Alef Corporation is a major player in Ukraine, with the corporation’s interests now represented in many of the most promising sectors of the country’s economy. Evolving over several decades, its synergistic businesses now work in manufacturing, construction, real estate and agribusiness. It has experience both in working within Ukraine and with foreign partners and is interested in finding ways to work alongside German companies to help them take advantage of the many benefits that come with doing business in Ukraine. Here, the corporation’s co-founder explains some of the Alef’s recent developments, the importance of local expertise, and why he sees Ukraine as the next European manufacturing hub
Since you and your business partner founded Alef Corporation, it has grown into the largest private holding company in Dnipropetrovsk region. Could you tell me more about the company’s development?
Our company has been developing since 1998. We’re developing in an evolutionary way, trying to develop our businesses step by step. We prefer to think ahead and never jump in head first. We have quite a few business directions and we’re developing in each. This diversity provides us with stability. As they say, you have to put your eggs in different baskets because, from time to time, crises happen in different economic sectors. Another guiding principle of the company is that the stakeholders are the managers. My partners and I work 24/7 and are personally involved in the whole decision-making process. The directions of our businesses have also been connected to foreign investments. We not only have a desire to do this going forward, but also a lot of experience already. For instance, in the beginning of the 2000s and end of 1990s, we developed a manufacturing and distributing company for synthetic washing materials alongside Turkish partners. After a little bit of time, we became leaders in the Ukrainian market thanks to our modern technology, high quality and quality control. Also, we really thought through our marketing and the system of distribution was fine-tuned. The only competitor in the Ukraine market was Procter & Gamble. After we became market leaders, Procter & Gamble made us an offer that we couldn’t refuse and we sold them our company. As a result, we received assets that we were able to invest in other projects. I am sure that our company could also work in a successful partnership for German interests in Ukraine. We were also quite interested in the real estate market and investing in the manufacturing of construction products. So, after we received the money from the sale, we started to invest the money in manufacturing businesses. We began to manufacture plastics, and that company is now the leader in the national market, and quite a large volume of what we manufacture is exported around the world. We also have a very good distribution chain. The next project was concrete manufacturing. We have installed extremely modern high-tech equipment. Currently, we are one of the manufacturing leaders in that sector in Ukraine as well. This product has no real export perspective because the price is low and transport costs make it unviable. The next project that we had was building the manufacturing plant that makes parts for windows and doors. We are the only manufacturer of such items in Ukraine. This is highly technological and extremely innovative. It is also fully autotomized and has incredible export potential. We export much more than we sell in Ukraine.
Where do you export?
We export to more than 20 countries, including Germany and China. In China, we are in a high-quality segment because in the Chinese market, it’s considered a luxury product. This is very different to the German market, but we have our own personal niches in both. The businesses I described to you are all synergetic. For example, we produce and manufacture plastic, so we sell that to the window manufacturer. We often sell two products to the same buyer, both in Ukraine and abroad. We are also in real estate and construction, so we use the products in those industries. Another direction that we have is heavy industry. We have a metallurgical factory, a machine-building factory and a pipe factory.
If a German company is looking to invest in Ukraine, why should they come to you?
It’s a fact that mentality differs in countries around the world. For example, we’ve been working with China for many years. We import a huge amount of products from there, and now we are also exporting there. However, I still do not understand Chinese, and frequently we just don’t understand each other. It’s not because they’re bad and I’m good – nothing like that. It just comes down to cultural differences and communication. The same thing is applicable to any market in any country. We also operate a business with our Turkish partners. Their mentality is similar to ours, although still different. We’ve been working together for 20 years and still, from time to time, issues arise and, of course, we solve them, but there can be misunderstandings. Each culture has its own way of thinking, negotiating, coming to agreements and following through on them. These are all extremely important factors. That’s why all the Western companies that come to Ukraine either have a local partner or they have top local managers. I think this is a major reason for German investors to work with us; we have local expertise.
What do you think makes Ukraine an appealing investment destination for German businesses?
I see several factors that could be extremely interesting for German investors. The first is that, compared to Germany, salaries here are quite low. I’m speaking as a businessman. The second is that the rent that you pay for the land is quite low as well. To build a factory or manufacturing line is relatively very affordable. The cities are also comparatively low cost. There is a large percentage of people here with higher education, and I consider education in our country to be of quite a high level. We have a lot of people who are extremely intelligent and highly educated, especially in engineering and technology. It’s not difficult to find employees that are extremely qualified and can easily be taught niche skills. It is common knowledge that many countries in Europe or America have moved manufacturing to East Asia. These countries had two big advantages – 30 years ago the labor force was almost free, and there were hardly any environmental regulations. That is now changing. But the disadvantages were that people were not highly skilled, which is why German companies had to send top- and mid-level people to oversee management. The second is logistics; the distance is huge. It’s not even about the cost, but the time of the delivery. The minimum time to deliver from China is 45 days. My opinion is that Ukraine is an amazing manufacturing hub for Europe and for Germany in particular. Here, there are a huge amount of different factors that can decrease operating costs and increase profit. For Ukraine, this is extremely beneficial as well because we get more employment and can improve the quality of life for many people. This, in turn, causes the internal market to grow. It’s profitable for German businesses, our people, and our government because apart from economic problems, it also solves social problems. The distance between us is only 2,000km. Anything can be implemented here.