President of the Polish-Ukrainian Chamber of Commerce, former Minister of Economy of Poland Jacek Piechota said in an interview about why entrepreneurs from Eastern Ukraine are actively investing in Poland, the Polish investments in Ukraine and the impact of free trade with the EU for export of Ukrainian goods to Poland.
Mr. Jacek far as we know, after the eastern part of Ukraine captured terrorists, some businessmen from the Donbas began to open offices in Poland. Tell us more about it.
Jacek Piechota: Those who have hitherto led economic activity in eastern Ukraine, in Lugansk, Donetsk or in the Crimea, now in a very difficult situation. They are looking for a place where one could move its operations and where one could invest. I think that Poland is their most friendly market owing to cultural proximity, linguistic closeness, understanding of Polish realities.
But for businessmen from eastern Ukraine this market could become Russia: there Language, and territorial and mental intimacy. Why do people, often for closer cooperation with Russia and the Customs Union is choosing Poland and the European Union?
Jacek Piechota: Why do not they go to Russia? I think the answer must be sought in the economic sphere, the prospects for development.
The European Union, despite the internal crisis is political organism that develops most dynamically. This great prospects. Entry into Poland means access to the 500 millionth consumer market around the European Union, and this is the attractive magnet.
Poland experienced an influx of foreign investment, as our membership perspective became apparent. Anyone who invested in Poland, knew that they could sell without restrictions on the market of the European Union. And Ukraine is now in such a critical moment.
We estimate the Ukraine as a corrupt country, as a country with a poor entrepreneurs regulation, as a country with an unfavorable tax system. But we also know that soon everything will move towards the transition to a regulation that is in the EU. At least I hope so.
If Ukraine will approach to regulation, which is in the EU, the situation will be more favorable for entrepreneurs. Those refugees from Donetsk or Lugansk already want to be in Europe, because if you choose, then choose the European Union, not western or central Ukraine.
They were against the EU because they thought could be this close to Russian regulations, in such a system, which has schedules, position, access to someone rather than economic reasons influence the decision about whether to do business. What can I say … So for those who are sitting there, in the east, the Russian climate was better. And when it is to decide on where to start from scratch, with no schedules or positions at the local level, the European Union is the best place for investment than Russia.
But will these businesses competitive in the Polish market and the EU market? Will they be able to work under different rules, given that Ukraine business operating under corruption? Do they bring elements of corruption in Poland?
Jacek Piechota, We are not afraid, because fighting corruption is efficient. The truth is that there is no country in which there would be no corruption issue only in its level.
We already have so transparent regulation is so transparent mechanisms so rapidly acting anti-corruption system, without fear that such corrupt practice shall be offered in Poland. Do they cope depends on whether they can find good partners in Poland, hire a good staff, and – if this Ukrainian capital or capital that comes from other areas, is of secondary importance. In our legal system, economic system, we do not distinguish, in whose hands the property, so it all depends on the ability to find good shots and generally find myself in Polish realities. I think the chances they have.
Tell me more, which sectors are investing Polish businessmen from East Ukraine? Give some example.
Jacek Piechota: An example of a firm that is now in Poland actively promotes its activities, seeking development opportunities are Ukrainian Plant. Frunze, who works in the sector and has been a performer to “Gazprom” in many markets, but “Gazprom” stripped of his contract. Now the plant is looking for its place in Europe and, of course, that it began with presence in Poland.
Tell me about how much investment we talking about?
Jacek Piechota: We do not conduct such calculations. Ukrainian firms do strange situation because we still had to deal with investment “Industrial Union of Donbass”, which was once controlled by Ukrainian and is now under the control of the Russians. Thus, the Ukrainian entity that invests in Poland, but is under the control of the Russian capital.
In addition, some Ukrainian companies investing in Poland through foreign markets, particularly through Cyprus. So already established Ukrainian system. It rightly largest investor in Ukraine are Cyprus. It is clear that it is the reinvestment of Ukrainian capital.
Unfortunately, this problem still exists in Ukraine – regulation that does not contribute even Ukrainian investments in Ukraine. Part of Polish investors invest in Ukraine through Cyprus. I think it is a great challenge for the Ukrainian government and parliament as soon as possible to create an enabling regulation for investors to not have to flee the capital of Ukraine.
What is today the volume of Polish investments in Ukraine and Ukrainian investments in Poland?
Jacek Piechota: Polish investments in Ukraine is about $ 900 million. As Ukrainian investments in Poland, there is a problem with the way they count, because if we consider investing through Cyprus, if we assume that investment “Industrial Union of Donbass”, it says something about the same amount. If we talk about investments directly from Ukraine, it is a total of tens of millions of dollars.
What are the trends in the last year?
Jacek Piechota, over the past two years, there is a reduction of direct investment from abroad in Ukraine because of the situation here because of threats, including through the annexation of the Crimea.
In recent years, no new investments from Poland to Ukraine. I must honestly say that Polish investors are waiting for the tipping point when you can say that the choice of Ukrainian society, the Government and the Parliament are beginning to put into practice. In the meantime, we are dealing with promises of reform programs, rather than to specific reforms.
Please tell me as the abolition of export duties for Ukrainian goods affected the trade turnover between Ukraine and Poland?
Jacek Piechota: The FTA is, in fact, the opening of borders for goods. Unfortunately, the effect of the free trade zone was delayed until 2015 because of the economic situation in Ukraine, relations with Russia, the dependence on the Russian market. Instead, the European Union has decided to unilaterally abolish duties for Ukrainian goods and open borders for goods from Ukraine. Over the last 8 months of Polish exports in Ukraine fell by about 20-plus percent. In this recently risen Ukrainian exports to Poland. Opening borders to Ukrainian goods have impact on Ukrainian exports to Poland.
One of the reasons why the fallen Polish exports to Ukraine is hryvnia devaluation. Polish goods are no longer attractive in Ukraine, as a rose. This also applies to cross-border trafficking, because our goods after the Ukrainian hryvnia devaluation are much more expensive. But for us to Ukrainian goods become cheaper.