Ukraine: Wartime Opportunities for US Business

Maksym Harbuz, MS, CEO and Managing Director Marimax LLC (Boston, USA) 

The bloody war in Ukraine is something that worries everybody now. In addition to human destinies, it destroys the economy and infrastructure of Ukraine. The United States and its citizens, reaffirming their leadership in the democratic world, have taken on the bulk of Ukraine’s daily military and economic support. But every war ends. And a reasonable question that is becoming more and more relevant for US business is the plan for the post-war reconstruction of Ukraine. That is why our attention was attracted by the article War in Ukraine: Wartime Opportunities for US Business by Maksym Harbuz. 

Maksym Harbuz is a name that has become synonymous with the field of USA-Ukraine trade in the agricultural machinery area. As a Chief of Import Operations of NovoFarm Ltd. and CEO of Agromax LLC, he has brought a lot of high-class US agricultural machinery to Ukraine and made it a golden standard for Ukrainian farmers. In his article Mr. Harbuz provides an actionable plan for potential investors to assess and enact investment responsibly since all investments come with some level of risk. This article is a compelling read that I urge U.S. business and political leaders to include among their required reading.

   During the initial days of the war, few expected the Ukrainian government to be able to manage the catastrophic events. However, despite immense skepticism, it proved capable of surviving the biggest crisis in Ukraine’s history of independence. The circumstances surrounding Ukraine’s establishment are unique, as the country has not only endured the war crisis but found new tools and opportunities for the eventual post-war development.

The Ukrainian government’s surprising ability to operate during wartime will no doubt be the subject of future research, analysis, and perhaps even Netflix documentaries. But the government has goals that extend far into the future; it declared that after the war ends, the country will become a new hub for investment and innovative projects. This will occur due to a variety of factors. For instance, having operated and defended itself in the face of enemies, Ukraine has proven that it is one of the safest locations for protecting international assets.

Additionally, many international companies have stopped their operations in Russia and Belarus, leaving gaps in the market that Ukraine can fill. As a result, Ukraine has the potential for immense growth in the coming years, perhaps enough to be considered a “tiger economy.” However, this will be impossible to achieve without joining forces with business leaders who can support such growth and feel confident in Ukraine’s ability to sustain and protect their business.

This report explores how, and in which spheres, US businesses can benefit from working with Ukraine in the future. This paper has been prepared to address the following questions US investors may have:

What are the major changes in the government’s work? 

         What is the government’s action plan for the near and far future?

What should businesses do now to create more business opportunities for themselves now and in the future?

Since the onset of the Ukraine-Russia war, its government has been doing everything possible to not only survive the crisis but also to improve the quality of its work, while also becoming more open to cooperation with various international organizations and businesses.

This paper reveals changes in the work of the Ukrainian government as well as the ministries seeking direct cooperation with international businesses. Additionally, it mentions best practices that can be adopted by international companies across different industries. 

Dealing with conflict necessitates clear and targeted strategy — in the war itself, but also in normal operations. The Ukrainian government’s plan of action has certainly changed in recent months. Many challenges have arisen, and there is not a person, let alone a government, ministry, or agency, who has the relevant preparation and experience to handle such adversity.

Despite the difficulty of leading a country through war, the Ukrainian government’s relentless work, at times, even led to increases in its efficiency. Each ministry is trying to carry out projects and initiatives to help alleviate the suffering and challenges related to the war, and sometimes there are small success stories that have brought additional value to the country. For example, the government has already presented the National Recovery Plan, which includes innovative projects that would have been unimaginable, let alone attainable, for the Ukraine that existed before Russia’s invasion in February of last year.

This plan is one facet of the Ukrainian government’s strategy for the future. Every government ministry has the potential for mutually beneficial future partnerships with international companies seeking a presence in Ukraine. Ukraine’s future will rely on such partnerships; most of the future plans are, in some way, connected to the plan to invite many international experts to the country.

While the outlook is quite positive for Ukraine and future US investment in the country, there will, of course, be challenges. Aside from complications due to the war, other factors must be considered, namely the issue of corruption. Corruption has been a major pain point in the country in the last two decades and, unfortunately, it has remained prevalent throughout the war. Some officials continue to lobby for their personal interests and schemes, contrasting those who have become true soldiers of Ukraine in the government offices. Another example of wartime corruption can be seen as a result of changes in government procedures. Simplifying such processes, such as procurement, has unfortunately created more room for corruption. However, it has also led to higher efficiency and faster problem-solving.

Cabinet of Ministers of Ukraine

MAJOR CHANGES

As the war started, the Ukrainian government made some significant decisions to ensure its work was sustainable. Despite sending an entirely different set of threats and challenges, the COVID-19 pandemic proved to be helpful in adapting to the war. The government Institutions were ready for remote work. In the first days, a variety of measures were taken to prevent an economic downturn or collapse. Taxes were lowered, and the official exchange rate for the Ukrainian hryvnia (UAH) was Frozen. Only in July did the official rate finally revert to its original value. Some of the government’s decisions created rigid conditions for many sectors, such as implementing transaction regulations or setting the new National Bank discount rate at the level of 25%. In doing so, the government aimed to ensure that the economy would not fail.

The major themes guiding the entire Cabinet of Ministers is working can be described as the following:

• Talking actions to ensure the sustainable functioning of all government institutions, even in temporarily occupied territories,
• Developing measures for protecting the economy,
• Developing a plan for the successful post-war rebuilding of Ukraine

One significant change, designed to decrease corruption, was selecting the head of the Special Anticorruption Prosecutor’s Office; this had been a major discussion throughout the past two years. In addition, Ukraine is joining several international bodies which can assist with efforts to limit and decrease corruption. Many efforts have already been made to make the state as transparent as possible. While there may be some weaknesses related to corruption, the government’s procurement system, Prozoro, proved to be effective, and even in times of war, is generally being used for productive purposes.

The Ukrainian government is also ensuring that all policies follow the EU integration procedures. A scalable portion of work is dedicated to developing new facilities for businesses in the western part of the country, establishing new logistical and transportation routes and creating many jobs throughout the country. This initiative is promising, yet there are challenges, such as ensuring that the social sphere receives enough money. More than a billion dollars have been paid through a government program, “E-Pydtrimka” It is also important to note that the grants from international partners fully fund many programs.

As of now, the country’s monthly expenditure is 8 billion USD, and the tax income is only 3.3 billion USD. This creates another challenge, as loans or grants from international partners become the only source to cover the difference.

ACTION PLAN FOR THE FUTURE

At present, the Ukrainian government’s primary plan is to promote its National Recovery Plan, which includes more than 850 projects across 15 spheres of national programs. The ambitious project aims, throughout the next 10 years, to secure a place for Ukraine in the top 25 countries in the Human Capital and Economic Complexity Index.

Some projects have the goal of creating jobs. For example, the government is planning large investments for the development of industrial parks across Ukraine, which will create thousands of job opportunities. Significant attention will be paid to developing a green energy plan, which will be critical in times of energy crises and in eliminating Ukraine’s dependence on Russian gas and oil.

It is vital to note that the government’s plans include the digitalization of many state services, ensuring more transparency and less corruption. While this mal<es improves accessibility and ease when seeking services, as with any digitalization process, this will inevitably render some government jobs redundant.

RECOMMENDED ACTIONS FOR US BUSINESS

1. If you see direct post-war opportunities for your business in Ukraine, waiting until the war is over could decrease your chance to win them. War time is a perfect period to build strategic relationships with government leaders by helping them overcome the current crisis, as it will create a business premium access to post-war business opportunities.

2. Connect with government and industry stakeholders in Ukraine. Making connections in war time can help you better understand the situation on the ground.

3. Invest time in learning more about Ukraine’s National Recovery Plan, as most of the priority projects are already enlisted.

Ministry of Infrastructure of Ukraine

MAJOR CHANGES

Before Russia’s invasion on the 24th of February, the Ministry of Infrastructure was working on one of the largest infrastructure projects in Ukraine’s history: “The Big Development.

Today, these projects have stopped, and many projects built since 2019 have unfortunately been ruined due to the conflict. According to Minister Kubrakov, Russia has destroyed more than 30% of Ukraine’s infrastructure. This creates significant work for the Ministry, and the country in general. Consequently, the Ministry of Infrastructure is currently targeting the following:

• Reconstructing vital infrastructure within the unoccupied territories, as fast as possible
• Developing new logistical routes and hubs
• Ensuring that the railway is consistently working for the fast delivery of fuel, humanitarian assistance, and military equipment.

The Ministry is making sure that all conditions are met for large businesses to continue their operations. Because the war resulted in a massive transportation collapse, the primary task was fixing routes, which were vital for the country’s survival as well as for business functioning.

ACTION PLAN FOR THE FUTURE

The Ministry has announced that, aside from rebuilding plans, there are other new opportunities coming. First, efforts are underway to fully integrate Ukraine into the EU’s logistics system. This includes building a new railway, developing new roads to unite European capitals with Ukraine, improving Ukrainian seaports, and continuing the work of the “open sky” for airplanes. Related to the “open sky” is another project: Ukraine’s intended launch of its own national airline company.

Many aspects of Ukraine’s infrastructure have been damaged or destroyed. Rebuilding systems, such as those for water and gas, are outlined in the Ministry’s detailed action plan concerning the technologies that may be used for building these new structures. This has also opened the door to implementing more ecological solutions across Ukraine after the war has ended.

Lastly, as rebuilding is considered the largest post-war priority, the Ministry participated in several negotiations, inviting governments to take charge of rebuilding certain regions. As of now, it has been publicly announced that all the frontline regions will have their own chief countries” involved in the rebuilding process.

RECOMMENDED ACTIONS FOR US BUSINESS

1. Study the opportunities of rebuilding Ukraine’s infrastructure, as some of the areas needing rebuilding are relatively safe now. Without starting big projects, a foreign company can invest in small, barely visible, but crucially needed infrastructure projects like water wells, communications, small roads etc., which are almost impossible to target with Russian long-range missiles Offer your technologies and skilled employees for infrastructure problem-solving. In the first few years after peace is imposed, infrastructure projects may become one of the largest sectors in Ukraine, providing the opportunity for significant partnerships and return on investment.

2. Examine the National Recovery Plan, Infrastructure section, in detail. Most of Ukraine’s future infrastructure projects are described in-depth in the National Recovery Plan. Use the presented knowledge to plan your future cooperation.

Ministry of Agrarian Policy and Food of Ukraine

MAJOR CHANGE

Following the war, the Ministry of Agrarian Policy and Food of Ukraine is dealing with a pressing issue: ensuring that all Ukrainian grain reaches its export destination. Because of war-related restrictions, it has become impossible to use seaports for export, and it is unclear whether Russia will abide by the new agreement signed by the United Nations and Turkey. At present, the Ministry is trying to develop conditions that allow the Ukrainian agricultural industry to survive, and eventually flourish once again.

In 2021, Ukrainian farmers harvested 107 million tons of grains; for 2022, they planned to gather 115 million tons. This year, however, the harvest will reach a lower number — only 60 million tons. The significant issue is that today Ukraine keeps more than 20 million tons of grain in storage, and if the grain is not exported, there is no space to store new harvests. The total storage deficit is currently 15 million tons.

The war situation forced the Ministry to create new export routes for Ukrainian grains, but this caused rapid increases in export prices. Before the war, it cost only 44 USD to export one ton; now, prices have risen to 200 USD per ton. Additionally, there is no interest offered when insuring the grain or the transport that collects it from Ukrainian territory.

Facing these challenges, the government sought new strategies, namely investing money into farms focused on gardening, growing produce, and greenhouses. In June, the government announced that 4 billion HRYVNAS (more than 100 million USD) would be distributed as grants for farmers who plan to start businesses in these sectors.

ACTION PLAN FOR THE FUTURE

The Ministry is actively exploring ways to ensure that stored grain is used for profit and not discarded as waste. The war has provided the opportunity to investigate new strategies for grain processing; there are, for example, plans to open factories to convert grain into biogas and to open plants for biomaterial processing.

Similarly, there have been discussions regarding the establishment of 20 new transshipment terminals in river ports and along railways and land borders. As a result, grain will be easily transported across borders, giving logistics companies the ability to export at faster rates.

Due to uncertainty in agriculture, transportation, and exports, many farmers may be hesitating to continue business. If there is no guarantee that their product can be exported, planting new crops may seem futile. To answer this uncertainty and to prevent a loss in harvests, the state will soon introduce a program to buy grains, creating assurance for the industry.

RECOMMENDED ACTIONS FOR US BUSINESS

1. Explore investments in Ukraine’s agricultural industry, particularly grain processing. This sphere will grow immensely in the coming years, and the government welcomes investment.

2. Considering partnerships for logistics and exports. There is a need for solutions to Ukraine’s difficulty transporting and exporting agricultural products, and this need will continue once the war is over.

3. Support projects aiming at increasing production and export capacity of small farmers. In doing so, Ukrainian farmers can support Europe’s agricultural industry, and investing in small farmers can create new business opportunities for the businesses inside the EU.

“The Ministry intends to start a state program for the purchase of grain. Together with the Ukrainian Railways, we plan to sell it on the external markets when the logistics situation improves. This should be of interest to foreign partners because our grain prices are lower than on the world market, and at the same time, it helps us to support the domestic producer” –

MARKIYAN DMITRASEVYCH

Deputy Minister of Agrarian Policy and Food of Ukraine

Ministry of Energy of Ukraine

MAJOR CHANGES

The Ukrainian energy sector is facing major challenges because many of its energy sources are now under Russian control.

Of specific concern: nuclear energy is under constant threat, coal mining in Donbas has become impossible, and there is no import of gas or oil from Russia. Infrastructure has also been damaged or destroyed, so the Ministry is paying significant attention to fixing the impacted electrical and gas supply facilities while also ensuring a sustainable energy supply for the plants and manufacturers that are still operating in Ukraine.

Beginning October 10^th, 2022, the Russian Federation has explicitly and systematically targeted Ukraine’s power system, which is vital for the well-being of the country’s citizens and economy. To date, Russia has carried out over ten huge missile strikes and many rounds of drone strikes against power stations around the country.

Due to the war, 780 towns and villages have been left without electricity or heating. Unfortunately, the winter season, and the critical need for heating, will become the toughest in the history of Ukraine’s independence. Thus, the Ministry is working to bridge the gap and is looking for innovative ways to ensure that the country’s population will have enough supply during the winters.

ACTION PLAN FOR THE FUTURE

The Ministry claims to have a plan to not only rebuild Ukraine’s energy sector but also modernize it. Within the diverse world of energy, Ukraine will become a lab for the symbiosis of the best solutions and technologies. Moreover, it will foster scientific and research informed approaches toward energy and resources.

Much attention will be paid to renewable energy sources as many old facilities are ruined. US’s Green Deal has also been a motivating factor when considering rebuilding energy infrastructure. Green and renewable strategies will be implemented in a variety of ways, for example, in ensuring improved energy efficiency for buildings across the country. Eventually, all rebuilt homes will follow the energy efficiency principle – something Ukraine has lacked for generations.

The war has also demonstrated a current and future need to secure energy facilities and prepare them for catastrophes or war. The war is speeding up some processes, and inside the Ministry, there is an understanding that the security of energy sources is vital for the future of the country, as well as the region.

At the World Economic Forum in Davos in January 2023, Ukraine presented its long-term energy reconstruction plans, with a focus on prioritizing nuclear and green energy and transitioning to a decentralized energy system over the coming decades.

While challenges lie ahead, Ukraine remains committed to its ambitious effort and anticipates attracting substantial investment in energy equipment and technology following the stabilization of the situation or the comprehensive insurance of military risks. With its strategic location and growing expertise in the energy sector, Ukraine is poised to emerge as a prominent energy hub in Europe in the coming years.

RECOMMENDED ACTIONS FOR US BUSINESS

1. Initiate a project related to renewable energy Ukraine will become a hub for startups and testing of many renewable energy sources, and the biggest projects in this sphere have the chance to receive complete support from the government.

2. Pay attention to energy security. As the war has shown, ensuring the security of energy systems is critical, so when investing in new manufacturing facilities, be sure to consider this.

Entrepreneurship and Export Promotion Office of Ukraine

MAJOR CHANGES

This government agency is one of the major players in supporting Ukrainian businesses and their operations abroad. For more than two years, the Office has been working on providing very convenient solutions for business-related issues, but the war has changed a great deal, meaning many companies have either closed or now face a significant decrease in sales.

One strategy from the Office was to establish emergency support consultations for companies evacuating their businesses to flee to the western part of the country. The Office helps companies to reassure international clients that Ukraine’s business ecosystem is still operating.

Additionally, it supports the promotion of exports and assists with reestablishing link with their supply systems; more than 450 companies have requested export promotion assistance, most of which were within IT, food production, organic production, and creative industries.

ACTION PLAN FOR THE FUTURE

In the coming months, the Office will present an extensive database of Ukrainian companies that are ready to export their products. This database will serve as a guiding instrument for anyone who wants to help Ukrainian businesses by establishing connections with the country’s manufacturing companies. The database will include all relevant information about the company and its readiness to export.

Another important strategy is the Office’s plan to promote the reality that, despite any difficulties, the Ukrainian business ecosystem is alive and ready to be part of mutually beneficial partnerships. The Office helps companies attend large events, expos, and conferences as a part of this.

“We are currently conducting an in-depth analysis of the business, analyzing how many enterprises are registered each month, have surveyed more than 800 companies on the issues and their needs from the government, and which programs and products are of interest to them. We also communicate with the central body of executive power and ministries working on strategies for economic development, and we are in contact with international donors” –

ANDRIY LYTVYN

Deputy Minister of the Entrepreneurship and Export Promotion Office

RECOMMENDED ACTIONS FOR US BUSINESS

1. Cooperate with Ukrainian businesses for your primary import needs. If previously, you were importing from Russia or Belarus, today you can find alternatives in Ukraine; many are open to large-scale cooperation and are ready to initiate new collaborations.

2. Invest in partnerships for stability and safety. Ukrainian businesses managed the war crisis well and can continue operations. If you want to receive more imports, it is high time to invest in partnerships.

3. Hire Ukrainian managers. Across industries, business owners and managers were forced to solve incredibly challenging issues during the first few months of Russia’s invasion. Ukraine’s business ecosystem offers creative, innovative, and resilient employees and partners.

Ukraine is open for business and investments. American industry could become its strategic partner, and cooperation would create a win-win case for both countries. U.S. companies could expand businesses and increase their profitability. Ukraine would benefit from economic development through investment and access to technology.