Vinnytsia is one of the most dynamic economic regions of Ukraine, having placed first in ease of doing business surveys for the last four years. Boasting famous representative brands including Nemiroff and historic sights including Gorky Park, the region is now a key driver of economic growth across the country. Post-Maidan reforms have opened up several sectors, including agricultural processing, to foreign investment and particularly to trade with the European Union (EU). Valeriy Koroviy, who has led Vinnytsia since 2015, explains how the business climate in the region grew stronger than its neighbors in Ukraine and why he sees much untapped potential for German businesses in the region

Four years ago when President Poroshenko introduced you as Governor of Vinnytsia, he also began implementing reforms aimed at Westernization of the regional economy. What progress has been made on these reforms?

Our region has advanced more in the last four years than in the previous 20. Investments into Ukraine have tripled in the last three years. We have taken the right decisions to improve Vinnytsia’s business environment and, since the 2008 financial crisis, reform consumer markets to make them more Westernized and competitive, based on ensuring a level playing field and attracting investment.

In 2013, 40 percent of Vinnytsia’s business was linked to the Russian Federation. In 2018, just three percent of business went to Russia and much more went to the EU. This is also considering that Vinnytsia’s total exports actually doubled in that time. Our export markets have changed, with the largest now being India, China and the EU. And since the Deep and Comprehensive Free Trade Agreement with the EU entered into force in 2016, exports to the EU from Vinnytsia’s companies have doubled. Meanwhile, gas consumption has decreased by more than 30 percent since 2013 and we have worked to transition to renewable energy while decreasing reliance on Russian gas imports.

The 2017 implementation of the visa-free regime for Ukrainians to the EU opened up the competitive labor market. Many Ukrainian businesses were unable to match European salaries and faced a drain in the national labor force. This forced us to look to foreign investment and economic diversification. We started working to attract investments in sectors like agribusiness, machine building and construction, and persuading companies who rely on cheap labor to raise salaries. As a result, we have seen a big inflow of investment into agribusiness and agricultural processing sectors in which Vinnytsia is the leading region of Ukraine. We are also welcoming popular European companies such as UBC Group, KNESS Group and Head into Vinnytsia.

It is very important for Ukraine to attract such investments and create jobs for highly qualified workers. Ten thousand people work in the region’s IT sector. Donetsk University, a very good national technical university, has opened a campus here. Every year it produces 25,000 graduates, which brings huge potential for the regional labor market.

There is healthy competition between the regions of Ukraine. What are Vinnytsia’s most important selling points?

Regional competition stimulates us to improve. Before the Ukrainian government made good decisions to begin reimbursing taxes and liberalizing exports, exports were dictated by agreements with cartels. These have all been destroyed, which has given big impetus for the development of our export industry and our economy.

For eight years Ukraine had a trade market system with no competition. Farmers and businessmen would not trade even between districts of Ukraine as their product sales were centralized to each region. When I arrived at the Vinnytsia administration, we had months of pension debt because of this system. Once I arrived, the budget stabilized and authorities started to redistribute pensions. After we had begun to create a competitive environment, companies then arrived to work in the region.

For the last four years, Vinnytsia city has been recognized as having the most comfortable business environment in Ukraine, according to an international survey based on reports from businesspeople in Ukraine and collected by the International Republican Institute. We have learned from the analytics that our results are founded upon high quality of life, good infrastructure and belief in business success. Rights and protection of business owners are assured in Vinnytsia, contrary to the perception of Ukraine as a whole. In our region, we are also strong at providing administrative services, which is fundamental for starting a business. And as businesses look for good living standards, we have invested in quality transport, hospitals, schools, and reconstructing our international airport at the cost of €32 billion.

Maintaining this comfortable business environment is our main task as a regional authority. One foreign company is currently investing €600 million to build a corn processing plant because they feel confident in the region’s business environment, infrastructure and availability of qualified human resources, as well as comfort and living standards. In the last four years, we have seen great changes in sectors such as agriculture, with companies like ViOil and MHP becoming huge producers and exporters. Economic, social and environmental standards have increased, leading MHP to invest in sustainable production near Vinnytsia.

Companies and business representatives are assured that as Governor, I understand business and economics and learn from success stories. German capital in Vinnytsia provides some of these success stories – for example, the Hlukhivtsi Kaolin Plant, which is operated by a subsidiary of German company Quarzwerke Minerals.

There is healthy competition between the regions of Ukraine. What are Vinnytsia’s most important selling points?

Regional competition stimulates us to improve. Before the Ukrainian government made good decisions to begin reimbursing taxes and liberalizing exports, exports were dictated by agreements with cartels. These have all been destroyed, which has given big impetus for the development of our export industry and our economy.

For eight years Ukraine had a trade market system with no competition. Farmers and businessmen would not trade even between districts of Ukraine as their product sales were centralized to each region. When I arrived at the Vinnytsia administration, we had months of pension debt because of this system. Once I arrived, the budget stabilized and authorities started to redistribute pensions. After we had begun to create a competitive environment, companies then arrived to work in the region.

For the last four years, Vinnytsia city has been recognized as having the most comfortable business environment in Ukraine, according to an international survey based on reports from businesspeople in Ukraine and collected by the International Republican Institute. We have learned from the analytics that our results are founded upon high quality of life, good infrastructure and belief in business success. Rights and protection of business owners are assured in Vinnytsia, contrary to the perception of Ukraine as a whole. In our region, we are also strong at providing administrative services, which is fundamental for starting a business. And as businesses look for good living standards, we have invested in quality transport, hospitals, schools, and reconstructing our international airport at the cost of €32 billion.

Maintaining this comfortable business environment is our main task as a regional authority. One foreign company is currently investing €600 million to build a corn processing plant because they feel confident in the region’s business environment, infrastructure and availability of qualified human resources, as well as comfort and living standards. In the last four years, we have seen great changes in sectors such as agriculture, with companies like ViOil and MHP becoming huge producers and exporters. Economic, social and environmental standards have increased, leading MHP to invest in sustainable production near Vinnytsia.

Companies and business representatives are assured that as Governor, I understand business and economics and learn from success stories. German capital in Vinnytsia provides some of these success stories – for example, the Hlukhivtsi Kaolin Plant, which is operated by a subsidiary of German company Quarzwerke Minerals.

How do you plan to attract more German investment to the region?

We first started to work with German investors on two successful projects in Koziatyn Municipality. One was the Hlukhivtsi plant, which draws upon Ukraine’s expertise in kaolin processing dating back to the Soviet era. The other is the most successful meat production company in Ukraine. In addition, last year the Extraordinary Plenipotentiary Ambassador of Germany to Ukraine visited Vinnytsia because a number of German banks have provided financial support to a gas distribution pump construction project. We have grants available and great potential for further development that can involve German financiers or businesses, in particular for modern equipment manufacture and production. I would like for German machine builders to invest in our region.

Bilateral trade between Ukraine and Germany rose 23 percent in 2017 to €7.9 billion. Yet Vinnytsia only exports eight percent of its production to Germany. What is the unrealized potential here?

If you look pragmatically at Vinnytsia region, our exports to Germany are mostly oil and fat products. Imports from Germany to Vinnytsia predominantly constitute technically advanced modern equipment. Yet in Vinnytsia we have doubled our agricultural potential in three years. Average salaries in Vinnytsia after the crash are still low so we have highly qualified, low-cost human resources, which can attract investment from, and stimulate exports to, Germany. For this reason, I think we have significant untapped potential here and German companies should look to Vinnytsia with more interest.

German businesses tend to be risk-averse and I often advise that they will lose out to other competitors if they spend too long thinking over entering our market. We are a nation of 42 million – a large consumer market. Our country has not yet been capitalized. Here lies the potential for stimulating business activity. Ukraine needs the investment to develop its territory and conduct business. But the EU is not just important for Ukraine. With a qualified workforce and a strategic geographical position between Asia and Europe, Ukraine is also very important to stimulating growth in Europe.

Germans associate a perception of risk with Ukraine. What would you tell investors and politicians in Germany of the risks associated with doing business in Ukraine?

I would invite them to see and feel Ukraine. In the past five years, Ukraine has done a lot to improve the condition of its military and defense potential, to pivot its trade relationships and exports toward the EU, and to gain more dependence from Russian gas. These represent changes in our collective consciousness. As a result, I see the investments we attract and who works with them. I see Ukrainians qualified to work with modern equipment. I see opportunities. Since the visa-free regime was introduced, I have seen the labor force transition. And I see the right decisions the government has taken to improve the business environment. German companies are very careful, but Ukraine is open to new opportunities. Those companies who have come to Ukraine are developing their businesses and activity.

Of course, we also see the risks, but we will continue moving forward. We have come through a very difficult time and feel like we are in the process of overcoming major challenges. Now we need to look to the future and develop our country, rather than just defend it. We are spurred on by the thought of our children being able to live happy lives here.

We appreciate the support and friendship of Chancellor Merkel, of Germany and of our EU allies, particularly at the time of Euromaidan in 2013. Since then, dynamic investment growth has reached 41 percent, construction investment is up 43 percent and structural investment has grown 70 percent. Salaries increased 30 percent last year. We are on the right path.