The executive director of the European Business Association (EBA), Anna Derevyanko, in an interview with DW, told how Ukrainians do business during the war, what problems they face and what plans for the reconstruction of the country already exist.

Deutsche Welle: Mrs. Derevyanko, the first investment index since the start of the full-scale Russian military invasion, which is compiled every six months by the European Business Association, was recently published in Ukraine. What are the main conclusions you drew from a survey of the directors of the companies that make up your association?

Anna Derevianko: Most companies were able to adapt to the new realities. More than 90 percent of companies have resumed work in whole or in part (most EBA members are foreign investors. – Red). The second conclusion is that companies are responsible for doing business in Ukraine and will try not to leave the country despite the war. The third important conclusion: companies continue to pay wages – no matter what.

In most cases, there are no significant cuts in wages or jobs, in some places companies even provide additional payments if employees are forced to go abroad. In general, the list of problems that companies complain about is quite stable. The only innovation is that the war came first. This is one of the main barriers to business. Among the challenges associated with the war, businessmen highlight the decline in purchasing power in the domestic market and the difficulties with logistics. But after the war on this list, the problems that hampered business even before the war are corruption that needs to be eradicated, as well as the inadequate functioning of the judicial system, which undermines the foundation of society’s development.

– What does the business community expect from the State under current conditions?

– First of all, we need constant dialogue, mutual support. So that we listen to each other and avoid destructiveness. At the moment, companies do not expect money from the state, although the situation is very difficult, very large losses. Everyone is just waiting for it to be clear how to make up for lost goods after the war. It’s not just about the state budget. We are talking about a comprehensive plan for the resumption of both business and the entire country as a whole. Meanwhile, large and medium-sized companies, which make up the majority of the European Business Association’s members, are doing their best to help bring Ukraine closer to victory – some financially, others with goods or food.

Micro and small companies are exactly who need help from the State. After all, they do not have the support of international headquarters, they do not have serious financial protection. I don’t know if it should be a direct aid from the state budget, or it could be interest compensation programs on loans or subsidies for starting a business. In addition, assistance provided by foreign partners must be distributed in such a way that small businesses are also supported and move forward.

In general, for businesses, large and small, it was now important to hear that there would be no tax hikes. Now it’s very difficult, if you also raise taxes, you can lose everything and not receive any revenue for the state budget. Before the war, the European Business Association raised the issue of the need to reduce the burden on the payroll. However, today we understand the situation that there is a hole in the state budget of five billion hryvnia per month. Thus, we do not demand tax reduction. But you can’t create them either.

– How to get out of the situation when holes in the state budget are patched with funds from foreign donors?

– There is hope, in particular, for the restoration of export volumes – this will give foreign exchange gains. But the main thing is that there should be no situations like importing tax-free cars. At first, the government allowed everything to be imported free of charge, and only then began to wonder how to fill the budget. Companies need, above all, the stability of legislation in general, including tax legislation. There’s no need to make too sudden moves, so think about what to do next.

We recently had consultations with government officials about the possible imposition of an import tax. Mainly, company representatives tend to believe that this should not be done, because it can lead to devastating consequences for the economy. There is another side of the coin – this is the risk of further growth in the exchange rate of foreign currencies. Dialogue is necessary to weigh the consequences of both scenarios. Meanwhile, the overriding concern is that the import tax will drive up prices. After all, someone has to pay, after all, for this. And the business, at the moment, barely survives on the edge of profitability, with the exception of the IT sector, which works for export.

For those who work for the domestic market, there is no doubt of great profitability. If you introduce new taxes, you need to understand how they will be covered. If there is no profitability, the tax will be included directly in the price. This will accelerate inflation and, if the limits of consumers’ purchasing power are reached, businesses will fall into oblivion one by one. And then they won’t pay any more taxes.

– You mentioned that in terms of filling the budget, there is hope for the resumption of exports. There are companies that reorient themselves from the domestic market to the foreign market in order to survive. Do you see the point in purposefully supporting this trend? After all, the recovery of the domestic market can take a long time.

– Undoubtedly. Entering global markets may be the only way companies can survive in these conditions. That’s why the IT sector is now functioning normally, because they are already in the global market. The rest will be extremely difficult if the business is focused on the domestic market. The exception may be companies focused on the military-industrial complex. Ukrainian producers should take advantage of the fact that the attitude towards goods from Ukraine is now very favorable. That doesn’t mean it will be easy. But it’s better to go this way now. After all, sooner or later it will have to be done, but it will be even more difficult.

Everyone must do everything possible for this. Starting by learning English to understand potential partners. Ukraine’s trade missions abroad, which work in embassies, are also expected to make efforts. They must serve as a source of information for our business, which intends to enter the foreign market. It is necessary to establish contacts with networks of distributors who are ready to promote Ukrainian products. It’s hard to go out completely alone, for a start, there isn’t enough information about the certificates needed for the products. That’s why we, the European Business Association, are currently creating the association “Global Business for Ukraine”. We will create a network of business representatives interested in receiving information from Ukraine – both about business opportunities in Ukraine and potential partners.

– So far, the investment climate in Ukraine in the context of the war is very unfavorable, as shown by a recently published survey by your association. However, more than 90% of companies said they had no plans to go out of business. Does this apply to Ukrainian and foreign companies?

– More than 60 percent of our membership is a large and medium-sized foreign company. All heads of representative offices of foreign companies in talks confirm that they plan to remain in Ukraine. Final decisions are made at headquarters, but everyone, without exception, has already made a decision on whether to continue business in Ukraine next year. It is still difficult to talk about long-term guarantees.

But foreign affairs, like Ukrainians, are determined to hold out. Nobody wants to lose the Ukrainian market, although it is now suffering from Russian aggression. Foreign companies, for the most part, have a greater margin of financial strength than Ukrainian ones. To keep employees, they often allocate funds for housing to those who have been forced to travel to Ukraine’s western regions or abroad. They believe that Ukraine has a great chance of winning this war. Representatives of foreign companies are already talking about how to rebuild Ukraine after the war together.

– Do companies rely on significant amounts of donor funding for recovery?

First, companies are already working on business turnaround plans. Some have already managed to restore the indicators to 60-70 percent of the pre-war level, while others are just planning to hit these indicators. It depends on the adaptability of the business. At the same time, conversations about restoration started not even now, but several months ago. Foreign companies see great potential in this. This can be a kind of springboard for business recovery.

We expect huge funds from international partners to be invested in post-war reconstruction of Ukraine. This will provide an opportunity for a strong boost to the development of the economy. Furthermore, there are high hopes associated with Ukraine’s status as a candidate for EU membership. This is expected to serve as a foundation for further transformation in areas where the greatest barriers to business exist. This is corruption and improper work of the judiciary. We feel that war changes society. There is hope that after the war there will be no more tolerance for corruption in Ukraine. EU membership is a dream for many Ukrainians, and along the way, the European Union will put pressure on Ukraine to resolve these age-old problems that make business difficult in particular. But transformations are inevitable and one should not wait with them until the end of the war. What can be done now must be done now.