Export of Ukrainian business during a full-scale war: to be or not to be?

The development of micro, small and medium-sized businesses (MSMEs) in Ukraine faces numerous challenges, especially during a full-scale war. Exporting goods from Ukraine abroad remains a possible "growth point." According to a study by the European Business Association, about 14% of surveyed MSMEs plan to expand their geography and enter other markets. This is a positive signal, and it is not an isolated one. For example, in mid-May, the EU Council finally approved the extension of the duty-free trade regime for our country for a year. This regime came into effect in June 2022 and will be applied until June 2025.

Let's be honest: exporting to the neighboring European Union faces many challenges. On the other hand, our services and electricity are cheaper and taxes are lower, which makes it possible to compete successfully in the European market. But there is an obstacle: the vast majority of Ukrainian companies do not really know how to engage in expert activities. To make up for this, a large part of the My Export conference for exporters, organized by Oschadbank with the support of the USAID Competitive Economy of Ukraine project, was devoted to life hacks on how to succeed in exporting.  I am sharing some of them with you.

The conference participants are convinced that it is always possible to transfer a business model that has worked in Ukraine abroad. Export activities should be planned in advance, assessing the company's readiness for export. You can't enter all markets at once, you need to focus on well-known countries. It is worth identifying a focus product for export and bringing it in line with the requirements of these selected markets.

In direct sales, an export lead manager should know the language of the country of export and be able to travel or even live there freely. Ideally, there should be a sales office in the country of sale. It is necessary to keep a warehouse of finished products abroad to be able to quickly ship to the customer. It is more difficult for small and medium-sized businesses from Ukraine to sell in the United States and Canada due to the dominance of large retail chains, which require millions of dollars in marketing fees to enter. They should focus on local sales in small batches. And on the markets of other countries, the list of which is not limited to the EU.

Successful exporters believe that to succeed, they need knowledge, experience and government support to overcome barriers to new markets. We see that businesses are not always familiar with the current currency restrictions imposed by the NBU and do not know how to protect themselves from late payments by their counterparties. The participants of the My Export conference gave advice on the latter: Ukrainian exporters should always specify Ukrainian courts in their foreign contracts as the place where potential disputes will be considered.

Among other things, businesses noted a lack of support programs for exporters. At the same time, they do exist, and there are many of them. For example, there is an export support program from the Export Credit Agency (ECA), under which an export contract is insured up to 85% of the amount and can become collateral for a loan. By the way, this insurance will also help in case of problems with a foreign counterparty. Under this program, Oschad and ECA have already supported Ukrainian exports worth UAH 4 billion. There is also an EBRD export support program, which provides for the guarantee of obligations to foreign banks for such transactions through a documentary letter of credit and a bank guarantee. The program limit for a client is up to EUR 40 million. These and similar programs ensure the security of payments. Since the beginning of the full-scale invasion in 2022, under all export support programs, Oschad has provided financing for more than 18 thousand foreign economic contracts worth the equivalent of UAH 200 billion.  

According to the speakers at the conference mentioned above, successful exports require not only financial injections, but also comprehensive support for entrepreneurs at all stages of entering international markets. This includes educational programs aimed at increasing competence in international trade, marketing support, and legal support. It is difficult for small companies to succeed on this path on their own, so Ukrainian businesses need to unite in export alliances. Similarly, alliances should bring together stakeholders who want to help expand the country's export potential.

There are already examples of such collaborations. Last year, in cooperation with our partners, we created the My Export program. It provides preferential service rates at Oschad, special offers for the delivery of export goods from Nova Poshta, as well as training and consultations from the USAID Competitive Economy of Ukraine technical assistance project, implemented by a representative of the Big Four, KPMG Ukraine. This offer is mainly intended for micro and small businesses. We have good results: a thousand new accounts of exporters. As a side result, these companies have concluded 426 new foreign exchange contracts worth UAH 1.6 billion and created 800 new jobs. In my opinion, this is a good example of how cooperation can help businesses expand their operations, overcome existing barriers, and strengthen the country's export potential.  

However, such initiatives will not be able to remove all barriers to exports. For example, logistics is an important issue. Public and international investments in improving logistics routes, including rail and sea, are of strategic importance to ensure fast and efficient transportation of goods abroad.

Ukrainian entrepreneurs - especially micro, small, and medium-sized businesses - have great potential for export development. But they need an impetus to turn this potential into export contracts. Cooperation between the government, international organizations helping to rebuild Ukraine, and the private sector can provide the impetus needed to restore and expand export opportunities, sustain economic growth, and strengthen Ukraine's position in the global marketplace.

Original https://www.epravda.com.ua/columns/2024/07/10/716426/