You're reading: Danish companies favor western Ukraine

LVIV, Ukraine – When it comes to setting up shop in Ukraine, west seems to be best for Danish businesses.

Lviv, the biggest city in western Ukraine, has attracted numerous Danish businesspeople, who, undeterred by Ukraine’s instability and Russia’s war in the east, have established subsidiary enterprises and opened new ones.

According to the Danish Business Association, at least 56 companies with investments from Denmark are now based in Ukraine’s western regions.

Danish businesses in western Ukraine are mainly involved in agriculture, clothing production, software development, wood processing and furniture making. Danish companies elsewhere in Ukraine are mainly focus on auditing, accounting, tax and legal services, valuation and consulting.

‘Lviv is booming’

IT outsourcing businesses started growing sharply in Lviv in 2008, several years after Danish manufacturers first arrived. The association’s president, Lars Vestbjerg, told the Kyiv Post that Lviv’s economy is growing.

“Lviv is like booming, it’s developing,” Vestbjerg said.

Vestbjerg works as a general manager at Sika Footwear A/S, a Danish company with a plant in Lviv. It produces work shoes and sells them on the European and U.S. markets.

“Denmark was probably the only country in those five years (after the 2008 financial crisis) who still came to Ukraine. All the other ones were waiting a little bit after the crisis,” he said.

In Soviet times, Lviv was a center of light industry, so Western producers found the market attractive because of the availability of trained staff, as well as its proximity to the western border, director of HRT Textiles sewing company Nazar Bychyshyn said.

HRT Textiles, a company with an 80-year history in Denmark, decided to relocate its production facility to Ukraine in 2002. Logistics, cheap labor, and other costs were deciding factors in the company’s decision to move production here.

“We make kid’s dresses made of Ukrainian velour for the U.S. market,” Bychyshyn said.

No benefits yet

The company employs around 250 people directly, but engages contractors to sew 70 percent of its goods because of a shortage of seamstresses. “We plan to build (more premises) because there’s a lack of industrial facilities,” Bychyshyn said, adding that each year the company’s output grows by 100,000 units.

Ukraine’s free-trade agreement with the European Union, which took effect at the start of the year, should simplify cross-border transactions, but Bychyshyn said he hasn’t noticed any difference yet.

Another Danish company, Miltex Ukraine Ltd., competes with six other sewing companies in the small city of Vynohradiv in Zakarpatska Oblast. “We see competition only in the area of labor, but it’s very tough,” company director Oleg Hlazunov told the Kyiv Post.

Miltex employs 115 people to produce knitted garments, namely dresses, cardigans, pullovers, sports and children’s clothes for H&M, Bestseller, Made in Denmark and other European brands. To compete, Miltex pays seamstresses Hr 4,500 a month (about $180), and provides transportation for them to and from home.

Taking a chance

Danish businessman Rene Milter founded Miltex in 2002.

“He took a chance, and won,” Hlazunov said of the company’s founder.

Milter now rarely comes to Ukraine because he trusts the plant’s management and workers, according to Hlazunov. “If we carry out the plans as ordered, then why would he have to come?” he said.

Furniture maker

Another Danish firm, Ambiente Furniture Ukraine, is located in the village of Kolodentsi in Lviv Oblast. Company director Yuriy Melnyk told the Kyiv Post that the firm has to compete with Polish wages which are more attractive to professional Ukrainians living near the border. Ambiente pays about Hr 4,000, or about $160, per month whereas Poland’s minimum monthly wage is around $450.

The factory produces sofas for IKEA and its owner, Actona Company. While it used to sell 70 percent of its furniture to Russia, the Kremlin’s war in eastern Ukraine has prompted the company to shift focus to European markets. The factory works with imported raw materials from Europe and Asia.

Ambiente is the second biggest factory with Danish investments in Ukraine after a fabric plant in Sokal, which employs 400 people. Ambiente even runs its own bus service for its workers, picking them up from 20 villages within a radius of 25 kilometers of the factory every morning, and bussing them home each evening.

Denmark at a glance

Total area: 43,094 square kilometers

Population: 5.6 million (2015)

Government type: Constitutional monarchy

Head of state: Queen Margrethe II (since Jan. 14, 1972)

Head of government: Prime Minister Lars Lokke Rasmussen

GDP: $250.7 billion (2014)

GDP per capita: $44,600 (2014)

Main sectors of the economy: iron, steel, nonferrous metals, chemicals, food processing, machinery and transportation equipment, textiles and clothing, electronics, construction, furniture and other wood products, shipbuilding and refurbishment, windmills, pharmaceuticals, medical equipment

Ukrainian-Danish relations

Trade: $350 million (2014)

Exports from Ukraine to Denmark: animal feed, textiles, outsourcing and IT services.

Exports from Denmark to Ukraine: specialized machinery, medicines and pharmaceuticals, textile yarn and fabric, chemical materials and products.

Danish foreign direct investment in Ukraine: $80 million (2014)

Main business partners: Maersk, Carlsberg, Novo Nordisk, Lego, Danosha, Ciklum, Danfoss, Grundfos, BIIR

Number of Danish businesses in Ukraine by sector: Agriculture (11), textiles (8), IT and software (9), construction (4), wood production (4) pharmaceuticals (3), with a total of 82 Danish companies in Ukraine.