A good sign for Ukraine's investment climate arrived when automobile parts division of Japan's Fujikura company announced on Sept. 16 that it will launch a branch in Ukraine's western city of Lviv.
Fujikura will initially invest €6 million to make such car parts as fuse boxes, cables and circuits. While Ukraine is struggling to improve its investment environment amidst war and a frail economy, there have been some improvements.
The country’s development to 83rd place from 87th in the World Bank’s Doing Business ranking is proof of positive developments. This is despite the only €750 million, or 41 percent decrease compared to 2013, in Ukraine-Japan bilateral trade in 2014.
Fujikura is one example of potentially more optimistic times ahead.
With €5 billion in net revenues and 52,500 employees worldwide, Fujikura is hoping to employ 3,000 Ukrainians in the next three years.
Jorge Garcia Puente, vice president at Fujikura Automotive Europe, says that the company is here for the long run. “The company has 130 years now. We are not aiming to make a short-term business of 10-15 years,” Puente told the Kyiv Post in a Skype interview on Oct. 27.
Initially Fujikura looked at Ukraine in 2011, when the company decided to expand.
“We checked a number of countries… all the neighborhood,” Puente says. Finally, Fujikura gave preliminary approval of launching the project in Ukraine in September 2013.
Ukraine’s close proximity to the European Union, market size and well-educated workforce are the factors that sold the company on the entry.
“We found in the region of Lviv well-educated people, people with the will to work… This is also logistically very convenient because this is on the cross-border to the EU,” Puente says. “Our customers are on the other side of the border.”
But because of the Euromaidan Revolution and Russia’s war against Ukraine, Fujikura froze its project in November 2013. What gave a green light to the Japanese company to unfreeze in September was the positive growth of reforms and relatively stabilized conflict in Ukraine’s eastern regions.
“We are at the point that it will not affect the future operations,” Puente says. “Politically the country is trying to change, of course it is going very slow, and it is not easy. But the country is changing and laws are changed slowly.”
In 2016 the company is expecting to receive €40 million in profit if everything goes as planned. The following years the number will go up to €70 million and maybe even higher.
Fujikura is not afraid of the poor customs service quality in Ukraine. Any kind of bribes will be rejected, Puente says. “I am not afraid at all. We just need to follow the law.”
Ukraine’s Economy Minister Aivaras Abromavicius welcomed the entrance of Fujikura.
“The arrival of these companies makes us feel optimistic… If they manage to do everything, they would create jobs and bring investment, and their colleagues, rivals and friends would come to our country and would invest with the purpose of exports to the European market. This investment is an important signal for the government and other foreign investors that reforms bring positive effect,” the minister said in September, according to Interfax news.
The employment boost has begun. “Today we have 300 Ukrainian employees in training phase in Romania operations,” Puente says. These employees will come back to Lviv in December after three months of training and will start manufacturing in January.
Another 600 employees should be hired by April. In less than a year, Fujikura is expected to have 1,500 employees and a 12,000 square meter manufacturing unit.
“And if things are going good… in 2017 we will be preparing the second unit” which will be a replicate of the first one, thus adding an additional 1,500 job opportunities for Ukrainians, Puente says.
The company is looking to hire professionals in areas such as information technology, technicians and engineers.
Puente says salaries will be market-driven. Ukraine’s average salary is Hr 4,343, or €172 per month, according to State Statistic Service of Ukraine.“We are a heavy user of labor, and of course we need to take care of (employees) because that’s the most important actually,” Puente says.
Fujikura has manufacturing units in other countries, including three in Morocco and four in Romania, employing 12,000 employees altogether. Fujikura also has customer service offices in Germany, Hungary, Czech Republic and Spain.
Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected]
