Because of the Russian war against Ukraine, in 2022-2023, more than six million citizens left Ukraine and are still in countries around the world. In this regard, Ukrainian businesses also decided to enter the international market and declare themselves as a serious competitor.
Main examples: «Nova Post» delivery company, «Ukrposhta» state post and delivery company, «Monobank», «Lviv Croissants» bakery network, and many others.
On the other hand, many businesses within the country were forced to close. But there are companies that continue their work at the level of millions of investments. In this case, it is worth mentioning the construction companies, which are largely considered possible growth drivers for post-war Ukraine.
How do Ukrainian businesses survive during the war? We asked representatives of the construction industry, delivery, and agricultural producers.
Why does Ukrainian business go west?
According to research by the Ukrainian research company «Gradus», about 50% of Ukrainian businesses need to relocate or have already done so due to certain circumstances. The most popular is the desire to keep one’s business (38%) and expand the client base (30%). In this regard, 17% of enterprises expanded outside of Ukraine, and 11% completely moved abroad. 77% entered the market of the EU and other European countries. The leader is Poland, where 63% of enterprises are developing or will do so. The most common reasons for such a choice are demand for products, developed infrastructure, and convenient legislation.
“AcademyOcean’s” research of Ukrainian IT companies operating abroad after February 24, 2022, which they shared with us, shows that 33.5% of companies have already or will soon start working abroad.
Ukrainian business chooses the EU the most, because it is, in general, one of the largest global sales markets with a population of 500 million people, with which it can compare only to the US market. But European countries, firstly, are logistically closer (and it is easier to deliver, for example, fresh food products there), and secondly, they are historically and mentally closer to Ukraine.
Ukrainians have registered more than 10,000 companies in Poland since the beginning of this year. Including 9,829 companies — after March 1, reports “Business Insider Polska”.
You can read more about the areas in which Ukrainian companies operate and invest in the EU and European countries by following the link.
Invest despite the war
The State Statistics Service provides the following data regarding the last pre-war year: during 2021, 11.4 million square meters were commissioned housing, which became the highest indicator in the last 30 years. Construction companies actively developed and increased sales. This trend would have continued to this day, if not for the war.
“After the full-scale Russian invasion, many developers practically suspended work on construction sites due to physical security risks: some for several weeks, and some did not resume, as in the eastern regions. As a result, already in 2022, the total area of commissioned housing was 7.1 million square meters, which is 38% less than in 2021. Builders in the east and south of Ukraine experienced the biggest crisis, where volumes fell by 70-90% compared to the previous year”, — Ukrainian Forbes.
Every war ends. After the end of hostilities, the role of the construction industry in the processes of restoration of industrial facilities, housing, transport, and social infrastructure will be crucial. Considering the scale of the destruction and the requirements for reconstruction, Ukraine can be called one of the largest construction sites in the world. It is the construction industry that can become one of the drivers of the revival of Ukraine after the end of hostilities.
“We have built more than 25 objects — this is a total of more than 500,000 square meters. It is worth mentioning that during the war we do not slow down: over the past year, we commissioned 113,000 square meters, which is approximately 1,700 apartments”, — Vasilis Boumbouras, CEO of Gefest Construction Company.
Construction companies are large taxpayers and have large workforces. Such companies help many related sectors of the economy stay afloat.
What challenges faced Ukrainian construction companies? The main is a shortage of labor force.
“In the first months of the war, we faced a serious shortage of materials. Obviously, the reason is that many companies ceased to operate and didn’t even deliver those materials that were already paid for, they did. Now we have dealt with this shortage because the company buys them with a margin of 2-3 months because no one can be sure this will never happen again. Another big problem is that we are understaffed, we are lacking a workforce. The reason for that? Some people have joined the army, this is now the number one priority for our country, some are too scared to go to construction sites, and there are also those who have already gone abroad with no guarantees for their return”, — Vasilis Boumbouras.
Currently, the construction market in Ukraine is experiencing a crisis and a certain imbalance. This is due to the fact that the supposedly safer western regions received an impetus to continue and expand construction. The regions adjacent to the territories with active hostilities are now in a difficult situation.
The rise in real estate prices in Ukraine is due to objective factors: inflation, rising dollar and euro exchange rates, and rising prices for building materials (sometimes 40%, and sometimes doubled). At the same time, a decrease in the volume of new housing commissioning is predicted. This is due to the fact that, as a rule, the commissioning of housing in 2022 was the result of a 2-3-year construction cycle.
Let’s not discount the fact that developers expect transparent and understandable legislation, which, in turn, will simplify the flow of investment into the construction sector after the end of the war.
“There are some difficulties related to the legislation, but I am sure that soon we will come to a transparent market that will allow us to attract international partners”, — Vasilis Boumbouras.
Development of the delivery market: how Nova Post enters the EU markets
Nova Post is an international Group of Companies that provides the full range of logistics and related services to private clients and businesses. The parent company has been helping Ukrainians to send and receive parcels and cargo for 22 years. Every year the company delivers over 315 million parcels both within Ukraine and worldwide.
“Nova Post started developing business abroad as early as 2014, entering the Moldovan market. Currently, Nova Post has a network of 19 branches and 220 post lockers throughout the country. Following our clients after the full-scale russian invasion, Nova Post entered the European market in October 2022 and Poland became the first EU country to welcome Nova Post branches. There are now 33 branches operating in the 22 largest Polish cities: Warsaw, Kraków, Wrocław, Lublin, Gdańsk, Rzeszów, Poznań, Lodz, Katowice, etc. Nova Post in Poland gave work to 200 employees. Most of our employees are Ukrainians who speak Polish and Ukrainian”, — reported the company’s press service.
Nova Post not only employs internally displaced persons from Ukraine but also brings investments to EU countries, thereby positively influencing the delivery market in EU countries.
“In less than a year of operating in Poland, Nova Post invested over €2 million in business development. We invested over €175 000 into the development of business in Lithuania. In less than 3 months, we invested over 250,000 euros in business development in the Czech Republic and hired 13 employees: the majority of our employees are Ukrainians who speak Czech and Ukrainian. The company’s investment budget for 2023 for Romania is €600,000. In June 2023, Nova Post opened its first branch in Berlin. Nova Post invested about €500,000 in business development in Germany by far. Till the end of this year, we are planning to open 10+ branches in 12 German cities. So, the total investment budget for the development of the network in Germany is €5 million”.
Do not forget that large companies entering the EU markets, upon successful completion of this stage, increase their capitalization, and profits and pay more taxes to Ukraine.
“Nova Post is a responsible corporate company. This is the group of companies, which is one of the largest private employers in Ukraine with 42,000 people. Along with this, the group of companies is one of the top 20 largest taxpayers in the country. For 6 months of 2023, the volume of taxes paid amounted to ₴5.1 billion (approximately €126 million), which is 75% more than the year before”.
The entry of a major Ukrainian player in the delivery sector with its software and high delivery standards has a positive impact on the European market.
Ukrainian grain business and problems of entering EU markets
Ukraine is a traditional exporter of grain and agricultural products. Many countries in Africa and the Middle East depend on Ukrainian grain. With the beginning of full-scale aggression against Ukraine, Ukrainian seaports were blocked.
“The Ukrainian grain market is one of the largest worldwide. In the trade year 2022/2023, Ukraine was the sixth-largest wheat-exporting region. Around five percent of total wheat exports came from Ukraine in that period. Furthermore, the country accounted for nearly 40 percent of global sunflower meal exports and 35 percent of sunflower oil”, — says Statista.
In the summer of 2022, the practice of ships leaving under the so-called “grain deal”. But the Russian side did not stop provocations and shelling. It also took a long time to check ships sailing to/from Ukrainian ports. On July 17, 2023, the Russian government announced that it suspended participation in the deal.
Currently, the Ukrainian ports of the Danube are regularly attacked by kamikaze drones. This poses a threat to grain exports from Ukraine.
We turned to Mykola Stryzhak, President of the Association of Farmers and Private Landowners of Ukraine, for comment regarding what other problems Ukrainian exporters of agricultural products have.
His statement: Ukraine must enter new markets and support mid-level businessmen and farmers at the state level.
“No one is waiting for us in those markets, local farmers see us as big competitors. Indeed, what they lack, they buy from us, but when we have a crisis, for example with cabbage, where do we get it from? From Europe! We need to sell where there is a need for these products and find ways and methods to sell there”, — Mykola Stryzhak.
It is important that Ukraine creates added value of raw materials by processing them into goods and products.
“We should not sell grain; we should sell value-added products. For example, it will be two or three times more expensive to sell compound feed. In addition, there will be new jobs. This will be less production, that is, one ton of corn will yield half a ton of compound feed. Therefore, we will save on transport, because we will have to transport not two ships, but one”, — Mykola Stryzhak.
Thus, Ukraine first needs to ensure the safety of production and transport routes for the export of products and goods to the country. Secondly, to ensure a transparent legal system in which business will operate and in which investments will be made. Thirdly, investing in the processing of raw materials will bring both additional income and the creation of new jobs.
Stanislav Kinka
With the participation of Tetiana Stelmakh
