Ukraine sells a lot of its agricultural products to the European Union — a third of all the country’s agricultural exports like grains, cereals and sunflower oil ended up in the EU last year, much of it to the Netherlands.
Ukraine exported agricultural goods worth $1.4 billion to the Dutch country, part of a bilateral trade valued at $2.5 billion in 2020.
From the latest statistics — January through November 2020 — the EU’s 27 nations bought $5.8 billion worth of food from Ukraine.
Professor Louise Fresco, a member of the Royal Netherlands Academy of Arts and Sciences, said Ukraine is a vital food producer.
“You are blessed with some of the best soils in the world,” Fresco said during a press event in Kyiv on April 15. Ukraine will always be one of the countries “making sure that food is available to the poor in the world.”
Ukraine, in turn, imported $740 million worth of goods from the Netherlands, mostly cars, pharmaceuticals, dairy products, vegetables, plants, cocoa and tobacco.
The partnership would be stronger if Ukraine had rule of law.
“The country has opportunities, the country has a skilled labor force — it has everything to be successful,” said Jan Steenstra, cofounder of EVW Automotive, the official dealer of Dutch DAF trucks in Ukraine. “But if investments are not protected, it’s very hard to make the decision.”
Dutch greenhouses
About 14 times smaller than Ukraine and with only 17 million people, the Netherlands distinguishes itself as one of the biggest traders in the world. The Netherlands exported $675 billion worth of goods in 2020. By comparisons, Ukraine’s exports reached only $49 billion — about a third of the gross domestic product of roughly $150 billion.
Agricultural products make up the lion’s share of Dutch exports.
Despite its agricultural successes, particularly in grain production, Ukraine is deficient in other areas. For example, it has to import huge volumes of vegetables like tomatoes and leafy green vegetables — especially during the winter. In 2020, imports of greenhouse tomatoes reached a record 86,700 tons, 21% more than the year before.
An exception to the country’s otherwise dismal reality in some areas, Galicia Greenery, a Dutch greenhouse company based in Lviv Oblast, produces around 2 million lettuce bushes annually. The company sells them to Ukrainian supermarket chains and restaurants.
Founded with the joint investment of FoodVentures and Dutch grower cooperatives Rainbow and Prominent, the company uses aquaponics technology for growing vegetables.
“Salads float in special crates with nutrients in water,” Serhiy Lenchuk, director of Galicia Greenery, told the Kyiv Post. “This is Dutch technology.”
While the Netherlands has more than 9,000 hectares of greenhouse production, the number of them in Ukraine has halved in just the last seven years — from 500 hectares to 280 hectares.
Main reasons: there’s no state support, electricity and gas are pricey and loan rates are high.
“Business should be extremely profitable to pay loans at 12-13% in the national currency,” said Lenchuk.
For him, it is much more difficult to run greenhouses in Ukraine than in the Central Asian country of Kazakhstan.
“When the business plan for growing in Kazakhstan or Ukraine is laid out on the same table, investors will choose Kazakhstan,” he said. “The attractiveness there is higher and the payback period is lower.”
Galicia Greenery invested 5 million euros to start business in Ukraine in 2015. The investment hasn’t yet returned a profit.
In the Galicia Greenery case, the initial plan was to build 15 hectares of hothouses, where the lettuce would be an additional product to tomatoes. But it never happened and the area was cut to 0.8 hectares with only lettuce to produce.
Investors from the Netherlands currently don’t have plans to launch other projects in Ukraine.
“Not so many people want to invest into projects with an over five-year payback period,” said Lenchuk.
Meanwhile, Fresco believes that Ukraine still has great potential in horticulture, including greenhouse production. The COVID-19 pandemic, she said, pushed many people to switch to healthier diets.
Dutch trucks
Doing business as a Western European company in Ukraine for 25 years means constant ups and downs, according to Steenstra from EVW Automotive. But even Russia’s war didn’t force the company to leave the market.
“I cannot remember for the last 15 years any period where there was no risk,” said Steenstra.
The sales of DAF trucks are around 1,000 annually in Ukraine. Still, it’s three times lower compared to what the company had in 2007-2008. Today, the company’s share in the Big Seven club — Scania, Volvo, MAN, Mercedes-Benz, Renault and Iveco — is 10%.
But this year is not an ordinary one.
As the pandemic fueled online commerce, it provoked extremely high demand on trucks in EU countries. Steenstra hasn’t given any concrete figures though, because many ordered trucks are still being built.
It takes about nine months to manufacture a truck, he said. “Even if the market in Ukraine places an order for a lot of DAF trucks, we simply cannot produce them.”
The company’s current growth forecast in Ukraine is much more modest than 15 years ago, when it just started working in the country.
In Eastern Europe, Dutch investors have more confidence in the Polish legal system because it is more transparent. “Not the case in Ukraine,” said Steenstra.
Dutch farmers have a similarly cautious attitude to investment in the Ukrainian agricultural sector, even amid the opening of the land market this July.
To make the country more attractive for Dutch farmers, Ukraine has to clarify “what foreign investors can expect,” said Reinoud Nuijten, agricultural counsellor to Ukraine at the Dutch Embassy in Kyiv. Currently, it is vague how and who can own or lease the land. The “situation is not favorable for foreigners,” said Nuijten.
