KIEV: Austria, with its historically deep ties to Ukraine, is one of the country’s most important sources of investment. But Ukraine’s economic crisis, unstable politics and the phantom cease-fire in the eastern Donbas have put fresh Austrian investment – which stands cumulatively at $2.4 billion – on hold for the most part. But even so, Austria remains Ukraine’s fifth biggest investor after Cyprus, the Netherlands, Germany and Russia. Moreover, some companies are even reporting growth.
There are 43 subsidiary enterprises of Austrian companies in Ukraine. But no new Austrian businesses have entered Ukraine over the past two years, according to Ukrainian-based Austrian business consultant Rainer R. Staltner. The largest Austrian enterprises in Ukraine operate in the banking and insurance sectors, with Raiffeisen Bank Aval and Vienna Insurance Group being the most high profile.
Represented in 24 countries, Vienna Insurance Group has founded four insurance companies in Ukraine: the Ukrainian Insurance Group, Kniazha, Globus and Jupiter. Together, they have a market share of 4.2 percent, according to VIG’s 2014 report. For VIG, Ukraine remains a core developing market, a senior executive of VIG in Ukraine, Gary Wheatley Mazzotti, told the Kyiv Post.
He confirmed that despite the economic turmoil, VIG is still doing good business. During 2015, the income of VIG in Ukraine was €54 million, which was still 14.6 percent less in euros compared to the year before. But Mazotti is happy with this result: In hryvnia terms, VIG is doing well. The company’s trump card is its Austrian origin. “Customers in Ukraine see the value of being insured by an international insurance group,” Mazzotti said.
Those investors who came to Ukraine before Russia launched its covert war haven’t sold their assets, but put them on the standby mode, said Staltner, the business consultant. Staltner has lived in Odesa since 1995. He advises investors who want to enter Ukraine, as well as Ukrainian producers looking to export to European markets.
According to Staltner, no Austrian investors have come to Ukraine in the last two years. “They’re interested, but they’re just watching and waiting,” he said. The instability of Ukraine’s economy continues to put off potential Austrian investors. Staltner said Austrians want to see peace in the east and a fair judicial system in Ukraine. Poor infrastructure also scares them off.
“When an investor comes and sees the roads, he doesn’t want to do anything. That’s because products don’t just have to be produced, but delivered as well,” Staltner said. As an illustration, he said that delivering goods the 330 kilometers from Odesa, Ukraine’s main sea port, to Reni, a town on the Danube River in Odesa Oblast, is more expensive than driving them from Odesa to Kyiv (a distance of 470 kilometers), simply because of the difference in the road quality.
