Polish and Ukrainian Business Groups Coordinate Kyiv’s Future EU Trade

During the “Europe-Poland-Ukraine: Cooperate Together” conference in Kyiv, two major employers organizations from Poland and Ukraine formalized a significant partnership to begin collaborating to shape the future of trade between the European Union and Ukraine.

The Federation of Employers of Ukraine (FEU) and the Union of Entrepreneurs and Employers of Poland (ZPP) signed a Memorandum of Understanding on Sept. 12. The parties publicly declared their commitment to working together to support Ukraine’s EU accession talks, focusing particularly on trade, as well as aligning business practices and regulations.

The Kyiv Post had the chance to speak with Marcin Nowacki, the Vice President of Poland’s ZPP, who signed the agreement.

Michał Kujawski: What can we expect from the agreement signed by you and Ruslan Illichov, as well as the Polish presidency in the EU Council, which will begin on Jan. 1, 2025?

Marcin Nowacki: The document concerns the future of trade between the EU and Ukraine. The ZPP was very actively involved in the process of drafting this agreement, including the debate surrounding it, particularly on sensitive products.

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What are they?

According to EU trade regulations, sensitive products are agricultural and food products. We are active participants in the economic debate taking place in Kyiv, Warsaw, and Brussels. During the Polish presidency in the EU Council, we will make decisions about extending the extraordinary trade instrument for Ukraine’s relations with the EU and Ukraine’s access to EU markets

Currently, it looks as if Ukraine is already a member state in practice.

That’s correct but with safeguards for selected product categories, where there is a certain volume limit in cases of excess supply of specific products in the domestic markets of EU member states. Ukraine already has access to the EU market, but about 10% of products may be subject to limitations. We assume that around 90% of trade volume between Ukraine and the EU is uncontroversial. Competitive advantages are emerging for both Ukraine and the member states. Some goods that once came from Russia now originate from the EU. The export of products from the EU is increasing.

The largest EU exporter currently is Poland.

That’s correct. We are working on strengthening Poland’s position and role in trade relations between Ukraine and the EU. The potential for developing these relations is immense.

Polish exports to Ukraine are roughly three times higher than imports. Currently, economic relations mainly involve trade, transportation, and logistics. Will we see an increase in activity in other sectors in the future?

Indeed, the transportation and logistics sector is incredibly active. At ZPP, we closely collaborate with companies in this sector. This industry is not only focused on cargo transportation services but also makes significant investment efforts. Polish companies have high expertise in infrastructure investments.

There is a bright future for investments in the environmental sector. The Ukrainian parliament is working on a new environmental law. The regulations in this area need to be fully aligned with EU requirements. It will be a legal revolution, but also a revolution at the business practice level.

So, perhaps a more accurate term than rebuilding Ukraine is its modernization.

We are definitely talking about modernization. It’s a complete restructuring of the country, from local governments to major cities. This is another area where Poland can share its experience with Ukraine, particularly in the construction of sewage treatment plants and water and wastewater infrastructure.

Ukraine’s new environmental policy will completely change investment processes. Polish expertise extends beyond advisory and legal issues. Over 25 years, we have gained experience in project design, implementation, and management, and developed our own technologies.

This type of infrastructure will also be financed by so-called political funds from international institutions, especially European ones, but also American ones.

Returning to Ukrainian legislation, in July the Verkhovna Rada reinstated the privatization process that had been suspended since the Russian invasion. Nonetheless, due to the war, the Ukrainian budget does not currently anticipate significant revenues from privatization. Is this another area where we might see changes and increased activity from the Polish capital?

It’s difficult to say right now. For investors, the opportunities currently involve significant risk. I assume that medium-sized enterprises will be the most active in Ukraine, and we are working to encourage such companies to get involved. They operate dynamically and swiftly, which facilitates entry into foreign markets.

Large enterprises and state-owned companies, which can also participate in the privatization process, are slower due to procedural hurdles. Implementing large projects is currently challenging.

In joint business projects, it is also crucial to sign preliminary and conditional agreements that both safeguard interests and provide an exit strategy in difficult situations or instability. The Ukrainian side is interested in this approach.

How can we define such situations, risks, and challenges?

The biggest issues are predictability and legal security, as well as a lack of trust in the procedures. We recently had discussions in Kyiv with representatives from both Polish and Ukrainian businesses. I see that Polish companies would prefer to delegate the investment process, even if it is small, to Ukrainian firms.

This is due to potential corruption risks and concerns about the procedures themselves. Investment processes were also challenging in Poland years ago, but today we adhere to international standards, and the processes are transparent. Changes were driven, among other factors, by foreign investments. We are sharing our experience in this area with our Ukrainian partners.

How does politics affect investments and business? Take, for example, the blocking of the Polish-Ukrainian border by Polish farmers.

It was a challenging experience, and the effects are still visible today. We also suffered reputational damage.

I mentioned how crucial predictability and stability in Ukrainian law, procedures, and administration are for Polish entrepreneurs. Similarly, the Ukrainian side has concerns about border crossing blockages.

Political stability encourages doing business.

The border blockade was completely incomprehensible to the Ukrainian side. The first blockade was organized by the road transportation sector and had specific goals and arguments related to the Ukrainian electronic border crossing system, eCherha, which was not transparent to the Polish side.

However, the farmers’ blockade was entirely unclear to me. If farmers are raising issues related to Polish or European policy, they should block Warsaw or Brussels, not the border.

As a result, Polish companies incurred significant losses.

Polish exports were blocked, and we are indeed a major exporter of high-value-added products. Poland benefits from trade exchanges.

The problem cited was the presence of Ukrainian grain in Poland, which harms Polish farmers. Can this issue be turned into an opportunity, for example, by investing in the processing of Ukrainian products?

Absolutely, that is a good direction to go. However, it’s also worth noting that Polish producers are not saying that Ukrainian grain itself is the problem, but rather the large volume of it being imported in a short period. This has created tensions among Polish producers, who, while interested in working with foreign grain producers, also remain loyal to local suppliers. We want to develop food production, and there is room for Ukrainian grain in the increase in production volume.

However, this is a long-term process. In a few years, Polish food producers will certainly become strong investors in Ukraine, like what happened with German companies in Poland. The faster Ukraine integrates with the European Union and achieves stability, the sooner this will happen.

Let’s talk about the future. What are ZPP’s plans?

In early December 2024, we will hold another Polish-Ukrainian conference in Warsaw. Building on past themes like “Rebuild Together” and “Cooperate Together,” we will focus on trade relations, transportation, logistics, and European integration challenges. We will also address changes in environmental law in Ukraine and the energy sector, which offers significant opportunities for collaboration.

While large-scale energy projects are typically handled by state-owned companies, in the field of renewable energy, the major players in Poland are private businesses. We have many operators and investors with extensive experience, and as we know, Ukrainian demand is enormous. This will certainly be a field for extensive cooperation involving Polish contractors and operators.

Our focus is on animating and managing trade relations. We want to strengthen Polish companies operating in Ukraine and Ukrainian companies in Poland. Interestingly, Ukrainian companies are currently investing more in Poland than Polish companies are in Ukraine.

Are Ukrainian investments abroad a result of the ongoing war?

Medium and large Ukrainian companies need to diversify their business to manage risk and ensure delivery predictability for European, including Polish, clients. Even if a company operates in western Ukraine, European clients often expect a presence within the EU. This has led to Ukrainian entrepreneurs investing in Poland and the EU.

We also support Ukraine’s European integration, with Poland sharing its sectoral experiences. Collaboration fosters mutual understanding between companies, elites, and people in general.

A good example is the sugar industry. Ukraine has become a major sugar exporter to Europe, which is surprising to Poles given their historical experience with the EU’s sugar market. Poland ceded this sector mainly to Germany, leading to the closure of much of the industry.

Despite this, we aim to help Ukraine understand these processes and show how Poland navigated its path to the EU, which was longer and different from Ukraine’s current situation.

Can Ukraine use Poland as a model for aligning its economy with European standards and integrating with the EU?

Poland has experts and companies that remember the integration process, which is a unique value for Ukraine. The negotiations will certainly be long and challenging, with some sectors being excluded.

It’s worth learning from Polish experiences, especially since the scale and structure of Poland’s industry and economy closely resemble Ukraine’s.