Cautious optimism in Ukraine: ‘Things are gradually improving’

Despite the fact that the country is at war with Russia, the national currency isn’t worth much, and the average income isn’t high, a cautious optimism can be detected among plant and flower traders in Ukraine. This optimism is fed by a modest economic growth. It will take a while though, before floricultural products are going to be big business in Ukraine. That’s what Floribusiness learned from their recent visit to Flower Expo Ukraine in Kiev. ‘Things are gradually improving’

By Arie-Frans Middelburg

The taxi driver’s gestures say it all. When I ask him how the Ukrainian economy is doing, he shrugs his shoulders and makes a so-so gesture, indicating that things are getting a little better. We’re on our way to the 12th edition of Flower Expo Ukraine, organised by Nova Exhibitions and Flower Council Ukraine. The words “a little better” will be frequently repeated later on, at the fair. This viewpoint is based on a mix of positive and negative developments that are currently going on in Ukraine. All in all, the predominant feeling is one of cautious optimism.

Jaguars and Audis

On our way to the trade fair, we can see that Kiev has developed a lot since the Soviet Union collapsed. In May 1992, it was apparently still very quiet on the roads. Nowadays, the roads are congested and we’re repeatedly cut off by large Jaguars and Audis. On the side of the road, there’s a lot of building activity. Apartment buildings seem to be shooting up like mushrooms. Someone tells us that the average Ukranian’s clothes have also become a lot more modern. After a major setback in 2014, the economy is slowly recovering, partly thanks to the millions of Ukrainians who are working abroad and transferring billions of euros to their home country every year.

The Ukrainian economy is seeing a moderate, 2-3% growth this year and the forecast for the coming year is the same, according to Carolien Spaans. She’s been Agricultural Counsellor in Ukraine since August 2016.

Agricultural counsellor Carolien Spaans.

That the economic growth has a positive impact on the plant and flower sales in the country, becomes clear at the busy trade show floor beside the Dnieper river.

“Yes, plant and flower exports are increasing. Not as fast as we’d like, but there’s definitely some steady growth”, says Michael Aristov of Astra Fund Holland. The export company is located in Naaldwijk and specialises in exports to Central and Eastern Europe. Aristov feels that their growth is thanks to the fact that Astra Fund Holland has been expanding their distribution in Ukraine across an increasingly wider geographic area.

Director Liliya Madaniuk of Limflor, who buys through the clock and directly from Dutch, Belgian and Italian growers, also mentions a small increase. Limflor is the biggest exporter to Ukraine. They also export to other countries, including Russia, Kazakhstan and Bulgaria.

Weak hryvnia

Ukraflora has been buying flowers from DGI for fifteen years. They used to get one delivery per week, but it’s been two for a while now. The last three years, we’ve been buying cheaper plants and flowers though, adds Andrey Shymkov. “We’re selling more shorter-stemmed flowers now, for lower prices.” Rose is their main product. Other flowers are often too expensive. He mentions chrysanthemum as an example. “They’re too expensive now, so we more or less stopped buying them.”

Shymkov feels that the competitive position of Ukrainian flower companies has become stronger, thanks to the weak hryvnia. Their advantage is that they’re located close to Kiev. Imported flowers are often too expensive for Ukrainians.

This made him the first person to mention the cheap currency. In July 2014, 16 hryvnia was worth 1 euro. Nowadays, a euro costs 32.4 hryvnia. That puts any strong increase of plant and flower imports to a halt of course. The exchange rate is characteristic for the situation of the Ukrainian economy, which is suffering from the war with Russia that’s still going on in the Donbass, in the east of the country. In 2014, Ukraine already lost their important agricultural and tourism region Crimea.

Exports to Russia haven’t been possible since the beginning of the war. Ukraine was also hit by an economic crisis in 2014. The country is only slowly recovering from it. As a result, the average standard of living in Ukraine is still quite low. Aristov of Astra Fund Holland feels that that’s the biggest barrier for exports.

Corruption at the border

A second barrier mentioned by Aristov is the corruption at the border. He describes the customs formalities as “very tricky”.

Liliya Maidanuk of Limflor, also located in Naaldwijk, confirms that there are always problems. “Exporting to this country isn’t easy, but it’s possible. It’s interesting”, she says, keeping it vague. The only thing she adds, is that having your own transport company, like Limflor does, makes things easier.

The association agreement between the European Union and Ukraine, which was designed in 2014, has been applied since November 2014, and officially came into effect in September 2017, has led to lower import fees on flowers, plants and propagation materials.

The corruption at the border, however, is a different story. Tackling the corruption was one of the conditions that the EU set, in exchange for billions of euros of aid money. The IMF has the same condition for any money they give to Ukraine. It should have put a halt to the bribes, which often have to be paid in order to get into the country with a load of plants or flowers. But according to Shymkov, nothing has changed yet at the borders.

Gas transit

The Dutch ambassador in Ukraine, Ed Hoeks, expects that it will take a while before the corruption in Ukraine is really over. One of the requirements of the EU and the IMF, is that Ukraine sets up an independent anti-corruption court. But there are presidential elections in March next year, and current president Petro Porosjenko doesn’t want to get involved in this matter. An important vote regarding the anti-corruption court is probably going to be deferred now, expects Hoeks.

Another important topic is the gas transit from Russia to Europe. At the moment, this goes through a pipeline in Ukraine. It brings in billions of euros for the country, explains Hoeks. But there’s going to be a second pipeline from Russia to Europe, via the Baltic sea. That could cut down the Ukrainian earnings by billions.

All in all, it will probably take a while before the Ukrainian economy is really going to flourish, and the 45 million Ukrainians will have enough money for luxury products such as plants and flowers. At the moment, people are still more focussed on making sure they’ve got a roof over their head and a hot meal on the table each day.

The current standard of living is confirmed once more, when an Uber taxi drives us from the International Exhibition Centre to Hotel Rus. After a 25-minute journey, we pay 100 hryvnia. Converted into euros: just under 3 euro.


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