What help Ukrainian entrepreneurs need to export more

Analytics

What help Ukrainian entrepreneurs need to export more

21.09.2021 Analytics

Exports of goods accounts for a third of Ukraine’s GDP.But we sell primarily raw materials abroad. It is a marker of underdeveloped countries and a path that does not contribute to economic development.

Our state’s strategic task is to increase the exports of high-tech goods with high added value: that is, not just to grow conventional grain for sale but to produce complex products those abroad will want to buy. Instead, so far the share of high-tech exports of Ukraine is only declining – from 17 % to 4.9 % in 4 years.

What inhibits the export development

According to the official data, last year, Ukrainian entrepreneurs exported goods worth $5 billion less than the year before. Exports of metallurgy decreased by 12 %, that of clothing, footwear, and textiles by 9 %.

Of course, one of the reasons was the global pandemic which complicated the process of international relations at all levels and in all industries. But to say that the development of Ukrainian exports is blocked only by COVID would be wrong: there are a number of other problems. That is why only the most resilient entrepreneurs are engaged in the supply of goods abroad.

Recently, the Export and Investment Support Committee of the Kyiv Chamber of Commerce and Industry held a survey among Ukrainian exporters to identify their sore spots. The survey involved 124 export companies from various industries: from mechanical engineering and energy to light, food, and chemical industries. Almost half of them have been exporting for more than 10 years. These are companies that export to the EU, the Eurasian Economic Union, the United States, as well as Africa and Asia.

Entrepreneurs were asked two key questions: what problems prevented them from exporting more and how they could be helped. Among the obstacles in the first place is the difficulty of obtaining permits for export and customs procedures.

‘Also, according to the survey, many exporters lack information and knowledge. There is still no “single window” in Ukraine where an entrepreneur who wants to sell their products abroad can turn to on any questions,’ says Viktor Shevchenko, chairman of the Committee for Export and Investment Support of KTPP and co-owner of the logistics company ZAMMLER.

According to him, there are too many structures in the country that are somehow related to exports, and this confuses business owners. Hence the ignorance even of those existing tools that could simplify the exporters’ work.

‘A few months ago, we held a webinar on customs clearance for exporters and realised that for many of them, the existence of an e-office was a revelation. They just didn’t know about that possibility’, explains Viktor Shevchenko.

Other problems mentioned in the surveyed companies are the lack of practical assistance from export-promoting institutions and organisations. For example, they could help with networking and establishing contact with potentially interesting companies – in Ukraine and abroad. Finding partners and starting cooperating with them is one of the sore points of Ukrainian exporters. There are organisations that could help with this issue, but not all exporters know about them, and often, the services of such organisations cost a lot.

Other obstacles voiced by exporters include high duty rates in importing countries, unfavourable currency regulation, non-refund of VAT, and trivial ignorance of foreign languages by entrepreneurs impeding effective negotiations with a foreign company and finding the necessary information.

How the state can help exporters

When asked what support is needed to revive exports, entrepreneurs agree that the problem of lack of information should be addressed first and foremost. In particular, it is necessary to create a single portal that would accumulate the necessary materials in one place so that all stakeholders can get them for free. Such a portal was launched in test mode within the Diia platform, but it should be improved.

What support is needed to carry out export activities

  • Jointly mutually beneficial activity with KTPP and representatives abroad, assistance in establishing relations with economic departments of Ukrainian foreign diplomatic missions (25 responses: 20 %)
  • Search for partners in target markets (25 responses: 20 %)
  • Analytical information on possible target markets (20 responses: 18 %)
  • Information support on existing opportunities to support exporters (15 responses: 12 %)
  • Education and training on the foreign economic activity implementation (10 responses: 10 %)
  • Organisation of B2B meetings (8 responses: 5 %)
  • Experience exchange (8 responses: 5 %)
  • Simplification of permitting procedures (5 responses: 5 %)
  • Assistance in obtaining an examination of KTSKBA products (5 responses: 5 %)
  • All options (3 responses: 1 %)

The experience exchange is also important. So that exporters can get acquainted not only with the theory but also receive practical help directly from those who have already gone through all the processes. There is a lack of analytical information about possible target markets and their specifics.

Have you used the services of structures and organisations aimed at supporting exporters?

  • No: 60 %
  • Yes: 40 %
  • 1 response: have used, but is not satisfied with the result

Organisations that assist/assisted in carrying out export activities for the last 2 years

  • TPP, KTPP – 11
  • Export Promotion Office – 4
  • REI at the Ministry of Foreign Affairs – 3
  • European Enterprise Network (EEN)
  • CUTIS – 2
  • Embassies of Ukraine abroad – 2
  • EBRR – 1
  • Ukrspecexport – 1
  • LLC Fihe Ukraina – 1

‘The Foreign Ministry, with its network of embassies and diplomatic missions, is a gateway abroad for our exporters,’ said Dmytro Senik, Ukraine’s Deputy Foreign Minister (CDTO).

According to Dmytro Senik, the Ministry of Foreign Affairs, as part of the Council of Exporters and Investors, regularly organises business meetings with Ukrainian ambassadors to various countries to inform entrepreneurs about the specifics of trade in these countries.

One of the key priorities of the Ministry of Foreign Affairs is to intensify cooperation with African countries to promote exports. The ministry is currently collecting commercial proposals and creating a calendar of contacts with the African party. All Ukrainian entrepreneurs who are interested in exporting goods to the African market can join this process.

‘Our embassies are ready to act proactively, applying an individual approach to each company that meets the minimum requirements of the participant. All you need to do is have presentation materials about the company in English or another foreign language and indicate the contacts of the company manager, whom an interested foreign partner can contact and discuss more specific things with,’ says Dmytro Senik.

Last year, KPIs (Key Performance Indicators) were set for foreign diplomatic missions of Ukraine (FDMs) on economic performance. The embassies have already reported on the work in that direction in the first half of the year, and the Ministry of Foreign Affairs should analyse those reports to understand how to make FDMs the most effective tool for export development. Also, they develop for diplomats a special system of training in the economic field. The quality of interaction between embassies and business will be assessed particularly through feedback; for this, entrepreneurs who have dealt with Ukrainian diplomatic missions can fill a Google form, a link to which is available on the websites of the Ministry of Foreign Affairs and the Council of Exporters.

Among other types of support mentioned by the survey participants is the need for education and training on foreign economic activity. Many entrepreneurs who would like to scale their companies and engage in exports lack such knowledge.

The state could also help exporters financially. For example, to pay for their participation in international exhibitions where manufacturers represent Ukraine. After all, not all medium and small entrepreneurs can afford such costs.

One of the tools for financial assistance to exporters is the Export Credit Agency (ECA). It is an organisation that insures exporters against possible risks, provides information, and seeks opportunities to partially offset the interest rate on export credits. Currently, the Ministry of Economy is completing the recapitalisation of the Export Credit Agency to UAH 2 billion and restarting its activities. The Agency will work to support the entry of Ukrainian goods into new and high-risk markets.

The wishes of exporters should be taken into account when updating the Export Strategy of Ukraine. This document, which is currently being revised and supplemented, should set out the directions for the development of Ukraine’s international trade and support for export-oriented enterprises for the next 5 years, starting in 2022. You can send your suggestions on an updated Export Strategy via the link.

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