Agrifoods magnate Benno Grimberg on the present and future of trade in Ukraine
On April 6, the Netherlands will vote yes or no to a deeper cooperation between Ukraine and the EU.
The destiny of Europe's biggest nation is potentially in the hands of the citizens of the Netherlands. The future of nearly 46 million people now depends on whether the Dutch decide to support Ukraine's association with the European Union.
This is exactly why, Ukraine Today with the cooperation of Euromaidan Press has launched #DUTCHINUA project. Our goal is to gather the views and opinions of the Dutch businessmen and entrepreneurs who work in Ukraine. As well as provide analysis by the experts from the Netherlands who can assess the influence of the referendum on the future of Ukraine and the E.U. as a whole.
Rahim Rahemtula: My guest today is a Dutch businessman, the coordinator of Foodtech Link Ukraine Benno Grimberg.
Perhaps, to start you could tell us a little bit more about Foodtech Link – what exactly do you do here? This is a conglomerate of a number of small, medium sized Dutch businesses working here in Ukraine. Is that right?
Benno Grimberg: Yeah, that's right. In fact, we are a public-private partnership, also our government involved and our agricultural counselor here at the Dutch Embassy is involved and a number of Dutch small or medium size companies are involved and they're all have their specialism, they all are active in the agri-food business not only in Ukraine but all around the world. They are not competitors to each other, together we can do a lot in different sectors of Ukrainian food processing industry. We have focus sectors, it's fruits and vegetables, one, number two is confectionery and industrial bakeries, the third one is the meat industry and the fourth is the dairy industry. In these industries we can supply all kinds of necessary equipment to do an efficient job and also to do a job that meets the requirements, the demands of your client abroad who want to have quality food, who want to have packages, and food contents that meet international food safety conditions. I think the way Ukraine is going now
R.R.: So you're serving Ukrainian companies who would have their clients in other parts of the world?
B.G.: Yes, exactly.
R.R.: And if Ukrainian companies need for example your products, your companies' products, in order to produce food to the right standards?
B.G.: I think you are not completely right, Ukrainians are already experienced in doing this kind of business. Most of the companies know what to do to produce food for this part of the world but if you want to move your export to other parts of the world – not only Europe, but also the Arab countries, like halal production, like you name it, then you have to know what it means and what you have to do to make your production fit in. For this kind of export.
R.R.: All the specifications – do they differ greatly? I mean for example now since the beginning of January Ukraine has a free trade agreement with Europe, the EU. So does that require large step change in Ukrainian production, for example producing goods for the domestic market of for the Russian market compared to the European market.
B.G.: Yeah, that's really a big difference. I have to say, many Ukrainian companies are already doing export to Europe for a long period of time. So many companies, let's say, the companies going ahead or anyway walking this way, they know about all kinds of certificates you need to export to Holland, to Great Britain. They can either B or C certificate otherwise forget about exporting to British retail, to Dutch retail.
R.R.: This is sort of safety certificate?
B.G.: Yes, exactly. Food safety certificate. If you don't have it, don't try to sell it to Holland, to Dutch retail, the British retail, French retail if you don't have the IFS certificate don't try to sell to German retail. If you don't have HACCP you cannot prove that your production meets food safety conditions.
R.R.: So there is plenty of checks here and certificates. It sounds quite almost bureaucratic but…
B.G.: It sounds bureaucratic, and it is bureaucratic, but it also
R.R.: Something Ukrainian businesses might be used to…
B.G.: But it also gives us a good feeling that if we do our shopping like I'm doing in Holland, I'm going to supermarket, I don't have to be worried. Also if products on the shelf they have been checked they meet international safety conditions.
R.R.: Is that enough, do you think? When you go to the supermarket in Holland and you see there are Ukrainian products? What are the attitudes of people there towards these? Are they buying, is that enough that there are international standards?
B.G.: At the moment, when I do my shopping, I don't see any products that are made in Ukraine. So this is what Ukraine still has to do, to be present in the European retail. I think most of the products go to European food processing industry and they make the final retail, consumer products.
R.R.: Okay, so these are more like the primary goods. Sort of, eggs, berry, chicken's a big one.
B.G.: All sorts of commodities, sunflower oil of course. We know the big export products of agri-food, Ukrainian agri-food business. And I think the commodities we know, Ukraine is very strong in it, Ukraine is a strong base to start from. But the next challenge is not to export everything that you harvest, but to add value and then to earn real money before sending it out, before exporting it. Because this is what we do. We grow products, then we don't send them out, the industries abroad can earn their money by food processing developments. We want to make the final products and have their normal profit that is in these products. That's the phase Ukraine is now in and we see already even a lot if you want example, maybe more examples even. If you go to Germany the big agri-food exhibitions in Europe are organized in Germany. That is a place to be to show yourself. I was there at Anuga exhibition of last October, Cologne. This exhibition takes place every two years and I saw that already some 20 Ukrainian companies shown themselves. Some of them from all kinds of sectors.
R.R.: Are these the finished products that you're talking about?
B.G.: Yes, this is mostly the finished products.
So some of these companies have the ambition to export. Of all the companies that show themselves there I know they're already exporting and they want to do more.
So Ukraine is going this road.
R.R.: What kind of products do they… if you can recall?
B.G.: It is about a lot of seafood supplies, chicken products, juices, berries, flower, sunflower oil.
R.R.: You see this as a growth area for Ukraine, potentially?
B.G.: I was surprised not only by the prices of Ukraine in such a broad way, broad scope of products, also the quality of the stands, of the exhibitions there was at high level. People were ready, they spoke they spoke their language, you could easy approach them in English, you could write the recommendation, they had USB sticks, everything present – Ukraine is going the right way but the big companies can do this themselves. The medium sized companies do it at a lower level, I appreciate their courage, guts to do it because I suppose in Ukraine they're doing it on their own without the funding or support of the government. When Dutch companies go abroad, we have a strong Holland branding.
R.R.: Food TechLink is backed with the Dutch government?
B.G.: Yes, partially backed by the Dutch government and partially companies have their own funds. We do the combination. So the government takes care of food safety. Attention here in Ukraine to support us – to do the business, we have to have our own funds.
R.R.: With the Ukrainian companies, we don't see this. You say they come to Germany to the food fairs, but presume they are all operating alone. They're not under any kind of government umbrella.
B.G.: Exactly. What I miss in these kind of food exhibitions, there are a lot of national pavilions from all over the world. Mostly from Ukraine, there is not Ukraine pavilion. And for the big companies, they don't need. They don't want even. They do it themselves. But the small and medium sized companies should have more support to make it easier for them to show themselves abroad. If they travel abroad, everything should be ready. They should not be worried about interpreters, about documentation, about stand building, about everything that should be done they should just go abroad to do the job. And this is the strong point that our government is always doing. We go with our minister of foreign affairs, all around the world. With missions, Holland exhibitions, Holland pavilions. Like next month our Minister for foreign trade and cooperation, will lead big delegation from Holland coming to Ukraine and for three days with the President of Ukraine to talk about Holland promotion and about Holland business.
R.R.: Could Ukraine look to countries like Holland to copy what they've done in order to grow, these small and medium sized business.
B.G.: I would say don't copy but know what other countries are doing and know about Ukraine, do your benchmarking, look around, what's going on. But at least give Ukraine a face of doing business. The empty Ukraine is not there anymore. Everybody is aware of Ukraine, a country as Ukraine existing in the world. But I don't have to tell you, it's no more filled in in a rather negative way.
R.R.: So in this case is this saying that we have, no such thing as a bad publicity. In Ukraine's case that may be true. There is a lot of bad publicity about Ukraine at the moment, even if people now know that even the fact exists at all.
B.G.: There is also a lot of bad publicity about other countries in the world: about Syria, about Germany, about refugees – there are a lot of negative things but we have to do business and the business should have special attention. So give us the tools, give Ukrainian companies the tools to tell the story abroad that we are an agri-food country supported by facts sheets that Ukraine says: this is who we are. That's the position that your Ministry of International Trade should pick, to give Ukrainians all the tools in their hands to be proud of their agri-food country. One of the top sectors in export already from Ukraine. And maybe you already know that last year something like 35% of total Ukrainian export was only in agri-food business and 2 years earlier it was only 25%. So this part is growing and growing, it needs more support. Because this is your money-making.
R.R.: Is it just the case of lack of funds here? Is it what holds back the government from investing more in this sector?
B.G.: I feel sometimes like I said at Anuga last October in Cologne there was a collective stand organized by the Chamber of Commerce in Kyiv. That was also a good try that Ukraine was really present and a lot of companies were from all, not only from Kyiv but from all Ukraine, in this one Ukraine pavilion. And I say this should be developed in a more professional way to choose your plan in which parts of the world do I want to have Ukraine promotion because I expect that this is an export destination.
R.R.: In Ukraine, the skills, the knowledge, the education, that entrepreneurs have – is it sufficient to enter the European market?
B.G.: Yeah, the Ukrainians know exactly what to do and they do it, in fact. I meet them all around the world, it's not only about Europe, it's also about the Far East, about Canada, about the United States. Ukrainian commodities and food products, agri-food products go already all around the world. So we don't have to teach them. They only need some normal support to do that better.
R.R.: I think, I wonder, when we talk about business in Ukraine, we can't not mention the word 'corruption'. And I think 'oligarchism'. Because I think small- and medium-sized businesses in this country they face so unique challenges we might say that are not present in Holland or Britain. You've been in this country doing business for 20 years, tell us a bit more about your experience of corruption, the oligarchs, because they control, you know, large sectors of the economy and this is a huge barrier. Is it not – for smaller and medium size businesses? It's preventing growth of it.
B.G.: I see the difference between my country, the Netherlands, or in a popular way, Holland, is that we also face corruption, but if we face corruption, we put it on the table and we talk about it, it's on TV, it's in the public and here it is more covered. We never know what's really going on. We know there are some way of corruption, but we cannot find it, we cannot take it.
R.R.: Does corruption matter, in your view? Because I've seen rankings, you know, corruption perceptions index, rankings we get annually. Countries for example like Italy – they have quite high corruption but at the same time their economy is one of the biggest in the world. So does corruption matter, can in your opinion Ukraine still grow and become a strong economy even when there is corruption?
B.G.: Of course corruption is for honest business wrong thing. Because the level playing field should be same for everybody. People who do honest business should not feel the negative events of corruption. So it counts, this is an important factor in every country of the world. If corruption is only far away, everybody knows that we don't know how to face it, of course it leads to negative effect on Ukrainian economy, because already probably not all the tax that you should pay is paid.
R.R.: I mean people might not even start a business, I'll thing I have a good idea but actually it's not worth conceiving because ultimately I'm going to fill in so many forms, so many bureaucrats, then I'm just going to get squeezed out by some oligarch. They might not even start a business. I think on that level, level of mentality it plays an important role.
B.G.: You're completely right. I also feel this is in my business that people who have the guts to start a business they already need to have the guts and it is in mentality, afraid of starting business at the time that they are openly having a business they're victims of all kinds of inspections, of all kinds of tax inspectors who want to see your books.
So this is very bad factor that hinders development as it is. The big companies, you know, they have their special department who take care of these kind of inspectors.
R.R.: And they budget as well, they have the money to build this.
B.G.: Yes, but most economists, they think Ukrainian economy will not be an assessment to this role. Small- and medium-sized companies, they give plenty of these jobs, and this is killing you as a level of smaller- and medium-sized enterprise. They don't like, they don't have the budget. So this is killing for small companies.
R.R.: How bad is it in Ukraine, in your opinion?
B.G.: I think if we only face that Ukraine at this kind of negative challenges, we would not be active here. And we wouldn't have any positive feelings.
R.R.: So we try to stay positive in spite of?
B.G.: And that's exceptions to the rule, see, it's possible. Use this positive exceptions as lighthouses so to say. Okay, it's possible, they do it, they do it. We can do it. So I think the mentality shouldn't be that there's corruption, it doesn't make sense to start a business, no, let's do it and get the support of your government that you need and they should give you. That's why they are in power, to give promotion to Ukrainian economy. And Ukrainian economy should earn its money from export. Your country is not big enough to say: Okay, local models, big enough. It's a lot, 40 or 42 mln people – we have 17 mln people. 17 mln people in Holland, we are open economy, we have to live from export. The local market is not big enough for our ambitions. And Ukraine also has big ambitions and should fill them in one by one, by just doing it. And of course there will be hiccups, and there will be problems, but by going your road you have to solve them one by one.
R.R.: Speaking of these hiccups, we had one in the recent weeks. We had Aivaras Abromavicius, the economy minister, he tended his resignation. At the time, speaking out in quite open terms about corruption and saying that he'd been put under pressure by certain high-level officials. I wonder what your reaction to this was, because you speak about the need for the current administration to bring in reforms, and the Economy Ministry was one place where people did say that real reform had happened since the Maidan revolution. Given that, can we look at – for you, his resignation, I assume, is something as a disappointment?
B.G.: It's not only a disappointment. We were supposed to have a scheduled meeting with former minister of trade, Mr Abromavicius, organized by the Dutch Embassy in Kyiv, to have a round table discussion, dialog and meeting with minister about what's going on. Of course this meeting has been canceled, so I mention this because this gives – this is a good example how your minister was in social life, was in business life, was listening to other countries, was listening to companies, so he knows exactly what's going on. He's a man from the business. And if this person says, I don't believe in it any more, my mission is impossible, of course this is something that gives a lot of worries in the international community. In the international business community. So this is a very bad signal and a lot of ambassadors already sent a letter to your parliament expressing their concerns.
R.R.: They did. Which is quite an unusual step but I think it shows the level that the West is actually invested in this country – politically, economically.
B.G.: Yeah. So as a matter of fact this resignation let to a lot of discussion in the international community here. Because we had a hope that this minister was one of the anchors who showed this is the way we have to go, and we have to face corruption, and we have to beat corruption.
R.R.: Unfortunately looks like he's gone now but we're almost out of time here Mr.Grimberg, so I wondered, given that we've had this blow in last couple weeks, but ultimately, what is your feeling. Do you think in the next 5 years, 10 years Ukraine is going to be able to grow and radically change its economy, become this more dynamic place where small- and medium-sized businesses do become the engine of growth? Do you see that?
B.G.: First of all, Ukraine has to develop more certainly and to show to the world: this is our strategy. This is our economic strategy. These are our top sectors. Focus on your top sectors. Like agri-food, like IT, like metal processing and give them support and give them the opportunity and guide them through the world, take the lead and if you'll take the lead, as a government, as a Ministry of international trade, for sure the companies will be ready. They will do their job. The companies are ready. They know what to do. You don't have to teach them. And the government should get ready and do it together. Do it as a tandem and do it as a public-private partnership and go around the world and show yourself. Like next week, there are many companies showing themselves in Dubai. There you know, it's where you have to show ourselves to export to this part of the world. So follow your companies, government, they know what to do, they know what's going on in the world and they have the experience to teach you. But show yourself on the same level, lead the smaller and medium sized companies, they need your support to conquer the world.
R.R.: Fantastic! Well, Mr Grimberg, let's hope that your advise would be heard in Ukraine and we'll of course be watching closely to see how it all develops. I'd like to thank you very much for coming to speak with us.
B.G.: It was a pleasure to be.