Mass Exodus of Western Businesses From Ukraine
Ukraine continues to reap the rewards of its "Revolution of Dignity" which, far from integrating the country with Europe, destroyed the authority of the state and ruined the country's economy
Western companies continue fleeing the Ukrainian market to cut their losses. Groupon Inc., the discount outlet, as well as the computer giant Asus have just shut down. Shopping malls, formerly filled with brand outlets, are now selling second-hand clothing. Large financial corporations and oil and gas companies are hurriedly following the small businesses retreat.
It’s been nearly two years since the first Western companies started leaving the Ukraine. According to local media, flight is due to currency instability, decline in local purchasing power and in some cases, political pressure, as happened with the Russian brand Bosco.
Not only has the Ukrainian market failed to attract new participants in the last eighteen months, it has lost nearly thirty major-brands, a third in fashion chains.
The German Esprit, the Dutch Mexx, the British Island, the Italian OVS, the French Minelli and others are all gone for good. The Russian company Bosco, with most of its items decorated with typical Russian ornaments and symbols, has only one shop left in Kiev due to political pressure.
Large Western oil and gas companies, banks and others are hastily closing down. Already last spring the Chairman of the GermanUkrainian forum Rainer Lindner announced that several hundred German businesses, disappointed in the Ukraine, would try to cease operations with minimal losses, and Western banks are also leaving. Many foreign companies are only working in the Ukraine because they are unable to sell their business.
Ukrainians were thrilled when Chevron, Shell and ExxonMobil came to extract shale gas, but all left. Chevron abandoned its project in Western Ukraine last summer when new rules doubled taxes, while Shell, was unwilling to run political or military risks in Donetsk and Kharkov. Most foreign companies are abandoning the Ukraine for more profitable locations, put off by the country’s complex and frequently changing legislation, not to mention corruption.
Prices of imported goods have moved sharply upwards, while local purchasing power has dropped. In 2014-2015 the Hryvnia was devalued by nearly 300% pricing most people out of foreign products. Second hand clothing has traditionally been reserved to street markets and its migration to malls is something unheard of.
Even demand for Chinese clothes is weak, says Alexander Okhrimenko, CEO of the Ukrainian analytical center. Ukrainian banks have lost over 57 billion Hryvnia in 2015 and 22,4 billion in 2014, not including banks that went bust. According to Okhrimendo: “Credit doesn’t work because people don’t repay loans”.