Ukraine: What's drawing German firms to a war-torn country
The article, explores the increasing interest of German companies in doing business in Ukraine despite the ongoing war and the substantial destruction it has caused.
The core of the article is the paradox that, despite the war, German companies are seeing significant opportunities in Ukraine, particularly in reconstruction efforts. The Ukrainian government estimates that the country needs around $750 billion for reconstruction by 2032, with some experts predicting the costs could be even higher. President Volodymyr Zelensky has encouraged foreign investment, promising good returns post-war. The International Monetary Fund (IMF) forecasts a gradual economic recovery for Ukraine, expecting growth rates to increase in the coming years.
German Chancellor Olaf Scholz has publicly supported German investment in Ukraine, viewing it as an investment in a future EU member state. The German government is offering state investment and export guarantees to minimize risks for these companies, including coverage for damages resulting from combat actions. Already, Berlin has granted fourteen investment guarantees totaling €280 million, with more projects under evaluation.
Despite the risks associated with war, many German companies continue their business engagements in Ukraine. For example, chemical giant Bayer is investing €60 million in its Ukrainian subsidiary, citing significant agricultural opportunities. The company is operating in areas of Ukraine where the risk of war is perceived as manageable.
The article also highlights the varying regional risks within Ukraine, with extreme risks in the embattled east and southeast, while other areas show resilience and adaptability. The German government has provided significant aid, including a recent grant of almost €80 million for urgent repairs in Ukraine's energy infrastructure.
A key focus is the lucrative arms and ammunition supply business to the Ukrainian army. Germany is a major supporter of Ukraine, providing civilian and military aid. German arms manufacturer Rheinmetall has registered a joint venture with a Ukrainian state-owned company for military vehicle services and production in Ukraine. Another company, Flensburger Fahrzeugbau (FFG), is significantly involved in providing armored vehicles to Ukraine and has set up a subsidiary in the country.
The article also addresses the challenges of doing business in a war zone, such as technical issues with machinery and travel warnings. However, Oleksandr Kamyshin, Ukraine's minister of strategic industries, suggests pragmatic solutions like online technical assistance, underscoring the resilience learned from the war and the COVID-19 pandemic.
In summary, the article provides a comprehensive look at the growing interest of German firms in Ukraine, driven by the prospects of reconstruction and economic development, despite the challenges posed by the ongoing conflict.