Since Roman Matys became Head of Investments for the Lviv Regional State Administration in 2015, the Western Ukrainian region has created at least 25,000 new jobs and a more competitive labor market. That number, however, is expected to grow exponentially as the region becomes increasingly competitive in terms of business process outsourcing. Here, Matys describes what’s behind the surge of employment and what makes Lviv a particularly attractive region for German investment
What have been the foreign investment trends in the Lviv region since 2015?
Prior to that, Ukraine had a regime that was not particularly interested in business. They had little regard for making the environment more comfortable or removing barriers. There were barriers associated with constant corruption risks and large-scale bureaucracy, which businesses do not like. Within these conditions, only those companies that were fine with being in such an environment invested in the region, and we cannot say that there were a lot of modern foreign investors among them. However, foreign businesses had invested mostly in agrarian business, related to the export of grain and other raw materials grown in the soil. Against this backdrop, there was an understanding that the situation should be changed and changed quickly. Among the problems that needed to be solved were to create employment and increase the level of wages. These two issues became the main Key Performance Indicator (KPI) in my work.
Since the end of 2015 and up until now, we have been actively working within the framework of the strategy that I developed called: “Lviv region- the factory of Europe.” The main task was, in a prompt manner, to involve companies associated with mass production in order to create 10,000 new jobs in the manufacturing industry. According to the results of 2016-2017 and part of 2018, more than 180 factories that were run with our participation managed to create about 25,000 new positions. As a result of more employment, a more competitive labor market emerged and Ukrainians were able to start receiving adequate remuneration compared to previous periods, although it still remains quite competitive compared to EU countries. But it is about the interest of the state, region, local authorities and the citizens of Ukraine. With all of this, we do not forget about the interests of business. We continue to work to provide a comfortable business environment and to protect the interests of every company that operates in the region.
We have also created a department to support investment projects. Its task is to solve any practical problems or assignments on the part of investors. This department was created because I, as a person who came to the authorities from the business community, clearly understood that the best reviews and recommendations regarding the investment potential of the region can only be given by the businesses that work here. We are able to achieve such endorsements thanks to around-the-clock work in this department, which is the so-called one-stop-shop for investors.
What are your targets for FDI in the upcoming years?
Today, after providing the market with offers for unskilled labor, we are changing our strategy and focusing on attracting more technological semi-automatic or fully automated production. The labor market of Lviv region can offer a sufficient number of qualified personnel who have grown as professionals in existing enterprises and need further development. The city of Lviv, which has a lot of young people, where universities have almost 125,000 students, and where 25,000 specialists graduate every year is certainly a perfect location for the development of the business process outsourcing (BPO) industry. In this context, we see prospects for creating about 100,000 new jobs in BPO and related industries in the next five to eight years.
Are there any recent FDI success stories in Lviv that you would like to highlight, particularly about German investment?
As already mentioned, more than 180 new productions in the Lviv region were launched through 2018 with our direct participation. Some of them are German investments. Talking about these investments, we would like to draw attention to the fact that some components for the production of automobile brands such as Audi, BMW, Mercedes and Maybach are produced in the Lviv region. Moreover, the companies that have been present in the market of Lviv region for the last three years not only opened new productions but also doubled or even tripled them. Some of them have plans to continue to do so going into the future. The automotive industry in the Lviv region is beginning to dominate more and more, and in most cases, these products for German companies are made with the help of German investments. These companies employ anywhere between 1,500 and 5,000 people.
The fact that we have a large number of universities that can provide the industry with qualified engineers helps explain the reasons behind the investments. These experts are able to comply with the requirements of the business and will cost the companies significantly less than their European counterparts. Another reason why companies choose our region is due to the extremely operational work of enterprises engaged in the production. Our geographical location allows us to supply products to the German market in one day, and to the Portuguese markets in a maximum of three days. German businesses also favor the Lviv region because of the direct air connections between Lviv and German cities such as Munich or Berlin. If necessary, German management can come to Lviv within a day since the flight from Lviv to Munich takes one hour and twenty minutes.
Much of the investment into the Lviv region has been in manufacturing, but you have said you would like to see more investment that creates higher skilled jobs in industries such as BPO, IT or renewable energy. What is the potential for investment in those sectors?
There are about 30,000 specialists from Lviv who work in the IT industry, which best illustrates the prospects for the development of the industry of outsourcing business processes, since it is only part of the entire BPO industry. Taking into account the existing human potential and positive experience of the IT industry development, I see an opportunity to develop an extremely dynamic BPO industry in the coming years. We expect to create at least 5,000 new positions in that industry every year. We have the potential because of our large student population and the fact that more than 60 percent of those who are currently unemployed have higher education. These people and their talent will give the industry a big advantage. Their knowledge and experience are a good starting point because companies aren’t required to teach them basic things, only to adjust their knowledge and skills to the needs of their own company. Thus, I understand that this approach and strategy can work, just as it worked in the manufacturing industry. We can quickly provide all the necessary employees. In the end, focusing on the needs of the market and offering the opportunities that business needs have always been the basis of our strategies and decisions. We do not waste time telling a business about how they have to do business.
What makes the Lviv region stand out from other regions in Ukraine for German investors?
We are similar. The inhabitants of the Western part of Ukraine, especially Lviv, have many similarities with the inhabitants of most European countries. I’m not going to say that we are identical, but we are very similar. We have a similar mentality, values, cultures, and it is not surprising because most of the Western part of Ukraine and Lviv region were part of the Austro-Hungarian Empire. Therefore, in my opinion, it is much easier for European business, including Germans, to build communication and trust with the residents of our region. We are already qualified as specialists and ready to improve. Besides that, we’re very close – just a short flight away; we are competitive, both in terms of quality and cost; and we have a thirst for knowledge and discoveries, after all, we have always identified ourselves as a part of Europe.
Your office is responsible for helping businesses cooperate with regional state bodies and navigate through state bureaucracy. What are some specific ways you can help assist businesses already on the ground?
The main pillar of our department’s work is to be open and ready to provide answers to any question – anything from which restaurants to visit in Lviv to writing a roadmap for developing your business in our region. We are a reliable and experienced partner when it comes to dialogue with officials and institutions. We are on the investor’s side throughout the process and act as a barrier against corruption, bureaucracy (acting as a guard against the creation of artificial bureaucratic obstacles), and we are a catalyst for making the processes move as quickly as possible. But we don’t just follow a manual for attracting investment – if the problem is systemic, we are the main initiators and lobbyists for legislative changes.
I would like to emphasize that investors can contact us with any question and count on our full support. It was this approach that helped us to get the results that I mentioned earlier. I am 99.99 percent sure that the majority of businesses in the Lviv region will give mostly positive recommendations about the quality of the business environment here and the quality of the work of our investment department.