On November 15, The Global Business for Ukraine held its first General Assembly in Kyiv (together with the European Business Association 24th general membership meeting). Representatives from Ukrainian and global companies, the government, the Verkhovna Rada, international partners, media, etc., joined the meeting. GB4U CEO and Co-founder, EBA Executive Director Anna Derevyanko congratulated all members, sharing the first results of the year. Thus, in times of crisis, she mentioned, that we as a community feel an even greater trend of businesses coming together in communities, as entrepreneurs are better heard in this way. This is also reflected in advocacy effectiveness data. The business in the Western region has become even stronger. Additionally, there is a strengthened commitment to education, development, and reskilling because new skills are crucial for the country's recovery.
Key trends in digitalization, euro integration, military and defense sectors, the global vector, and perceptions of Ukraine, which were discussed during thepanel discussions, we welcome you to read in the follow up below.
Digitalization, Innovation, Education
During the event, Mykhailo Fedorov, Deputy Prime Minister for Innovation, Education, Science, and Technology Development - Minister of Digital Transformation of Ukraine, noted that the issue of trust from global partners towards Ukraine is crucial today. Therefore, the Ministry of Digital Transformation pays a lot of attention to communication on the global stage. In this aspect, Ukraine finds the experience of Israel interesting - cases highlighting the importance of international communication, state marketing, attracting venture funds, etc. From Ukraine's perspective, it is essential to communicate more about companies continuing to operate in Ukraine, particularly in IT, meeting deadlines despite shelling or blackouts. At the same time, the Minister hinted at some plans - the Ministry is currently working on a project similar to Upwork (to unite businesses needing orders on one platform and provide guarantees from the state to foreign partners that obligations will be fulfilled). This project will complement other Ministry projects, such as the Innovation Development Fund, the defense cluster to stimulate the development of defense innovations (Brave 1), and the special regime Diia City. Additionally, a new country's innovation development strategy will be presented this winter. It will be a clear guide on what to do for innovation development - how to stimulate the development of science and education, launch venture funds, manage intellectual property, etc. The strategy, analyzed based on innovation strategies from various countries, will be designed for 10 years.
Olivér Várhelyi, European Commissioner for Neighbourhood and Enlargement, highly praised Ukraine's efforts in supporting macroeconomic stability, a functional banking sector, government services, and simultaneous mobilization of resources to overcome the consequences of unprovoked Russian aggression. He acknowledged positive trends in Ukraine's business activity, noting a 5% economic growth in 2023. The Commissioner also announced a proposal to provide Ukraine with a special financial instrument of 80 million euros aimed at supporting economic stability and implementing reforms, contributing to European integration.
Olha Stefanishyna, Deputy Prime Minister for European and Euro-Atlantic Integration of Ukraine, discussed Ukraine's progress towards EU membership. Thus, the European Commission recommended starting accession negotiations for Ukraine. Importantly, this thesis was unconditionally supported in the report, and all recommendations concern only the next steps. Yes, there is still work to be done, and a strategy for each area, aimed at solving problems and advancing in the negotiation process exists. As moving towards the EU means moving towards stability in unstable conditions. And by the beginning of 2024, the negotiation framework will be clear. Ms. Stefanishyna emphasized the importance of unity and strong ties between the state and business, especially in the face of russian aggression. In response to challenges related to the war, there are plans for targeted investments in the development of border and customs communication through Romania. The goal is to open freight routes and find solutions to ensure the stability of Ukrainian businesses. In conclusion, she noted that, in the context of the budget, we as a country know the volume of commitments, so can calculate the needs.
Andrii Gerus, Chairman of the Committee of the Verkhovna Rada of Ukraine on Energy and Housing and Communal Services, informed participants about the progress and plans for the Eurointegration of Ukraine's energy sector. On March 16, 2022, the synchronization of the Ukrainian energy system with the European one took place in a unique experimental mode. The path that we were supposed to cover in years was overcome in months. The Verkhovna Rada of Ukraine continues to work on key decisions that would contribute to the development and Eurointegration of Ukrainian energy markets, particularly the prospective biomethane and bioethanol markets. Export and import of electricity to the EU are open, and European companies have access to Ukrainian gas storage facilities. Currently, dozens of European traders use them to store gas. This speaks to the predictability and trust in our state. At the same time, the construction of new energy capacities continues. This includes approximately 500 MW of solar power stations, 300 MW of wind power stations, and 100 MW of gas power stations. Even in such a challenging year, there is room for new projects and investments in Ukraine.
The EU's climate agenda is quite demanding, but Ukraine continues efforts to align as closely as possible with European environmental and climate policy standards. Oleh Bondarenko, Chairperson of the Committee of the Verkhovna Rada of Ukraine on Environmental Policy and Nature Management, shared this information with the event participants. Even during the war, Ukraine is implementing systemic reforms and undertaking commitments under the Green Course, the Paris Agreement, and similar initiatives. But businesses also need to be ready to work towards achieving EU environmental standards, which are cross-cutting for various industries. For enterprises willing to modernize, this can be a stimulus for growth, a competitive advantage, and simplify access to funds and investments.
The integration of Ukraine's agricultural market into the European one will be a real challenge for both Ukraine and the EU. According to Mykola Solskyi, Minister of Agrarian Policy and Food of Ukraine, the government does not expect any concessions from European colleagues and understands that the conditions will be stringent. Even during the war, we faced significant pressure on the export of Ukrainian agricultural products. Ukraine's agriculture is very different from European agriculture, primarily because it does not exist on subsidies. This means that the EU will have to make several changes to integrate our agro-sector, and this can significantly impact even the social structure in some countries.
Logistics and Recovery Issues
Yurii Vaskov, Deputy Minister for Communities, Territories and Infrastructure Development of Ukraine, informed the attendees about the situation at the Ukrainian-Polish border. As of the event date, the strike by Polish carriers continued. However, the demands of the carriers are addressed not to Ukraine but to the European Commission, while Ukraine remains an active participant in negotiations to unblock border movement. Since the start of the protests, the number of freight transport leaving Ukraine has decreased by about 20-25%. Meanwhile, efforts continue to improve communication with Ukraine, including for passenger transport, as well as projects for recovery. The priority is the restoration of housing, energy, and transportation infrastructure, as well as local and social infrastructure. The state electronic ecosystem DREAM has been introduced to enhance transparency in post-war recovery. Work is underway to restore and develop facilities in the ports of Odesa. Together with the business sector, the Ministry will continue to address key issues in the transportation and logistics industry.
Defense and Strategic Industries Sector
Rustem Umerov, Minister of Defense of Ukraine, noted that Ukraine is currently restoring capabilities to return to the 1991 borders. The Ministry pays special attention to localizing the lethal and non-lethal components of defense needs, encouraging business participation, particularly in auctions, to localize defense requirements, as technology is crucial for the country. The Minister also identified tackling corruption as one of his key tasks. Additionally, communication support from the business sector is needed to ensure global partners understand that Ukraine is open for business and that long-term contracts are viable. A question was raised about reserving workers, and Rustem Umerov mentioned plans for a meeting with the Ministry of Economy to discuss this issue. Overall, the Minister called for everything to be done for Ukraine's Victory, urging cooperation and the pooling of efforts to move forward.
On his part, Oleksandr Kamyshin, Minister for Strategic Industries of Ukraine, called for the development of arms and military equipment production in Ukraine, as the high-tech defense industry should become the main driver of national economic recovery. Mr. Kamyshin urged businesses to find niches, attract qualified personnel, and fund defense projects. The Minister acknowledged corruption issues in the state defense industry but stated that Ukroboronprom already has a short-term anti-corruption strategy to overcome opaque practices related to the appointment of plant directors, property distribution, and procurement. The first results include transparent competition for the position of the head of one of the enterprises, saving 50 million UAH on centralized purchases of energy resources, and the suspension of two directors from their duties on suspicion of corruption actions. Additionally, Mr. Kamyshin noted the rapid growth of the private sector's share in the defense industry.
Andrii Pyshnyi, Governor of the National Bank of Ukraine (NBU), shared the results of recent negotiations with the International Monetary Fund (IMF). During the annual meetings of the IMF and the World Bank, Ukraine was discussed in a very positive context. Economic growth, despite the war, exceeded initial forecasts. The country entered a stable deflationary trend, and a reduction in the discount rate began earlier than predicted. Despite the war, Ukraine transitioned from a fixed exchange rate to managed flexibility. An essential element is the Currency Liberalization Strategy, which is currently being implemented. The first stage, including the transition from a fixed to a managed exchange rate, has been operating successfully for six weeks. NBU is working on the second stage of currency liberalization. Mr. Pyshnyi addressed the issue of the bank sector's windfall profit tax, predicting its likely introduction (as banks earned 110 billion UAH in profit in 9 months). The discussion on this is ongoing in the Verkhovna Rada Committee. However, he assured that financial stability would be maintained. The diagnostics of the largest banks' resilience (covering 90% of the market) showed that the banks are in good shape.
Serhii Marchenko, Minister of Finance of Ukraine, noted that Ukraine undoubtedly relies heavily on international assistance (European and American packages) and expects that its level will not decrease. However, there are alternative scenarios for seeking sources, such as Canada, Japan, etc. However, this does not mean that it is possible to replace the leadership, for example, in the United States (it is too early to talk about this complex scenario). At the same time, the situation looks more optimistic than initially perceived, and the country has alternative scenarios if assistance is less. However, macroeconomic stability will undoubtedly remain in the country. In the context of fiscal pressure on businesses, the Minister asked to signal if the issues are systemic, and legislative changes should be worked on. Regarding additional taxation, the decision to introduce an additional tax on the super profits of the banking sector is conceptually supported by the Ministry of Finance.
Inga Andreieva, General Manager of Mastercard in Ukraine and Moldova, highlighted the resilience and adaptability of Ukraine's financial sector in the face of challenges, emphasizing the effectiveness of digital solutions in times of war. In terms of the volume of contactless payments with digital cards from smartphones and other gadgets, Ukraine is among the leading countries on the world stage, which reflects the country's digital progress and innovativeness. Tokenization, which is the basis of digital payments, and the evolution of digital wallets into universal superwallets with wide functionality are identified as future trends in the field of financial technologies. In terms of changing customer attitudes, the emphasis on meaningful finances and shopping, coupled with a desire to understand their impact on the country and the planet, reflects a growing sense of responsibility among consumers. According to Inga, small and medium-sized businesses play a key role in the country's economy, so the company supports entrepreneurs on their way to growth. At Mastercard, the Ministry of Digital Transformation acts as a long-term partner in the development of the Diya.Business portal, and also actively supports Diya.Business centers throughout Ukraine and abroad. The company's research says that digital channels for entrepreneurs play a significant role in business growth, so the potential for further digitalization is obvious, and Ukrainian SMEs see this as an important condition for their recovery.
Oleksandr Pysaruk, Chairman of the Board of Raiffeisen Bank, spoke about the economic recovery of Ukraine and the role of international aid. Pysaruk agreed with the NBU's forecast of actual economic growth of 5%, acknowledging that maintaining this growth, approximately 4-5%, over the next 2-3 years will depend on avoiding additional shocks and maintaining international aid. At the same time, he noted that although the reduction in international aid will affect growth, macroeconomic stability can still be maintained, given the record high foreign exchange reserves of the NBU and the stability of the banking system. Pysaruk noted a decrease in solvent demand for loans, especially during the crisis, but expects its recovery. He mentioned the recent revival of demand, especially for investment projects in the central and western parts of the country. Raiffeisen Bank actively issues new loans, including such critical sectors as agriculture, food industry, medicine and energy. Taking into account the NBU's latest decisions on lowering the key rate and changing the operational design of monetary policy, interest rates on loans are expected to decrease by several percentage points next year. Oleksandr Pysaruk also noted that the banking sector works cyclically, often experiencing losses during crises. Therefore, taxation of the banking sector should take into account its profitability during the full economic cycle. He highlighted that the growth of tax revenues should be primarily due to the expansion of the number of taxpayers, and not solely due to the increase in the tax burden on transparent taxpayers.
Pedro Serret Salvat, President and General Counsel, PPG EMEA greeted the participants and shared what challenges he perceived on global and Ukrainian business landscapes. He mentioned that business and the world enter a new phase of sustainability and that should be taken into account while working. Besides, worth making sure that everything (EU policies and local policies) is in line with the European market. Speaking about plans for Ukraine Mr Salvar mentioned that PPG is already on the market, for example under the Tikkurila brand and, yes, to be honest, the group is concerned about compliance, nevertheless, plans to increase expansion. According to Pedro, Ukraine every day shows enormous agility, and, therefore, has only admiration from the world.
Marco Settembri, Executive Vice President, Chief Executive Officer Zone Europe, Nestle, obviously, highlighted on the war as the biggest challenge in Ukraine. But also, inflation, energy, very complex regulations. However, now Ukraine is shaping the future, as a part of the EU. Nevertheless, Nestle has a clear vision of what they do and must continue doing – make organic investments, have KPSs on quality, create an environment to help farmers, customers to transit to more sustainability.
Gunter Deuber, Managing Director, Head of Raiffeisen Research, Raiffeisen Bank International shared his macroeconomic forecasts. He expects a weak global economic growth, and this fact will stay up to 2025. This will, most probably, mean fewer policy space in the Western world, incl. Ukraine support. That said, Ukraine must be prepared for more discourse on economic support. However, we shall not allow the Kremlin's calculus that we are only concerned about our short-term prosperity in the Western world to prove true in the end, as Gunter Deuber stressed. Otherwise, Gunter shared his view on the resilience of the Ukrainian economy and service sector, including banking. With positive GDP numbers in 2023 in Ukraine, this resilience gets more and more tangible for outsiders, which may finally support more business opportunities.
A view on the geopolitical situation was shared by Risto E. J. Penttilä, CEO of Nordic West Office, policy expert, former member of the Finnish parliament, and Secretary General of the European Business Leaders’ Convention. According to his forecasts, 4 geopolitical scenarios are possible. Among the possible shocks are oil at $200, a regional war in the Middle East, no climate cooperation, US cutting support for Ukraine, and the Taiwan crisis escalating in 2024. All these would lead to a “Polycrises” scenario. Other possible scenarios include “Orderly Decoupling” which is characterised by the US-China ‘divorce’, “Sleepwalking” which includes going back to quantitative easing and “Tech Boom” which sees significant technological advancements in all areas.
We sincerely thank the speakers and all the participants for the event! It was a great pleasure to see our large business community.