The number of French companies doing business in Ukraine has remained unchanged in 2013-2014. Some left, others have entered the market, but the French Chamber of Commerce in Ukraine still counts 120 members.
This commitment to the Ukrainian market is an indication of the country’s potential.
“I don’t know any company that has left Ukraine,” says Alexis Struve, the director of Business France Ukraine, a French governmental organization that concentrates on attracting French businesses to Ukraine. “All of them want to stay here. They all built something here and somewhere deep inside they are confident that the potential of the market is realistic.”
Thomas Moreau, president of the French Chamber of Commerce in Ukraine, says that there are more than 160 French businesses operating in Ukraine.
However, Ukraine’s foreign trade turnover in goods with France fell in 2014 by 15 percent compared to 2013’s $2.4 billion.
This decrease is largely due to fluctuations in the hryvnia, making budgets and planning difficult. Moreover, the majority of French companies in Ukraine carry debt pegged to dollars or euros. But parent companies often kick in to provide financial support and to help through the challenging times.
“If the economic situation will be difficult, but if we know that the basics of the economy are stable and strong… it’s not so bad,” Moreau says.
Despite being in a country at war that is in economic turmoil, Struve believes that now is actually a good time for big companies to enter the Ukrainian market. He says that new companies are unlikely to see profits in the short term, but future gains could be enormous.
Struve says that French investors are drawn to the qualified staff in Ukraine, and their high levels of work performance. Moreau cited one French businessman who has been developing a video game for 15 years by hiring 70 Ukrainian IT specialists. The game is now being sold globally.
The biggest chunk of French business in Ukraine is in agriculture and comprises about 60 percent of French business. France exports machinery and technology to Ukraine, but invests in seed and livestock plants. Prominent French dairy companies also have a strong local presence: Danone, Lactalis, and Bel Shostka all have factories in Ukraine.
Jean-Jacques Herve, a board member and advisor in agricultural matters at Credit Agricole, spent the last 10 years in Ukraine. The global demand for agricultural commodities is still growing rapidly and the possibilities for Ukraine are wide open, he says. But investors that are eyeing the Ukrainian agriculture market need more than mere interest in order to start doing business here.
First, the European Union can help, he says, if it eases the agrarian subsidies that give preference to European farmers. But responsibility also falls on Ukraine’s own reforms.
Herve believes that the Ukraine’s agriculture sector is perfect for environmentally friendly development. “We do not have to cut down forests or dry naturally wet areas,” he says. “The land is prepared to produce. That is fantastic.”
The conflict between Russia and Ukraine also provides serious challenges for French companies with operations in, and commitments to, both countries. The French are trying to find a compromise between all parties. But there is by no means a natural inclination by the French toward the larger markets of Russia. Ukraine is one of their biggest markets in Europe, Moreau says.
Herve says that most French companies were surprised by Russia’s aggression.
While some French businesses still prefer to do business with Russia, Business France’s Struve says they are exceptions to the rule. “Most of the French entrepreneurs strongly support Ukraine,” he says
To win France’s partiality, Ukraine needs to continue to focus on reforms. The ones put in place so far are not enough, Moreau says. Struve laments the new 5-10 percent customs tax on all imports, introduced on Feb. 16 by the Cabinet of Ministers. It confuses French companies. “No one understands why they did this,” he says. “Who benefits from it?”
There is also concern about turnover within the government administration. Moreau worries that officials like economic minister Aivarus Abromavicius and agriculture minister Oleksiy Pavlenko will be replaced in the near future. “How can you build a future when the people are changing each day?” he asks.
But Moreau appreciates the direct dialogue that is now possible with government officials. Just two weeks ago, officials hosted an event with Pavlenko and another with Abromavicius. This, he believes, builds the necessary trust between the business sector and the government.
“It is something that really changed in one and a half years,” he says.
France at a glance
Total area: 643,801 square kilometers
Population: 66 million (2013)
Chief of state: President Francois Hollande (since May 15, 2012)
Head of government: Prime Minister Manuel Valls (since April 1, 2014)
GDP: 2.8 trillion (2013)
GDP per capita: $35,700 (2013)
Main exports: machinery and transportation equipment, aircraft, plastics, chemicals, pharmaceuticals, iron and steel, beverages
Ukraine-France relations
Trade turnover: $2.4 billion (2014)
Exports from France to Ukraine: chemicals and pharmaceuticals, nuclear reactors and equipment, essential oils.
Exports from Ukraine to France: food waste and residue (biomass), seeds, animal/vegetable fats and oils, inorganic chemicals.
French investments in Ukraine: $1.65 billion (from Jan.-Sept. 2014)
Main investors: Danone, Auchan, Credit Agricole, Lactalis
Sources: World Bank, Central Intelligence Agency, Embassy of Ukraine in France, Ukraine’s State Statistics Services
Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].
