The “Andre Tan” fashion brand, “Nebesna krynytsia” drinking water, major Ukrainian tea producer “Monomakh,” the Drogobytskyi meat processing plant. All of these well-known companies have one thing in common: at different times, they applied for advice from the joint programmes of the European Union and the European Bank for Reconstruction and Development (EBRD) to help develop their businesses. In May, the EU and EBRD launched EU4Business, a new programme to support Small and Medium-Sized Enterprises (SMEs).
An agreement on the funding was signed by Ambassador Jan Tombinski, Head of the EU Delegation to Ukraine, and Sevki Acuner, Director, Head of EBRD operations in Ukraine. Photo EBRD
SMEs are the driving force behind the EU economy: 99% of EU companies are SMEs, and they account for 67% of jobs in the EU. It’s often beleived that “what is good for SMEs is good for the European economy.”
The DCFTA is not only about export but requires companies to comply with higher technical standards and reporting requirements. This creates opportunities but can also be a threat if the business sector is not prepared. In Ukraine, SMEs are also growing in importance, although they face serious challenges to their development, including flawed legislation, obstacles to getting loans, limited knowledge and skills among entrepreneurs, and limited access to markets.
“The EU4Business initiative aims to support job-creating Ukrainian businesses by equipping small and medium-sized companies with new skills and supporting their ambitions to export to the largest neighbouring market – the EU Single Market of more than 500 million consumers.”, said Ambassador Jan Tombiński, Head of the EU Delegation to Ukraine, during a presentation on the EU4Business project on May 20.
The EU has been cooperating with EBRD to support Ukrainian SMEs for many years. The Kyiv and Lviv offices of the EBRD are very active in this work.
“We help companies at a particular stage of their development,” explains Anton Usov, external affairs senior advisor of the Kyiv EBRD office. “A business may be well suited to several different opportunities for development, but may not have a clear vision of which direction to choose and what its priorities are. A business may wonder whether to widen its assortment of products or to enter new markets, employ more people or cut staff, make export certificates or modernise its management system. We help companies find a consultant and we partially cover the expenses.”
EU4Business consists of several actions covering support measures such as access to finance or business advice. The current part of the programme has a budget of €40 million and it consists of two parts: the first is the advisory support, with a budget of €28 million. Altogether 15 EU4Business business support centres will be opened by EBRD, providing business advice across Ukraine. Businesses will be advised among others on networks such as Europe Enterprise Network or info portal Export Helpdesk . These will not be EBRD offices, but they will be devoted to the goals of the EU4Business programme.
“This new programme will contribute to increasing the external potential of companies,” says Usov, “We will help small businesses enter foreign markets and participate in different forums and conferences, possibly even outside Ukraine. These activities will help companies be more confident and enter foreign markets with their products in a favourable situation.”
Additional €12 million under EU4Business programme is directed to loans for SMEs. The priority will be given to companies that already export and are willing to increase their share in foreign markets, or to companies that are about to start exporting.
Under the umbrella of the EU4Business programme, the €7 million technical assistance project will support Ukrainian authorities in the implementation of the deregulation reforms thus helping to improve the business climate for Ukrainian SMEs.
Also significant additional funds will be made available under the EU4Business to the three associated countries in the Eastern Partnership – Georgia, Moldova and Ukraine – in the second half of the year, as €200 million in grants will be provided and that should lead to €2 billion in investments through loans mainly from the EBRD and European Investment Bank. It is expected that about half of this amount will go to Ukraine.
Despite the undeniable challenges, there are examples of companies benefitting from such support. For instance, under another EU and EBRD programme providing direct support to SMEs in countries that have free trade with the EU, the agricultural enterprise, “Kyschentsi” based in the Cherkasy region, received €5 million to renew its harvester park and purchase additional agricultural equipment. “Kyschentsi” has a wide range of activities, from growing grain and vegetables to dairy farming and pig farming. The company exports 60% of its products to the EU.
Unfortunately, this kind of success story is relatively rare among Ukrainian SMEs. EU4Business hopes to help make these cases commonplace.