Denmark is a global alternative energy leader and many Danish companies are already active as investors in this sector in Ukraine. What aspects of the Ukrainian alternative energy industry hold the most promise for Danish companies and how can Ukraine learn from the Danish energy experience?
Denmark is a world leader both in the alternative energy sector and in the energy efficiency sector today thanks to the processes we have been through over the past 40 years. Four decades ago, Denmark was in a position very similar to Ukraine today. We were completely dependent on fossil fuels. Traditionally we had relied on coal, but we had turned almost entirely to imported oil from the Middle East. The energy crisis of the 1970s forced us to rethink our strategy and we focused our efforts on two areas – renewable energy sources and energy efficiency. The results of this process can be seen today in Denmark’s leading position. We are particularly strong in wind energy and see huge potential for the further growth of wind farms in Ukraine – especially in southern Ukraine, where conditions are ideal. We are also global leaders in technologies to produce biofuel and exploit biomass – a sector offering extensive opportunities for Ukraine with its agricultural riches. Both wind power and biomass investments require long-term predictability in order to become profitable. If Ukraine can create the right environment for investment, it will be possible to gain huge advantages.
Denmark has also benefited from energy efficiency policies, allowing our economy to grow without parallel increases in energy consumption. This has only been possible thanks to efforts to promote energy efficiency, making it economically attractive for companies to develop and adopt efficiency measures. We see huge potential in Ukraine for the energy efficiency initiatives that have proved so successful in Denmark, and we are eager to share our experience with our Ukrainian friends. We have established the Ukrainian-Danish Energy Center within the Ukrainian Energy Ministry, which is a unit with a long-term advisor provided by the Danish government offering advice on energy sector strategy and planning. In the same way, Danish companies offer innovative solutions in a large range of CleanTech areas.
Ukraine now has the benefit of being able to learn from others: There is no reason Ukraine should repeat the mistakes of others, including Denmark. Denmark was in many ways a first mover in energy innovation. Ukraine can be a fast mover, if it acts wisely.
How do you expect full implementation of the EU-Ukraine Association Agreement free trade zone in 2016 to impact on Danish-Ukrainian commercial ties?
The most important aspect as far as both Danish and Ukrainian companies are concerned is the fact that Ukraine is taking on a commitment to implement EU standards on a wide range of trade issues. These standards have already been enormously successful in fostering trade within the EU’s internal market. Ukrainian companies will now benefit from greater compatibility to other European markets. For Danish companies, this standardization will create predictability and establish a level playing field. One key concern of Danish companies looking to enter Ukrainian markets is unpredictability. Part of this is the traditional impact of vested interests on the Ukrainian business environment. Removing this uncertainty will make Ukraine a far more attractive investment option. During political discussions, we often encounter the semi-mythical idea of Ukrainian exceptionalism – the belief in a set of circumstances unique to Ukraine that we must take into consideration and accommodate. This approach is misleading and unhelpful. In reality, if you create a level playing field here, investors will come.
What are the key concerns you encounter when communicating with Danish businesses present in Ukraine, and those eyeing potential entry into the Ukrainian market?
The top concerns are lack of security for investments and rule of law issues. There is a clear sense that things are moving in the right direction, but much remains to be done. There are also concerns over excessive bureaucratic red tape and administrative discretion over the issuance of licenses, customs clearance and so on. Too much appears to be up to individual civil servants to decide, rather than being subject to clear processes and transparent timeframes.
Despite these issues, I am broadly optimistic about the improving investment climate. Whenever I meet potential Danish investors, one of the biggest hurdles I have to overcome involves perceptions of Ukraine as a war zone. Thanks to media coverage of the fighting in the Donbas, many outside of Ukraine have the impression that the whole country is experiencing military conflict, when in reality only a small part of the eastern region is affected. Security is not actually a major issue for Danish companies entering the Ukrainian market – instead, I tell potential market entrants they primarily need to consider commercial and political issues. I advise them that they need to weigh the pace and complexities of continued political and economic reforms against the prospects of gaining from entering the Ukrainian market at this stage, while also acknowledging the challenges that still exist.
The Danish government has recently launched a new programme to support greater Danish investment in Ukraine. What are the main goals of this initiative?
Danish engagement with Ukraine involves both governance support programmes and the promotion of Danish private sector ties. Both are important to create the kind of development that benefits people and businesses alike. For many years, the Danish government has run investment funds that help Danish companies establish a presence in new markets. For the next four years, we will have established a specific Ukraine investment facility worth EUR 4 million. Danish companies must co-finance these investments to a minimum of 50%, so this investment fund is worth at least EUR 8 million for the Ukrainian economy. We decided to provide this additional financial support to promote Ukraine as an attractive investment environment because interest is currently high but there is also considerable caution due to the challenging circumstances in the country.
Many Ukrainian companies are currently looking to develop new relationships with EU partners and realign their businesses towards European markets. How can Ukrainian companies make themselves attractive to potential Danish partners?
My message to Ukrainian companies looking to expand in Europe is to be trustworthy, to think long-term, and to be visible. You have to have considerable stamina and need to be ready to go through 20 potential partners before you find somebody who is interested in developing cooperation. Ukrainian companies need to appreciate that potential Danish partners have the whole world to choose from when it comes to placing their investments. Ukrainian companies need to be proactive and they need to be persistent.
You took up your post in Kyiv in summer 2015. During your first few months in Ukraine, what has surprised you most about the country?
I served in Denmark’s Moscow Embassy for four years at the turn of the millennium and this experience formed the basis of my initial expectations when coming back to the former Soviet Union. What has surprised me most about Kyiv is how livable and European the city is. It is a hugely charming and very pedestrian city. Friends and family tend to visit me with reservations based on the media coverage of the conflict in east Ukraine, but they always leave full of positive impressions. The cobbled streets, golden domes, and general city layout, together with friendly Kyivan attitudes and the café culture, make it an enormously comfortable city to live in.