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Partner, International Legal Center EUCON (Poland)
Why do Ukrainians Choose Poland as a Business Immigration Destination?
In 2014 the history of Ukraine changed drastically. The crisis over this country brought back not only the illusion but the reality of war. That’s the turning point when Ukrainian business that historically and geographically was greatly oriented towards trading with Russia was suddenly forced to look for new trade and development directions.
The Ukraine–European Union Association Agreement, signed on 21 March, 2014, was treated excitedly by Ukrainians, and as a huge opportunity that had finally appeared. All of a sudden over 500 million citizens of the European Union started to be much closer as a trading partner, opening up absolutely new horizons.
2014 and 2015 were years when business expansion was also supported with hotheaded decisions in most cases without any long decision-making process or in-depth analysis of various factors, Ukrainian entrepreneurs were ready to leave the country in order to prepare the ground to build their business abroad, often planning to go with their whole family.
One of the most favorable destinations was Poland, as it was also dictated by decisions of a lot of worldwide companies that decided to invest in this well developing country over the last 10 years
Firstly, Poland’s convenient geographical location, which was by Ukrainians metaphorically seen as a bridge between Ukraine and other European countries. In addition, an easy accessible market to over 38 million people but and as mentioned before, the entire EU market with over 500 million potential customers beyond. Another advantage comes from Poland’s participation in different global organizations like the European Union, United Nations, and NATO (especially, which was a reason for the defense industry).
Moreover, the economy of Poland was not as affected by the global crisis, and has even strengthened its positions. This was due to internal turbulence, which was the reason Ukrainians took into account, as stability for them is in great demand.
Furthermore, Poland significantly improved its infrastructure, particularly the road and rail transportation environment (thanks to EU funds, that is often bat-eyed by Poles). Economic growth in 2016 was 2.8% and GDP per capita growth at the level of 70% of the EU average. According to Bloomberg’s rankings in 2017, Poland is in 22nd place in the ratings of the most innovative countries in the world. The ranking was based on six innovation factors such as R&D, manufacturing, hi-tech companies, education, research personnel, and patents.
Poland also was one of the key supporters of Ukraine during the conflict with Russia, which created a positive picture in terms of choosing a destination for expansion. Another key reason for coming to Poland was the closely-related language, which is quite easy to learn for Ukrainians and very intuitive (but not in all of the cases because some phrases that seem to be quite similar could have totally different meanings). So that makes the communication and adaptation process much more accessible.
There are also special organizations established by the Polish authorities that are responsible for creating a positive attitude toward new potential investors. The friendly climate for investors and clear legal rules create even more trust in this country. In the report “Doing Business 2017”, Poland stood in 24th place in terms of “Ease of doing business” according to the World Bank.
The special attention of Ukrainian investors was grabbed by other investment incentives, such as tax credits, special economic zones, areas for investments, accessibility of EU funds and so on. There are plenty of institutions that provide advisory services to new investors.
Another significant reason is that in Poland you can find well-qualified employee for a quite reasonable salary (in comparison to other European countries). Moreover, the country already had many educated specialists and many Ukrainians who arrive there continually in search of a stable source of income (according to various statistical sources there are currently between 1 million and 1.5 million Ukrainians in Poland). That was also treated by entrepreneurs as a great opportunity to build their business.
However, we should bear in mind that many Poles had already left and are still leaving the country, mainly for EU countries like Germany and the UK, while Ukrainians barely could substitute that leaving workforce. According to statistics provided by The Ministry of Family, Labor and Social Policy, data from employment offices identify registered unemployment at 6.6% in December 2017, which is pretty low.
A qualified workforce is in great demand by global corporations and Polish and Ukrainian companies doing business in Poland.
As Dmytro Kobzarenko, Production — Director at Zavod Kobzarenko (Ukrainian leading manufacturer of agricultural equipment), said: “Polish investment programs provided a great contribution to the development of Ukrainian producers abroad. An additional advantage was attractive prices for land near big cities. The problem was, unfortunately, a staff issue. Manufacturing industry in Ukraine continues to lose more and more important employees, attracted by higher wages in Poland and other EU countries. The manufacturing sector in Poland also suffers from staffing problems as more and more people of the young generation continue to go to Western countries. We are currently interested in test mode to consider the employment of our workers at subsidiaries in Poland. Such integration reduces the language barrier and keeps important employees at the enterprise”.
Moreover, it was highlighted by other business community representatives, that the Polish authorities work transparently and that was taken as a huge advantage in comparison to the situation present in most cases in Ukraine, though some official agencies were exceptionally bureaucratic (most of the complaints about The Office for Foreigners, were repeatedly the tons of documents that should be submitted and long queues exist to receive residence permits, especially for business owners of newly-arrived companies).
What’s more, on this list last but often not least, parents were looking for a higher education for their children and that’s something Poland could also provide you with, as it’s currently full of public universities and private universities able to deliver a pleasant combination of good quality and surprisingly affordable education.
All of the above-mentioned reasons created favorable conditions in 2015 for the Ukrainian Business Association in Poland to appear. It was set up by 25 Ukrainian investors and supported by the Ukrainian Embassy in Poland headed by the well-recognized diplomat Andrii Deshchytsia.
Most Ukrainian business starts in Poland with so-called “trade houses” at the very beginning, as it helps them to explore a new market, prove their business concept, find differences in conducting business here and compare it to their previous experience. Many entrepreneurs try to apply approaches that used to work in Ukraine or Russia but that do not fit into the framework of the European mindset and it’s integral part for a business project to understand this in order to succeed.
Being present in a new country also plays an essential role in terms of building tight relations with new business partners and customers. Moreover, acquired experience gives them an opportunity to rethink and restructure the strategic development of their companies that already operate in Ukraine.
For some manufacturers, representation in Poland gives an opportunity to supply and serve their production needs with new materials, parts and machines, as usually global and European companies set their offices that cover Ukraine in Russia and communication with Russian divisions in many cases was simply blocked and they refused to supply required parts.
There are also Ukrainian companies that have ambitious plans of setting complete manufacturing capacities in Poland in order to be even closer to their European customers. Some of them are in the process of building their plants and some already operate or have acquired production capacities.
International Legal Center EUCON (with offices in Kyiv and Warsaw), often support manufacturers as a legal and investment advisor. EUCON has been operating as a Law Company on the Polish and Ukrainian cross-border market since 2006 and has partners with deep expertise and broad experience that helps to successfully navigate these types of projects.
Coming back to the Ukrainian Business Association in Poland, it currently represents over 50 companies that work in various sectors of the economy: the service industry, agriculture, goods manufacturing, metal processing, packaging, construction, retail etc. The main goals of establishing the Association were inter alia:
— getting support when entering the EU market through the Republic of Poland;
— lobbying the interests of Ukrainian business in Poland;
— networking and establishing business contacts for boosting development of business;
— protecting business interests at state level in Poland and Ukraine;
— sharing of information between top managers and business owners.
Another interest of the Ukrainian Business Association in Poland is generating new entrepreneurial opportunities and building friendly relations between the business representatives of the two neighboring states. An annual forum like Ukrainian Business Day which is held in Warsaw usually during the spring and Polish Business Day in Kyiv (autumn) began as a platform for developing such relations.
Moreover, since 2014 a series of these events were strongly supported by Government representatives, including institutions like the Ministries of Development, Ministries of Infrastructure, embassies and other authorities of both countries that warmly welcomed such an initiative by the business community despite the political steam that covered the last year of clashes over historical truth.
A nice addition to the aforementioned events is that of the opening of the so-called Ukrainian Business Hub, which should become an integrated office in Warsaw to connect Ukrainian investors in Poland and assist in mutual exchange of experiences. That should be the place where people can solve most of their issues in a new market to ensure rapid growth and avoid common mistakes.
The period of 2016-2018 has continuously demonstrated the great interest of Ukrainians in expanding into Poland and EU countries, though this interest is framed with a more prepared and thought-out decision, which includes deep analysis of the new market and thus has a vital influence on the quality and success of business projects.