Siemens wants to power Ukraine through 21st cen­tury, in­clud­ing with more re­new­able en­ergy

Kyiv Post - - Business Focus - BY BRIAN BON­NER BON­NER@KYIVPOST.COM

Siemens Ukraine sells every­thing that Ukraine acutely needs to be­come pros­per­ous: more and cleaner en­ergy, mod­ern in­fra­struc­ture, state-of the-art man­u­fac­tur­ing, ef­fi­cient heat­ing, cool­ing and light­ing sys­tems for all build­ings; bet­ter di­ag­nos­tic equip­ment for health care. The list goes on and on.

“Ukraine needs huge mod­ern­iza­tion in in­dus­try and in­fra­struc­ture,” Siemens Ukraine coun­try man­ager Ma­ciej To­masz Zielin­ski to the Kyiv Post in an in­ter­view this month from the com­pany’s head­quar­ters. “This is ex­actly what Siemens de­liv­ers. We create value chains for our cus­tomers in elec­tri­fi­ca­tion, dig­i­ta­tion and au­to­ma­tion.”

The Ger­man-based com­pany’s tech­no­log­i­cal wiz­ardry in 2017 earned $83 bil­lion in global rev­enue and $6 bil­lion in net profit with 376,000 em­ploy­ees.

In Ukraine, how­ever, a re­bound­ing busi­ness in 2017 earned only $80 mil­lion in rev­enue — less than 1/10 of 1 per­cent — with 250 em­ploy­ees in five lo­ca­tions.

Still, the Pol­ish cit­i­zen who has been in Ukraine for more than two years, said “things nowa­days are go­ing quite well” com­pared to 2015, when Siemens had to evac­u­ate its Donetsk of­fice, and 2016, the year that Zielin­ski ar­rived to a se­vere down­turn in busi­ness, saw no work­ing street­lights in parts of Kyiv and heard shoot­ing on the out­skirts of Mar­i­upol dur­ing a busi­ness trip.

The hard­ships, of course, came in the af­ter­math of the EuroMaidan Rev­o­lu­tion that drove Krem­lin­backed Pres­i­dent Vik­tor Yanukovych from power on Feb. 22, 2014, trig­ger­ing Rus­sia’s mil­i­tary in­va­sion and oc­cu­pa­tion of Crimea and parts of the Don­bas, which con­tin­ues to­day.

“Since then, things have changed a lot,” Zielin­ski told the Kyiv Post from Siemens’ mod­ern 8th floor head­quar­ters in the As­tarta Busi­ness Cen­ter in the Podil neigh­bor­hood. “I have to say the last two years were very suc­cess­ful for the whole Siemens Ukraine team. When you talk about Ukraine, you don’t have su­per big projects, but still, for such a coun­try, projects of the vol­ume of 10 mil­lion eu­ros are not small projects.”

What does Siemens do?

Siemens has such a vast ar­ray of com­plex, high-tech prod­ucts that it’s hard to know where to be­gin.

But even in Ukraine, where Siemens does busi­ness on a smaller scale com­pared to other na­tions, the prod­ucts and ser­vices are wo­ven into ev­ery­day lives and the na­tion’s econ­omy.

In power sup­ply, Siemens’ soft­ware and hard­ware helps the na­tion’s elec­tri­cal grid de­liver en­ergy more ef­fi­ciently. Also in en­ergy, Siemens tech­nol­ogy is used in oil and gas ex­plo­ration as well as the bud­ding re­new­able sec­tor of wind and so­lar.

In fac­to­ries, au­to­ma­tion and drive sys­tems mod­ern­ize and im­prove pro­duc­tion and ef­fi­ciency.

In food and bev­er­age, Siemens’ tech­nol­ogy is used in stor­age el­eva- tors and other in­fra­struc­ture, as well as in pro­duc­tion of such things as ed­i­ble oil. It even is in­volved in burn­ing waste from sun­flower grain to pro­duce steam that pow­ers tur­bines.

Re­cently, Siemens signed a mem­o­ran­dum of un­der­stand­ing with Tur­boatom in Kharkiv to ex­plore more busi­ness op­por­tu­ni­ties.

But Siemens could do much more, if the pri­vate and pub­lic sec­tors in Ukraine find the to in­vest.

Ukrz­a­lyznyt­sia, the state rail­way monopoly with twice as many kilo­me­ters of track than Ger­many, “needs elec­tri­fi­ca­tion” to de­liver peo­ple and goods more quickly, ef­fi­ciently and prof­itably, he said. Siemens spe­cial­izes in elec­tri­cal lo­co­mo­tives, which could re­place more of Ukraine’s ag­ing diesel lo­co­mo­tives and rolling stock.

“We de­liver equip­ment for sig­nal­ing, elec­tri­fi­ca­tion and rolling stock as well,” he said. “We have the com­plete port­fo­lio, not only in rail. When it comes to in­fra­struc­ture, there’s plenty to do in Ukraine…In Ukraine, this is about pri­or­i­ties.”

Even be­fore pro­duc­tion takes place, Siemens — as the “big­gest in­dus­trial soft­ware pro­ducer world­wide” — has vi­su­al­iza­tion sys­tems to great a “dig­i­tal twin” pro­to­type of the prod­uct un­der de­vel­op­ment.

“If some­thing is wrong, you can change the fea­tures of the prod­uct. Nowa­days, most (things un­der) pro­duc­tions have their own dig­i­tal twin,” he said. For ex­am­ple, com­put­ers can sim­u­late the im­pact of crashes on car

bumpers, help­ing au­to­mo­bile man­u­fac­tur­ers create “the right prod­uct.” (It’s not very ap­pli­ca­ble to Ukraine since fewer than 5,000 cars are pro­duced in the coun­try an­nu­ally.)

In terms of in­vest­ment, Zielin­ski is see­ing a lot more ac­tiv­ity in oil and gas pro­duc­tion. He thinks the food and bev­er­age in­dus­try is poised for growth. And he also be­lieves that re­new­able en­ergy will create more de­cen­tral­iza­tion in that sec­tor. Con­struc­tion is back on the rise in Ukraine, he said, pri­mar­ily in the res­i­den­tial sec­tor, cre­at­ing op­por­tu­ni­ties for Siemens’ au­to­mated heat, light­ing and safety sys­tems.

In most ho­tels and mod­ern of­fice build­ings in Kyiv, Siemens’ sen­sors au­to­mat­i­cally con­trol light­ing, heat and fire alarm sys­tems and let the cus­tomer change set­tings re­motely.

On roads, Siemens’ tech­nol­ogy con­trols sig­nal light­ing sys­tems to make traf­fic run more smoothly.

Big and small cus­tomers

It’s not sur­pris­ing that big oli­garch-owned pri­vate com­pa­nies, as well as large state com­pa­nies, are cus­tomers of Siemens Ukraine. They can af­ford the com­pany’s ser­vices.

The ros­ter of clients in­cludes Victor Pinchuk’s In­terPipe; Ri­nat Akhme­tov’s DTEK and Met­invest; ArcelorMittal, the na­tion’s largest steel mill; and UkrEn­ergo, op­er­a­tor of Ukraine’s elec­tri­cal power grid.

But Zielin­ski said that the ma­jor­ity of cus­tomers are medium-sized com­pa­nies who need au­to­ma­tion and bet­ter elec­tri­cal equip­ment to im­prove their ef­fi­ciency and op­ti­mize costs.

“Cost-cut­ting is not just about la­bor costs,” Zielin­ski said. “It’s about the whole value chain: to pro­duce goods with qual­ity and ef­fec­tiv­ity, you have to in­vest in pro­duc­tion. We see peo­ple are in­vest­ing more and more in mod­ern tech­nol­ogy.”

De­spite the small foot­print that the Ukrainian out­fit has in Siemens global sales, Zielin­ski said that the com­pany has never con­sid­ered clos­ing the coun­try of­fice. Its roots in Ukraine run very deep. “We have been in Ukraine 166 years. We have been in­volved in the elec­tri­fi­ca­tion of the trams in Kyiv, the light­ing sys­tems in Kyiv, Lviv, and Odesa and the telegraph lines to Sim­fer­opol,” Zielin­ski said. “The ques­tion is about de­vel­op­ing and find­ing the busi­ness models that will be suc­cess­ful and sus­tain­able in the longer-term per­spec­tive.”

About 40 em­ploy­ees in Kyiv de­liver ser­vices for other Siemens en­ti­ties from its engi­neer­ing hub.

Zielin­ski said Ukraine is ide­ally lo­cated for such an in­no­va­tive hub for three big rea­sons: a highly ed­u­cated work­force, rea­son­able costs and close prox­im­ity to Eu­ro­pean and other mar­kets.

What Ukraine needs

But for Siemens to de­velop its busi­ness, Ukraine needs to de­velop as a coun­try.

“Ukraine has the po­ten­tial,” he said “It needs some PR as well,” which in­vest­ment pro­mo­tion and brand­ing ini­tia­tives such as Ukraine Now are help­ing.

Be­yond PR, “it should have a trans­par­ent ju­di­cial sys­tem. It should fight cor­rup­tion,” Zielin­ski said. “If the coun­try pro­vides trans­par­ent and clear con­di­tions for busi­ness, the busi­ness will come.”

While ProZorro, an on­line sys­tem de­signed to make gov­ern­ment pur­chases more com­pet­i­tive and trans­par­ent, is an im­prove­ment, Ukraine can­not “sit on its lau­rels and say we have ProZorro, so every­thing’s fine. Some­one has to con­trol the pro­cesses in ProZorro, whether you give the same terms and con­di­tions to all ven­dors.”

Ad­di­tion­ally, “what is needed is pri­va­ti­za­tion of the pub­lic sec­tor,” Zielin­ski said. “There’s no rea­son that some pro­duc­ers of some me­chan­i­cal parts are still owned by the state. Then step-by-step the in­vestors will be com­ing.”

The out­mi­gra­tion of Ukrainian la­bor to such na­tions as Zielin­ski’s na­tive Poland, where up to 2 mil­lion Ukraini­ans live, is a prob­lem that needs to be ad­dressed by busi­ness and gov­ern­ment. In the short term, he said, the ex­o­dus puts up­ward pres­sure on salaries, faster than the econ­omy is grow­ing.

Ed­u­cat­ing work­ers

Be­sides pro­vid­ing jobs, Siemens is coun­ter­ing Ukraine’s brain drain through ed­u­ca­tion ini­tia­tives to help power Ukraine’s dig­i­tal trans­for­ma­tion.

“We need to im­prove skills,” he said. The start is a Siemens ed­u­ca­tion cen­ter, a “dig­i­tal lab­o­ra­tory, wholly equipped and de­signed by Siemens” at Lviv Polytech­nic Na­tional Univer­sity.

“This was our pi­lot project,” he said, of the ef­fort that will likely in­volve branch­ing out into other in­sti­tutes around Ukraine.

Get­ting past con­tro­versy

Siemens has had to nav­i­gate po­lit­i­cal con­tro­ver­sies, most se­ri­ously, from Ukraine’s stand­point when the com­pany’s tur­bines ended up in Krem­linoc­cu­pied Crimea in vi­o­la­tion of in­ter­na­tional trade sanc­tions in 2016. Siemens weath­ered the con­tro­versy, in­sist­ing that the tur­bines were meant for the Rus­sian main­land, and weren’t sup­posed to be trans­ferred to the Ukrainian penin­sula.

Many in Ukraine find the ex­pla­na­tion im­plau­si­ble, but Zielin­ski said Siemens did noth­ing wrong, as CEO Joe Kaeser ex­plained to For­eign Min­is­ter Pavlo Klimkin in per­son.

“Siemens took the le­gal ac­tion against the com­pany that de­liv­ered the tur­bines and lost in court, but also took ad­di­tional mea­sures to pre­vent such sit­u­a­tion in the fu­ture,” Zielin­ski said, es­pe­cially in work­ing with state-owned en­ergy com­pa­nies in Rus­sia. “This is how the things were.”

An­other dust-up came when Naftogaz head An­driy Soboloyev last year said that Siemens, un­der pres­sure from Rus­sia, did not want to sell equip­ment to Ukraine’s state-owned Naftogaz en­ergy monopoly. “There were busi­ness rea­sons we didn’t come to an agree­ment,” Zielin­ski said. He said he “can­not even imag­ine” Siemens would not do busi­ness in one coun­try be­cause of pres­sure from an­other coun­try.

Siemens, how­ever, had a ma­jor scan­dal and paid large fines in the early 2000s af­ter set­tling cases of al­leged bribery. It led to a ma­jor trans­for­ma­tion within the com­pany.

“We are a com­pany with the val­ues of in­tegrity,” Zielin­ski said. “Our as­pi­ra­tion is to serve the cus­tomer the best we can. We are al­ways com­pli­ant with rules and reg­u­la­tions. We have in­stilled an own­er­ship cul­ture. If you feel your­self as the owner of the com­pany, you never go for dirty busi­ness and you be­have with re­spon­si­bil­ity. I can guar­an­tee you we don’t have any cor­rup­tion is­sues in Ukraine. This is not a strat­egy or tac­tic. This is the foun­da­tion of our ac­tiv­i­ties.”

Charter of Trust

Siemens and other com­pa­nies glob­ally are spear­head­ing the Charter of Trust move­ment to im­prove aware­ness of the im­por­tance of hav­ing ex­cel­lent cy­ber­se­cu­rity, an­other ser­vice that the com­pany pro­vides. Some are high-tech so­lu­tions, while oth­ers are com­mon sense: shut­ting down com­put­ers not in use and not writ­ing down pass­words.

“The charter of trust is to em­pha­size how im­por­tant cy­ber­se­cu­rity is and to set the mea­sures with other com­pa­nies to ex­change knowl­edge and creat stan­dards,” he said.

First time in Ukraine

Zielin­ski, 44, who is also an elected mem­ber of the Eu­ro­pean Busi­ness As­so­ci­a­tion, has a me­chan­i­cal engi­neer­ing back­ground and had never worked in Ukraine be­fore this as­sign­ment. But he’s worked in Poland and Rus­sia since join­ing the com­pany in 2003.

He got a mas­ter’s de­gree in busi­ness ad­min­is­tra­tion from Ox­ford Brookes Univer­sity in the United King­dom. He speaks, English, Pol­ish, Rus­sian and Ger­man. He is mar­ried with two chil­dren, en­joys run­ning and lis­ten­ing to live mu­sic in his spare time. Since he trav­els a lot for his job, he prefers to spend week­ends in Kyiv with friends and fam­ily.

From the ar­chi­tec­ture to cul­ture, food and friend­li­ness of peo­ple, “I like Kyiv a lot. It was a very pos­i­tive sur­prise.”

Siemens en­gi­neer Dan­ish Lars Birk­mann works on a Siemens wind tur­bine on Nov. 6, 2015. (AFP)

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