You're reading: World in Ukraine: Ukraine currency, corruption crimp Swedish businesses

A 19 percent decline in Swedish exports to Ukraine in 2014, down to 204 million euros, is another sign of the weakening purchasing ability among Ukrainians. The hryvnia's steep devaluation in the last year and legal obstacles are clearly impediments to Swedish companies who bring paper, machinery and oils to the local market.

By contrast, Ukraine’s exports to Sweden in 2014 increased 16 percent, from 45 million euros to 52 million, mostly in machinery and furniture.

Out of the 80 Swedish companies with established offices in Ukraine, some of the big names include Volvo, Kinnarps, Ericsson, Scania, Electrolux and Tetra Pak.

Kinnarps

Devaluation this year “is hitting our company severely,” says Vladyslav Mieshkov, 38, chief executive officer of Kinnarps, a furniture producer from Sweden. It decreased the expected revenue in the first two months of 2015 by 41,000 euros. Last year sales reached 534,000 euros.

Mieshkov doesn’t see progress in Ukraine’s legal system, saying there are even more problems than before the EuroMaidan Revolution. He is not happy with the new 5-10 percent tax on imports that was introduced in February.
“It used to be equal to zero and we were moving closer to Europe,” Mieshkov says. New tax order created greater problems at the border control where one of Kinnarps’s trucks was delayed for two days causing late delivery to customers.

Tetra Pak

Roman Kharytonyuk, key account and sales office manager of Tetra Pak, a food packaging and processing company, says that the biggest problem for his company is that Ukrainian consumers are getting poorer.
“Salaries are not growing. Maybe we are growing, but not so quickly as inflation in Ukraine,” says Kharytonyuk. Consumer prices rose by 28.5 percent in January year-on-year, according to the National Bank of Ukraine.

Tetra Pak’s only factory in Ukraine is in Kyiv and employs around 250 people. The factory was built during the fall of the Soviet Union and now serves about 25 customers. The top five – PepsiCo, Sandora, Vitmark, Lusdorf, Chumak – are 85-90 percent of the company’s sales in Ukraine, estimates Kharytonyuk. Tetra Pak doesn’t disclose financials on its operations in various countries. Usually, packaging material makes about 10-15 percent of the product price.

Tetra Pak’s raw materials are imported from Sweden. Due to the NBU’s foreign currency limitations, the company’s problems grew as it couldn’t buy euros to conduct the necessary purchases.

“All of us maybe expected some good improvement after the (EuroMaidan) revolution,” says Kharytonyuk. But Tetra Pak’s customers are still complaining about pressure from the government and that previous shadow schemes of doing business have returned. He sees no major improvements in legislation and courts regarding the corruption.

Kharytonyuk hopes that the difficult times will pass and that growth will come back in a little more than a year.
“I don’t know how we will finish this year. Maybe a 10 percent decline. Maybe more. It would be nice if not more than 10 (percent).”

In addition to the hryvnia devaluation, Russia’s war against Ukraine caused a loss of four wine and juice customers in Crimea and one major dairy company in Donetsk. This led to a decrease of up to six million euros in sales, estimates Kharytonyuk.

He expects an additional 10 million euro hit in 2015 due to the loss of Crimea and the war-torn Donbas region.

Kyiv Post staff writer Ilya Timtchenko can be reached at [email protected].

Sweden at a glance
Total area: 449,964 square kilometers
Population: 9.75 million (2014)
Government type: constitutional monarchy
Head of state: King Carl XVI Gustaf
Head of government: Prime Minister Stefan Löfven
GDP: $472 billion (2014)
GDP per capita: $48,670 (2014)
Main exports: Machinery and transport equipment, paper products, chemicals.

Ukrainian-Swedish relations:
Trade turnover: $436.5 million (2014)
Exports from Sweden to Ukraine: paper and cardboard, nuclear reactors components, electrical machinery, fats and oils.
Exports from Ukraine to Sweden: ferrous metals, wood and wood products, furniture, nuclear reactors components.
Swedish investment in Ukraine: $0.39 billion (cumulative as of Oct. 2014)
Main investors: Tetra Pak (packaging), Electrolux (electronic devices), Oriflame (cosmetics), SKF (machine components).

Sources: Official Statistics of Sweden, BBC, Ukraine’s State Statistics Service, Embassy of Ukraine to Sweden, Embassy of Sweden to Ukraine