Ukrainian business does not wait for the war to end

The Union of Ukrainian Entrepreneurs (UUE) - one of Ukraine's biggest business associations- opened its first European office with headquarters in Warsaw on June 17th. This is a significant event for both Ukraine and Europe: it manifests not only the endurance and ambitions of Ukrainian businesses in times of deep crisis but also the readiness for integration into the European commonwealth. Among the main challenges of the agency are advocacy and support for Ukrainian business in Europe, making connections with international partners and attracting investments into the Ukrainian economy.

The Union's CEO, Kateryna Glazkova, often visits Poland and not only due to business matters: her children have been living here for over a year - 16-year-old Pavlo and 5-year-old Mark. She confesses she is a very anxious mother, and if her sons were in constant danger in Ukraine she would not be able to concentrate on her work goals. «I understand how hard it is for both those who stayed and those who left because I find myself on "both ends" every two weeks: at one time I am in Ukraine and the other abroad. I am much more effective at work now that I am sure my children are safe», - my interviewee shares.

We met in one of the Ukrainian restaurants near the Ukrainian embassy in Warsaw that made it to the list of the best establishments in the Polish capital a few years ago.

Irena Tymotiievych: Lady Kateryna, it is quite significant that in the time of the full-scale war, it is you who is representing a major part of the Ukrainian business in Europe. I think the role of a Ukrainian woman, especially a woman in business, is gaining a completely different meaning right now.

Kateryna Glazkova: A colossal meaning. In times of war, additional responsibility is placed upon a woman’s shoulders. Women learn male professions, and companies are more eager to hire them because the risk of mobilisation is lower. As we are literally losing men - more and more women will be taking key positions not only in the country but also within the area of international relations.

On the other hand, it could give us a certain drive forward. More often than not we, women, underestimate ourselves and do not believe in our own power. For example, in 2020, when our organisation tried to «portray» the Ukrainian entrepreneur and conducted appropriate research, we concluded that the owners of large Ukrainian companies were mostly men. And women, for the most part, own small businesses that often have a «glass ceiling» of development. Now is the moment when there is an opportunity and need to straighten our wings. Moreover, there are plenty of grants, support and educational programs for women entrepreneurs both in Ukraine and abroad. It is worth taking advantage of them.

You have been involved with entrepreneurship for many years now. How is it - being a woman in the Ukrainian business?

Personally, I am quite comfortable in the Ukrainian business, despite it being mostly «male-dominated». Maybe I just got lucky or perhaps it is a personality matter. Entrepreneurs’ energy inspires me. They think differently and do not fall into disbelief: there are no problems - only goals. The word «impossible» does not exist to me, - that is what I learned from them. It can be «very difficult», can be «we have tried a hundred times but did not succeed», but «impossible» - is not an option for me and my team. If we, Ukrainians, categorised things as impossible, we would not have endured this fight for so long.

Without the economy, the war can not be won

The question puzzling the whole international community regarding Ukrainian business today - how is it possible that in the third year of the full-scale invasion, it does not only function but also demonstrates good positive dynamics: it enters new markets and implements innovative solutions?

We simply do not have a choice. Ukrainian business has unprecedented resilience. It is hard to explain to people who never lived in wartime what it means in practice.

In ten years of war and over two years of the full-scale invasion our entrepreneurs have learned to perform quite successfully, despite the constant shellings, blackouts, border blockades and employee mobilisation. And I am sure that cases of Ukrainian companies will soon be taught in international business schools.

In two years of the great war, the sole members of the Union of Ukrainian Entrepreneurs have invested 630 million euros into business development in Ukraine: reconstruction of destroyed facilities and warehouses, launching new products, entering international markets and implementing technologies.

This is our country and we believe in it.

Just like our defenders protecting the country’s borders on the frontlines, each of us at our positions has to do everything we can, and even more for victory. Ukrainian business is also performing its duty. Because without the economy - the war can not be won.

Notably, the UUE analytics centre conducted major research in 2021, not long before the full-scale invasion, regarding the attitude of various segments of the society towards stakeholders: the government, president, business, business organisations and oligarchs. The trust level in small and medium businesses in Ukraine was the largest after the Armed Forces - over 80 per cent. And if we combine the large businesses and business associations - it is an unprecedented percentage for Ukraine. For comparison, the government was only at the eighth place in the trust level ratings.

What is the cause of this?

In the country’s most difficult times, the entrepreneurs were the first to help. In times of Maidan, businesses gathered teams of young men and helped with food and money. During the pandemic, they bought equipment for hospitals, organised headquarters and delivered food to the elderly, who could not go outside.

And when the full-scale invasion happened - they evacuated people, provided them with shelter, brought them back from the occupied territories and fed them. Entrepreneurs gave away the supplies from their warehouses to guys and girls in the Armed Forces of Ukraine, sometimes even risking their own lives. At the moment the only source of financing for the army in Ukraine is the taxes, and each one of us who pays them is helping to win this war.

We have not done analogical research at this time, but the business has lived up to the community’s trust.

Are we talking about small and medium businesses right now?

About any businesses. Large included.

UUE - is also a representation of the state of the business. Our organisation has been active since 2016. Among its founders are both small and large companies like, for example, Nova Post, Rozetka and UBC Group. Now the Union consists of over 1200 companies from all regions of Ukraine. We function on the member fees that depend on the company’s size.

In February 2022, we had a two-month decline for obvious reasons, there were no incoming fees: in such times, the Union membership fee is not the first priority financially. Additionally, the members of our collective were busy taking care of their families' safety in the first days of the war. And then they would get in touch with other organisation members to help each other out. They formed new priorities and reacted to new inquiries. I am proud of my team.

When we received the first annual membership fee from a small company in April 2022, we thought: «Finally, fresh optimists have appeared among us». Those five thousand hryvnias [approximately 120 US dollars, - Edit.] became a kind of symbol of trust and hope, that everything will be okay. And in the last two and a half years we have not only restored ourselves but also grown. We have a 35 per cent increase in members, there are new applications each week.

Ukrainian business - is about a high level of creativity. On one hand, there is strategy, but on the other - you always have to be ready for changes if a new challenge appears

There are no problems - only goals

Regarding the challenges. What does Ukrainian business live with now and how does it cope with it?

Firstly, there are obviously questions of safety. Safety of the workers, equipment and facilities. Larger companies invest wild sums of money into this. For example, after the enemy destroyed the Nova Post warehouse in the Kharkiv region - the company fully rebuilt it taking into account an improved safety system. This cost over 34,5 million hryvnias.

Secondly, the decrease in Ukraine’s purchasing power. The Ukrainian market has become too small, and because of that, companies are forced to move to international markets, even if they had not planned to do so.

At the same time, some sectors are growing. These are, primarily, the defence industry, goods transportation, medicine, suppliers of electrical/gas equipment that ensures energy autonomy, fossil fuel industry (for example, as of May 2024, «Ukrgazvydobuvannya» has increased natural gas production by 10 per cent) and the supply of energy resources, online trade, and the sale of agricultural products. If we look at growth by types of activity through the revenues to the State Budget of Ukraine for May 2024, we see that wholesale and retail trade, repair of motor vehicles, extractive industry and quarrying, processing, transport, warehousing, postal, and courier activities are growing.

The third challenge is the lack of people. There was a colossal problem with personnel even before the large-scale invasion, and during the war, it is a deep crisis that businesses can not solve on their own. Mobilisation, migration, a sharp decline in birth rates, and the loss of the working-age population require an effective strategy on the state level.

Money. They are always needed for development. And now they are needed for the sole purpose of survival. Generally, there is support, there are many grant programs from our partners, and we are thankful for that. But the queue for receiving available finances has become much larger.

How about the issue of inclusivity? According to the latest announced data, in two years of the full-scale invasion, the number of people with disabilities in Ukraine has increased by 300 thousand. How are companies adapting to these realities?

This is a new challenge that has not yet caught up with us but is already emerging. We are all just at the beginning of the path. For example, the UUE is currently looking for a lawyer in the team - a specialist who will work specifically with veterans' requests. For employees to return to their workplaces, it is necessary to go through all the required procedures, obtain a combatant status document, etc. We want to simplify these processes.

Meanwhile, the network of laboratories of the CSD Lab company, which is our member, is working to make each of its services accessible to people with mobility impairments - both for employees and clients. Some locations are planning to be re-equipped, and new laboratories are being built according to new standards.

There are many examples like that.

Entrepreneurs are very quick to react to all changes and implement innovative solutions.

Ukraine is already becoming a competitor and supplier of innovative solutions for many developed countries. In particular, the field of military-technical solutions has grown several times, and the Ministry of Digital Transformation has identified this direction as a priority for the coming years. How are companies showing themselves in this area?

For example, two of our members - IT companies STFalcon and Ajax - created and launched the mobile application Air Alert at the beginning of March 2022. It signals the missile danger in different regions of Ukraine. Currently, 6 million people in Ukraine have downloaded this application, including me. This year, Ajax also began producing surveillance cameras. This is an opportunity to occupy a niche that has always been dominated by Chinese manufacturers, but the market is now changing due to sanctions imposed against certain Chinese companies.

The products of other members, such as K.tex, a manufacturer of non-woven materials, are now used for sewing military uniforms and even for reinforcing defensive lines and critical infrastructure. Another example is Milliform, which relocated its production from Kharkiv to the Lviv region in 2022 and, by 2023, launched its own production of cosmetic containers with investments of about 600 thousand dollars.

This is also an answer to the question I am often asked abroad: Why should someone invest in Ukraine right now, despite the high risks? It is because the Ukrainian business does not wait for the war to end. Now, the air raid alerts and shellings are seen like the weather, which you have no control over.

I always say in cold business language: whoever came first - gains the profit. Consider it right now, look for partners among Ukrainian companies right away

According to President Zelenskyy, Russia has destroyed 80 per cent of Ukraine's thermal and a third of its hydroelectric generation capacity. How do you plan to address the energy supply issue?

Energy supply problems are not new, we stocked up on equipment and seemed ready for another winter. However, we did not expect the destruction to be so extensive.

To ensure uninterrupted production, some large companies have begun importing energy from the EU. For instance, the Nova group (which includes Nova Post) has founded its own electricity production company. Currently, the UUE is lobbying for legislative changes in Ukraine that will allow for the liberalisation of the electricity generation and supply market, which will promote the development of small-scale generation. It is much harder to destroy hundreds of thousands of small stations than one large one, which a significant number of consumers and critical infrastructure depend on.

We see a strategic path in developing distributed generation based on natural gas, renewable energy sources using modern mobile energy storage systems, and smart grids.

Distributed generation is favourable for investment, its cost is relatively low, and it takes less time to launch them into operation

Playing by new rules

One of the factors deterring investors from coming to Ukraine is the widespread perception of Ukrainian business as oligarchic. How strong is the influence of the oligarchic system on the economy and business in Ukraine now?

Ukraine has started playing by new rules. The elites are also changing. The influence of the former oligarchs on political institutions and specific politicians has significantly decreased. In agriculture, oligarchs are very conditional. There are questions regarding the finances’ origins, but now these are market companies traded on international exchanges.

At the same time, the influence of the private non-oligarchic sector is growing significantly. UUE is an organisation that fundamentally does not accept businesses connected with oligarchic capital. After the start of the war, we also began checking for connections with beneficiaries from Russia and Belarus. We take court decisions into account if there are questions about specific companies. In Ukraine, some data has been classified due to the war, but overall, the amount of open data in our country is one of the leading examples in Europe.

"The areas of our constant focus are the tax system, customs regulation, international trade regulation, public procurement, labour legislation, and the digitalisation of public services"

Photo source: Facebook‍

I have no illusions that all the oligarchs have gone under the radar - definitely not. But representatives of our association, founders, and members of the board of directors, are now part of many quasi-governmental institutions and influence decision-making. These are people who earned their money through their own efforts, hard work, and ideas

For example, there is the Business Support Council during wartime under the President of Ukraine. It consists of seven people, six of whom are entrepreneurs from the UUE.

There are concerns that a new class of oligarchs may form in Ukraine during the war. Are there such risks?

There are always risks. No country is perfect, and ours is no exception. The media, civil society, and the private sector have a huge role to play here: to do everything possible to prevent this from happening. There are many high-profile stories about corruption scandals in Ukraine in the media space right now, but there is also a positive side to this: it is a sign that corruption is being fought. Corruption was greater in silence. And if there had been no progress, negotiations with us about joining the EU would not have begun, as this was one of the three main points for starting the negotiations.

When the official negotiations for Ukraine's accession to the EU began on June 25, you wrote on your Facebook page: «I hope that in the process of these negotiations we will not compromise our interests, and the opinion of Ukrainian business will carry significant weight». What interests are you referring to, and what role does your business association want to play in this process?

For the business sector, joining the EU is a colossal stress, especially for SMEs [small and medium-sized enterprises, - Edit.], since companies have to comply with certain norms and standards: from environmental norms to minimum wages. But production processes cannot change overnight. In the negotiation processes on the government level, transition periods must be established in addition to the terms of trade. To avoid an unfortunate situation where we agreed to everything at once to quickly join the EU, but then were unable to fulfill the obligations on time.

Our business is competitive, but many companies need help to become so. For example, pharmaceutical companies need to re-equip. Large companies can afford to spend money on this, while small ones can not. Then it is also a matter of financial support. Within the framework of the single European market, some French company with extensive experience, support, and development over all these years, and without the war - without everything that Ukrainian business is currently experiencing - will definitely be more competitive than a Ukrainian one.

These aspects need to be considered so as not to «kill» the Ukrainian business. In this, I see our important role. On the other hand, we will encourage international companies to invest in Ukraine. We will not be able to manage without investments.

One of the most painful issues in the economic dialogue between Poland and Ukraine is agriculture. In your opinion, how should the Ukrainian business build a dialogue to avoid situations like the farmer protests we observed at the Polish-Ukrainian border?

We do not have large agricultural companies here in the UUE, as most do not meet our criteria. But why is this question directed at businesses and not politicians? Business simply does its job. If it produces good, competitive products, there are buyers. And in Poland, someone buys them, that's the market. If a business produces a bad product or imports it illegally, there are law enforcement and customs authorities, and court decisions hold the business accountable.

The incidents that occurred at the border - are beyond business logic, they are primarily political stories.

While Polish farmers protest against Ukrainian products, dumping the grain that people often collect at the risk of their lives, grain from Russia and Belarus flows into Poland. UUE, along with colleagues from leading Polish associations Leviathan and the Ukrainian-Polish Chamber of Commerce, raised this issue at the EU level and appealed to Brussels. Russia is trading grain here that it stole from Ukraine

I would very much like to convey this to Polish society.

From the perspective of economic relations between Poland and Ukraine, it is no secret that last year the export of goods from Poland to Ukraine was at a record high - 51,6 billion zlotys (12 billion euros). Poland's trade surplus with Ukraine reached 6,8 billion euros, a historical record. Meanwhile, imports from Ukraine to Poland have significantly dropped, especially after the embargo on agricultural products was imposed.

As for business matters, let's look at what some Ukrainian companies did when the transport collapse happened. Entrepreneurs calculated and decided that waiting at the Polish border was more expensive than redirecting logistics to Romania. And there, the port of Constanța accepted everything without issue. This is also a telling situation.

According to the latest statistics, every tenth business in Poland is Ukrainian. From my observations, it seems that Ukrainian entrepreneurs often target not so much the Polish markets as the «Ukrainian markets» in Poland. Some UUE members already have businesses here, how is the integration going?

Cooperation with Ukrainians is indeed smoother. Finding a Polish client or becoming a supplier for a Polish company is very difficult. There is a certain scepticism and media narratives that «this is temporary», «the war will end, and Ukrainians will return home». There is also the perception that Ukrainians are «unreliable partners» who work to «low standards», despite many examples proving the opposite. We opened an office here because we realised we need to build closer ties. We are conducting educational work on both sides to establish personal connections among entrepreneurs and build trust.

In this context, it is also worth mentioning the recent results of a study by Deloitte, according to which Ukrainians who arrived after February 24, 2022, added 0.7-1.1 per cent to the Polish economy's GDP (in absolute figures, this is 6-9 billion dollars). In the long term, this effect will increase to 0.9-1.35 per cent.

I am convinced that the share of Ukrainian business will increase, and competition with it will grow.