INSIGHT – Ukraine seeks to rebuild economy with defiant small businesses


Women-Owned Skincare Business Expands Despite War


Signs the frozen economy is stabilizing


Kyiv aims to achieve $500 billion GDP by 2032​​​


Government has relocated 700 companies

Andrea Shalal

LVIV, Ukraine, Oct 8 (Reuters) – On the first day of Russia’s invasion of Ukraine, Victoriaia Maslova abandoned her herbal cosmetics factory in the Ukrainian town of Bucha when rockets began hitting a nearby airport.

A month later, they returned to Ukraine, determined to continue producing Maslova’s plant-based cosmetic brand Vesna.

“We love Ukraine. We want to go back to our country and work here,” said Maslova, 24, who founded the company seven years ago with her 44-year-old mother, Inna Skarzhynska.

To reverse the economic shock of Europe’s biggest war since World War II, the Ukrainian government is pinning its hopes on the entrepreneurial resolve of people like Maslova, the return of millions of refugees and massive international financial aid.

Maslova’s mother returned to the factory after the chaotic Russian withdrawal from the town of Bukha, near Kyiv, in April. The workshop was ransacked and chaotic, but she salvaged some equipment and loaded it onto a truck. They launched a new operation in relatively peaceful Lviv, about 450 kilometers (280 miles) west of the Polish border.

Five months later, Vesna products are sold in more countries than ever before, including Poland and Lithuania, and Maslova recently won a deal to manufacture goods for private label in the U.S., she said. All the while, the company has been donating skin and hair care products labeled “You Are Our Hero” to women and men serving on the front lines.

The war, which Moscow has dubbed a “special military operation,” is now approaching its eighth month. Despite Ukraine’s recent progress on the battlefield, experts believe it could drag on for a long time, causing millions of Ukrainians to be internally displaced and nearly 8 million Ukrainians to be displaced abroad.

So, while Ukrainian troops are fighting to retake the territory Russia has occupied since February 2. Invasion on the 24th, Kyiv’s government is racing to stabilize the economy and find employment opportunities for those fleeing their homes, jobs and businesses in the east and south.

The economy is expected to shrink by more than a third this year, but as businesses reopen, Economy Minister Yulia Svyrydenko expects output to stabilize and grow by as much as 15% by 2023, albeit from a low base. Within a decade, she dreams of more than doubling pre-war levels to $500 billion, aided by foreign investment and EU accession.

“We always say we have two fronts: one military front and one economic front,” Sveridenko told Reuters in an interview in the basement of Ukraine’s grand Soviet-era cabinet building, where corridors and windows are located. Packed with sandbags. “The economic aspect is as important as the military aspect.”

Small and medium-sized businesses like Maslova are at the heart of the government’s efforts.

Economic activity across the country has stalled since the war began, but restaurants, retail stores and even nightclubs are now visibly reopening in Kyiv, Lviv and other uninhabited cities, and even in Zaporozhye near the besieged nuclear power plant .

Svyrydenko said the Ministry of Economy has helped 700 companies relocate from first-tier areas, of which 480 have resumed operations. The companies are benefiting from the return of an estimated 3 million refugees, helping needs, while money is flowing back into the economy from new exports, including three Black Sea ports.

To help displaced companies start anew, the Ukrainian Investment and Trade Promotion Center in Lviv is providing companies with rent-free office and manufacturing space, a valuable lifeline.

Given recent estimates by the World Bank and the European Union that total war losses are approaching $100 billion and Russia’s ongoing crackdown on civilian infrastructure, the task facing the country and entrepreneurs like Maslova is daunting.

Ukraine also faces mounting budget problems, even as Western government creditors and private creditors agreed this month to freeze debt payments in August. It is seeking foreign aid, but also needs private capital to rebuild.

Given what the German Marshall Fund called Ukraine’s “history of corruption” in a report last month, any investment requires security guarantees and strong accountability.

Top economic experts from Ukraine, the World Bank, the International Monetary Fund and other donors will address some of these issues at a recovery conference hosted by Germany on October 10 in Berlin. 25.

“Brave Businesses, Brave People”

Iryna Tytarchuk, director of the Lviv Investment Center, helps displaced business owners access resources, including government microcredit and loans of up to $68,000, as well as USAID funding dedicated to helping Maslova re-start women-owned companies her feet

“These are brave businesses and brave people who, instead of leaving everything and going abroad, decided to start again and again,” she said. Tytarchuk recalls that when many companies left the Russian market in 2014 following the annexation of Crimea, revenue rebounded.

“More markets are opening up for them now,” she said, noting that some businesses in the UK have contacted her specifically looking for “Made in Ukraine” products.

Mykolaiv, close to the front line, 800 km (500 mi) southeast of Lviv, was frequently shelled. Here, Julia Konovalova is waiting for her moment, and when the fighting stops, she’s eager to restart her once-thriving healthy food delivery business, Fresh U & detox.

When more than half of Mykolaiv’s population fled, Konovalova stayed. She donated her supplies to the military when the war began, and in recent months has been coordinating food aid for the World Central Kitchen Relief.

“My equipment is still there. Now I wait until the war is over, and then I’ll start over,” said the former hotel manager. “We just need to survive.”

Near the Russian border, fierce fighting has depleted three-quarters of the 2 million inhabitants of Ukraine’s second-largest city, Kharkiv, although recent Ukrainian advances have reclaimed nearby territory.

The Rockets destroyed Evgeniy Safonov’s bar in Kharkiv, but he’s already looking for a new location in a safer city and hopes to eventually return to Kharkiv.

“Even now, our investors are interested,” he said. “Whether I’m brave or stupid, I know. But our plan is only a matter of days. You never know what’s going to happen tomorrow.”

find investment

Svyrydenko acknowledged that Ukraine faced enormous challenges, but said she and other officials were seeking investment wherever possible, citing an estimated $10 billion in investment that would increase the country’s output by 5 percent.

Her department is studying 50 applications from the U.S., Germany, the U.K. and Poland after the New York Stock Exchange launched a new “Ukraine Advantage” investment portal last month, which planned $500 billion in investment opportunities, but Said it was too early to provide details.

The World Bank’s private finance arm, the International Finance Corporation and the European Bank for Reconstruction and Development, also said last month they would invest $70 million in a private equity fund to invest in technology and export-oriented companies in Ukraine and neighboring Moldova. It aims to raise up to $250 million over the next 12 months.

Andy Hunder, head of the Ukrainian American Chamber of Commerce, said Ukraine’s economy had shown “amazing resilience”, with internet and banking services in Kyiv working better in wartime than in some parts of Europe in peacetime.

The group’s latest survey released this week showed that 77% of its 600 member companies believe the war will end in 2023, with all but 2% planning to continue doing business here.

Yulia Zavalniuk’s small Villa Verde flower farm, about 40 kilometers west of Kyiv, was badly damaged by Russian troops four days after the war and initially considered moving to Slovakia but decided to temporarily move to Lviv while selling the plants to continue paying wages and Cover essential business costs.

“It’s time for us — small entrepreneurs,” she told Reuters. “We must produce, sell and pay taxes with the most creativity, service and quality oriented products,” she said. (Reporting by Andrea Shaalal; Editing by Frank Jack Daniel)

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