Among German companies, Ukraine is often dubbed as “a turbulent market” because the level of purchasing power in the country is low, corruption flourishes and bureaucracy prevails at every level.
However, for the last few decades, Ukraine has been a reliable partner for German businesses: Big companies like Henkel and Rehau have entered the country because they saw potential in the growing market.
Currently, over 2,000 German companies are operating in Ukraine, mostly involved in the automotive supply industry, retail, wholesale and logistics.
They appreciate Ukraine’s workers — skilled and hard-working — and are ready to invest here.
Germany expects that the Ukrainian market will become more profitable, although consumption per capita in Ukraine is low, said Nina Dombrowska, the Ukrainian president of German chemical and consumer goods company Henkel.
“But if income increases, people could afford more, so the purchasing power will grow,” she added.
To help businesses, Ukraine needs better legislation and a reliable judiciary, businesspeople said.
“Ukraine missed many chances to reform the country and improve its business climate. We are moving too slow and there are no noticeable changes,” said Dombrowska.
Lack of regulation
Ukrainian laws are complicated and the government doesn’t implement them effectively, according to a report published by the independent World Justice Project organization.
Germany, on the contrary, implements the laws fairly, according to the report. This makes it more difficult for Ukrainian businesses to work in Ukraine.
“This is not because (the laws) are bad in Ukraine — they are different,” said Lennart Osses who works as strategy and growth manager at the German legal tech startup RightNow, which employs tech specialists in Kyiv.
According to Osses, Germany has strong social institutions, thus the country is properly regulated.
“(Germans) can rely on the country’s legislation, they know that the court can protect them,” said Dombrowska.
Ukrainians, on the contrary, do not trust their judiciary, according to a report by the Ukrainian Center for Economic Strategy, so the regulatory progress still needs to be improved.
“(Ukraine will solve) these issues sooner or later, but it often takes much time and effort,” said Fedir Omelinskyj, the Ukrainian director of German polymer business Rehau.
Doing business in Ukraine
In 2019, the World Bank placed Ukraine 64th among 190 countries for ease of doing business.
Although the business environment in the country has improved, it is still ranked below most post-Soviet states, including Georgia, Lithuania and Estonia.
German businesses that work in the country face numerous challenges.
Henkel, for example, struggles with unfair competitive conditions that benefit competitors and allow them to escape taxation and additional regulations.
Another problem that restrains businesses is the lack of affordable mortgage loans, according to Omelinskyj.
“The government promises to improve that, but I think that 10% annual interest for long-term mortgage lending is also too expensive,” Omelinskyj told the Kyiv Post.
The business environment is more precarious in Ukraine because everything is changing very fast.
“Our European colleagues are not used to such sharp and significant changes in the exchange rate and the respective impact it has on business,” Omelinskyj said.
Resilient nation
These constant changes and the endless barrage of crises have made Ukrainians who they are, Dombrowska said.
“My colleagues from Europe are going through a tough time during this coronavirus crisis because, for many of them, it was the first (crisis) that concerns them personally,” she added.
That is why Ukrainians have a different mentality — crises for them are a normal state, according to Dombrowska.
This environment has made Ukrainian specialists more flexible and hard-working. That is why they are valued abroad.
German startup RightNow, for example, is satisfied with its Ukrainian team of techies.
“In Ukraine, the level of (tech) expertise is very high,” said manager Osses.
Although Germany has over 900,000 tech specialists (Ukraine has nearly 200,000), it is cheaper to employ developers in Ukraine and their skills are highly valued, according to Osses.
For foreign businesses, it is easy to work with Ukrainians because they are flexible and can adjust quickly, Dombrowska said.
“People are Ukraine’s greatest potential,” she added.
