Citi Ukraine Holds The First “Shared Service Center Forum” In Ukraine - Oct. 06, 2017

Citi Ukraine holds the first “Shared Service Center Forum” in Ukraine, a precedent focusing on a new investment activity in Ukraine

Kyiv, Ukraine. – PJSC Citibank Ukraine brought together the heads of IT, tax, audit, finance, Shared Service Centers (“SSC”) departments, CFOs and CEOs of over 50 international corporations, together with legal, tax, accounting and consulting agencies, as well as Ukraine government investment promotion offices to discuss the opportunities Ukraine presents as Central and Eastern Europe’s most attractive destination for establishment of SSCs as well as the ongoing experiences and prospects for further development of SSCs already operating in Ukraine.

International companies use Shared Service Centers to centralize a function, or a broad range of business support services, into one location to provide services support to cover different markets with greater efficiency and higher quality, compared to a previous situation where the same function was provided in each individual market. Often a SSC provides centralized functions support on a 24 hour/7 day basis. Over the last decade, Central and Eastern Europe has been viewed as a desired hub for SSC locations and has attracted significant investment from international companies that developed their SSCs.

In examining a number of factors such as the level of economic and markets development, geographic location, as well as the existing practices of SSC implementations, the speakers at the Citi Shared Service Center Forum concluded that Ukraine presents an attractive balance of positive features and opportunities to consider Ukraine as an ideal location for SSC creation.

Deloitte Ukraine conducted an analysis on attractiveness of Ukraine as a location for Shared Service Centers. Deloitte assessed the potential across a number of criteria and in comparison with 15 countries of Central and Eastern Europe. According to this study Ukraine reveals high degree of attractiveness in some areas. The most attractive aspects are human resources and infrastructure. With the country’s average salary of €286 per month, Ukraine has the lowest salary level as compared with other Central and Eastern European countries. Combined with the high proportion of labor force with higher education the country positions itself very strongly as one of the most attractive places for SSC. Somewhat weaker position of Ukraine is in risks, location appeal and operating environment. Moderate prime rent level and internet quality and penetration level provide for a favorable infrastructure conditions. Disregard the subaverage position in taxation, positive dynamics in this area are supported by improvement in the Ease of Doing Business Index, where Ukraine moved up from 181 position in 2012 to 84 in 2016. Overall, Ukraine looks to be significantly underrated in the shared service centers world.

KPMG in Ukraine, in their recent research, provided an overview of Ukraine and the main benefits for investors looking for a potential location for SSC, or for a Business Processing Outsourcing center (“BPO”). KPMG in Ukraine highlighted the significant availability of a young and highly qualified labor force as one key advantage. Ukraine spends on average 6.2% of its GDP on education, which is higher than the OECD average of 4.8%. Higher relative Ukraine country political risk is partly offset by the government’s implementation of reforms to boost the country’s competitiveness, while currency depreciation has led to significant improvements of Ukraine’s tax and regulatory costs, placing Ukraine by 17 positions upwards. KPMG in Ukraine analyzed the 6 most attractive cities for SSCs and BPO operations. Lviv and Ivano-Frankivsk were chosen as the 2 most attractive destinations taking into account availability and cost of qualified labor, developed infrastructure, the real estate market and convenience of geographical location.

AB InBev, Gruma, Nestle and VEON (Kyivstar) have already set up SSCs in Ukraine and shared their successful experiences at the Forum. Nestle found Lviv as a very good place for their SSC where they now employ over 1100 employees with the staff growing substantially over the last 5 years. For Gruma, the biggest challenge was to find specialists in Cherkassy to support finance services in Italian and Turkish languages in addition to English in order to service Gruma EMEA. The key lessons learnt for Gruma were to diligently analyze all outsourcing options, to document the process before SSC implementation phase, to appoint a full time SSC Head at the very start of implementation and to properly analyze all possible operational costs. AB InBev established their SSC in Kharkiv which covers operations across Eastern Europe. Their SSC has grown to 600 employees since 2008. The services and operations supported from Ukraine include supply chain, procurement, collections, accounting, HR, and in the future it is planned to develop this further to focus on digital transformation and the use of data to optimize costs and improve efficiency. VEON opened its SSC in Lviv only last December. Their center has grown to over 250 employees that services HR, finance and procurement operations across Eastern Europe and the CIS region.

Forum participants agreed that the SSC can help attract significant foreign investment as the hosting country accumulates new workflows and infrastructure from a number of neighborhood franchises. Ukraine-specific internal environment and regulations was discussed in a panel session dedicated to government support of foreign investment inflows participated by the President of the American Chamber of Commerce, Andy Hunder, Yulia Kovaliv, Director, National Investment Council Ukraine, and Chief Investment Advisor to the Prime Minister of Ukraine, Daniel Bilak, Director, UkraineInvest. All panelists agreed that cooperation with business associations active in Ukraine is very important and that tremendous progress has been made recently including establishment of the VAT refund system, education reform completion and continued progress on other key reforms including medical, pension, land and privatization reforms, all of which are of key importance for the country.

Citibank Ukraine CEO, Steven Fisher opened the forum by sharing his view why it was the right time to have the 1st SSC forum in Ukraine by highlighting the recent positive progress of the country’s economy development, recovery in the banking sector and demonstrated increased interest from the global investor community. After moderating a panel discussion Steven Fisher concluded that availability of qualified human resources, technology, infrastructure and government support and intentions to progress with reforms are the key requirements for a successful set up of a new marketplace.

Citi in Ukraine
Citi established a Representative Office in Ukraine in 1997 and was incorporated as a wholly-owned subsidiary in 1998, making it the 100th country in Citi’s global network. Citi Ukraine has 140 employees and provides a full range of services to corporate and commercial banking clients. Citi Ukraine has significantly expanded its customer base to over 400 customers, and leads important financing transactions for the Government of Ukraine, as well as key multinational companies and top tier Ukrainian companies.

Additional information may be found at http://www.citigroup.com/citi/global/ukr.htm

About Citi

Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.