Stepan Chernovetskyi, founder of Chernovetskyi Investment Group, talks about his experience of doing business in Europe and shares his insights on Ukraine’s 71st ranking in 2019 Doing Business on delo.ua.
We all have our own version of the Champions League. Year after year, with every edition of the World Bank’s Doing Business, politicians keep scores and report on their teams’ successes, businessmen compare indicators and follow trends, and armchair critics argue that “we should have played differently in the defense”. This year, in the ease of doing business “championship”, Ukraine ranked 71 – five positions higher than last year. Does this mean that it is always easier to run a business in any of the 70 countries with better indicators?
The simple answer is “no”. The reality is more complicated and interesting. In my experience, you should never underestimate the commercial, historical and cultural context of any market.
First, I do not agree with the claim that Ukraine lags behind Europe in every respect. Admittedly, this is true in some aspects. Clearly, we had insufficient time to establish stable financial institutions, judicial system, transport infrastructure, and other projects that by nature require decades of investment and development.
However, these weaknesses can turn into our strengths. Today, Ukraine is open to the technologies that did not even exist yesterday. Instead of updating something outdated, we can immediately implement something innovative. For instance, NFC technologies for contactless payments have now a strong foothold in the consumers’ wallets. In 2017, Ukraine became only the 15th country in the world where Android Pay rolled out, and in 2018, we were the 28th for an official launch of Apple Pay.
Second, young Ukrainian business, with its fits and starts, differs significantly from its European peers which have been operating in an open market for decades. This time allowed them to accumulate vast experience of foundation, development, successes and failures of the long-term projects. Along with this experience, the companies acquired goodwill – the virtue of Western businesses.
European money is roughly divided into new, old and ... well, very old. Working on a project with the very old money is a big success and an invaluable experience, commercial incentives aside. It is very beneficial to work with the old money as well to expand horizons and develop your business. Although this cooperation must be earned: these companies set high standards for both themselves and their partners.
Occasionally, where Ukrainian businesses cannot showcase long-standing history and reputation, they face considerable caution from the Europeans. At times, such vigilance is justified. There are frauds and other con artists even in a stable and secure market. As much as elsewhere, established and reliable contacts are essential.
In Ukraine and Eastern European countries, it is easier to collaborate with international companies or top-tier consultancy. Firms operating in these markets understand their specifics but, at the same time, value reputation and maintain high standards. Such an environment is more encouraging and open to fast projects. The success of Ukrainian startups confirms it.
Third, even within Europe, approaches to business cooperation are very distinctive. Northern Europe is more open and disciplined but in turn, requires strict commitment from the partners. Southern Europe – Italy, Portugal and Spain, where I had my ups and downs, – will seem rather relaxed even by Ukrainian standards. In addition, some South European markets are quite protectionist. Do not fall for the region’s openness to the tourists – it does not extend to everything.
Entering a European market is a serious step for any Ukrainian business. It requires discipline, meticulous preparation and a fair assessment of one’s capabilities. Indeed, much depends on measurable indicators. However, sometimes an “away game” does not go smoothly despite many years of experience and tested strategies both in defense and in offense.
Do not avoid world business “championships”, just get acquainted with the rules in advance.