What made Ukraine so attractive to Israeli heart and investments? (Delo.ua)
Olha Stoliarchuk, CEO of Israeli-Ukraine Alliance’s Kyiv Office
Talks about how attractive Ukraine is for foreigners and how many international investors are looking at projects and opportunities in Ukraine are heard everywhere. Everyone also says that Ukraine is conveniently located, has a huge number of university graduates and specialists in various fields, as well as competitive prices for services and accommodation. And don’t forget about unique natural resources, agriculture and developed industry.
But which sectors truly benefit from the talk and attract the investors’ attention? What sectors do our Israeli neighbors invest in?
According to the State Statistics Committee, the volume of bilateral trade in goods and services amounted to $907.3 million last year. Down by 18.9% compared to 2019 when it reached $1.1 billion.
As for the direct Israeli injections in Ukrainian economy, those were at $68.7 million as of September 30, 2020. Investments were mainly attracted in real estate, information and communication, as well as processing industries. In other words, the potential that Ukraine publicly claims to have is not yet that easily “sold” to investors and requires strong marketing — both by companies and the state itself. Now, let's dive into the details of successful Israeli investments.
COVID-19 had a massive impact on real estate markets worldwide, and Ukraine is no exception. Developers took the hit, especially the ones who lean on banks for funding as the latter now apply way more stringent loan conditions. Eventually, this will affect pricing. That said, is Ukrainian real estate still attractive for investment?
Yes. Analysts are seeing an increase in demand for Ukrainian properties and a new trend — the one developers are also talking about: emergence of Israeli funds that buy lots of apartments at once. Sometimes they purchase entire floors, sections or even buildings. Usually, these apartments are then rented out and managed by specialized funds. I believe this creates a field for new opportunities and rethinking of the residential real estate market.
Technologies and Solutions
It is too early to talk about Ukrainian companies and solutions in which Israeli investors invested last year. However, it is worth focusing on what Ukrainian companies have received Israeli investments and what Israeli structures have their offices and R&D capabilities in Ukraine. In my opinion, this is a true example of what Ukrainians are best at.
Playtech. It is the world’s largest provider of gaming software, offering solutions for online casinos, as well as for online sports betting and mobile games. The company has offices and development centers in 17 countries, including Ukraine, where developers and security, data processing and quality control engineers work on the latest R&D projects.
Wobi. The company offers clients to choose the best insurance provider by comparing products and prices. The company focuses on different types of insurance, such as travel insurance, vehicle insurance, loans, pension insurance and others. It is the offices in Kyiv and Kharkiv that develop Wobi’s React and Node.js based solutions.
MyHeritage. It is an online genealogy platform that first became known for its genealogical tree development service. Today, the company offers genetic testing services, diagnostic DNA screenings, tools for identifying relatives and family members. It currently has 93 million users worldwide. The company opened a special development center in Kyiv, where Ukrainian PHP and Java developers work on the company’s web and mobile products.
Zirra. A market research platform that aims to help its users avoid financial risks, understand trends, generate ideas and find investment opportunities. Those are Ukrainian artificial intelligence developers who help Zirra use NLP and machine learning for advanced data analytics.
Wix. Israeli web development platform that offers thousands of templates for web and mobile sites, web hosting and business management. Company’s international offices include two in Kyiv and Dnipro with more than 500 employees.
Additionally, there are many other Israeli companies in Ukraine: Check Point, Teva, Lumus, Imonomy, Bridge, Celeno, Trackimo, Plarium, Similarweb, and others. So, as reality clearly shows, excellent quality of Ukrainian STEM resource and performance of Ukraine’s outsourcing companies are already praised worldwide. Now, Ukrainian government’s #1 task should be promoting the trend of Israeli tech giants opening their offices in Ukraine.
Processing and Agroindustry
No one knows what industries got the biggest share of that $68.7 million attracted last year. But we can assume that vectors of financial injections coincide with the areas where Israeli-Ukrainian cooperation is in full swing, particularly the export of Ukrainian goods to Israel. When it comes to the processing industry, agricultural sector is undoubtedly the one showing the biggest “yield”. According to State Statistics Committee, Ukrainian agricultural exports in Israel mostly comprised cereals (40% of total exports); ferrous metals (18% of total exports); food industry residues and waste (6.6% of total exports); alcohol and soft drinks (3.6% of total exports); animal or vegetable fats and oils (3.4% of total exports); oilseeds and oilseed products (3.3% of total exports).
Investment attractiveness of the agricultural sector can be further strengthened by joint interstate projects, especially in the field of Israeli agro-tech innovations that are already gradually entering the Ukrainian market. Like a widely publicized pilot project in the south of Ukraine using innovative Israeli irrigation technologies.
What do we have now and what we do about it moving into the future?
Even though foreign investors, particularly from Israel, are already present in the market, Ukrainian companies vitally need to work on their brand awareness, quality of goods/services and export skills, and not be afraid to explore and enter new markets.
On this way they can expect assistance — both in theory and practice — from the Office for Entrepreneurship and Export Development. At the same time, business councils at city halls and foreign embassies have begun to actively help Ukrainian exporters and trade missions. In addition, there have long existed business communities, associations and alliances providing a wide range of services and assistance to businesses wishing to enter new markets or scale up their operations.
What should Ukraine do to attract Israeli investments? First, make itself clearly visible on every business platform imaginable. Second, work hard every day to better protect foreign financial injections. Today, international community also wants to see what will come out of the recently signed “investment nannies” law that introduces a number of benefits for the investment projects meeting its criteria and implemented till 2035. In addition, the international focus is on the newly announced Foreign Investment Fund. Thirdly, the analysis of several “hot” cases of foreign investors (in particular, Scania Ukraine) proves that protection of investments and assets, fair courts and the fight against corruption should be on the top of the state's agenda. Fourthly, Ukraine should consistently support exporters by clarifying conditions and opportunities of the Free Trade Agreement between Ukraine and Israel.
Should we mention here the creation of favorable conditions for doing business for non-residents, digitalization and new opportunities for investing, for example, in the Ukrainian stock market, state facilities subject to privatization and land (after opening of the land market)? Sure. But first, let's get back to 2020 bilateral trade volumes. After that, the sky’s the limit.
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