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EBA: How does business stay afloat: the EBA Odesa member-companies experience

05 Dec, 2022
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EBA: How does business stay afloat: the EBA Odesa member-companies experience

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Since the beginning of the war, Ukrainian business has undergone several transformations in order to continue its activity. In particular, the Southern region of Ukraine, being under constant shelling, and considering the worsening energy situation in the country, continues to adapt business processes.  

On November 15, 2022, during the discussion EBA Odesa Business Talks (kaleidoscope): "How does regional business stay afloat?", organized by the European Business Association Southern Ukrainian office in partnership with the member company Interlegal, the current business situation in the Odesa region was covered in several industries of economy.  

"It is important to review the situation and understand how Ukrainian business stays afloat using the example of several industries that are typical for the South of Ukraine. Therefore, among the participants of the discussion today are representatives from the logistics business, agro-production, a production company, as well as the crewing sector," - said Artur Nitsevych, Partner of Interlegal, Chairman of the EBA Odesa Legal Committee, moderating the event.  

Katerina Morozova, Head of the European Business Association Southern Ukrainian office, started the discussion by announcing the results of the latest Regional Index 2022 survey and the main problems companies faced in their activities.  

For example, Odesa businessmen listed difficulties with logistics and a decrease in the purchasing power of the population as the TOP problems, and in third place was the outflow of personnel abroad. Thus, all companies reported losses as a result of military actions. At the same time, the estimates of the companies are divided, so 1/2 estimates losses up to 50%, and others - more than 50%. In the future, the business plans to focus on maintaining operations under martial law, entering new markets, and optimizing the number of employees. Therefore, an important role in the post-war reconstruction of the region will be pai to the restoration of production and the new jobs creation, as well as the attraction of investors to the region and grant/credit support for business. Companies are also waiting for the reconstruction and demining of infrastructure, the unblocking of ports and the resumption of trade.  

Ms. Morozova also spoke about the new project of the Association — Global Business for Ukraine, which is designed to unite global business around Ukraine, to share with the international business community information about Ukraine, existing opportunities, forecasts and moods of businesses operating in the country, to help and support global companies in finding partners, customers, stakeholders in Ukraine and to promote the attraction of investments in the country.  

Ivan Sakal, Financial Director of Agrofusion, shared an information about the state of agricultural and manufacturing businesses that were closest to the front line. Thus, the main activity of the company is the cultivation of tomatoes and the production of tomato paste.  

The war affected the company 100%. After all, Agrofusion enterprises are territorially located in Kherson and Mykolaiv regions. Before the war, the company owned 4 factories, and now only 1 remains, which had to be constantly repaired due to regular russian bombarding. In general, volumes fell 10 times compared to the previous year. This year, 860 hectares of land were under cultivation. For comparison, last year the amount of land was 33,650 hectares. Moreover, all the fields were mined, and their demining will take a long time. Among the good news is that the Snihurivka city was liberated and the Mykolaiv region is considered liberated. However, the losses over the last 8 months are very significant.  

Therefore, according to Mr. Sakal, there is a hope for recovery. In particular, the priority measures for the revival of the agro-industrial complex of Ukraine will be: demining fields, preferential state programs for renting, leasing and purchasing agricultural machinery, restructuring loans for 3-5-7 years for borrowers whose property has suffered losses and damage, state and international grants, restoration of irrigation systems, the possibility of renting agricultural lands belonging to educational and scientific institutions, etc.  

Olga Ilnytska, Head of Supply Chain Management at Ukratlantic, shared the experience of a manufacturing company to show how this business works and survives.

The company resumed operational activities on April 18, partially, but within three months it returned to a regular work schedule. The company resumed the supply of finished products to customers a little earlier, in March 2022 (to the market of Ukraine and Poland).  

The first thing Ukratlantic faced during the war was the loss of partners in certain groups of components, such as: cardboard boxes, polyamide for plastic parts production, etc. The risk of losing regular suppliers remains, although direct deliveries from all foreign and local suppliers have already been resumed. In addition, most international companies in the first weeks of the war canceled the company's order, which created a shortage of components in the future. The demand for our products in the spring and summer months was very high, so it was necessary to fill this deficit as quickly as possible. It is worth noting that many Ukrainian partners resumed their work quite quickly and demonstrate very good supply discipline, even in those places that are not far from active combat zones. The second block of tasks was related to the transport and optimization of logistics chains. Now, the company and its permanent partners have adapted to the new conditions and the situation with the availability of vehicles has stabilized. In addition, a new challenge that is relevant for all enterprises in Ukraine - restrictions on the supply of electricity. Therefore, the company switched to working mainly in night shifts. In addition, the company started a new project "Energy saving". 

In particular, Ukratlantic technical specialists will analyze the consumption of resources at each stage of production and determine further actions to reduce the consumption of electricity, gas and water.  

"The ability to quickly adapt to new circumstances, maintain constant contact with partners: customers, suppliers, contractors is a necessary condition for working in such complex, rapidly changing conditions, in which manufacturing companies currently operate. This applies both to foreign partners who feel a lack of information about events in Ukraine and initially distrusted the fact that the company can function in such conditions, and to Ukrainian partners in order to be informed about possible risks in order to warn them. "— said Ms. Ilnytska.  

Rachid Buda, General Director of MSC Ukraine spoke in more detail about the situation on the container transportation market in Ukraine as of November 2022. 

Therefore, according to Mr. Buda, the good news for Ukrainian business is that, despite all the difficulties associated with the transition of Ukrainian container logistics from Ukrainian ports to European ones, most stakeholders in the market have successfully rebuilt their processes. Thanks to joint work and constant interaction, the business has reached relatively effective work patterns. This is confirmed in the form of a significant increase in the volume of transportation in recent months. The next news: the decrease in demand for sea transportation in the main markets of the world (North America, Europe, Asia). Imports made it possible to evenly distribute the useful volume not only on sea vessels, but also among the accompanying infrastructure and, as a result, led to the absence of a large accumulation of containers in ports and terminal congestion, as well as regular productivity (without delays in receiving and issuing containers). This has significantly reduced costs for road carriers, for storage in ports, including demurrage and detention. Moreover, in November, Ukraine and Romania reached agreements on joint actions to speed up freight transportation on the Danube River and the Sulina Channel. Given the possibility of operating the channel 24/7, the movement of vessels in the container connection to the ports of Izmail and Reni will become regular, and their number will increase. That will allow us to build certain business models of the agency's work. However, due to negative trends, there are no ship calls to our ports yet and they are not planned. In addition, there is a large shortage of container equipment in Ukraine today. The reason for the latter is a significant decrease in the volume of imports and the continued growth of exports, which creates a large imbalance between their volumes, and as a result, a large shortage of container equipment. This is a serious threat to our exports, as the cost of transporting empty containers is quite high.  

It is worth noting that MSC Ukraine, together with the Head Office, allowed the free movement and use of container equipment from nearby countries such as Romania, Poland, Bulgaria and Hungary for Ukrainian exporters, which today helps to smooth out the shortage of equipment provided in Ukraine, promoting Ukrainian business in general. At the same time, the truck carrier could combine the delivery of exports abroad with the return route, delivering an empty container for the next export.  

Oleksandr Sahaidak, Head of Olvia Maritime highlighted the state of the crewing business in the region and the main challenges of the industry.  

According to Mr. Sahaidak, even though crewings are offices of foreign companies and independent agents, all of them cannot recover and influence the situation. Thus, the crews now work remotely (some employees are evacuated in Western Ukraine or abroad, others are in the Armed Forces), and they have also refocused their activities. Overall, the industry has experienced a severe drop in business. Currently, there is no way to search and check seafarers, difficult departure of seafarers, complicated logistics, increased prices for communication and some other services, and the principals hire other seafarers. The sailors themselves cannot leave (or it is very difficult), do not have the opportunity to obtain visas (for example, the USA), do not want to pay bribes for exams, do not pay taxes, almost do not join the army (and not all of them are needed there) and do not work for shore.  

Moreover, according to the speaker, our state needs to develop a program to support maritime business and crewing and the work of sailors, organize a self-regulated system of crewing, establish a system of objective assessment of sailors' knowledge, settle the issue of taxes for sailors, etc. In addition, the long-term program should include the development of its own merchant fleet and the Navy - to support the merchant fleet on sea and ocean routes.  

"It is not easy for us on the economic front. However, what can help us now is constant communication with the teams, dialogue with the authorities, as well as Ukrainian and foreign business partners," emphasized Mr. Nitsevych, summing up the speeches of the speakers.  

Today, Ukraine is going through difficult times, so international support and the development of relations between business in Ukraine and abroad are also extremely important, in order to further strengthen the country's economic front.


EBA Odesa

EBA Odesa

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