Ukraine

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8:21 AM Friday, December 15, 2017
Agriculture
Germany’s BASF Finds Growth in Ukraine’s Regions
Ukraine MD Lier sends out scouts to tell him what is going on beyond Kyiv’s Ring Road
image/svg+xml Kyiv Lutsk Rivne Zhytomyr Lviv Ternopil Khmelnytskyi Uzhgorod Chernivtsi Vinnytsia Chernigiv Sumy Kharkiv Poltava Cherkasy Kirovohrad Lugansk Dnipropetrovsk Donetsk Zaporizhzhia Mykolaiv Odesa Kherson Simferopol Sevastopol Ivano- Frankivsk

KYIV – Andreas Lier, Ukraine Managing Director of BASF, the German chemical giant, faces a unique challenge. He runs a “B to B” business, but the business news chain is broken in Ukraine, a country almost twice as large as Germany.

His solution?

“I hired business scouts who drive through the country, seeing things that are not documented,” he said. “You have to look over the fence. The information does not fully come to Kyiv.”

By sending his scouts up and down the highways and byways of Ukraine’s 24 regions, he comes up with new investments and new companies – a carpet business in Khmelnitsky, furniture factories in Ternopil, new wind turbines in Mykolaev.

BASF, one of the world’s leading chemical producers, has a finger in almost every industrial pie in Ukraine – chemicals, plastics, oil and gas, green energy, construction, agriculture and food processing.

By following investments outside of Kyiv’s Ring Road, Lier boosted BASF Ukraine sales last year by about 12% – five times the nation’s GDP growth for 2016.

Andreas Lier, Ukraine Managing Director of BASF, brings to the job experience in Russia. (supplied)

Tale of 2, 3, many Ukraines

His scouts – and his sales – detected real regional differences.

Quantifying what many business people suspect, BASF enjoyed above average growth in Ukraine’s West and Center.

In 2016, BASF’s business in the Lviv, Ivano-Frankivsk, Ternopil, Vinnytsia and Kyiv regions grew by 15-20%. Lier attributed a portion of this growth “to foreign investment and an entrepreneurial approach to management.”

Drawing on his information across businesses and across regions, Lier says of the nation: “Ukraine is recovering – not a boom – but a steady growth. If current gains keep up, by 2020, growth rates may be of five percent or more.”

“We see tectonic shifts going on, going away from heavy industries to light industries and more and more Ukrainian entrepreneurs,” he said in a recent interview at the BASF regional headquarters on Druzhby Narodiv Boulevard. “There is a steady, ongoing recovery. We can see positive trends in some industries – light industry, food, shoes, refrigerators, furniture, clothing.”

The kind of billboard that makes a BASF scout's heart beat faster. UBC is building a massive 'smart refrigerator' factory outside Vinnytsia (Photo: James Brooke)

After five years in Ukraine, Lier now wears a second hat – president of German-Ukrainian Chamber of Industry and Commerce. Upgraded one year ago and known by its initials, AHK, the Chamber promotes trade and investment between Ukraine and Germany, a nation that functions as Europe’s economic locomotive.

Ukraine Turns to Germany

After Maidan, Ukraine’s pivot to West is explicit, and it is increasingly to Germany. Currently, 700,000 Ukrainians study German, 9,000 study at German universities, and 133,000 live and work there.

On the German side, about two thirds of the German chamber’s 100+ members said in a recent survey that they see prospects and plans for further investments in Ukraine.

The challenge is to get new companies to invest in Ukraine.

When German business investors do come here, he said, they tell him: “This is not the place we saw on television where the conflict is going on, there is only corruption.”

“We have to invite people, have them here,” he said, adding that Ukraine appeals to visitors. “In the last two years, we had two visits of a board member of BASF who came here.”

Lier believes that security for companies has increased since he arrived here in late 2012.

“There is more to do, the government knows this, and they are doing this,” he said of the need for the rule of law. “The politicians have an open ear.”

Ukraine Joins Middle Europe Supply Chain

In the late 1990s, Lier worked in Russia. While Russia is “a huge consumer market,” he said he sees Ukraine becoming an integral part of “the Middle Europe supply chain.”

The number of Ukrainians working for German auto parts production is rising from 10,000 to 25,000. Polish furniture companies now outsource work to Ukrainian companies.

The next step, he said, is to raise more Ukrainian production sites and processes to EU standards, as spelled out in the new Free Trade Agreement.

“The FTA is a road map for Ukraine to modernize and become globally competitive,” he said. “As soon as you have European label, you can go into China and other countries quite fast – poultry, eggs, meat, pork beef. We at BASF have big food team supporting the industry, bringing them to a higher level.”

Major European retailers are looking at Ukraine as a potential supply hub, he said.

BASF is helping two major Ukrainian sunflower producers enrich their cooking oil with Vitamin A, a requirement for sales to many countries in Africa and Asia.

Visit the Regions

Following the BASF approach, Lier led AHK forums this year to Kharkiv, Lviv, Dnipro and Odesa.

Convinced of the dynamism of Ukraine’s regions, he said: “There is something happening out there that is not reported in the statistics.”


For comments and story tips, UBJ Editor in Chief James Brooke is reachable at james.brooke@theubj.com

Posted Oct. 19, 2017

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