Kateryna Morozova, Head of the EBA Office in Southern Ukraine, speaks about the main challenges facing entrepreneurs in Odessa in 2022
The companies in Odessa, like those in Lviv, have the biggest problems with logistics and the reduced purchasing power of the population, while the brain drain abroad ranks third. In the near future, the companies intend to focus on supporting business activities under martial law, entering new markets and optimizing the company’s human resources.
This year, Odessa took second place in terms of business conditions (compared to Western Ukraine, Kharkiv and Dnipropetrovsk regions, where offices of the European Business Association are located). At the same time, 71% of the entrepreneurs interviewed by the EBA replied that it was difficult for them to do business in the region, the other 29% – that it is satisfactory (there used to be 44%). Last year not a single entrepreneur answered that it was easy for him to work.
The entrepreneurs named the logistical difficulties and the declining purchasing power of the population as the most pressing problems, as well as the migration of staff abroad. Despite the difficulties, most companies, viz 71%, did not shift their business to other regions. of them, 46% reported that they had no such need and 25% – that they could not move. Other 21% forced to relocate their business abroad or to the west of the country.
In general, regional business works, but with certain limitations. So approx 90% of companies continue their work, and 10% – it does not work. Business sentiment is mostly neutral. Most of the interviewed entrepreneurs, viz 71%consider the current conditions to be difficult14% from them – very difficult. For now, 29% of entrepreneurs consider the terms and conditions satisfactory (44% last year). As in the previous wave of surveys, not a single entrepreneur answered that it was easy for them to work. At the same time, 27% believe conditions have gotten worse and 14% believe they have not changed.
Considering the peculiarities of the region, shippers, forwarders, logistics companies, container terminals and stevedores dominate the members of the South Ukrainian Bureau of the European Business Association. The office also includes producers of wine, oil and tomato paste, as well as companies offering financial, legal and consulting services, etc.
How was the company able to adapt?
Some logistics company in the region, its staff have been able to relocate abroad and work remotely, but plan to return to Ukraine immediately when peace returns. The volume of work has decreased, and their activities are slightly modified, but continue. Blocked ports remain Odessa’s main problem today, but work related to the implementation of the “Black Sea Grains Initiative” has partially resumed. Therefore, all shippers, shippers, stevedores and container terminals are waiting for the ports to open to fully resume their activities. In return, since the beginning of March 2022, container lines have been created as alternative logistics routes for international freight transport. Also, the company faced the need to find alternative ways to deliver imported containers going to Ukraine and organize exports across land borders. In addition, in connection with military actions and temporary occupation of territories, there is currently a problem of undersupply of goods already registered for export at checkpoints on the border with Ukraine.
production companies in the region work, but with some changes. Also, the economy notes an acute shortage of raw materials (it was usually delivered by sea, but now the ports are closed due to the war). Also, at the beginning of the war, the problem was complicated by the lack of means of transport that could transport the finished products to the border.
That consulting area could work remotely, but some law firms are complaining about the lack of work and have closed some offices.
Because of this, Farms with farms in the Kherson region and lost them in the face of the greatest difficulties. Some were forced to stop working during the occupation, particularly because they refused to cooperate with the occupiers to resume work.
All companies report combat casualties – they are divided into two equal groups. A half loses up to 50%and the other loses more than 50% of their income. None of the companies we interviewed made a profit. At the same time, 14% of companies have branches, offices or assets in temporarily occupied areas.
Likewise, Business in the occupied territories and closer to the contact frontline is somewhat pessimistic and preparing for the worst. These companies are waiting more than the last for government support programs. In addition, some companies have already applied for business grants in Diia.
In addition, at meetings of the South Ukrainian office of the European Business Association, regional companies express the problems they face in their work during the war. These are challenges with State contracts and payments for state contracts, insurance of investments against the consequences of war, opening of ports and solving material and technical problems, mechanism of loss compensation (actual and lost profit), credit restructuring and introduction of tax exemptions, compensation for property damaged by military operations, the possibility that seafarers going abroad, the speed of cargo registration, specific problems with container visas, the importation of ozone-depleting substances, etc.
How did the economy and state organs interact in times of war?
The EBA maintains a constant dialogue with state and local authorities. We are very pleased that the government understands the importance of investment and sees us as a reliable partner. Therefore, EBA Odessa actively cooperates with the Odessa Regional State Administration, the Odessa City Council, the Federal Tax Service in the region, the Odessa Customs, the Pension Fund and other regional branches of state bodies. And we are pleased to see an improvement in the interaction between companies and municipalities, which is reflected in higher ratings of their work compared to the previous year. It is about interaction with the State Tax Service, City Council, Regional Military Administration, Courts, National Police, Territorial Centers for Recruitment and Social Support and Regional Customs.
The majority, 71% consider the level of development of e-services in the region to be satisfactory, and another 18% find it good. Only 11% of respondents are dissatisfied with the number and quality of services and the number of administrative services and permits that can be obtained in times of war. Interestingly, this year’s data is better than last year’s.
Plans for the end of 2022 and the main trends for business development
The companies plan to focus on supporting martial law activities, entering new markets and optimizing the company’s workforce by the end of the year. In order to improve the framework conditions for economic activity in the region, the survey participants suggest focusing on restoring and maintaining infrastructure, ensuring transparency of legislation and a level playing field, and introducing support programs for companies that use the need support in the first place. Among the most anticipated infrastructural changes is the Restoring seaports to full operation and opening borders.
According to business, a An important role in post-war reconstruction of the region is played by restoring production and creating new jobs, attracting investors to the region, grants or credit support for businesses. Companies are also waiting for infrastructure to be rebuilt and demined, ports to be opened up, and trade to be restored.
The level of regional development is an important indicator of the country’s economic and social development. The latest business trends in the region and Ukraine relate to the role of socially responsible business in general. And EBA Odessa member companies continue to help Ukraine with the needs of the armed forces and humanitarian work during the war. Together to victory!
For reference: To assess the conditions for doing business in wartime, the European Business Association conducted the Regional Index Survey 2022 among companies in the Odessa region. The overall assessment of the entrepreneurs fell slightly – from 2.25 points from a possible 5 in the previous year to 2.15 points this year.