Bumpy ride yet bright future for local logistics businesses
Logistics, the business of transporting, custom clearing, storing and distributing goods, was hit hard by the 2009 global recession, but is now estimated to be growing in Ukraine at impressive, double digit rates.
In the short term, the path ahead for Ukraine’s logistics business is as bumpy as Ukraine’s roads, in part due to a horrible investment climate that chokes business in bureaucracy, corruption and shakedowns.
Yet it’s a path that logistics businesses will stick to, because of the huge long-term upside. Simply put, Ukraine lags far behind the West in terms of number and quality of logistics infrastructure, be it roads, warehouses, cargo terminals or ease of customs clearance procedures. And where there are hurdles for some, there is opportunity for others.
“Growth dynamics have not recovered to pre-crisis levels,” said Oleg Kalensky, secretary of the logistics and transportation committee at the American Chamber of Commerce in Ukraine. Kalensky estimated, however, that the industry is still growing strongly, by about 15 percent annually. Yet this, he said, is only half of the 30 percent annual increases of 2006-2008.
The pinch of recession has forced various businesses operating in the logistics sector to focus on improving competitiveness by boosting the quality and value of services provided.
Whereas investors in pre-crisis times were throwing money into any warehouse or other logistics project that popped up, “now investors usually think twice before starting a logis- tics business” in Ukraine, said Alyona Maksymchuk, head of transport and logistics commission at Kyiv regional Business Council.
Maksymchuk said that businesses have started developing in a so-called horizontal direction. New logistics operators tend to appear not from out of town, foreign investment, but as offshoots of existing retail operations that are in need of such services.
“Retailers, like Fozzy Group and Epicenter, are now constructing their own big logistics centers,” Maksymchuk added.
Ukraine’s notoriously bumpy and pothole-filled roads can cause delays and add extra costs for the most basic of logistics operations, such as delivery of goods by truck. (UNIAN)