You're reading: Business and trade are building new bridges between Ukraine and Poland

Jacek Piechota, the former Polish economy minister, is bullish about the future of Ukrainian-Polish trade relations, while acknowledging there’s still a lot of room for improvement.

The economist and former government minister, now co-president of the Polish-Ukrainian Chamber of Commerce — alongside his Ukrainian counterpart, Oleksandr Shlapak — suggests that Ukraine and Poland are beginning to jointly establish an Eastern European powerhouse that bridges East and West.

The potential for joint projects between Ukraine and Poland is endless, suggests Piechota. Polish businesses realised this a while ago, and they’re increasingly setting their sights on the opportunities that Ukraine has to offer.

“Poles are seeing exceptional benefits from investing in Ukrainian assets like land, real estate and human resources,” the former minister told the Kyiv Post as he travelled home to Warsaw from a business conference in the eastern Ukrainian city of Kharkiv. “There are also relatively low costs for investors too,” he added.

Ukrainians too are embracing opportunities across the border, even if they approach them with slightly more hesitation and seem to face a steeper learning curve than their Polish neighbours.

“Three or four years ago most Ukrainian workers were coming here for seasonal jobs or to work in factories — today we see a new wave of Ukrainian entrepreneurs moving to Poland to build their businesses here,” says Margarita Sytnik, a Ukrainian television journalist based in Warsaw since 2015. “Often they are quite successful — opening beauty salons, restaurants, cafes and buying property here,” she added.

From the perspective of Warsaw, Ukraine is also making good progress with its “complicated process” of internal reforms, says Piechota, adding that it’s worth the struggle: Polish businesses are already seeing the positive effects today, he said. As this continues, more Polish companies will take an interest in Ukraine, he suggested.

“Polish-Ukrainian economic cooperation is improving, as evidenced by the impressive results in mutual trade through the past year,” he said. “We cooperate in almost every field of the economy and are developing joint, cross-border projects in priority areas like agriculture, infrastructure, security and energy.”

The numbers speak for themselves: In 2017, total bilateral trade between the two countries reached about $6.2 billion, according to Ukraine’s state statistics agency — a 26.2 percent year-on-year increase compared to 2016.

While the numbers aren’t tallied yet for 2018, Piechota says there’s reason to expect more growth in trade between Poland and Ukraine. Moreover, business ties could deepen further if political relations strengthen and business conditions continue to improve.

“We strongly believe that the potential for our cooperation is still not fully realized,” said Piechota, adding that both countries can do more to progressively develop their economies, establish new trade agreements and be “consistent in the implementation of European standards.”

Investing in each other

Poland has been constantly investing in Ukraine since 1991. After 2005, following Poland’s integration into the EU, capital investments really took off — moving into the hundreds of millions per year, as opposed to the tens of millions.

Today, official figures show that there are about 3,000 businesses registered with Polish capital in Ukraine. Given the improvement of business ties between the two countries and Ukraine’s ever-closer integration with the EU, that’s likely to increase further.

“From the perspective of trade, we see great growth dynamics,” said Andrii Romanchuk, a business lawyer for the Warsaw Legal Group of EUCON and Board Member of the Ukrainian Business Association in Poland.

“The most promising sectors (for bilateral trade and investment) are infrastructure projects, construction, building materials, energy, agriculture, the food industry — and obviously IT,” he said. “There are great prospects for joint business projects for, and in, both countries,” he added.

“There is always the problem of how people adapt to the specifics of doing business in this country,” said Romanchuk. “One of the biggest challenges faced by Ukrainian investors, is one of mentality — they’re beginning to realize that it’s impossible to transfer the rules of doing business in Ukraine to Poland — they simply don’t work here.”

Exporting labour

While Ukrainian capital investments into Poland are still modest, workers from Ukraine make a substantial contribution to the country’s economy through its migrant labour force there.

A recent official study carried out jointly by Ukraine and Poland concluded that over the next two years, about a million more Ukrainian workers will travel to Poland for work, while about two million Ukrainian workers already live and work there.

As the political climate between Warsaw and Kyiv has worsened — the ruling Law and Justice Party in Warsaw are seen by many observers as less supportive of Ukraine — many Ukrainian workers report that they’ve experienced negative attitudes and xenophobia in Poland, but tolerate it for the higher salaries — up to four times more, on average, by some official estimations.

At the same time, according to an official study, 21 percent of Polish employers say they employ Ukrainian workers — compared to only 11 percent at the start of 2018 — and 17 percent say they’re ready and happy to hire more.

That about 4.6 million Ukrainians, or roughly 25 percent of the country’s economically active population, now work abroad — a large portion of them in Poland — is a cause of significant debate and concern in the country. But emigrant workers also send home to Ukraine about $9 billion per year, with a big chunk of that coming from Poland, according to the National Bank of Ukraine.

Jacek Piechota recognizes that there are challenges with regards to the status of Ukrainian workers in Poland, and says that civil society and government is working to find solutions.

“We have a social campaign that’s aimed at combating perceptions about the recruitment of workers from Ukraine,” he said. “But we’re also creating points of contact and a framework for Ukrainian employers and Ukrainians who will perhaps return home when they receive good offers of work.”

Road to improvement

While the Polish-Ukrainian economic relationship is strong, most agree and champion the idea that deeper and more streamlined trade cooperation is possible. Bilateral trade may have grown, but for many $6.2 billion is still not regarded as satisfactory when compared to the sizes of the two countries’ domestic markets.

Suggestions as to how the situation can be improved, as usual, orbit around Ukraine’s lagging process of internal reforms.

“To my mind, Polish investors face the same challenges as do businesses (coming here) from Germany, Austria or Belgium,” says Anna Derevyanko, Director of the European Business Association, or EBA, in Kyiv.

Stifling bureaucracy, a weak justice system and corruption are the chief obstacles to better trade relations between Ukraine and Poland. Legal harmonization with EU norms is seen as the solution.

For Derevyanko and the EBA, a top priority is reforming and streamlining customs regulations, which are currently causing “significant problems” along the lengthy land border between Poland and Ukraine.

“The EBA in western Ukraine has started to receive a number of appeals from the largest companies in the region about the difficulties in crossing the Polish-Ukrainian border,” Derevyanko said.

“There are a number of challenges (in this area) that are affecting honest and transparent business… the situation is having a negative impact on the business climate as a whole,” she said, adding that the EBA plans to lead efforts in reforming customs laws.

Despite the challenges, there is a strong base of optimism for further improvements to Ukrainian-Polish trade relations, as the two countries cement their status as an economic, logistics hub that bridge East and West.

“Ukrainian entrepreneurs are easily adapting to the European business system,” said Piechota, adding that Ukrainian business already has a home in Poland.

“We’re seeing a significant increase in the number of Ukrainians who are bringing their business to Poland… and the improvement of trade conditions between Ukraine and the EU and Ukraine’s implementation of European standards is building a solid foundation for further mutual, economic cooperation.”