Natalia Jakubowska, Trans.iNFO: Following the first Ukraine Recovery Conference, “ReBuild Ukraine”, which took place in Warsaw in February, one got an impression that many promises but few concrete commitments had been made. What was it like this time? What do you think of the event?
Piotr Zaleski, Regional CEO, East Europe, Hellmann Worldwide Logistics:
Well, this time, there were definitely more substantive discussions, and, I think, the quality of debate in the forums was even higher. Thanks to the participation of various Ukrainian ministries, the world of politics had a strong representation, so the ReBuild Ukraine initiative got tangible support. We also met EU officials, such as Energy Community representatives. Commitment is very strong, especially in the energy sector.
How many branches do you currently have in Ukraine?
Two, in Kyiv and Odessa.
And how many were there before the war?
Also two. After the outbreak of the war, we had to take two months off our operations due to military activities. Luckily, our 40 Kyiv and Odessa employees could soon return to work and we have been active without interruption ever since.
So you have regained full operating capability?
Right. But our activities are restricted by the lack of airline connections and port closures. Odessa, Chornomorsk, Mykolaiv, and Pivdennyi Port currently admit dry bulk cargo ships, which carry, for example, grain exports to other countries. But these transports also happen under special conditions, because the ports are not safe yet. All other goods are transported via other European countries, primarily via Poland and Romania.
Why should we invest in Ukraine now that the war is still ongoing?
This is what Hellmann is doing, mostly out of a sense of social responsibility. Our employees in Kyiv and Odessa have supported us in everything from day one. We are also aware that they want to return the favor and get actively involved in rebuilding Ukraine. We believe that good decisions and important reforms are being initiated in the country.
How would you describe the economic and investment climate in Ukraine?
With various guarantees and sureties, support goes mainly to the sectors of energy and infrastructure, as well as residential reconstruction. In other areas, investors are still largely holding back, partly because production in Ukraine is still high-risk.
Are there any legal protections available for investors in the war zone?
As I said before, many countries and the EU as a whole issue investment and export credit guarantees (Hermes surety bonds). However, there are still gaps when it comes to insurance. We have been working with the Committee on Eastern European Economic Relations to develop new transport insurance solutions and recommendations.
How would you describe the investor profile in Ukraine? Which countries and businesses have invested in the country thus far? Which sectors offer the greatest opportunities?
At present, the Ukrainian government focuses on the energy sector, because this is where there is the most pressing need. Due to the ongoing military activities, infrastructure investments are currently planned over the medium term. However, the energy sector is something we will be intensively working on in the coming months, maybe even years. The energy supply in Ukraine is being decentralized, because the old, Soviet infrastructure was concentrated at only a few locations. For the process to succeed, the government needs new technologies that are currently not available locally.
The Ukrainian approach to reorganization is very far-sighted: all infrastructure destroyed during the war will be replaced with sustainable energy supply in the mid to long term.
The goal of the decentralization project is to stabilize the energy supply to the country.
And how does your business cope with power outages in Ukraine?
We have distributed powerbanks among our employees and our non-profit organization, Hellmann Helps, has equipped our offices with power generators. The organization was founded after the outbreak of the war on the initiative of our employees around the world in order to bring aid quickly to wherever it might be urgently needed.
Ukraine has a certain notoriety for corruption. Does that discourage entrepreneurs?
We have been active as an enterprise in Ukraine since 2008 and we have witnessed great progress and a push for reform: the government is trying to take decisive measures to combat corruption through better monitoring. The war, too, has changed the mindset a bit, because it has sensitized Ukrainian society to the issue.
Let’s say a business wants to invest in Ukraine. What steps should it take?
Today, investments are largely focused on specific projects and most concentrate on energy supply and infrastructure.
And how good is access to tenders in your opinion? Under the New Silk Roads initiative, for example, investors had to start public-private partnerships to be able to join projects. What is the situation like here? Are the procedures transparent enough from the point of view of investors?
Access to the private sector is much easier. Most active companies come from the West and attach a lot of importance to transparency.
Do you get an impression that some companies or countries get preferential treatment?
No, I do not. At the conference, we could see that many representatives of European business have got involved in working for Ukraine.
What do you think would need to change in terms of infrastructure and formal requirements to boost investment in Ukraine in the nearest future?
Customs formalities, for one, should be optimized. That would greatly facilitate the flow of goods, and, as a consequence, also investments.
The logistics infrastructure also needs to be further upgraded. The war, of course, has made the situation worse, because at the moment military targets are being prioritized. This has negatively affected the throughput of nearby European sea ports and airports.
And what about broad-gauge railways? Is Ukraine planning to change to the European standard?
As for the European standard in Ukraine, debates are already underway. This, however, is not an investment we are likely to see in the next two or three years; it is a long-term project. But this would give us a good connection to the European network.
At present, rail transport reaches Western Ukraine, where the goods need to be reloaded into other carriages and trains or transported by trucks. We need to develop the railway system because right now the network does not meet the latest standards. This will help Ukraine join the EU market and accelerate its postwar reconstruction.
Does Ukraine have potential to replace Poland as a nearshoring destination in the medium-term perspective?
Indeed, we have analyzed this issue recently. And I think that in the future, Ukraine is sure to play an important role as a production location for Europe.
In general, the trend of nearshoring has already been evident for some time: it is promoted by the pandemic, and Western businesses are showing increasing interest in Eastern Europe. We have also observed a greater interest in the Balkan countries and Turkey.
For now, the priority in Ukraine, of course, is to provide humanitarian aid and support reconstruction. But in the longer term, it can really become an important production location.
Following the sanctions, were German companies able to offset their losses in Russia by business activity in Ukraine?
We treat these two issues as completely separate. One doesn’t have anything to do with the other. We have focused on reconstruction and on our people on the ground.
How do you think the business model of transport logistics in Ukraine is going to develop in the future? What are the prospects?
Of course, this largely depends on what happens in Ukraine, when peace finally returns. But Ukraine is very interesting economically, too. Rebuilding the country and its infrastructure creates new opportunities for the modernization of the road and rail network and better and faster connections to the European Union.