is enormous, the chronic political instability restricts future investment and growth.
KP: What makes Ukraine so attractive to Polish investors and business?
SP: Ukraine is attractive because it is a huge market with enormous potential and the competition isn’t as great as it is in the West. Poland has three comparative advantages in Ukraine when developing business. First, we share a common border with Ukraine. This is a huge advantage vis-a-vis our competitors.
Secondly, we share a similar cultural heritage, particularly in western Ukraine, but it is transferable throughout the country.
And last, Polish companies, entrepreneurs and executives have experience working in developing post-Soviet economies.
KP: What areas are Polish investors focusing on in Ukraine?
SP: Poland has invested heavily in all aspects of the economy, particularly in the financial, manufacturing and food processing sectors. There are a number of Polish companies that have used the comparative advantages we talked about to build significant market share, for example, in building material production. We are talking about flooring, windows, bathroom fixtures and the like.
For domestic Polish producers, Ukraine is a huge market of 46 million people. As the Polish market nears saturation, these companies naturally look here for continued growth.
In terms of foreign direct investment (FDI) inflows to Ukraine, Poland is ranked 12th, but if you strip out the huge investments in Ukraine’s financial sector by other European countries, Germany’s investment [through a subsidiary of] Mittal Steel and the investments from Cyprus, which are really repatriated funds from Russia and Ukraine, Poland’s $700 million in FDI looks better. Moreover, if we take a look at the number of FDI projects launched in Ukraine, Poland is ranked among the top three countries.
KP: What is the Polish Entrepreneurs Association?
SP: The association was founded in 1998 and initially only for entrepreneurs, but now includes managers with Polish roots of international investments or business in Ukraine. The number of Poles in key management positions in all sectors of the economy – financial services, manufacturing, media, consumer products – is growing rapidly. Why? Poland began its transition from a planned economy much sooner than Ukraine and its managers gained experience in a developing economy. This isn’t limited to Ukraine. Polish management personnel are being recruited to work throughout the post-Soviet, post Warsaw-pact nations. The association’s main goal is to unite and support polish entities and the polish business community in Ukraine.
KP: What are the main challenges for Polish firms doing business in Ukraine?
SP: There are three areas I hear consistent complaints about.
Firstly, the economy needs political stability. Without it, the economy will not develop as quickly as it could. Without it, the much-needed reforms in land use, VAT (tax) administration, commercial code, financial markets – including the regulation of investment and pension funds – cannot be enacted. Without political stability, corruption cannot be controlled. The political situation sets the tone for all economic activity.
Secondly, Polish employers and managers complain about workforce stability. In Ukraine, it is not uncommon for young professionals to change jobs every seven to nine months. We call them job jumpers. In the West, if someone changed jobs three or four times in a two-year period, a human resources manager would be suspicious, and screen this person out. Here that is not the case. Part of the problem is retention incentives. But the other part is the lack of sophistication in human resources departments.
Finally, the border is a constant complaint. The line for entering and exiting Ukraine [via Poland] is routinely six to ten kilometers long. The customs procedures for imports entering the country are antiquated and need to be reformed on the EU model.
KP: What is your forecast for Polish investments and businesses in the mid-term?
SP: In terms of Polish FDI inflows to Ukraine, I expect them to grow at 20 to 25 percent year-on-year.
