New opportunities for business expansion in Ukraine

The opportunities for Polish companies in rebuilding the Ukrainian economy were discussed in Karpacz by participants in the Breakfast with “Rzeczpospolita”, whose guest was Jadwiga Emilewicz, Deputy Minister of Funds and Regional Policy and the Government Plenipotentiary for Polish-Ukrainian Development Cooperation. Jadwiga Emilewicz, who has been involved in supporting Ukraine (including war refugees) since last year, reminded that Poland is the leader in helping Ukraine in relation to GDP.

Nonetheless, it is important to note that we should not anticipate preferential treatment for the extensive projects aimed at reconstructing the Ukrainian economy in the post-war period. While these projects may amount to billions, as Emilewicz highlighted, at present, our efforts in supporting this reconstruction largely remain in the realm of verbal commitments.

– “Private investors will refrain from investing a single dollar or euro in Ukraine until the formal declaration of the war’s end. During this period, significant public procurements funded by organisations like the World Bank, EBRD, or EIB will also remain on hold”, the Plenipotentiary emphasised. However, this does not mean that Polish companies should wait passively for the war to end. On the contrary, it is worthwhile for them to build up their presence now and many companies are aware of this necessity.

The barrier of corruption

Jadwiga Emilewicz highlighted that, as per data from KredoBank owned by PKO BP, there are 660 Polish companies in Ukraine that were established before the outbreak of the war and have chosen to remain despite the Russian aggression. She also accentuated that Polish companies with well-established local partners through direct business relationships (B2B) can anticipate conducting business securely even during wartime conditions. It is worth noting that there’s a distinction to be made between eastern and western Ukraine, where many businesses from the eastern regions relocated following the Russian invasion, and where there is less of a pervasive sense of war.

A more formidable challenge lies in the business-government relationship upon which Ukraine’s reconstruction will be founded. The primary hurdle is corruption, which has surged to twice its pre-war levels. The European Union also grapples with this issue; out of the €50 billion allocated last year to assist Ukraine, only half was disbursed transparently.

– “Therefore, prior to foreign funds being channelled into Kyiv’s authorities’ budget, it will be imperative to establish intermediary institutions responsible for coordinating reconstruction tenders and instituting some form of arbitration court. Otherwise, the efficacy of these measures is likely to be significantly diminished”, assessed Jadwiga Emilewicz. According to her, the declarations of the representatives of the Ukrainian authorities, including President Volodymyr Zelensky, regarding the fight against corruption and the introduction of European standards are valuable and important, but such a change is difficult and takes time.

Despite these challenges, Poland’s opportunity lies in the potential of the numerous companies already operating in Ukraine. These companies possess a deep understanding of the Ukrainian administration, business landscape, and market conditions. Barlinek, for instance, has significantly increased its production in Ukraine over the past year after closing its factories in Russia, while Cersanit has also experienced substantial growth. Polish companies aren’t just active in Ukraine; they are contemplating new investments in the country. For example, the well-known window manufacturer Oknoplast is planning to establish a factory near Lviv.

As emphasised by the Plenipotentiary, the Polish authorities are not inclined to wait for the war to end. Instead, they aim to prepare their own support mechanisms and risk-mitigation strategies to facilitate companies’ entry into Ukraine. An upcoming amendment to the KUKE Act, expected to be signed by President Duda later this week, is part of this effort.

New fund

Jadwiga Emilewicz highlighted that the Export Credit Insurance Corporation (KUKE) is set to become the first agency in Europe capable of insuring investments and transactions in Ukraine up to 100%. This attractive instrument is not limited solely to Polish companies or those operating in Poland; it’s open to companies from other countries as well, provided they contribute 30% locally. Such is the appeal of this offering that inquiries are already emerging from Austria and Germany. The annual cap on the value of KUKE’s guarantees, currently standing at PLN 30 billion, can be expanded as needed.

A second measure beneficial for companies planning expansion in Ukraine is the new investment fund being developed at the Polish Development Fund, expected to be operational by year-end. This fund will support Polish companies in their Ukrainian endeavors, including acquisitions and new ventures, even those previously put on hold due to the war outbreak. According to Jadwiga Emilewicz, the combined support from KUKE and the Polish Development Fund should serve as a substantial incentive to revive these projects.

Polish initiative

The Plenipotentiary underscored that Poland is actively participating in the platform planning measures for the coming year as part of the EU’s financial aid package. She expressed pride in the presence of BGK as technical support, highlighting the guaranteed involvement of the Polish development bank as a fund distributor. According to her, the initial priorities in the reconstruction of Ukraine will focus on investments in crucial areas, such as water and sewage systems, energy, road infrastructure, and housing rehabilitation. Nevertheless, Bogusław Chrabota, the editor-in-chief of “Rzeczpospolita” daily, who chaired the meeting, emphasised that companies from other sectors should also start considering, at least in principle, their involvement in Ukraine’s reconstruction.