The Lviv region stands out in Ukraine for its dynamic economy and the historical heritage of its towns and capital city. With a burgeoning IT scene that is increasingly gaining international fame and a manufacturing sector that hosts major companies such as Germany’s Leoni, its government has put in place innovative strategies to attract and retain the nation’s most talented people. Sharing a border with Poland, it has also gained new significance in recent years as Ukraine’s transport hub as trade has shifted away from Russia and towards the European Union. Oleh Synyutka, the region’s governor, explains how the region has changed since the 2014 revolution, his plans to ensure economic growth, and why German investors would be wise to invest today
You took office in December 2014. What have been your main priorities over the last four years?
All I can say is that 2015 and 2018 are totally different years. When I first came to this office, the situation was critical: production had fallen by 10 percent, the exports of goods and commodities decreased by 25 percent, and real salaries by more than 20 percent. Basically, our treasury was empty. Every single week we had people in front of the regional state administration with certain problems. One group of people were demanding for their salaries to be paid, others were demanding certain medications for health conditions. At the same time, the main bulk of funds had to go to defense policies and the national army. Another thing is that almost every week, we were holding funerals for people who were killed near the Russian border. Those were very difficult days. Today, we still have problems but they are different in nature. Today, we are talking about the effective use of funds. Today, the questions surround the transition of authorities to the newly created amalgamated territorial communities, and how to support them in various ways. Recently, there was a council of regional development, headed by the president of the country, and we discussed issues related to construction and infrastructure. These problems are also complicated because they require a lot of effort and work. For instance, over the last four years, we managed to renovate and rebuild 1,700km of road in the Lviv region. Once again, these are totally different problems in a totally different country.
Where do you think Ukraine stands right now?
First of all, we are not going back to the country as it was. We are in the process of building a different and better country. Once the Revolution of Dignity took place, everything changed. First of all, people went to the Maidan to stand up for their European values and for a better life. We see our future within the structure of the European Union and in the NATO alliance. We want our country to represent the eastern border of those unions. This is the kind of a country that people voted for and the country we want to build together.
What makes Lviv’s economy stand out within Ukraine?
Geographically, Lviv is the closest region to the EU. Since the flow of goods and commodities shifted from moving towards Russia in the east to the EU in the west, we now carry the role of being Ukraine’s hub for transport and logistics. Therefore, the infrastructure of transportation and logistics warehouses are great priorities, not just for our region, but for the whole country. This year, we also opened the Beskyd tunnel, which is a huge infrastructural project that allows us to double the turnover of cargo being shipped between Ukraine and the EU. This tunnel is 1.7km long and the general cost of investment was 2.2 billion hryvnias (€69.7 million). This is the largest infrastructure project in Ukraine since we first gained independence. At this point, we’re also in the process of the gasline that would connect the greatest gas reserve in the country, which is located in the Lviv region, with the gaslines in Poland, with an opportunity to get gas supplies from Baltic countries. We are also expecting the governmental decision to extend the European highway that connects Berlin and Krakow with the border of our country, to connect to the city of Lviv. I’m also convinced that within the next year, we’ll have the feasibility study finished about the extension of the narrow European railroad to reach all the way to the territory of Lviv.
Besides transportation and logistics, which sectors of the Lviv economy have the most potential for growth?
A major priority is in the development of high-precision scientific manufacturing. We are one of the top-10 most prospective IT development territories. Investors such as Brookfield and Horizon Capital are also investing in a new IT city in Lviv. The first stage of that IT city is going to cost $160 million. Nowadays in the Lviv region, we have the simultaneous training of 120,000 students in all categories. That is a huge human resource pool. Contemporary sources of alternative energy are another burgeoning sector. Even though we don’t have as much sunshine compared to the eastern part of the country, this year we managed to launch and start using the highest capacity energy island of solar power in Ukraine. It is located in a former sulfur mine, on land that cannot be used for agricultural production or construction. Next year, the overall capacity will be at the level of 600MW. Another priority is small and midsized businesses. In the last three years we managed to create 180 new manufacturing companies and from that, 23,000 new jobs in the Lviv region. Altogether, there was around $220 million investment. German companies here are in a good, comfortable position. We have huge companies like Leoni AG, where about 6,000 people are employed. We also have some smaller companies that hire 50-100 people, and we value every single one. The capital that we get from German investments is one-fifth of all the foreign investment in the Lviv region.
How important is the German market to Lviv region and its companies?
The German market is one of the largest markets in Europe and one of the most important in the world. Altogether in the territory of Lviv, we’ve got 1,200 companies that are involved in export operations. Every fifth company out of those 1,200 is somehow related to a representative of the German Federal Republic. At this point, we have already achieved the highest levels allowed under the quota system to the EU and actually have to slow down our growth in development in exports, especially in terms of the agricultural sector. We definitely have the potential to increase exports of high-quality products to the European market in agriculture, and I’m convinced that we have huge potential in the segment of organic produce. As a result of the economic depression in the past, a great amount of land was not subjected to chemical cultivation. So what used to be a problem has turned out to be an opportunity because these lands are a wonderful match for organically grown produce. We have good dynamics in growing fruits and berries. Together with our German partners, we are also producing trolley bus trams and buses. You can see their products on the streets of Lviv, and they definitely meet the highest European standards. Of course, they are much cheaper compared to their competitors from Bombardier or other companies. We certainly believe we can expand our presence in the German market because of the quality and cost of our products.
As the governor of the region, what tools do you have to get German investors to come here in a way that’s different from other regions in Ukraine?
The first thing is that we have is the absence of corruption. Secondly, in the regional state administration, we have the department of accommodation of investment packages. The department is responsible for escorting the investment project from the moment the decision is made to invest through the opening of the business and manufacturing launch. It helps the investor handle all the difficulties that occur from start to finish. On the regional level, we are also able to adjust the cost of the land that is issued to a certain company as a grant for establishing manufacturing. The preparation of the workforce is another advantage. In our region, we have 51 professional trade schools that teach 21,000 different students. We have an opportunity to adjust the curriculums of those schools to fit the needs of the companies nearby. Security is the next point. We ensure 100 percent safety for businesses and their personnel. We have also created opportunities for investors who relocate with their families to have a very high quality of life. We have kindergartens that allow children to be raised in the language they are most comfortable with. If a person came to Lviv and they had no idea which city they were in, after opening their eyes, they’d guess they were in Prague, Vienna, Paris or another great European city. Fifty percent of Ukraine’s UNESCO heritage is concentrated in the Lviv region.
What are you doing to develop the IT sector?
I think the future is hidden behind the digital technologies. As for today, there’s not a single aspect of the economy that IT is not supporting. And if you look around the world, salaries in the IT sector are among the highest. Therefore, we are directing our most intelligent and talented people towards the IT industry. That is the strategy that was adopted, even prior to the Russian aggression, in around 2011. It had several components. The first was to increase the volume and spectrum of foreign languages; the second was reformatting the curriculums of high education institutions; and the third was enhancing the convenience and housing opportunities for people who work in the IT industry. We realized that these people are unique, and inasmuch, they require unique housing opportunities. We know that they can grab their computer, go anywhere in the world and keep producing. Therefore, it was very important for us to help them feel comfortable in Lviv. Another thing was the support from the state level to all the companies who became players in that space on the global level. For instance, SoftServe hires a couple of thousand workers, and they work both for the North American and Asian markets. It was important for us to make them feel supported. Seven years later and the results are clear – around 18,000 people now work in the sector. The young generation feels that there is a prestige to their occupation, and people who are working in IT rarely emigrate from the region.
How has tourism in Lviv grown over the years?
The development of tourism is not really our merit – it’s due to the fact that many generations of Ukrainians created the beautiful city and region. Our task was to clean and polish the pearls so their glittering would be seen as far away as possible. I would like to extend my gratitude to a project we did with the German Agency for International Cooperation (GIZ) that contributed a lot to the restoration of the historical heritage. I would also like to mention the importance of the renovations at Lviv airport. As of today, the airport meets all the global requirements in terms of safety and convenience. Now, many global companies like Lufthansa, Ryanair and WizzAir are partners with Lviv airport. Now, the passenger growth of the airport is increasing at a rate of 40 percent per year. This year we expect 1.8 million passengers to be served by our airport, and next year, at the very least, we expect that number to exceed 2.2 million. Overall, the capacity of our airport allows us to serve 1,200 passengers per hour, and we are already achieving those peak capacities.
Is there a final message you would like to send to potential investors?
If you want to invest with the highest speed, with the highest level of safety, in a place with the highest added value to your resources, then you’re already late. That could have been done yesterday in Lviv. But you still have a chance to do it today. We are ready and waiting.