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Austrian investors attracted by “Made in Ukraine” brand values –

Competitive costs and a highly skilled workforce among factors attracting Austrian investors to Ukraine

Kyiv and Vienna-based investment consultant Sven Henniger currently advises international investors looking to develop business in Ukraine. Mr. Henniger can call upon years of prior experience as an executive in Kyiv, providing him with unique insight into the key issues on both the sides of the bilateral business bridge connecting Austria and Ukraine. He spoke to Business Ukraine magazine about the future of Austrian investment in the country and explained why he believes the “Made in Ukraine” brand can capture Viennese imaginations.

What are the most interesting segments of the Ukrainian economy for Austrian investors today?

That is a good question but I would be hesitant about narrowing the scope of Ukraine’s investment potential too much. Every investment is unique and I think it is crucial to explore the specific business model each individual investor has in mind for Ukraine. Not all will be a good fit for the current Ukrainian market and business environment, while different approaches may produce different results in the same sector. Having said that, in broad terms I see agriculture, IT, and production outsourcing as the main drivers of all international investment into Ukraine. A combination of competitive labor costs and the availability of highly skilled employees also makes Ukraine attractive to Austrians looking to outsource R&D or administrative functions. The appeal of production outsourcing is particularly strong in the west of the country close to the EU border, where many Austrian companies have established a presence. This trend looks set to gain momentum in the coming years. I am aware of a couple of companies that have already developed plans along these lines. They are now waiting for the right moment to enter the Ukrainian market.

What should Ukrainian businesses be doing to make themselves more attractive to potential Austrian investors?

The main concerns for all foreign investors, including Austrians, are weak rule of law, excessive bureaucracy, and pervasive corruption. Tackling these issues is a national priority and it is the responsibility of every single company operating in Ukraine to contribute to this process. Individual Ukrainian businesses looking to attract Austrian merger and acquisition interest need to focus on transparency and compliance. If they offer products or services, these must be globally competitive in terms of both pricing and quality. There are also differences in the business cultures of the two countries that can sometimes create obstacles to investment. The Austrian approach to doing business is very much results oriented, whereas in Ukraine the emphasis is still often on relationships.

How do Austrians perceive the “Made in Ukraine” brand?

In order to explain my opinion on this issue, I will need to take a few steps back in time and offer a broader perspective. The “Made in Germany” branding (I would place “Made in Austria” on the same level) was first introduced by Great Britain in the nineteenth century in order to protect domestic markets from what the British then saw as cheap and inferior imported German goods. Today, the global prestige enjoyed by German and Austrian manufacturing of all kinds makes this strategy seem retrospectively absurd.

I believe the “Made in Ukraine” brand has similar possibilities to become associated with excellence. In certain sectors, this is already the case. For example, the world’s largest transport aircraft, the Antonov An-225, is “Made in Ukraine”, as are many other world class Antonov aircraft. The Ukrainian IT sector is another example where “Made in Ukraine” has become synonymous with quality and competitiveness. The world’s leading IT outsourcing players have long understood the combination of talent and cost effectiveness available in Ukraine, with many establishing representative offices and R&D centers in the country. Austrian investors know this. Elsewhere in the tech sector, hundreds of startups with great global potential lack in the most cases only financial support.

For many Austrians, “Made in Ukraine” also means impressive agricultural output. This is no longer limited to raw crops alone, with Ukrainian companies increasingly investing in complex production lines to add value and produce higher margins. Austrian companies can play a role in this process by providing state-of-the-art technologies and financial support. Ukraine’s reputation as one of the world’s most fertile regions can help to attract investment and is well worth promoting internationally.

Another area where perceptions of the “Made in Ukraine” brand are rapidly improving is the fashion industry. Ukrainian designers have enjoyed considerable international exposure and acclaim in recent years, while fashion labels such as Arefeva have established a street-level reputation in Austria and other European markets. This sort of exposure can do wonders for the visibility and status of “Brand Ukraine”.

How has the ongoing conflict with Russia affected perceptions of Ukraine among Austrian investors?

While I am acutely aware of the ongoing tragedy in the Donbas region, I think it is also important to recognize that the conflict is regional in character and unlikely to move beyond the current frontlines. This helps to provide a much-needed sense of perspective to the issue. Nevertheless, the conflict has clearly had a significant impact on the country as a whole and on the Ukrainian investment climate in particular. Country risk is one of the main issues facing foreign investors anywhere in the world, and armed conflict is the ultimate risk factor. The specific impact of the conflict has varied from industry to industry but it is inevitably a consideration for all Austrians considering Ukraine as a potential future investment destination. Having said that, the conflict is no longer as prominent in the Austrian media as it was in 2014 or 2015. It would now be good to see more Ukrainian success stories promoted in the international media as a way to counter lingering and inaccurate perceptions of Ukraine as a war-torn country.

About the author: Sven Henniger (s.henniger@hwc.com.ua) is a Partner at Kyiv and Vienna-based Henniger Winkelmann Consulting

The interview with our partner Sven Henniger on topic Austrian investors attracted by “Made in Ukraine” brand values you can read here