Since 1991, Belgium-Ukrainian relations in general and commercial relations in particular have been steadily developing to the mutual benefit of both countries. Occasionally trade and investment trends have been influenced by negative macroeconomic trends and, inevitably, by the more challenging geopolitical and security context of the past years.
Return to Growth
In the most recent period, macroeconomic winds have started to blow favorably again. In 2016, Belgian trade with Ukraine registered strong growth with a 16.2% increase of bilateral trade turnover. Last year, Belgium exported goods worth EUR 556.9 million to Ukraine and imported goods worth EUR 315.2 million. Now that the Deep and Comprehensive Free Trade Agreement aspect of the Association Agreement between Ukraine and the European Union is fully functioning, we expect trade between the two countries to further increase. Belgian statistics support this positive expectation, showing that no less than 2152 Belgian companies already export to Ukraine and another 2692 companies are interested in the Ukrainian market.
Belgium exports to Ukraine in 2016 mainly consisted of chemical products (30%), machinery and equipment (22.3%), and transport equipment (15.4%). Ukraine’s top exports to Belgium were vegetable products (46.4%) and base metals (16.3%), as well as textiles (9%) and wood (6.7%). To be more precise, Belgian exports to Ukraine focus on pharmaceutical products, herbicides, tractors and cars. Meanwhile, Ukrainian exports to Belgium are concentrated on maize and colza seeds along with clothing and iron and steel.
Besides direct trade, there is a steady flow of foreign direct investment coming from Belgium to Ukraine. At present, the Belgian business community in Ukraine includes around 100 companies, ranging from international groups to SMEs. Belgian companies have established production plants and product development centers as well as representational or sales offices in the country. They are active in a variety of economic sectors, but mainly in food processing, beer brewing, agriculture, construction, public lighting, mining, chemicals, IT solutions, microelectronics, and logistics.
Most Belgian investors stayed in Ukraine in spite of the more challenging environment since 2014. Some are currently in the process of expanding their business presence, while newcomers are entering the market. There is inevitably still a lot of caution. Businesses expect stability and security. Transparent markets and a solid legal framework guaranteeing a level playing field and protection of property, together with the availability of quality infrastructure and reliable public utilities, remain the key conditions to attract foreign investment and boost trade.
In order to deepen their bilateral economic relationship, Belgium and Ukraine have established a Joint Economic Commission that meets on a regular basis. The Commission last met in Kyiv in September 2016 to take stock of the latest trends in trade and investment and to highlight a number of success stories, as well as addressing some trade irritants or obstacles to investment. On that occasion, a successful trade mission also took place and a Belgium-Ukraine Business Forum was organised in partnership with the European Business Association. As a matter of fact, the flow of incoming Belgian trade missions to Ukraine has remained uninterrupted. Indeed, it is encouraging to see how the number of participants is steadily growing.
In the best of BENELUX traditions, Belgian, Dutch and Luxembourg companies also team up together in the BENELUX-Ukraine Business Club (BUBC), an informal but useful networking instrument and platform for dialogue with Ukrainian decision makers.
There is a welcome readiness from the authorities to listen and to try to assist in dealing with the concerns of the Belgian business community on subjects like cases of administrative arbitrariness involving customs, taxation, and inspections of all sorts. In other cases, Belgian investors sometimes face ‘raider’ attacks or are victims of questionable business ethics from their business “partners”, but lack the necessary protection from law enforcement bodies and cannot obtain justice in the courts.
Fighting corruption and implementing the rule of law are essential in this respect. A new Ukraine has embarked on a truly Herculean task since 2014, and nobody underestimates the “blood, sweat and tears” it takes, nor the resistance the country can expect from vested interests. Nevertheless, Ukraine has adopted an impressive new set of laws and created new institutions in order to strengthen the rule of law and tackle the root causes of corruption through smart deregulation and de-monopolization. There is now no room for complacency. Success is largely dependent on the will of the authorities to bring about a profound mentality change and exercise effective authority over all layers of administration and law enforcement, in the center and on the periphery of the country. This is the only way to create realistic expectations regarding the effective implementation of overdue reforms and their positive effects on the ground.
The overall positive and hopefully irreversible trends of recent years create a renewed sense of confidence that Belgian-Ukrainian business relations will further grow and diversify in a transparent and business-friendly climate. Ukraine is an interesting market with growing purchasing power that is increasingly turning westwards in diversifying its suppliers and approximating its standards and norms to European and international practices. Ukraine can boast huge resources, both human and material, in the agricultural and energy spheres, in the manufacturing industry, and in the IT and service sectors. A new generation of well-trained young professionals speaking foreign languages is emerging. These new entrepreneurs are proving themselves to be reliable and trustworthy business partners and giving more cause for optimism, creating great opportunities for bilateral business development in Ukraine.
About the authors: Luc Jacobs is Belgian Ambassador to Ukraine and Michel Versailles is Minister-Counsellor at the Belgian Embassy in Ukraine