U.S. policymakers and businesses have been keen to keep Ukraine close since it broke free from the Soviet Union in 1991.
Still, the business relationship between the two, while solid, has room to grow. Problems with rule of law scare off potential investors. Overall trade with the US, arguably one of Ukraine’s most important geopolitical partners, has remained low.
The United States is Ukraine’s 8th largest trading partner. In 2020, trade in goods and services between the U.S. and Ukraine amounted to $5.78 billion, including roughly $3.94 billion in goods and $1,84 billion in services, according to Ukraine’s State Statistics Service.
In contrast, overall trade turnover with China, Ukraine’s largest trading partner, was $15.4 billion in 2020.
U.S. President Joe Biden’s recent invitation to meet President Volodymy Zelensky in Washington, D.C. this summer has sparked hope among American businesspeople in Ukraine.
For Andy Hunder, the President of the American Chamber in Ukraine, which boasts over 600 members, it is the perfect occasion to show off Ukraine’s potential.
“It’s an opportunity to show what is Ukraine doing and why American companies should come to Ukraine,” Hunder told the Kyiv Post on July 6.
Overall, Hunder believes that U.S. investors should listen to the success stories in the country to get an idea of its potential, and not be deterred by wrong stereotypes.
“Bad news always travel faster,” he said. “Ukraine is open for business, come and have a look.”
Rule of law
Within Ukraine, most of the American Chamber’s efforts are directed towards helping businesses and the government communicate better, Hunder said.
Hunder, who’s been in Ukraine since 1996, stated that the main challenge for U.S. businesses in Ukraine is the lack of rule of law, which deters potential investors.
But U.S. companies are not looking for preferential treatment, he said. “They’re looking for justice and fairness,” which is the message the Chamber has been trying to convey to key stakeholders in the country including in Ukraine’s parliament.
Unfortunately, no reform has been able to effectively address the country’s rule of law problem.
Instead, the limited reforms have so far have focused on restructuring some courts and replacing some judges, while failing to tackle the systemic causes of long-term corruption.
Promising sectors
Since Ukraine is an untapped market for foreign investors, it has a bright future as Europe’s leading agricultural producer and the potential to be a growing information technology powerhouse, given it can deal with the rule of law in the country.
“U.S. investors are involved in getting grain from the fields to the international market,” Hunder said.
Agriculture experts including Nikolay Gorbachov, president of the Ukrainian Grain Association, predict a record 100 million tons of grain harvest in 2021, putting Ukraine in the spotlight.
This forecast expects continued growth. The Ukrainian Grain Association estimates production will reach 113 million tons by 2026, thanks to improved yields due to increased irrigation. Ukraine boasts 25 percent of the world’s most fertile black soil.
A yield of 113 million tons would mean 79 million tons of exports. This potential has already attracted U.S. companies, including Chicago-based Archer Daniels Midland, in Ukraine.
The company employs more than 850 people in Ukraine and operates an oilseed crushing plant in Illichivsk, a grain terminal in the port of Odesa, six silos, and a trading office in Kyiv.
Port infrastructure and river transportation will also boom in the years to come, Hunder said. River transportation will allow Ukraine to increase the volume of freight transportation via inland waterways as a cost-saving alternative to road and rail transport.
Today, 75% of Ukraine’s river infrastructure is rundown. While Soviet Ukraine was able to move 60 million tons per year, the current annual barely reaches 10 million tons.
“We will see significant U.S. involvement in that in the next 18 months,” Hunder said.
But it all comes down to the food and beverage industry, with companies such as Pepsico involved in a wide range of products for the Western market, from carbonated water to dairy products and potato chips.
The company has also established holdings in Ukraine and owns three production sites here: one in Kyiv and two in Mykolaiv, a southern city of nearly 500,000 people, nearly 500 kilometers south of the capital.
American multinational company Mondelez also has a factory in the Kyiv region, making coffee, chocolate, salted snacks, biscuits and gum, which brings unexpected products on Western supermarket shelves.
“The Oreo cookies you buy today in Europe or even in the U.S. are made in Ukraine,” Hunder said.
