Baltic business waste no time in tapping Ukrainian market

  • 2005-09-07
  • Staff and wire reports
VILNIUS - Hardly a day goes by without mention of a Baltic company expanding operations in Ukraine or announcing its intention to tap the vast consumer market to the south.
In fact, business interest in Ukraine, whose population is some six times larger than the three Baltic countries combined, has become so intense that Baltic entrepreneurs are pressed to get up and running as quickly as possible.

Last week Olympic Entertainment Group, an Estonia-based casino operator, opened two new casinos in Kiev, a 2.4 million euro investment, bringing the total number of the company's gambling houses in the Ukrainian capital to four.

Hanner, a Lithuanian real estate developer, announced last week it intends to open the largest trade and entertainment center in Kiev along with its Ukrainian partner, Nedvizhimost Stolicy. Investments in Olympic Plaza 's which will boast 106,000 square meters and accommodate over 100 stores, cafes and restaurants 's are expected to reach a staggering $95 million. "We intend to open this trade center by February 2007. The project should break even in some five-to-seven years. We have undertaken this project because the deficit in commercial premises is acute in Kiev now," said Hanner's chairman, Arvydas Avulis.

Hanner has launched two other major project in Kiev. One involves the acquisition of a tobacco plant that will be transformed into a $8 million office and residential building complex, and the other the construction of a 12 million euro 27-story residential building to be completed in December 2006.

Last month Nausjasis Sirijus, a Lithuanian manufacturer of batteries and electric products, announced it would open a subsidiary in Ukraine this autumn.

Biznes, a Ukrainian business paper, in a recent publication rated several Lithuanian-owned companies among the country's top retailers. BM Trade, a Kiev-based company that controls the Bumi Market chain of grocery stores, is 60-percent owned by Sanitex, a Kaunas trade and distribution company. Eko Market, established by a Lithuanian and his Ukrainian partner in 2002, now has a chain of 18 stores.

"The time is absolutely right for the expansion [in Ukraine] now. The terms of crediting have been simplified, while the real estate earlier acquired by the chain has gained in value, which enables the banks to increase the amounts they may lend," businessman Sigitas Daugnoras told the Verslo Zinios daily.

Ramunas Kairys, BM Trade vice-president, told the paper that the company was preparing itself for "the fastest expansion possible" in Ukraine.

Indeed, all the factors are in place for tackling the Ukrainian market. Perhaps dominant is the fact that the country has pro-EU leaders who are intent to diminish to country's reliance on Russia and open the doors to Western capital.

President Viktor Yushchenko's personal rapport with Lithuanian President Valdas Adamkus has played a major role in establishing trust between the two countries. After Ukraine's customs officials raised import duties on Snaige refrigerators, the Presidential Palace phoned Kiev and straightened the matter out. Now the Lithuanian refrigerator producer pays only a 5 percent import duty.

Other exporters may soon benefit after Kiev reduces duties on certain foodstuffs. Yushchenko has reportedly signed the appropriate amendments, and duties on some products should fall as much as 94 percent.

Kestutis Masalskis, Lithuania's commercial attache in Ukraine, said meat and fish producers were likely to win, since the southern market has been experiencing a shortage of meat.

Haulers also received good news last week, as Ukrainian authorities agreed to issue an additional 700 permit to Lithuanian truckers for transporting cargo to and from third countries.

A joint Lithuanian-Ukrainian transport commission, which recently held a two-day meeting in Vilnius, agreed that the number of permits issued by Ukraine to Lithuanian carriers would be raised to 5,000 universal permits, 900 haulage permits and 600 fee-paying haulage permits.

Estonian businessmen are also keen to get a slice of the action. In April the Estonian Embassy in Kiev arranged "Estonian business day," with some 14 firms participating. Among them were garment maker Baltika, real estate company Arco Real Estate, Eesti Ehitus, Estonian Air and hotel operator Reval Hotels.

Hillar Teder, one of the country's richest businessmen, recently announced that he and his partners intended to develop office premises in Russian and Ukraine. He is partial owner of the O'Key chain of hypermarkets in Russia.