The Danish ambassador says that Ukraine has come far in its reforms and that many Danish companies are thinking of locating here due to the disruption of the international supply chains. It happens despite the Russian military buildup.
Another year has almost passed. We have taken a look at the year with the Danish Ambassador to Ukraine, Ole Egberg Mikkelsen, and asked him to look forward into 2022.
How was 2021 from a Danish perspective?
“2021 should have been the year of joy in Ukraine, celebrating 30 years of independence and Ukraine’s rebirth as an independent nation. It was celebrated in style and Denmark participated. It was the symbol of Ukraines independence and a celebration of the many changes and progresses, which has happened here since 2014. But we have recently seen dark clouds gathering with build up of military forces near the borders. On one side, we have seen great progress for Ukraine in 2021. But unfortunately there are also dark clouds on the horizon.”
“The normal contact and communication between Ukraine and Denmark with physical visits have almost been impossible this year due to the pandemic. There has however been frequent on line contacts between ministers and senior officials.”
“We did have a window for visits in the fall. Among other things, we had a visit of a Danish delegation representing the district heating sector. It might sound boring but Ukraine is a superpower, like Denmark, in district heating. This area is one place that we can help Ukraine develop, which can help Ukraine in its energy independence. We also had a large delegation from the Danish agricultural sector. There is a substantial interest in Ukraine due to Ukrainian farmers now being able to take loans in their land, thanks to the land reform which we all expect to have a big effect.”
“It also looks good for the 2021 trade volume between the two countries, where we seem to be back to the level before the pandemic… 2021 was also a good year for new Danish investment in Ukraine, with Hjort Knudsen, a strong player in the furniture industry, as the most prominent success. They made a new green field investment in Rivne and the scope of this is impressive. It is a state of the art and top modern furniture factory. This will create about 1,000 new jobs and it is a real joy to see this and to meet the new mayor in the city, who of course is very happy about the investment.”
“In 2021, we have had an increasing number of inquiries from Danish companies, located in Asia who are now looking for ways to shorten their supply chains. They are now looking at Ukraine and the neighbouring countries as a base for nearshoring. At the embassy we are ready to assist Danish companies wishing to have a closer look at Ukraine as a business location.”
It is really good for Ukraine to attract some of these companies. Foreign direct investment is exactly what Ukraine needs. To export to the EU products both need to live up to EU- norms and regulations and at the same time be able to compete in a very competitive European marketplace. Danish companies know exactly how to do that. An investment like the new furniture factory will also make areas such as Rivne blossom and it will create a positive dynamic. When one company decides to invest, others are following. I think that this is the symbol of the potential of the association agreement with the EU.”
“In 2021, Denmark has also been very active supporting reform in Ukraine through the Danish neighbourhood program. Denmark is implementing the European Ant-corruption program, EUACI and that is the main component in our support. Not everyone are interested in an effective anti corruption effort, but there is a strong political commitment in Ukraine as we have seen on several occasions in 2021. We have also launched the next phase of the Ukrainian-Danish energy programme, running for the next five years. Among other things, we support Ukraine in its transition to green energy and it is an area where Denmark can play a major role. If energy efficiency in Ukraine reaches the lowest level in the EU, Ukraine would not need to import any gas at all. It shows the huge, untapped potential in Ukraine.”
You mention the changing supply chains and that you talk to companies, which are considering moving production to Ukraine. Do you agree that we are seeing a changing world when it comes to this?
“It happens frequently that Danish companies call me to enquire about Ukraine and they are very attentive to the risks of having long supply chains. The last two years have shown that they can be disrupted by, for example, a ship blocking the Suez Canal. Very often Danish companies need to be certain that they can deliver on time and some start to look at locations closer to home. There used to be a lot of focus on Asia as a location for manufacturing, but much has happened over the last couple of years.. Besides the problems with supply routes, we have also seen the spike in the costs of transport and labor costs in Asia are increasing. Ukraine has much to offer as an alternative. But there are challenges here as well. One of them is the issue of transportation permits for Ukrainian trucks going West. Border crossing for trucks can also be time consuming. But the association agreement with the EU and the free trade agreement makes Ukraine a good location for manufacturing for European markets.”
UkraineInvest recently held a conference and highlighted the decentralisation reform in Ukraine as important. It makes the regions more dependent on their own success. How important do you find that reform?
“It is really important and one of the un-told success stories of Ukraine’s reform and transformation process. Many Danes have never heard about it. But it is extremely important. The regions and the municipalities in Ukraine didn’t have this kind of autonomy before. Now they can raise taxes and elected mayors are now directly accountable to their citizens. That is good for transparency and accountability.”
“But there are also other important reforms such as the judicial reform that the government is working on. It is not easy due to strong vested interests but important progress has been achieved in 2021 and there is strong political will to carry on. The fight against corruption is also on the right track with Denmark as a partner. There have been setbacks, but the anti-corrption institutions are now in place and the country is ready to move forward. and this is what the majority of Ukrainians really wants.”
To what extent do you think that Ukraine is able to compete with its neighbouring countries, which it comes to attract investments or companies located in Asia?
“Ukraine has a strong position as a vibrant European democracy with a strong commitment to the rule of law and with the EU-Ukraine association agreement.
When I have phone calls from Danish companies the first question they ask is about the judiciary. They know everything about labor costs but they want to know how the judiciary is working well, for instance in the case of commercial disputes. Potential investors are not only looking at Ukraine, so it underscores the importance of the judicial reforms that Ukraine is currently implementing.”
“They also look at the quality of human capital and Ukraine is strong in when it comes to technical skills and IT. Ukraine has a strong comparative advantage here.”
What role do Danish companies have in the development of Ukraine?
“Danish companies come here with their Danish business model, technology and market access. They are globally competitive in their industry and they also bring Danish busniess values with them, with a strong focus on corporate social responsibility. It is not only about making a profit but also about being a responsible part of the local community and contributing to Ukraine’s dynamic social and economic transformation. Being a part of the nation. Danish companies also show how to do climate friendly business.”
If you look ahead into 2022. What do you think will happen then?
“In 2022 Ukraine and Denmark will celebrate 30 years of diplomatic relations.”
“We will celebrate 30 years of friendship and partnership with high-level visits and activities that will highlight both the official relations as well as people-to-people contacts and not least the commercial contacts, involving the Danish-Ukrainian business community. We will also focus on the historical contacts dating back to the Viking age, where Viking settlers became part of the great Kievan Rus civilization, the cradle of the entire East Slavic culture. To celebrate this proud common history we intend to bring a Viking longboat here in cooperation with the Viking ship museum in Roskilde and Ukraine’s national history museum to sail from Kyiv to the Black Sea in the summer of 2022. We are actually looking for sponsors who will support this initiative and companies are welcome to contact me for further information if they want to be part of this.”
“As for the geo-political developments there is currently a lot of uncertainty. That underlines the need for close contact between the embassy and the Danish business community and that continues to be a high priority for the embassy team. Companies are more than welcome to contact us if they have any questions. Danish companies are also welcome to sign up for membership of the embassy’s Danish Executive Network. We meet approximately once a month on line or in a hybrid format with a prominent Ukrainian guest speaker from political life, government institutions or the business sector. In times of uncertainty this kind of networking is particularly important and companies are welcome to sign up. On line participation from headquarters in Denmark is also possible.”
“Let me take this opportunity to extend warm greetings for Christmas and New Year to the Danish-Ukrainian business community, to the Ukrainian community in Denmark and to all those who are supporting Danish-Ukrainian friendship and partnership at a challenging time.”