3 Ger­man busi­nesses — Henkel, RightNow & Re­hau — talk about their ex­pe­ri­ences

Kyiv Post - - BUSINESS - By Daryna An­to­niuk an­to­niuk@ kyiv­post

Among Ger­man com­pa­nies, Ukraine is of­ten dubbed as “a tur­bu­lent mar­ket” be­cause the level of pur­chas­ing power in the coun­try is low, cor­rup­tion flour­ishes and bu­reau­cracy pre­vails at ev­ery level.

How­ever, for the last few decades, Ukraine has been a reli­able part­ner for Ger­man busi­nesses: Big com­pa­nies like Henkel and Re­hau have en­tered the coun­try be­cause they saw po­ten­tial in the grow­ing mar­ket.

Cur­rently, over 2,000 Ger­man com­pa­nies are op­er­at­ing in Ukraine, mostly in­volved in the au­to­mo­tive sup­ply in­dus­try, re­tail, whole­sale and lo­gis­tics.

They ap­pre­ci­ate Ukraine’s work­ers — skilled and hard-work­ing — and are ready to in­vest here.

Ger­many ex­pects that the

Ukrainian mar­ket will be­come more prof­itable, al­though con­sump­tion per capita in Ukraine is low, said Nina Dom­browska, the Ukrainian pres­i­dent of Ger­man chem­i­cal and con­sumer goods com­pany Henkel.

“But if in­come in­creases, peo­ple could af­ford more, so the pur­chas­ing power will grow,” she added.

To help busi­nesses, Ukraine needs better leg­is­la­tion and a reli­able ju­di­ciary, busi­ness­peo­ple said.

“Ukraine missed many chances to re­form the coun­try and im­prove its busi­ness cli­mate. We are mov­ing too slow and there are no no­tice­able changes,” said Dom­browska.

Lack of reg­u­la­tion

Ukrainian laws are com­pli­cated and the gov­ern­ment doesn’t im­ple­ment them ef­fec­tively, ac­cord­ing to a re­port pub­lished by the in­de­pen­dent World Jus­tice Project or­ga­ni­za­tion.

Ger­many, on the con­trary, im­ple­ments the laws fairly, ac­cord­ing to the re­port. This makes it more dif­fi­cult for Ukrainian busi­nesses to work in Ukraine.

“This is not be­cause (the laws) are bad in Ukraine — they are dif­fer­ent,” said Len­nart Osses who works as strat­egy and growth man­ager at the Ger­man le­gal tech startup RightNow, which em­ploys tech spe­cial­ists in Kyiv.

Ac­cord­ing to Osses, Ger­many has

strong so­cial in­sti­tu­tions, thus the coun­try is prop­erly reg­u­lated.

“(Ger­mans) can rely on the coun­try’s leg­is­la­tion, they know that the court can pro­tect them,” said Dom­browska.

Ukraini­ans, on the con­trary, do not trust their ju­di­ciary, ac­cord­ing to a re­port by the Ukrainian Cen­ter for Eco­nomic Strat­egy, so the reg­u­la­tory progress is still needs to be im­proved.

“(Ukraine will solve) these is­sues

sooner or later, but it of­ten takes much time and ef­fort,” said Fedir Omelin­skyj, the Ukrainian direc­tor of Ger­man poly­mer busi­ness Re­hau.

Do­ing busi­ness in Ukraine

In 2019, the World Bank placed Ukraine 64th among 190 coun­tries for ease of do­ing busi­ness.

Al­though the busi­ness en­vi­ron­ment in the coun­try has im­proved, it is still ranked be­low most post-Soviet

states, in­clud­ing Ge­or­gia, Lithua­nia and Es­to­nia.

Ger­man busi­nesses that work in the coun­try face nu­mer­ous chal­lenges.

Henkel, for ex­am­ple, strug­gles with un­fair com­pet­i­tive con­di­tions that ben­e­fit com­peti­tors and al­low them to es­cape tax­a­tion and ad­di­tional reg­u­la­tions.

An­other prob­lem that re­strains busi­nesses is the lack of af­ford­able mort­gage loans, ac­cord­ing to Omelin­skyj.

“The gov­ern­ment prom­ises to im­prove that, but I think that 10% an­nual in­ter­est for long-term mort­gage lend­ing is also too ex­pen­sive,” Omelin­skyj told the Kyiv Post.

The busi­ness en­vi­ron­ment is more pre­car­i­ous in Ukraine be­cause ev­ery­thing is chang­ing very fast.

“Our Euro­pean col­leagues are not used to such sharp and sig­nif­i­cant changes in the ex­change rate and the re­spec­tive im­pact it has on busi­ness,” Omelin­skyj said.

Re­silient na­tion

These con­stant changes and the end­less bar­rage of crises have made Ukraini­ans who they are, Dom­browska said.

“My col­leagues from Europe are go­ing through a tough time dur­ing this coronaviru­s cri­sis be­cause, for many of them, it was the first (cri­sis) that con­cerns them per­son­ally,” she added.

That is why Ukraini­ans have a dif­fer­ent men­tal­ity — crises for them are a nor­mal state, ac­cord­ing to Dom­browska.

This en­vi­ron­ment has made Ukrainian spe­cial­ists more flex­i­ble and hard-work­ing. That is why they are val­ued abroad.

Ger­man startup RightNow, for ex­am­ple, is sat­is­fied with its Ukrainian team of techies.

“In Ukraine, the level of (tech) ex­per­tise is very high,” said man­ager Osses.

Al­though Ger­many has over 900,000 tech spe­cial­ists (Ukraine has nearly 200,000), it is cheaper to em­ploy de­vel­op­ers in Ukraine and their skills are highly val­ued, ac­cord­ing to Osses.

For for­eign busi­nesses, it is easy to work with Ukraini­ans be­cause they are flex­i­ble and can ad­just quickly, Dom­browska said.

“Peo­ple are Ukraine’s great­est po­ten­tial,” she added.

Bill Chris­tensen (R), the chief ex­ec­u­tive of Ger­man poly­mer busi­ness Re­hau, and Fedir Omelin­skyj, the pres­i­dent of the Ukrainian branch of Re­hau, visit the com­pany’s ware­house in Kyiv. Re­hau en­tered Ukraine in 1997 be­cause it was a strate­gic mar­ket. Al­though the pur­chas­ing power of the pop­u­la­tion in Ukraine is low, Re­hau keeps on grow­ing.

The Ger­man chem­i­cal and con­sumer goods com­pany Henkel is known for brands like Per­sil, Fa, Sch­warzkopf and Syoss. For Henkel, the Ukrainian mar­ket is prof­itable and rich in skilled and hard-work­ing spe­cial­ists.

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