Poles Invest in Ukraine Despite Ongoing War

During the Ukraine Recovery Conference in Berlin, Kyiv Post's Special Correspondent Michael Kujawskia asked Karol Kubica, Executive Director of the Foreign Trade Office in Kyiv of the PAIH (Polish Investment and Trade Agency) about Polish investments and plans related to the reconstruction of Ukraine

Michal Kujawski : The Kyiv office of the Polish Trade and Investment Agency (PAIH) resumed its operations about a year ago. What does the office do on a daily basis, and what does it focus on?

Karol Kubica: The office in Kyiv has been operating since 2018. It replaced the Trade and Investment Promotion Section (WPHI) of the Embassy of the Republic of Poland in Kyiv, which functioned at embassies in various countries. Due to the war, our office was temporarily evacuated, but the agency continued to operate uninterrupted from Poland. In July 2023 we returned to Kyiv. We are working at full speed and paradoxically, we have more work to be done than before the war. Our facility, the Foreign Trade Office in Kyiv, is the most staffed PAIH office in the world and we plan to engage even more people in the coming future.

We also plan to open an office in Lviv to be able to work closer to the Polish border. We find Lviv becoming the second business center of Ukraine with many investments located there. It’s because of security reasons – it’s close to the EU border, particularly with Poland. Our office supports Polish businesses in expanding into the Ukrainian market. We support the Polish economy but we also help Ukrainian investors, inviting them to invest and set up their companies in Poland. Our investment department takes care of them and guides them through the entire process of establishing a business in Poland.

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However, our main task is to support Polish entrepreneurs, help them find Ukrainian business partners for cooperation, assist in finding recipients for goods and services, verify contractors and provide information on the current market situation in Ukraine including various facilitations or restrictions. We work closely with the economic department of the Polish embassy in Kyiv and the Polish consulates in Lviv and Lutsk. Our task is also to get Polish businesses ready for the post-war reconstruction of Ukraine and to implement current projects.

MK: Three thousand Polish companies have expressed their interest in participating in the reconstruction of Ukraine to PAIH. Which industries are these?

KK: Together with the Polish Ministry of Economic Development and Technology, PAIH runs a database of Polish companies interested in cooperating with Ukraine. We have identified six key sectors that currently and in the near future have the greatest potential. These sectors are construction, medicine and pharmaceuticals, the agriculture sector, IT, automotive industry and energy. We also have an “other” category, which includes consulting firms that support the business environment.

Currently the largest group is the construction and energy sectors. We strive to respond to Ukraine’s needs in the area of critical infrastructure damaged by the war. We present Ukrainian entities with Polish companies that can supply power generators and build energy storage facilities. The Ukrainian market has undergone a significant change. Ukraine used to cooperate with Russia and Belarus. For obvious reasons this cooperation has ceased. The role of Turkey has also decreased – the Sea of Azov and partially the Black Sea are cut off, which prevents the delivery of certain goods and services.

Ukraine has redirected its trade routes to the European Union and Poland plays a crucial role here. Warsaw is Kyiv’s most important trade partner. Since 2018, we’ve consistently observed an upward trend in trade exchange. We are highly competitive in terms of the quality of services and goods. We have an advantage over Germany and France, mainly due to geographical proximity and a similar business culture. We simply understand each other well, Poles understand the Ukrainian market. Our office in Kyiv is the office of every Polish entrepreneur. We have conference halls and B2B rooms where entrepreneurs can hold meetings, negotiations and just use our infrastructure.

Since the outbreak of the war, we have conducted 11 economic missions with 190 Polish entrepreneurs participating. The last two missions focused on the medical and pharmaceutical sectors, including companies involved in the production of prosthetics. There is a huge need for prosthetics, treatment, and rehabilitation due to the large number of wounded Ukrainian veterans.

It’s also connected with the construction industry - medical and rehabilitation centers are being built. We are helping 3,000 entities that have expressed their will to provide their services and goods to Ukraine. The issue of demining the country is also important. As we know, one-third of the territory is mined, which makes Ukraine the most mined country in the world. The demining process will take from 5 to 10 years and without it the real reconstruction process won’t begin. Needs must be addressed according to their priorities, and we are responding to them.

Our office works closely with Deputy Prime Minister Iryna Vereshchuk (Ministry of Reintegration of the Temporarily Occupied Territories of Ukraine). We consult and implement our projects under her patronage and care. We feel her sympathy for Poland and Polish business. The support of the Ukrainian government administration is very valuable to us – we appreciate it.

MK: Visiting Kyiv’s grocery stores, it is easy to notice Polish products. Polish exports to Ukraine are three times higher than imports. As a result of protests at the Polish-Ukrainian border, some Ukrainian goods are being transported through the port in Constanța, Romania. How has the border’s blockades affected Polish-Ukrainian trade exchange?

KK: There’s no denying that the protests had a very negative impact. They also caused some difficulties for our office. The border blockade meant that Polish entrepreneurs couldn’t deliver their goods and services to Ukraine. Despite good relations, a lot of work done and Ukrainian needs, the goods couldn’t be delivered.

Many Polish companies running business in Ukraine faced some problems. One furniture producer which has 11 stores in Ukraine, couldn’t fulfill a large order. Polish businesses also work with Ukrainian transport companies. It’s because of price competitiveness and the ongoing war that many Polish companies are deterred. The border blockade had negatively affected Polish exports. At one point farmers also blocked themselves – Polish agriculture goods and food, especially Polish dairy is an important element of trade exchange. These goods weren’t delivered to the shelves of Ukrainian stores.

Poland also suffered reputational losses. I observed a lack of understanding about why the delivery of services and goods, which Ukraine cannot afford on its own, was blocked. To maintain supply continuity, other supply chains emerged immediately. We also observed a decrease in demand among Ukrainian consumers and there was a boycott of some Polish products. Some retail chains refused to introduce Polish products to store shelves due to the blockade. The CEO’s of some companies spoke of a 20 percent decrease in sales.

The Polish-Ukrainian border is also a transport route for companies from other countries. Many foreign firms, including Japanese ones, want to enter the Ukrainian market in cooperation with Polish companies, building warehouses and other facilities in Poland. I understand the arguments of the protesting farmers, but I hope that the problem will be permanently solved with the involvement of Poland and the European Union.

MK: When discussing investment in Ukraine, it’s impossible to ignore the war. What impact does it have on potential investors?

KK: It’s a very high risk. Ukraine’s territory is constantly shelled by Russia. There have been situations where Polish investments were destroyed. One of the Russian missiles hit a facility of the Polish company Fakro in Lviv.

Entering the Ukrainian market is an individual decision for each company. Despite this threat, we observe growing activity of Polish companies, which are registering their representatives and offices in Ukraine. Also many companies are ready to cooperate with Ukrainian partners but are waiting for the end of war. Large investments with Polish capital, such as the construction of production plants, are currently on hold.

Trade exchange and service execution of public procurement are leading now. When entering the Ukrainian market, Polish businesses can also get insurance against war, which is offered by the Polish Development Fund Group, to which PAIH belongs, as well as KUKE, which deals with export credit insurance. We offer many tools to protect against the risks associated with war.

MK: What are the prospects and future plans of the PAIH office in Kyiv?

KK: We are focused on strengthening the position of Polish businesses in the Ukrainian market. We run a series of activities to present Polish offers and connect Polish companies with Ukrainian partners. It enhances mutual cooperation.

On June 18th-20th the 3rd FORUM for the Reconstruction of Ukraine – PAIH, Integration – Economy – Partnership” will be held in Kyiv, organized jointly with the Polish Ministry of Economic Development and Technology, the Polish-Ukrainian Chamber of Commerce, and the National Chamber of Commerce. The event is under the patronage of the Polish Embassy in Kyiv and the Ministry of Reintegration of the Temporarily Occupied Territories of Ukraine, led by Ukrainian Deputy Prime Minister Iryna Vereschuk, who will personally participate in our forum.

The Polish delegation will consist of approximately 200 people, including around 100 entrepreneurs. The first day will feature panel discussions, while the second day will involve roundtable discussions where partners can talk directly about their offers and ideas. It is important for Polish entrepreneurs interested in cooperation with Ukraine to talk with their partners here in Ukraine. It gives better results than online meetings and, as mentioned earlier, our office creates conditions to organize such meetings. We also plan to open a PAIH office in Lviv.