Lviv’s Chamber of Commerce is the oldest in Ukraine, founded over a hundred and fifty years ago by decree of Franz Joseph, the emperor of Austro-Hungarian Empire. The Lviv Trade and Industrial Chamber was established in 1850, together with similar chambers in Krakow, Prague, Vienna, Budapest and other regional capitals of the Habsburg domains. Today it is at the fore of a burgeoning Lviv business community looking to expand on EU cross-border trade and benefit from the investment boost provided by preparations for the Euro 2012 football championships. We recently met Dmitry Aftanas of the Lviv Chamber of Commerce for an outline of the region’s business and economic perspectives.
Overview of Lviv commerce
Like the rest of Ukraine, Lviv is witnessing a construction boom, and this is one of the main areas of international economic activity in the region. “Tourism and recreation are very important for us, and the region has huge potential,” Aftanas says. “Lviv in particular has everything it needs to be a tourism centre, while Truskavets and the Carpathian mountains have recreational potential.”
Other focuses include the timber industry and the agricultural sphere. “Large numbers of international investors are currently renting land in Lviv region for agricultural use. One example is the German companies which are growing rapeseed for use in bio fuel production.”
The political instability of the past three years has not managed to slow down the growth of regional commerce and like many business-oriented Ukrainians, Aftanas is an advocate of staying out of politics as much as possible. “Our 290 members are all company directors and they all have their own personal political orientations. Our region has a traditionally more positive attitude towards Orange forces because they favour closer ties with the West. It’s very natural for a population that has always felt close to Europe and feels almost as much at home in Poland as in Lviv.”
However, Aftanas appreciates the need for dialogue with the government to improve the business environment, and sees judiciary reform as the most pressing concern facing the country. “This country needs to redress the problems with the court system as a priority. In general the reform process should be geared towards the liberalisation of the economic sphere. We need more economic freedoms. Small and medium-sized businesses are developing, but they still face a lot of obstacles. A new, more liberal tax code should be adopted to present more opportunities to local business.”
Beyond the political transformation the country is going through, Ukrainian businesses are also excited about the opportunities presented by the Euro 2012 football championships. Aftanas sees the tournament as a once in a lifetime chance to radically improve Lviv in every way from its infrastructure to its ties with the region’s European neighbours.
“Euro 2012 is the kind of chance for Lviv and the whole Ukraine which will not be repeated for decades. At the moment preparations remain stuck at the theoretical level, with the search for sponsors ongoing and plans being drawn up, but I am confident the work will proceed at good pace. The planned new stadium will be built by 2010, and Lviv will also see huge road reconstruction to resolve our growing transport problems.
“Everyone knows that we also don’t have nearly enough quality hotels, but this is the chance to radically update our entire infrastructure and there is a general consensus among the authorities at every level that this chance must be seized. We have a special department in the city administration working to prepare Lviv for Euro 2012. The team is young and already experienced. I know them and think they will cope well with the challenges they face because they have different mentality and different approach compared to older generations. They do not engage in time-consuming meditation, but try to solve everything very quickly.”
Relying on foreign expertise
Budgeting estimates for Lviv’s role in Euro 2012 vary significantly, with anything from USD 4 billion to USD 9 billion stated as the likely overall cost of preparations. Aftanas confirms that the current situation remains unclear owing to legislative inconsistencies and pending government decisions, and says that the biggest infrastructure projects will likely be handled by foreign companies with the requisite expertise.
“At the moment 50% of investment needed is expected from the state budget and 50% should come from private investors. Our local authorities are working to offer tax breaks, while the Cabinet of Ministers is considering a decree the will keep more regional taxes here in Lviv deductions to the state budget and remain them here.
Regardless of legislative changes the biggest individual projects such as the planned new stadium have not so far involved Ukrainian companies.”
“I think that local investors will be contractors and subcontractors and will do some work because there is quite simply a lot of work to do. People seem to think that there are a huge number of cafes and restaurants in Lviv, but given the number of tourists we are expecting we will need to increase the amount of leisure facilities three- or four-fold. Our guests will be interested in more than football, and in theory at least Lviv has more than enough to entertain them. I have recently been impressed by our museums myself.”
Lviv as international transport hub
The reconstruction of Lviv airport may well prove to be the biggest single long-term result of Euro 2012, and is also likely to be handled by international companies. Lviv has huge potential as a regional air travel hub, because Kyiv is too far away and people from all western Ukraine already come to Lviv to fly to Europe. “The prospects for Lviv airport are good,’ says Aftanas. “Talks are currently underway to link the existing airport with the neighbouring military base, which would make it possible to receive the largest categories of plane for long distance flights. Turning Lviv into an international hub airport is actually a long term project that has been under consideration for years. At present Lviv-based travellers often fly to Warsaw or Vienna for transit. We recently received a delegation from the neighbouring Polish town of Zheshiv which is in 200 kilometres from Lviv. They already have airport much smaller than Lviv’s but offer flights to London, Dublin, New York and Chicago. If Lviv fails to grasp the air travel potential it currently has, everything will be shifted to Krakow or Zheshiv. We have already received offers to initiate flights from budget airlines,” he confirms.
Even after the excitement of Euro 2012 has subsided, Aftanas says he will remain upbeat about the long-term prospects for Lviv region. “Here it is quite possible to start any sort of manufacturing process from scratch. There are already plenty of manufacturing facilities and land available not far from the border. We are regularly being asked to find land within a 30-50 kilometre radius of Lviv because in the city itself land and real estate are getting more and more expensive. We already have a group of people who have up-to-date databases of available potential plots and who accompany investors as they search for the right spot, helping them to build relationships with the local authorities and develop contacts.”
Aftanas also sees a bright future for Lviv as a host for regional trade fairs and conferences, with its ancient European heritage and geographical location both making it an obvious choice for such events. “Lviv could be promoted as an exhibition centre because it is about 500 kilometres to the nearest exhibition centres in Kyiv and Poznan. There is simply nothing closer. The first big trade fair is expected to open here in the beginning of December this year. We may not have heavy industry like in the east of Ukraine, and many of our more well-known production plants, like the legendary Lviv Bus Factory, are currently operating at a fraction of capacity. But while this is not immediately encouraging, it represents room for growth. Assembly plants for household goods can be quickly established in Lviv. Many locals have left Lviv to find work elsewhere in Europe but I think we still have the potential labour force to power an increase in the manufacturing industry. Lviv is a big student centre and we receive thousands of applications from graduates every year, so it is clear that we have serious intellectual potential as well.”
Anna Melnichuk Business Ukraine
http://www.businessukraine.com.ua/bordering-on-economic-success
