LVIV — What a difference a free trade pact makes.
This city’s annual two-day forum, “Lviv is the Factory of Europe,” clocking nearly 1,500 participants last month.
That was five times as many as last year -- when Ukraine had no free trade pact with the EU. “It is five times as many as last year and, in total, equal to the number of all previous forum participants over 15 years,” Roman Matys, head of Investment Policy for Lviv Region. With 2.5 million inhabitants, Lviv Region has two thirds of Ukraine’s border with Poland. The participation boom indicates that foreign investors are looking at Lviv as a launch pad for low cost assembly for the EU.
Foreign factories in Lviv region
“This is the right time and the right place to invest in Ukraine,” Ukraine’s president Petro Poroshenko, said Thursday before inaugurating a new division of Bader Ukraine, a German car upholstery producer. It will produce leather interior kits for Audi and BMW cars. Located 20 km west of here, the factory is on the M10, a major highway to Poland.
“Commodities produced in Ukraine are not subject to taxation on the European market,” the President said of the free pact that went into effect last January. “This brings investments to us. Investors vote for a free and independent Ukraine with their money.” The factory will employ 1,700 workers, paying a monthly wage of about $310, said Oleh Syniutka, Chairman of Lviv’s Regional State Administration.
In North America, ‘American’ cars are really ‘NAFTA’ cars, with parts made in Canada and Mexico, members of the North American Free Trade Agreement. Western Ukraine is starting to play this role for the EU.“Everybody believes that Audi and Volkswagen are producing in Germany, but they are mistaken,” continued Syniutka. “The biggest part of its production belongs to Ukraine.”
Nexans, a French cable producer for Audi and Volkswagen, recently entered Lviv region and is investing $3.1 million in Brody, a city 100 km east of here. The factory is to open next year and employ 2,000 workers.
Earlier this year Fujikura, a Japanese company, opened two car parts factories west of Lviv city, just off a highway to Poland. It is recruiting 1,800 additional workers.
Leoni, a German company, employs 5,000 workers at a car parts factory in Stryi, a Lviv city two hours by truck from the Polish border.
Roads and locomotives
At the Forum, investors complained about bad roads in Ukraine and problems with customs. Ease and transparency navigating customs is an essential way to facilitate cross-border commerce between nations. So are well-maintained roads. Ukraine’s were ranked one of world’s worst, according to the World Economic Forum rating.
Government officials said help is on the way. “New highways will be built in the next four to five years with $40 billion in investment from the European Commission and the Ukrainian budget,” promised Volodymyr Omelian, Ukraine’s Minister of Infrastructure.
Omelian highlighted a joint project between Ukrainian Railways and Bombardier, of Canada, to produce locomotives in Ukraine.“This is a great opportunity for Ukraine to make a breakthrough in railway modernization and show foreign investors that Ukraine can and should invest in technology,” said Omelian.
Bombardier director of business development Flavio Canetti told Forum participants that he is optimistic that joint venture will take place.
$25 Million for Carpathian Wind
Renewable energy was another hot topic at the Lviv Economic Forum.
A wind power project is under development by Eco-Optima, a Ukrainian-Italian company, and Vestas, a Danish company, outside of Staryi Sambir, a Carpathian town 100 km south west of her. With four turbines already up and generating electricity, the completed wind farm is to produce 36 megawatts of electricity annually, supplying power to thousands of homes.
This wind project received a $25 million financial package from international donors. Two backers, the EBRD and the Nordic Environment Finance Corporation, signed a loan agreement at the Forum.
“This shows how big the renewable energy potential is in Ukraine,” said Sevki Acuner, EBRD Director for Ukraine. “It also paves the way for similar private investments across the country.”
Debut of Investment Promotion Director
In his first public appearance since starting Tuesday as Director of Ukraine’s New Investment Promotion Office, Daniel Bilak said he is confident that foreign investors will soon discover Ukraine’s positives.
“Lviv region is an example of what has to be done,” said Bilak, who is on a one-year sabbatical from his private sector job. “We have to welcome investors as the guests who come to our homes. Then the confidence will return.”
“Investors have to be sure that their proprietary rights will be protected,” he said.
He added that Ukraine needs rebranding. Foreigners need to associate the country with high tech and agricultural technology, not with the war and corruption.
Foreign investors interviewed at the Forum were cautious about the effectiveness of the new investment promotion office.
“We will see how it works -- it’s too early to say anything,” said one foreign businessman said. “Let’s hope that it’s not just more new officials. Let’s hope that the people will help investors develop business in Ukraine.”
Lviv Beer for China
Among the concrete deals announced, Lvivske beer announced plans to export beer to China beginning early next year.
“The company is in negotiations to supply over 300,000 litres per quarter,” said Yevhen Shevchenko, CEO of Carlsberg Ukraine, the parent company of the local brand. Part of the Danish Carlsberg Group, the company owns breweries in Lviv, Kyiv, and Zaporizhia and employs about 1,650 people nationwide.
For comments and news tips, please email UBJ Western Ukraine Correspondent Oleksandra Kharchenko at firstname.lastname@example.org
Photo: Petro Poroshenko, Ukraine's president, inspected leather car seats cut and sewn at Bader Ukraine, a new German factory in Lviv that suppy Audi and BMW factories.