10:31 AM Tuesday, October 23, 2018
Ukraine's Future? Lviv After Free Trade with EU
Corporate pioneers move in from Poland, Czech; existing multinationals expand; newcomers face board resistance over Ukraine image
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LVIV – Japanese businessmen and women from Central Europe gathered in Lviv’s 180-year old Viennese-style City Hall not knowing quite what to expect.

Mayor Andriy Sadovyy entered the reception hall. After a short introduction, he broke with protocol. Row by row, business suit by business suit, he worked the audience, proffering his business card, extended Japanese-style, with both hands.

Almost 18 months after free trade began between the European Union and Ukraine, Lviv, the largest city near the EU border, is systematically courting foreign investment.

Japanese business representatives listen to presentation on investment opportunities given by Lviv Mayor Andriy Sadovyy, in Lviv’s ‘ratusha,’ or City Hall. The visit to Kyiv and Lviv was organized by JETRO and UkraineInvest, the national government's new investment promotion office. (Yustyna Lukavych)

Glimpse of Ukraine’s Economic Future?

Foreign money is not flowing as fast as expected. But Lviv -- city and region -- offer a glimpse of the future. Here is what much the rest of Ukraine could look like in coming years with the EU free trade and investment regime.

This month, CTP, Eastern Europe’s largest developer of industrial parks, crosses Ukraine’s border for the first time and breaks ground on a factory and warehouse complex here.

Next month, Nexans, a French auto parts maker, opens here.

Two more foreign auto parts makers, Bader of Germany and Fujikura of Japan, are planning to open their third auto parts factories in the Lviv Region. Bosch, the German auto parts manufacturer, is considering similar expansion.

Boosting European tourism, direct flights start in June between here and Berlin. In September, flights start between Lviv and London. By October, Lviv will have direct flights to 22 foreign cities, half of them new.

These flights are to increase the international segment of Lviv’s tourism flow, forecast to hit 3 million visitors this year. Last year, Lviv received three tourists per inhabitant, the same ratio as Prague.

Business Investment Follows Tourism

In September, Ukraine’s first Crowne Plaza, a business-oriented hotel brand, opens in Lviv. Radisson is in talks to open here.

“Now 10-15 percent of our Turkish visitors are businessman,” Roman Matys, Lviv Region’s investment head, said, noting that Istanbul-Lviv flights doubled last year, to twice a day. “Turkish businessmen are interested in investing in alternative energy and light industry.”

In the last two years, Matys says that with support of his office 52 new companies -- almost all foreign -- have opened in the Lviv Region, creating 12,000.

This year’s big bounce comes from Wizz Air’s return to Lviv and the arrival in the fall of Ryanair, with direct flights from here to seven EU cities, including Berlin and London.

“Soon an investor in Berlin can sit in a plane for one hour, come here, tour sites, have coffee, and make a decision,” Mayor Sadovyy said in an interview here about Ryanair’s arrival. “Direct flights are like fast internet.”

IT Expanding Fast

In the internet sector, about 27,000 people in Lviv work in IT. About one third of these work at the Lviv IT Cluster, a campus-like concentration of startups and outsourcing companies in a northern suburb. Of the 57 companies there, half are foreign.

Lars Vestbjerg, manager of a shoe factory here and president of the Danish Business Association of Ukraine, worries that lbor migration to the EU will continue if the governments -- regional and national -- do not level the playing field, making sure all companies pay taxes. (UBJ Editor)

Not all is sunshine this spring in Western Ukraine.

“There are too many companies operating in the black,” Lars Vestbjerg, Danish general manager of a shoe manufacturer here, said referring companies that can pay higher salaries because they do not pay taxes.

Echoing a nationwide concern, he predicted that Ukraine’s visa-free access to the Schengen zone, expected for this summer, will accelerate a westward labor exodus.

“We already have had some workers go to Poland,” he said, referring a nation that is only a one hour drive west of here. “If we can’t get the people, we’re out.”

Foreigners Still Testing Waters

Vestjberg is also president of the Lviv International Rotary Club. He said the consensus among members is that foreign companies already established here are expanding operations. New companies are studying the market -- and then encountering resistance to investing in Ukraine from company boards back home.

At a monthly Rotary dinner, one member, Yuriy Dzeva, told the UBJ that he temporarily has switched occupations: from helping foreign investors set up in Western Ukraine to recruiting skilled workers in Eastern Ukraine to work in Czech factories.

“I thought that we will have more investors and investments by now, but I understand that people are very carefully analyzing the political situation in the country and what is happening in the east of our country,” Mayor Sadovyy said in the interview. “And then, it seems to me, today is a very good time for those who are ready to take risks and earn money.”

News of war and corruption dominate Ukraine’s international image. Few foreigners understand Ukraine’s immense size. For the last two years, the separatist war has been bottled up in the nation’s southeast corner, 1,300 kilometers by road east of here.

Olha Syvak, Lviv’s chief investment officer, answers a question from visiting Japanese business men and women. (Yustyna Lukavych)

“The advantages of the free trade agreement are not properly communicated – to foreign investors and to local investors,” Olha Syvak, Lviv’s chief investment officer, said in an interview. “Over the last six months, the visits, the inquiries have intensified. Those who are most ‘brave’ come. They end up liking our city, our food, our coffee – and our business opportunities.”

For comments and story tips, please email UBJ Editor in Chief at: <>

Slider Photo: Lviv Mayor Andriy Sadovyy greets Japanese business representatives, largely from Japanese company subsidiaries in Poland, Czech and Hungary. (Yustyna Lukavych)

Posted May 7, 2017

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