Ukraine And Canada: Bridg­ing The Dis­tance

Kyiv Post - - Front Page - BY I LYA TIMTCHENKO TIMTCHENKO@KYIVPOST.COM

The sky­line of Ni­a­gara Falls, Canada is seen from Ni­a­gara Falls, New York on July 3, 2016. While 7,000 kilo­me­ters apart, Ukraine and Canada are united by blood ties — 1.4 mil­lion Ukrainian-Cana­di­ans. Canada re­mains one of Ukraine's big­gest po­lit­i­cal sup­port­ers and, since the start of a free trade agree­ment on Aug. 1, 2017, com­merce is inch­ing up, al­though still un­der $300 mil­lion an­nu­ally. More­over, since June 6, three non-stop flights weekly in each di­rec­tion be­tween Toronto and Kyiv by Ukraine In­ter­na­tional Air­lines have given new im­pe­tus to tourism and trade.

Canada is host to one of Ukraine’s largest di­as­pora com­mu­ni­ties and is one of Ukraine’s top sup­port­ers as Kyiv faces down Rus­sia's war in its fifth year.

But in bi­lat­eral trade, Canada is barely in the top 50 of Ukraine’s part­ners (45th, in fact) with turnover worth $293 mil­lion in 2017, de­spite the ad­vent of a free trade agree­ment on Aug. 1.

There's a lot of catch­ing up to do for two coun­tries with com­pletely dif­fer­ent eco­nomic sit­u­a­tions. Ukraine, with 42 mil­lion peo­ple, has a gross do­mes­tic prod­uct of a lit­tle more than $100 bil­lion, while Canada — with six mil­lion fewer peo­ple — comes in at $1.6 bil­lion.

The trend is mov­ing in the right di­rec­tion, helped by the pres­ence of 1.4 mil­lion eth­nic Ukraini­ans in Canada.

ELEKS

An ex­am­ple of this can be seen at ELEKS, a top 10 Ukraine in­for­ma­tion tech­nol­ogy soft­ware en­gi­neer­ing and con­sult­ing ser­vices firm that serves For­tune 500 clients such as BNY Mel­lon and Au­todesk.

“Our re­la­tion­ship with Canada started three years ago,” An­driy Krupa, chief com­pli­ance of­fi­cer at ELEKS, told the Kyiv Post.

The com­pany has signed a con­tract with a large Cana­dian re­tail en­ter­prise. “Since then, we’ve started build­ing the re­la­tion­ship with the coun­try, we’ve had cus­tomer vis­its here, and we had our peo­ple going to Canada,” Krupa said.

ELEKS, a com­pany with 1,200 em­ploy­ees, mostly lo­cated in the western Ukrainian city of Lviv, is now think­ing of open­ing up a small of­fice in Canada to con­tinue ex­pand- ing its client base in the re­gion.

“It’s a very in­ter­est­ing mar­ket and I think we can re­late to that first of all in terms of cul­ture,” Krupa said. “It seems they would like to have Ukraine suc­ceed (po­lit­i­cally and eco­nom­i­cally) and are do­ing their best to make it hap­pen… So this builds rec­i­proc­ity.”

Chu­mak

This good will has also helped one of Ukraine’s big­gest food pro­duc­ers, Chu­mak, over the past 15 years that it has been ex­port­ing its prod­ucts to Canada.

“The core busi­ness is around what is called ‘eth­nic dis­tri­bu­tion,’ as there are a lot of peo­ple in Canada of Ukrainian ori­gin,” said Chu­mak ex­port di­rec­tor Orest Rozhankivsky.

Chu­mak part­ners with two dis­trib­u­tors that tar­get the Cana­dian di­as­pora mar­ket with Ukrainian-made ketchup, may­on­naise, sauces, juice, sun­flower oil and more.

But the di­as­pora mar­ket is worth less than $100,000 in an­nual rev­enues for the com­pany, or only 2 per­cent of its over­all ex­ports. And it’s been dif­fi­cult for the Ukrainian com­pany to ex­pand be­yond that.

“We un­der­stand that di­as­pora is… a rather lim­ited mar­ket,” he said. “Of course we are also try­ing to be on the ‘real’ Cana­dian mar­ket, which is not so easy.”

The main rea­son for that is that the mar­ket is al­ready quite sat­u­rated.

Chu­mak thought that by en­ter­ing the Cana­dian mar­ket it would be suc­cess­ful sim­ply if it had a good qual­ity and tasty prod­uct at a com­pet­i­tive price.

“But un­for­tu­nately it’s not like that, be­cause there are so many prod­ucts on that mar­ket that al­ready fit those re­quire­ments, so you need some­thing more, you need to es­tab­lish con­tacts, break through this wall, and that’s not so easy.”

Break­ing bound­aries

Denys Kras­nikov, the vice pres­i­dent of the Ukrainian League of In­dus­tri­al­ists and En­trepreneurs, or USPP, a union of busi­nesses and or­ga­ni­za­tions, says that that

the Cana­dian mar­ket in gen­eral is much more closed to for­eign goods and ser­vices than some other coun­tries, be­cause of non-tar­iff bar­rier reg­u­la­tions.

“Many ad­di­tional re­quire­ments for for­eign prod­ucts are sup­ported by do­mes­tic busi­ness as­so­ci­a­tions and lo­cal pro­duc­ers; and some­times th­ese are re­ally un­ex­pected for for­eign pro­duc­ers,” Kras­nikov told the Kyiv Post.

Cana­dian part­ners will re­quire more in­for­ma­tion about a for­eign prod­uct com­pared to many other coun­tries, and will ask to see cer­tifi­cates prov­ing the qual­ity of the prod­uct and pro­duc­tion process.

“They (will) try to un­der­stand the his­tory of the com­pany, its owner’s port­fo­lio and ori­gin of the cap­i­tal,” Kras­nikov said. Even if you have a com­pet­i­tive prod­uct and good price, if you do not meet their re­quire­ments, you don’t have a chance for co­op­er­a­tion.”

Kras­nikov is hope­ful though, and says that more Ukrainian com­pa­nies will adapt their prod­ucts to Cana­dian mar­ket re­quire­ments. He pre­dicts that “some of them will play a sig­nif­i­cant role there.”

Rozhankivsky, how­ever, said it has been eas­ier for his com­pany to en­ter the mar­ket in Canada than the one in the United States. Chu­mak has ben­e­fited from help from trade or­ga­ni­za­tions in Canada as well as a more “pos­i­tive at­ti­tude to­wards (Ukraini­ans),” he said.

Free trade agree­ment

The Canada-Ukraine Free Trade Agree­ment, which came into force on Aug. 1 last year, has also helped.

Adam Bar­bo­let, se­nior trade com­mis­sioner and com­mer­cial coun­selor for the Em­bassy of Canada in Kyiv, says that deal has no­tice­ably con­trib­uted to bi­lat­eral trade, and in a unique way.

“Nor­mally you would ex­pect to see… trade of more (types of goods) but not nec­es­sar­ily a higher volume,” Bar­bo­let told the Kyiv Post. “But ac­tual vol­umes are also going up — it’s not just more types of things that are be­ing traded… And that’s in both di­rec­tions.”

Bar­bo­let says that the CanadaUkraine Trade and In­vest­ment Sup­port project, or CUTIS, has played an in­stru­men­tal role in this. The sup­port "has been quite ac­tive in telling the story of Ukraine in Canada. Com­mer­cial re­la­tions are ex­pand­ing be­yond just di­as­pora groups, it’s re­ally a busi­ness-to-busi­ness kind of a re­la­tion­ship that’s start­ing to de­velop,” Bar­bo­let said.

Most of the Ukrainian compa- nies col­lab­o­rat­ing with Canada are small- to medium-sized ones, in key in­dus­tries like IT, footwear, con­fec­tionar­ies, cloth­ing, and fur­ni­ture.

Cran­ber­ries

For ex­am­ple, since 2017, Ukraine has bought up Canada’s en­tire sur­plus sup­ply of can­died cran­ber­ries.

“The Ukrainian con­fec­tionary in­dus­try used to buy Amer­i­can cran­ber­ries, dry them, candy them and then process them,” Bar­bo­let said. “What they found was that it was more eco­nom­i­cal… to buy them di­rectly from Canada as can­died cran­ber­ries. They had wanted to buy 500 mil­lion tons, but we don’t have 500 mil­lion tons.”

And when Ukrainian com­pa­nies en­ter Canada, they demon­strate that Ukraine can make high qual­ity prod­ucts that whet Cana­di­ans’ ap­petites to in­vest in Ukraine.

To­day the em­bassy’s eco­nomic sec­tion has an un­prece­dented num­ber of in­vestor projects in the pipe­line, to­tal­ing more than $1.5 bil­lion in for­eign di­rect in­vest­ment.

On­tario-based pri­vate mer­chant bank Forbes & Man­hat­tan’s in­vest­ment in the Kryvyi Rih iron-ore project has been re­spon­si­ble for $1.2 bil­lion, re­new­able en­ergy com­pany TIU Canada is plan­ning to in­vest $100 mil­lion this year, and Brook­field As­set Man­age­ment is pump­ing tens of mil­lions of dol­lars into the Lviv IT Park, a 10-hectare of­fice park.

“We’ve never seen any­thing like this…,” Bar­bo­let said. “We’re start­ing to see an in­crease in com­mer­cial con­fi­dence in the coun­try.”

An­other ex­am­ple is Colon­nade Ukraine, a non-life in­sur­ance com­pany, owned by Cana­dian Fair­fax Fi­nan­cial Hold­ings since 2015.

Igor Verich, the com­pany’s busi­ness de­vel­op­ment man­ager, says that the com­pany has been grow­ing ev­ery year at ap­prox­i­mately 15–25 per­cent.

“Last year we were able to col­lect Hr 180 mil­lion in gross pay­ments, mak­ing up to 1 per­cent of the whole in­sur­ance mar­ket,” Verich said.

Coal plum­met

While there are a lot of projects to keep the em­bassy and CUTIS busy, over­all trade fig­ures are still quite low, which makes them quite volatile. For ex­am­ple, Cana­dian ex­ports to Ukraine dropped by around 60 per­cent, or by $57 mil­lion, in Jan­uaryApril com­pared to the same pe­riod of 2017. The rea­son — coal. “(Coal) is now com­ing from the United States rather than from Canada,” Bar­bo­let said. Back in 2017, U. S. Xcoal En­ergy & Re­source signed a deal with Ukraine’s Cen­tren­ergo to de­liver steam coal.

But Bar­bo­let says that there have been con­ver­sa­tions about Ukraine start­ing to pur­chase Cana­dian coal again, “so we could very well see those num­bers resurge.”

If the coal fac­tor is ex­cluded from the over­all trade, then trade is up by 126 per­cent, he added.

Post­mark Ukraine

An­other Ukrainian com­pany that has been ben­e­fit­ing from the re­cent pickup in trade is Post­mark Ukraine, an on­line cloth­ing store that ex­ports to Canada.

“We’re com­ing into our third year now, and it’s start­ing to look on the up,” said Post­mark’s owner, Lana Ni­cole Ni­land. “Mostly ( our clients are) Ukrainian di­as­pora, but not only.”

Ni­land ex­pects her busi­ness to earn around $100,000 by the end of this year, ap­prox­i­mately dou­ble the amount it made in 2017.

All of Post­mark’s cloth­ing is made in Ukraine, de­liv­ered from var­i­ous ven­dors across the coun­try.

And thanks to com­pa­nies like hers, Ni­land sees trade re­la­tions im­prov­ing.

“Of course we still have a long way to go, but (Ukraine) is be­com­ing a more trans­par­ent, demo­cratic place to live and to do busi­ness,” she said. “There will come a time where Ukraine is no longer the Wild East, as it is now.”

(AFP)

Canada’s gross do­mes­tic prod­uct of $1.6 tril­lion has much to of­fer for Ukrainian busi­nesses. But the two na­tions don't rely on each other eco­nom­i­cally. Canada ranks only as Ukraine’s 45th largest trade part­ner with $293 mil­lion in 2017. A free trade agree­ment, in ef­fect since Aug. 1, 2017, is boost­ing the to­tal. (AFP)

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