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“We’ve suggested to Australian government officials that if you’re taking goods over to Russia for an exhibition or so on, why not, for an hour’s flight, divert to Kiev and expose exporters to other opportunities?”

Barriers

As with many post-Soviet nations, Ukraine has a few challenges in the form of financial and legal infrastructure. This affects business at every level, from property ownership and leaseholding in agribusiness to the unfamiliar legal system based roughly on the Napoleonic code, now under renovation after decades of Soviet influence.

“The court system is still an emerging legal system and you wouldn’t look at it as the most reliable but it is improving,” Tebbutt remarks.

Bureaucracy can also be a problem and, paired with an uncommon foreign language, it can quickly turn into a nightmare for doing business. As a result, many businesses try to take shortcuts through the red tape, making corruption a serious problem. Romaniw thinks this will start to change as businesses lobby the government for better operating conditions.

“There are some good strong businesses in Ukraine that have stood up to the system, that have said ‘we’re not interested in paying bribes, we’re a business’. Some big business people in Ukraine have said to government, ‘get out of the way, we’ll pay our taxes but let us do our thing’.”

Tebbutt agrees that “the sheer volume of paperwork that needs to be done can make things quite slow” but also says the government is committed to reform, making banking and finance improvements, simplifying the tax system and reducing complexity in regulatory requirements. “Under the current government there seems a real desire to tackle some of those challenges,” he notes.

Other barriers may actually be opportunities, says Tebbutt. “One very limiting part of their agricultural sector is their grain storage infrastructure. They grow more than they use and struggle to store it so they have fairly high spoilage rates. Australia can help with this.”

Romaniw proposes that the real problem is the lack of buy-in at government level to promote Ukraine as an attractive market. “Both Ukraine and Australia have dragged their feet. There have been lots of negotiations but nothing ever comes to fruition,” he says. “I’m just talking purely about things like double taxation, which are the sort of norms that people operate under.”

The future

Ukraine is seen as a difficult market when it shouldn’t be, says Romaniw. Like any other potential destination, exporters should do their homework and explore the market, then it’s about building relationships.

“There are good serious business people in Ukraine who want to do business with Australia—why shouldn’t Australia take up that opportunity? A Federation like ours can make the links. While we’re not a business organisation, we certainly have the network.”
Although Ukraine isn’t high on the export radar, it hasn’t fallen by the wayside either. Adomaytis says there is an increasing interest in Ukrainian-Australian relations, with a number of official trade missions initiated by both the Australian and Ukrainian governments as well as chambers of commerce, going both ways.
“It isn’t a market for everyone but for people with the right products or strategy, or a particular interest in the market it can be a successful market,” says Tebbutt.

Case study

Bronx International

While the growing markets of Asia lure many an exporter, doing business in Asia conversely led Bronx International to explore other markets.

“The 1997 Asian crash changed our approach,” explains Rod Sawyers, Bronx’s managing director. “Fortunately we survived and it opened our eyes to the global market.”

Bronx is the manufacturer’s manufacturer: it provides coil processing solutions for metal, such as galvanisation, levelling and colour coating, which allow its customers to produce construction materials.

“Emerging markets are obvious markets because that’s where housing is improving,” says Sawyers.

Bronx began doing business in Asia with the company now known as BlueScope Steel before the crash prompted a search for additional markets in Africa and Central America. Today it also operates in South America, Eastern Europe and the Commonwealth of Independent States (CIS—formerly the USSR), including Ukraine.

It was Russia that acted as a gateway into the Ukrainian market. After Bronx completed some projects with a Russian company, one of the directors partnered with a Ukrainian entrepreneur, says Sawyers: “Basically he wanted to do what had been done in Russia and recommended Bronx.”

While Ukraine is considered an emerging market, Sawyers says it is far more advanced than many others in the same category. However, he admits challenges exist in the level of bureaucracy required to do business there and exporters will need to learn to make paperwork more efficient.

You’ll also need patience as Ukraine consolidates its financial and political position, Sawyers advises. He says Bronx was able to do business there only after government credit agency Export Finance and Insurance Corporation provided a loan guarantee for the Ukrainian buyer, as the country’s financial infrastructure is not as robust as Australia’s.

Now, Bronx is serious about the market and the region. “We now have a team in Ukraine responsible for business development in CIS and Russia, which currently provide us with the greatest number of opportunities of any global region,” says Sawyers.

“We see Ukraine as the gateway into Europe so once they get their financial and political position under control, a reference from Ukraine will become more important.”

Rod’s rules:

* Get on the ground. Desk research and talking to the exporters doesn’t prepare you for any given market. You have to get on the ground to understand the conditions.
* Commit. You have to be geared up and prepared to commit. It’s rarely less than two years before you’ll see results.

Risk profile chart

Business Cycle Risk Very high
Currency Risk Very high
Currency Inconvertibility Risk Very high
Systemic Banking Risk Very high
Sovereign Default Risk Very high
Difficulty Enforcing Contracts High
Source: EFIC (www.efic.gov.au)

Ukraine profile

Capital: Kiev
Government: Democratic
Language: Ukrainian (Slavic)
Currency: Hryvnia (UAH)
Tipping custom: Around 10-15 percent for good service.
Visas: Australian citizens require a visa.
Religion: Eastern Orthodox, Catholicism and Judaism
Seasons: Summer is May to September, winter is October to April.
Source: FCm (au.fcm.travel)

Trade links

Australian Federation of Ukrainian Organisations: www.ozeukes.com
Department of Foreign Affairs and Trade: www.dfat.gov.au/geo/ukraine
Embassy of Ukraine: www.mfa.gov.ua/australia
Ukrainian-Australian House: www.uah.org.ua
Ukrainians in South Australia: www.ukraine.com.au (includes business section)

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