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How to do business these days in the “ever promising country” of the Ukraine?

February 24, 2015
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I visited our branch in Kiev last week. The main aim of my visit was to see the current situation there with my own eyes and to make a decision on how best to continue with our business there. I did not want to rely on second hand opinions from newspapers, instead I wanted to feel the atmosphere for myself directly and formulate my own opinion. Just like practically everybody else, we have been hit by the current environment in the Ukraine and many of our clients are leaving the local market. How can we move forward in the current conditions there? Is it possible to move forward at all? I hoped that personal meetings with our clients, colleagues and business partners would enable me to resolve these questions.

When I mentioned to my family that I am going to fly to Kiev, my daughter started to cry; “Dad, don’t go there, they will shoot you!” It was difficult to explain to her that she should not be afraid, when all she can hear each day, is news about people dying in the Ukrainian conflict. So, how was the visit and what are the answers to my questions?

We flew from Vienna in an almost empty Boeing – there were approximately 19 people in total + the crew. These flights used to be full. We landed in Kiev/Borispol at a brand new terminal building, which was virtually deserted.

Kiev itself looks pretty normal – the empty plane and airport were the only indications that something is wrong. The City was illuminated by neon lights and you could see no evidence of what is currently going on in the Ukraine.

But you could feel the difference when you spoke to people here. Their mood is gloomy – almost everybody has already lost somebody in the conflict – relatives, friends or friends of friends. Because of a weak Hyrvnia prices are climbing and the real value of salaries is going down, everybody is being impacted by this.

Unfortunately, it also seems that some of the steps and measures taken by the current government are deepening the economic crisis, which is not helpful for both international and local businesses and also not helping the country itself in any way what so ever. But I realize it is difficult to manage a country in these conditions and I hope the government and national bank will react on feedbacks from the market accordingly.

To cut it short – the situation will not improve quickly and will not improve in the near foreseeable future. Even if they manage to silence the weapons this year, it will take years for a proper recovery. Historically a poor economy combined with the negative effects of war, a deeply corrupted environment and the general frustration of the majority of the population is a really dangerous set up. What will eventually come out from it all and how long it takes to start to recover, is a question for a crystal ball.

You would believe that having over 20 years of experience in international business management and dealing with so many cultural or legal differences through all these years, would prepare you for such a situation. But the truth is that you could never imagine how difficult it is to witness all the distress surrounding local business environment, and the next days’ uncertainty that people working in Ukraine are facing. Still, people go on with their lives, they adapt to their new world and so must our business.

OK, so what should we do with our business in the Ukraine under these conditions?

Many companies have already decided to stop their business activity within the Ukraine and have started liquidating their companies. At the moment, helping clients to liquidate their companies is the most flourishing part of our business there. But to liquidate a company is a very lengthy process.

There are many providers to be found there offering a special service – they will buy the company off of you, change the name and the managing director of the company and then “take care of” your company. This service is much cheaper and faster than liquidation, but what does this “taking care of” usually mean? To nominate somebody from the street (quite often a regular homeless man) as the managing director, to stop fulfilling the fiscal and legal obligations of the company and let it rot out. Financial authorities within the Ukraine have recently started focusing more on these cases and are currently investigating them. I do not believe any serious owner or a board of directors would send their daughter company in the Ukraine to such a fate, with such unpredictable risks and the huge potential of certain damage to reputation in the future.

Being an optimist by nature, I believe that as usual, difficult and challenging situations can also mean opportunity. Many companies have invested heavily in the Ukrainian market and if they decide to liquidate their company now, they will pay for it twice – once for the liquidation and the second time for re-entering the market in the future.

Therefore, we have started to offer a special new service for these types of companies – THE HIBERNATION OF COMPANIES. We would help our clients to minimize all the costs connected with running their businesses within the Ukraine, we would take care of all accounting, tax and the legal aspects of their entity and keep the company in good standing during this difficult period. Once the situation starts to improve, the client can wake the company up and start again from where he left off. This is a cost-effective solution and has one really important advantage – it does not damage the reputation of the particular company on the Ukrainian market and also in front of the local authorities.

The probability is that many managers and leaders are currently deciding what should be their next step in this market. Whatever your decision will be about the future of your business in the Ukraine, I wish you good luck. Also, please feel free to contact me, to share your experiences from within this difficult market.

I hope that the loss of life will stop as soon as possible there and that the Ukraine will have competent and trustworthy leaders, who will lead the country out from the current mess. The Ukrainian people really deserve better prospects for the future.

Jiří Majer
Founder of Accace Group
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