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Swedish business in Ukraine
12 July 2011
Sweden hosts one of the most internationalized economies in the world. Whether judged by international trade and investment flows or the extensive presence of Swedish businesses abroad and foreign companies in Sweden, Sweden ranks among the top ten countries in most comparative assessments. This international approach to business has led to a strong Swedish presence in today’s Ukrainian economy. This comes as no surprise to students of the Scandinavian nation’s modern economic success story: relative to its size Sweden has delivered, and continues to deliver, technological breakthroughs and companies that become world-leaders in their fields. Such world-famous companies as Ikea, Electrolux and Ericsson, Scania and Volvo, Tetra Pak and AstraZeneca are just a few of the multinationals to have emerged from Sweden to share Swedish innovation and technology globally.

Sweden: a top ten investor in Ukraine
Brand ‘Sweden’ is particularly strong in today’s Ukraine, where it is associated with notions of quality, sustainability and innovation. This brand recognition has translated in blossoming trade ties - Sweden is currently among the top ten foreign direct investors into the Ukrainian economy. Swedish investments have focused on Ukraine’s financial sector, the manufacture of home appliances, food products, packaging, metalworking and engineering goods. There are around one hundred Swedish companies currently present on the Ukrainian market and more than four hundred who are also active in the Ukrainian economy, operating through local partners or distributors. This thriving trade relationship between Ukraine and Sweden has been on a constant growth curve ever since the early 1990s. During this decade, Swedish exports to Ukraine have grown by an average of 30%, and likewise Ukrainian exports to Sweden are also now gradually increasing. Sweden has a long history as an innovative industrial nation and Swedish companies exporting to Ukraine have readily shared their engineering achievements. They have encountered considerable interest in Ukraine for their innovative engineering products including manufacturing machinery and tools, telecommunications and medical equipment, and, naturally, Swedish trucks and buses, and passenger cars. Sweden’s science infrastructure is world-class and its development a passion for both public and private sectors: indeed, R&D conducted by multinationals in Sweden exceeds the volume of publicly-financed R&D three-fold. This has a global impact - for example, a substantial share of international R&D activities in the world’s pharmaceutical and chemical sectors is done in Sweden. As a result, the export of pharmaceuticals and chemical products to Ukraine is major factor in the total Swedish export trade to the country.

Geopolitical appeal and cultural affinities
Geographical proximity and cultural similarities have combined with competitive prices and low salaries to encourage a growing number of Swedish companies to develop Ukraine as a sourcing and outsourcing destination. This trend has been particularly visible in the woodworking, textile and metalworking industries, where an increasing number of Swedish companies continue to place orders with Ukrainian enterprises for the manufacture of furniture and wooden particles (mainly solid wood). The trend can also be seen in companies specializing in clothing manufacture or the cost-effective Ukrainian production of metal component parts for the Swedish engineering industry.

Making the most of Ukraine’s IT excellence
Ukraine is one of the largest IT outsourcing destinations in the world and the country’s strong educational and scientific background has also attracted both major Swedish corporate names and plenty of Swedish SMEs who have chosen to outsource their IT development to Ukraine. A number of Swedish IT companies have also launched their own development centres in Ukraine with particular focus on three of the country’s largest university cities: Kharkiv, Lviv and Kyiv. This move towards to the creation of independent IT outsourcing operations looks set to continue. Back in the 1970s Sweden was the most oil dependent country in the industrialized world, a predicament which in many ways offers a mirror on the energy challenges facing Ukraine today. Since the nadir of the 1970s, oil dependence for heating and electricity production in Sweden has been reduced by 90%, to such an extent that today Sweden is widely recognised as one of the most environmentally friendly nations in the world. The result is a new approach to sustainability, which Swedish businesses are currently sharing with their partners in Ukraine in the fields of energy efficiency and waste recycling, water and waste water treatment within the framework of overall sustainable urban development. The Swedish approach to sustainability is being shared in Ukraine within the SymbioCity™ platform (www.symbiocity.org) trademark, which is owned by Sweden and promoted by the Swedish Trade Council.

An attractive market smothered by red tape
Ukraine is an emerging market and as any developing country presents both opportunities and challenges for Swedish companies. The latest in the regular business climate surveys of the Swedish companies operating in Ukraine conducted by the Swedish Trade Council, which was compiled in late 2010, shows that the majority of Swedish companies continue to regard the Ukrainian market as an attractive business destination with solid prerequisites for growth. Many of them stated that they plan to expand their businesses in the country and see the contemporary Ukrainian market presenting more concrete business opportunities than many other comparable international markets. On the other hand, Swedish business representatives also noted that the level of bureaucratization and corruption remain high in Ukraine compared to other international investment markets. Particular attention was paid to the need to improve customs procedures and VAT refund practices.

Source: Business Ukraine

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