Already a major trade partner to Ukraine, Italy’s business ambitions mean it will always see more untapped potential. Both countries still have plenty to offer each other.
Ukraine-Italy bilateral relations have been more or less constant at roughly $5 billion through the past decade. In 2018, Italy was Ukraine’s third-largest trading partner in the European Union after Poland and Germany.
Among those three, Ukraine had a positive trade balance only with Italy, according to the Ukrainian Embassy in Rome.
Overall, bilateral trade last year grew by 13 percent compared to 2017 and reached $4.7 billion, or an 11 percent share of Ukraine’s trade with the whole EU bloc. Altogether,, there are around 15o Italian companies doing business in Ukraine.
“Following the adoption by the EU and Ukraine of the free trade area, and in parallel with Russia’s imposition of a series of trade restrictions, the EU replaced Russia (for) Ukraine as the main trading partner,” Marco Toson, honorary consul of Ukraine in Italy, told the Kyiv Post by email.
“Ukraine is considered to be an attractive country for investments and business development,” said Toson.
For example, among the top twenty retailers that entered the Ukrainian market in 2018, four were Italian — Emporio Armani, Trussardi, Santoni and Pennyblack — according to the Ukrainian Retail Association.
“This is a positive signal when big brands enter Ukraine,” said Oleh Beresniev, CEO at B2Ukraine, a consulting company that helps mainly Italian businesses to operate in Ukraine.
In addition, in Italy there is a growing demand for Ukrainian alcoholic beverages, especially vodka, as well as hand-made products.
Italy’s business appetite
Beresniev, who has been strongly involved in Ukraine-Italy business relations during the past decade, says that Italy’s interest in Ukraine is starting to gain momentum and return to the pre-crisis levels of 2013–2014 when the EuroMaidan Revolution that ousted pro-Kremlin President Viktor Yanukovych and Russia’s war against Ukraine hit the economy.
“After the revolution, much was not clear for business, but in 2016–2017 the mood more or less returned to normal,” Beresniev said.
This year there have been a number of Italian entrepreneurs who came to Ukraine to develop their businesses, he said.
For example, more Italian food and wine producers are entering Ukraine’s market, which has developed a ravenous appetite for Ukrainian cuisine.
Wine producer Motespada entered the Ukrainian market in 2018 while luxury water brand Acqua Morelli entered this year.
“Last year, several Italian companies signed contracts for the supply of arugula and other traditional Italian herbs with the EcoMarket supermarket chain,” he said.
According to Toson, who has been working on Ukraine-Italy trade relations for more than 20 years, there is a lot of interest from Italian companies in agriculture, construction, and renewable energy as well.
Out of all Italian regions, the southern island of Sicily shows the most interest in doing business with Ukraine, according to Beresniev.
“Sicily shows great interest in different areas, mainly in the agro sector (production of seedlings) as well as clothing production (in Ukraine, then shipped to Italy),” he said.
Parmesan cheese is shown in storage at a warehouse on April 5, 2019 in Motteggiana, Italy. Only a few regions in the north of Italy are able to produce the famous, dry cheese that is globally popular. (AFP)
Ernest Airlines
But it’s not only food, agriculture and clothing that Italians are interested in.
Italian low-cost airline Ernest entered the Ukrainian market in October 2017, shortly after the European Union’s visa-free regime with Ukraine came into force in June of that year.
Ilza Xhelo, chief commercial officer at Ernest Airlines, is happy with the results of the airline’s operations in Ukraine so far.
In 2017, the airlines had only five routes between Ukraine and Italy, whereas now it serves 13 direct flights.
“We feel that it’s a very important market for us and we’re happy that we’re giving discount service to Ukrainians, that now they can fly to more destinations in Italy such as Naples, Venice, Genoa, and not only to Rome or Milan,” said Xhelo.
Ernest Airlines is currently flying from Kharkiv, Kyiv, Lviv, and Odesa, with Odesa being the latest addition.
To advance and localize their services, Ernest Airlines is beginning to hire people who speak Ukrainian.
“We’re hiring a Ukrainian-speaking cabin crew who are Italian residents. We’re also thinking to have an official base in Ukraine so we can hire local people,” she said.
But the Italian airline in Ukraine is facing some difficulties. The company accepts payments only in euros and not in Ukraine’s local currency.
“We’re collaborating with different tour operators and smaller travel agencies to buy tickets in hryvnias, and then they can pay us in euros,” said Xhelo.
According to Ernest Airlines Marketing Director Valeria Beccari, the airline has carried more than 400,000 passengers since October 2017 between Ukraine and Italy for a total of 116 flights in 2017, 2,100 flights in 2018 and 1,155 in 2019 (up to May).
“We see huge growth,” Xhelo said.
Overcoming obstacles
Though much progress has been made, there are key problems that still keep investors from betting on Ukraine. Most investors are afraid of Russia’s ongoing war in Ukraine’s Donbas region.
“Everyone is waiting for the end of the war, although in most regions of the country everything is calm. There, in Italy, people don’t get the right information,” said Beresniev, in reference to Italian media coverage of the situation in Ukraine.
Moreover, the 30-day period of limited martial law in Ukraine that was imposed across 10 Ukrainian oblasts back in November created even more fear.
“Many investors simply (left). I knew people that were ready to invest millions of euros into Ukraine, but after the martial law they said that they will wait until everything gets right,” said Beresniev.
But another problem is simply the lack of knowledge about Ukraine among Italian businesspeople, according to Beresniev.
“They start to learn the situation about Ukraine right at the airport, sometimes when they just ask taxi drivers what is happening in the country. They simply do not analyze the country they’re flying to and want to do business with,” he added.
