Building Business bridges

  • Building  Business  bridges
Issue 12, April 2009.

Leading Danish business consultant Anders Johansen has been active in Lviv region since 2001, and has helped a wide variety of international companies to enter Ukraine. He has witnessed the growth of the international investment community from the inside but believes that there is still a lot that needs to be done to create an investment climate which will prove regionally competitive.

What was it that first attracted you to Lviv?

Danish textile producer JOHA already had factories in Poland and Lithuania and wanted to expand. Ukraine was an attractive option as we were already working with subcontractors not far from Lviv. Costs were rising quite quickly at the time in Poland and Lithuania, so our investors decided to build a new production unit in Novoyavorivsk, where they already enjoyed fruitful cooperation with a Ukrainian company.

What was your initial reaction to the news that you might find yourself posted to Lviv?

Actually I was asked by the owner of JOHA to join him on a trip to Ukraine. At the time I had some free time as I was just back from a six month trip to Venezuela. I was asked to set up the factory, and it was more the business prospects of the project than any particular interest in Ukraine that spurred me on.

What was your first impression of Lviv?

I arrived in Lviv for the first time in March 2001 and felt like I was literally time travelling. The city’s old buildings were very beautiful but looked like no one had carried out any maintenance on them since they had first been built! The roads were terrible and the infrastructure was in such a bad condition that I found it difficult to understand how people could accept it.

How difficult was it to get the project to the operational stage? What were the main obstacles you encountered?

We were well prepared when we actually began production as we had already hired a team of 30 people and had established good relations with the local authorities. I was surprised at the length of time it took to secure all the necessary permits from the authorities, but the experience proved to be a useful insight into how the system works. The biggest surprises were tied to the process of applying for VAT refunds, with our production restricted at one point as a result of liquidity problems tied to missing VAT refunds. Today’s VAT return system, which forces new companies to wait 12 months before they receive their refunds, has done a lot to put potential investors off Ukraine.

What was your impression of last October’s international economic forum, which was hosted in Lviv and billed as an opportunity for potential investors to learn about the market?

We took part in the forum and were left with the impression that it is essentially an exercise for the authorities to showcase themselves. When it comes to practical decision–making, nothing has changed over the past eight years.
However, at least such events show that there is a political will to improve the business environment.

What are your current business focuses and how do you assess the investment climate in today’s Lviv?

J&L supports foreign investors in Ukraine with legal, accounting and tax advice alongside project management services. Most of our customers are producing goods for export to the EU market, covering everything from automotive parts and metals to wood, textiles and IT software. We have actively assisted more than 30 production projects, 12 of which are located in Lviv region. One area where we have built up specialist knowledge is the agricultural sector. Some of the biggest pig farms in Ukraine with up to 30 million euro investments have been advised by J&L. At present we are serving more than 80 corporate foreign clients and are experiencing an increase in demand for administration and bookkeeping services from companies, which are decreasing activity due to the financial crisis and the devaluation of the Ukrainian currency. We are also facing more and more requests for legal services from clients who are facing
official demands for more and more tax payments. At a time when investors are looking for the best possible terms to enter a new market, Ukraine is losing out to rival destinations.

What do you regard as the most attractive areas for investment in Lviv region?

Lviv is a good place to be located if the product you are making is bound for export to the EU. If we look at energy saving and infrastructure, including water supply, heating, electricity and waste recycling, there are a lot of projects which should be of interest for foreign investors who have the necessary know-how and technology. Ukrainian decision makers need to understand that investors will only invest in such future opportunities if they can expect the security to earn a profit. The political and economical situation in Ukraine must change to provide investors a stable and predictable business environment.

How will the global financial crisis impact on the Lviv investment climate?

Hopefully the country’s politicians will use the situation to adopt the right reforms on a lot of issues, which would help Ukraine to become competitive again and regain the initiative from many of its neighbours.

In your opinion what is the single biggest obstacle to a better investment climate in Lviv?

The Political and economical situation in Ukraine remains the biggest obstacle.

What would you suggest to the Lviv city authorities as they seek to attract investment ahead of Euro 2012?

Ukraine has to understand that investors are coming to Lviv to earn money and relatively few would regard a 6 week event in 2012 as a long-term reason to invest. Investors will invest money in Lviv if it is profitable, therefore business conditions are paramount.

When you are relaxing in Lviv, what are your favourite Ukrainian dishes?

I have traveled around the world but in Ukraine I have tried a lot of dishes which I haven’t encountered anywhere else. In my opinion Ukrainian cuisine is highly original, although with many of the country’s national dishes you can feel the influence of Austrian, Polish, Hungarian and other regional culinary traditions.

What is your favorite place in Lviv?

The two places which are most important to me are my office where I meet my colleagues and friends, and my home where my girlfriend and my 2 daughters keep me busy.

Is there anything in particular you miss about your native Denmark?

I really miss golf courses and the sea, where you can relax and obtain energy for the challenges which lie in front of you.