Under the rubric “Reforms in the Regions” we continue publishing the information about Transcarpathian exporters to the EU. The heroine of this article is Myroslava Kalamuniak, the Director of the Uzhgorod Clothing Factory PrJSC. The company headed by her has been operating in the European coordinate system for 30 years now! Recently the factory sends 400-450 thousand pieces of clothing to Europe annually.
We asked Myroslava Kalamuniak to share their experience of working with European partners and advice Ukrainian manufacturers that are only think about the prospects of entering the EU markets. She immediately states that it won’t be easy for Ukrainian producers in Europe, but it surely worth trying. The main thing is to faith in yourself and to take the first step.
About the first orders for French and European markets
In the second half of the 1980’s our factory was included in the list of 7 Ukrainian light industry enterprises, that, according to the decision of the authorities, were opened to cooperation with foreigners. At that time a French company was carrying out re-equipment, staff training, we got new modern sewing machines and our workers were trained in France. That’s when we established our first contacts with European customers. Our French partners who trained us tried to place small orders with us.
Then the Soviet Union split. However, we saved international contacts and started to look for orders at once. At that time or French partners did already know that there, in Uzhgorod, work good people capable to fulfil orders in a responsible manner. By the way, even up to now I meet children’s cherry polka dot dresses that were one of our first orders in the early 1990s.
It is clear that there have always been high demands in Europe. Why do we constantly want to buy import? Because it used to be better, more stylish, interesting and of higher quality. Naturally, fulfilling European order requires constant additional efforts. Moreover, the more known the customer the more efforts it takes. I still have to listen to complaints at each meeting: when we are sewing for “Marc O’Polo” there arise such and such problems. Meanwhile when we are fulfilling an order for “Gerry Weber” everything goes smoothly because the requirements are simpler. That’s the reason why we sew “Marc O’Polo” – to upkeep the high level of our performance.
However, to work in such a manner as we were taught by our European customers and to sale in Ukraine is a very difficult task. For a long time we simply could not compete with cheaper and less-quality producers.
About equal conditions for businesses
It was a very important event for us when we were granted a possibility to issue the Euro-1 Certificate, which means we got the rights equal to the rights that have European manufacturers. (Ya.S. Note: according to the Association Agreement since January 1, 2016 when exporting goods from Ukraine to EU countries the customs of the State Fiscal Service issue certificates for the goods transporting of the EUR.1 form). Because what practically does the Association give us? Our customer does not pay the tax on our labour and, accordingly, can pay more for us. This comprises our price, consequently this makes the higher salary of our seamstresses.
But not only do we have financial gains. We are now perceived in Europe differently, we are perceived as an equal. For example, I work under the same conditions as Romanians or Bulgarians. There are still complexities in filling in of customs documents, because each of my European customers has to employ a worker who can fill in huge “logs” in accordance with the requirements of Ukrainian legislation. But I understand that this is just another stage to go through. And Ukraine will pass it. We will learn and will be able to improve this legislation as well.
I see how many things have changed in our country over the past few years. We have a lot of problems, and the biggest is corruption. But at the same time step-by-step there are being created more civilized conditions for businesses.
About the requirements imposed by world brands for the clothes factory to meet
In 2015 we started our work with Hugo Boss and Dolce & Gabbana for the first time. Of course, for us, this cooperation with the first world-class brands is primarily a status issue. After all, not anyone can work with such customers. Not only do they have stringent quality requirements, but also they require absolutely high technology, special machines, moreover their partner must have a certain production culture. Hence, to sew clothes for brands, we have to meet the standards of the customer and pass the annual certification.
For example, if there is no hot water in the washbasin you will not pass it. There are a lot of requirements: for fire safety, for signalling, for compliance with labour legislation. Hugo Boss and Dolce & Gabbana cannot sew in, say, in Bangladesh, where factories collapse, or in Vietnam. Their clients simply do not buy manufactured goods there, they want these products to be European-made. Even the wage level in the team they work with is also important: expensive brands pay well and want people who work on them to be satisfied with their work and payment.
In general, I would not say that for us, cooperation with Hugo Boss or Dolce & Gabbana is very beneficial economically, because all the features required by the customer do not allow “to accelerate” – the productiveness is not high. At the same time, I repeat, it’s not easy to get the trust of such serious customers, not everyone can cooperate with expensive brands, it’s prestigious.
About arguments for investors and customers
When under Leonid Kuchma’s presidency, we started a law on so-called Free Economic Zones in Transcarpathian region, as soon as there appeared a preference for investors, I immediately had an argument in communicating with my customers. Those times I could already say: finally, we are open to you, we create special conditions for you, you will not pay a profit tax for 5 years. Then we implemented the first investment project in Chop: we created Lego-Ukraine Joint Venture. As soon as German money came, we made repairs in the abandoned room, brought a good technique, employed people and started of work. That was an example of European management.
Now I have even more arguments for communicating with the Europeans. One of the most important is related to VAT, the tax which has always blocked us. I constantly had to explain to each customer that I could not buy a thread in Ukraine, because I would have to pay that VAT and then I would not refund this money. They could not understand why our thread should be 20% more expensive than Poles or Romanians were buying. Now I just do not talk to foreigners on this topic and count the price without VAT, because I know that the tax will be refunded to me automatically. This is a tremendous achievement for businesses.
In recent years, the attitude towards the business of so-called controlling bodies has also changed. For example, Sanitary-Epidemiological Station was liquidated. This is a very good news for us! Nobody really was interested in the working conditions themselves – I just had to pay, as another additional tax. Now the factory uses this money for other needs. As for the appropriate working conditions, we do maintain them, as I have already said.
In general, Ukrainian business environment is steadily changing step by step. Today everyone says that there is a shortage of specialists and labour force. It’s true. Why do we face such a situation? On one hand, there are some objective reasons, in particular: people a seeking any work abroad plus demographic crisis. On the other hand, it also indicates that we are starting to do something creating the conditions for work today in Ukraine.
About optimism and self-belief
Sure enough, nobody in Europe is really waiting for us. European markets are full: they have everything, everything is produced and sold. Finding your own way is not that easy. It’s a lot of work, effort, it’s understanding that the only way to win is to be stronger, and only the best is able to compete.
But the truth is that we are really better and smarter. Because we have gone through such a thorny path in life that no European manufacturer probably had to go…
Those who have survived and who are still producing something today are really wiser. We only need to gain courage and go to European markets. Just do the first step! These markets are rich, there is plenty of money, meanwhile they are always ready to be surprised. Hence, our task is to find our special service or product. Due to the Association Agreement, we, Ukrainian producers, have easier access to these markets today, the fact that duty-free quotas are being increased for us simplify the export conditions – this is very good and very important. This is a chance for Ukraine.
About the prospects of the “Parade” brand in Europe
It is possible and necessary to try to sell in Europe the collections that we sew under the brand “Parade” for the Ukrainian market. And the sooner the better. The only thing that holds us back now is that this business requires a lot of operating capital. We are still financially limited, because money in Ukraine is very expensive. This is what makes us uncompetitive.
In the West, the entire business is conducted not for its own funds, but for credit resources: the bank lends to an entrepreneur, participates in his/her business and makes its money off. European entrepreneurs often use interest-free loans. Meanwhile the situation with Ukrainian banks is absolutely different… Well, who can tell me how a loan at 20% per annum can help me?
Our factory tries to sell our products abroad. But it is not yet bulk. In order to enter the European market with own brand, it is necessary to have serious stores and large volumes of production, which means huge amounts of money. The absence of it constrains us with our own product.
However, this will change too. I believe our banks will take the normal direction and sooner or later Ukrainian businessmen will also be able to use cheap loans. And they will become even more competitive. I am confident of it.
However, it would be better if it happened as soon as possible.
The material was prepared within the framework of the Project “Regions for Reforms”
This publication (an article, an analytical report etc.) was prepared within the framework of the Project “Regions for Reforms” with the assistance of the European Union (http://ec.europa.eu/europeaid). The content of this publication is the sole responsibility of the “PP Zakarpatskyi informatsiinyi tsentr” and in no way reflects the point of view of the European Union.
The article was originally published on Prozahid