Austria, with its historically deep ties to Ukraine, is one of the country’s most important sources of investment.
But Ukraine’s economic crisis, unstable politics and the phantom cease-fire in the eastern Donbas have put fresh Austrian investment – which stands cumulatively at $2.4 billion – on hold for the most part. But even so, Austria remains Ukraine’s fifth biggest investor after Cyprus, the Netherlands, Germany and Russia.
Moreover, some companies are even reporting growth.
Insurance doing fine
There are 43 subsidiary enterprises of Austrian companies in Ukraine. But no new Austrian businesses have entered Ukraine over the past two years, according to Ukrainian-based Austrian business consultant Rainer R. Staltner.
The largest Austrian enterprises in Ukraine operate in the banking and insurance sectors, with Raiffeisen Bank Aval and Vienna Insurance Group being the most high profile.
Represented in 24 countries, Vienna Insurance Group has founded four insurance companies in Ukraine: the Ukrainian Insurance Group, Kniazha, Globus and Jupiter. Together, they have a market share of 4.2 percent, according to VIG’s 2014 report.
For VIG, Ukraine remains a core developing market, a senior executive of VIG in Ukraine, Gary Wheatley Mazzotti, told the Kyiv Post.
He confirmed that despite the economic turmoil, VIG is still doing good business. During 2015, the income of VIG in Ukraine was €54 million, which was still 14.6 percent less in euros compared to the year before. But Mazotti is happy with this result: In hryvnia terms, VIG is doing well.
The company’s trump card is its Austrian origin.
“Customers in Ukraine see the value of being insured by an international insurance group,” Mazzotti said.
Investors on standby
Those investors who came to Ukraine before Russia launched its covert war haven’t sold their assets, but put them on the standby mode, said Staltner, the business consultant.
Staltner has lived in Odesa since 1995. He advises investors who want to enter Ukraine, as well as Ukrainian producers looking to export to European markets.
According to Staltner, no Austrian investors have come to Ukraine in the last two years. “They’re interested, but they’re just watching and waiting,” he said.
The instability of Ukraine’s economy continues to put off potential Austrian investors. Staltner said Austrians want to see peace in the east and a fair judicial system in Ukraine. Poor infrastructure also scares them off.
“When an investor comes and sees the roads, he doesn’t want to do anything. That’s because products don’t just have to be produced, but delivered as well,” Staltner said.
As an illustration, he said that delivering goods the 330 kilometers from Odesa, Ukraine’s main sea port, to Reni, a town on the Danube River in Odesa Oblast, is more expensive than driving them from Odesa to Kyiv (a distance of 470 kilometers), simply because of the difference in the road quality.
Ukraine needs to resolve these problems to fulfill its investment potential, Staltner said.
A tourist climbs a hill near the slalom course track of the FIS Ski World Cup in Kitzbuehel, Austria on Jan. 22.
Investors encouraged
As for Ukrainian exports to Austria, Staltner said agricultural products, transport and medical equipment could all be of interest to Austrian customers. “There are actually a lot of good (products) here,” Staltner said.
And in the wake of the free trade agreement between Ukraine and the European Union launched on Jan. 1, trade between Austria and Ukraine should get a shot in the arm. Indeed, at a Ukraine-Austria trade conference on April 13 in Kyiv, all of the presentations were focused on the effects of the free trade agreement and the potential for Ukrainian investment in Austria.
Austria, a country with a growing gross domestic product and population of 8.5 million people, shares borders with six European Union member states.
“Austria could be the location to establish a company or a subsidiary of a Ukrainian enterprise, which would help (Ukrainian exporters) to work better in the European market, a market with 500 million consumers,” Austrian Ambassador to Ukraine Hermine Poppeller said at the April 13 conference in Kyiv.
Meanwhile, in Vienna, Ukrainian Ambassador to Austria Alexander Scherba sees his job as defending Ukraine’s image, reputation and business interests to help Ukrainian producers find consumers in Austria.
“Austria has managed to achieve what Ukraine wanted, but unfortunately didn’t get – it became a bridge between the East and the West,” Scherba said.
Ukraine’s poor image is the biggest problem that Ukrainian businesses face when looking to enter the Austrian market, according to Scherba.That is party due to Europeans’ poor understanding of the conflict in the eastern Ukraine, he said.
To introduce Ukrainian producers to Austrian buyers, Scherba has organized a conference for food retail companies, namely Billa and Germany’s Lidl, which will take place in May. Next, he plans to bring Ukrainian information technology companies to Austria, he said.
Austria at a glance
Total area: 83,871 square kilometers
Population: 8.534 million
Government type: parliamentary republic
Head of state: President Heinz Fischer
GDP: $436.34 billion (2014)
GDP per capita: $51,159 (2014)
Main sectors of the economy: food and drink industry, mechanical and steel engineering, chemical and automotive industry, electrics and electronics industry, wood, pulp and paper industry.
Ukrainian-Austrian relations
Trade: $812 million (2015)
Exports from Austria to Ukraine: chemical products, machinery, pharmaceuticals
Exports from Ukraine to Austria: raw metals, toys, wood
Austria investment in Ukraine: $2.402 billion (2015)
Import: $335 million (2015)
Export: $477 million (2015)
Main business partners: Raiffeisen Bank Aval, Vienna Insurance Group, Fischer-Mukachevo UAP, Billa-Ukraine / REWE GROUP
