Named one of Lonely Planet travel guides’ top 10 undiscovered cities to visit in 2016, Lviv – the largest city in western Ukraine, but only the seventh largest in the country, with a population of 750,000 – is becoming a hub for European businesses looking for high-quality talent and manufacturing on the doorstep of the EU.
Famous for its 19th century architecture, award-winning coffee and handmade chocolate, Lviv has a growing tourism sector and in 2016 welcomed 2.5 million visitors, according to Olha Syvak, chief investment officer at Lviv City Council.
But as a self-proclaimed Western-oriented city – formerly part of Poland and Austria’s Hapsburg empire and located just 70 kilometres from the EU – Lviv and western Ukraine are favourably located for manufacturing and integration into the European and global supply chain.
Low energy, low costs
Lars Vestbjerg is CEO of Lviv-based SICA, a Danish footwear manufacturer, and president of the Danish Business Association (DBA), which represents the 200 Danish companies operating in Ukraine, 65 of which are in Lviv. He came to Ukraine in 2003 with the aim of outsourcing, taking advantage of the area’s proximity to key markets and its low energy and labour costs.
“Of the problems we had when we first came here in 2003, 90% have gone,” says Mr Vestbjerg. “The DBA and European Business Association are constantly working through the administration to make life easier for investors.
“Ukraine is good investment country; it’s also a good country to live in. Ukrainians are highly educated, and here they are more Western-minded in business and politics,” he adds. “We’re brainstorming a new FDI strategy,” says Ms Syvak. “We say ‘Make in Lviv’, speaking about IT and manufacturing. We have more than 15,000 employees in the IT sector, designing programs for the US and UK markets.”
Lviv IT Cluster is dedicated to uniting the city’s 200-plus IT companies through marketing, knowledge-sharing and events such as Lviv IT Arena. It has created a masters degree in technology management with Lviv Business School, whose professors include experts from Princeton and Carnegie Mellon universities in the US.
“We don’t want our selling point to be ‘low-cost city’, but rather ‘smart city’,” says Ms Syvak, highlighting the 30,000 annual graduates from the city’s 12 universities.
Sophia Opatska, founding dean at the Lviv Business School of Ukraine Catholic University (UCU), says: “In Ukraine, our big challenge is changing the mindset from this post-Soviet legacy of a paternalistic society. We, as a university, are focused on developing an entrepreneurial and risk-taking attitude.” UCU partners with local businesses and firms to develop their programmes, ensuring students are equipped to meet future industry needs.
Up the value chain
“Clusters are growing in western Ukraine in manufacturing and the auto industry, feeding assembly plants in Hungary and Slovakia,” says Andy Hunder, president of the American Chamber of Commerce in Ukraine. In early 2016, Japanese automotive company Fujikura opened its first local plant, producing electric wiring for Volkswagen and hiring more than 1500 staff, with plans to hire a further 1300.
“Lviv is leading Ukraine’s economic revival, creating well-paying, hi-tech and modernised jobs,” says Daniel Bilak, director of Kiev-based UkraineInvest.
Despite Ukraine’s political challenges, European companies are flocking to the region. For example, automotive OEMs from Germany (Bader) and France (Nexans) also opened plants in 2016.
Last year, Austrian companies invested $8m into Lviv and Poland spent nearly $16m, according to Lviv Oblast’s statistical office. Food production giants Nestlé and Coca-Cola are also thriving in the region. These investments require both manpower and IT talent, moving the region up the value chain.
“When people come here they see a European city; they don’t see tanks on the street,” says Ms Syvak. “They see a professional local government ready to help. That is why we work to highlight the success stories and show there is good news in Ukraine.”
Mr Vestbjerg adds: “We have a good company here and we are operating. There is a war in the east but here you don’t feel it at all. There is nothing to be afraid of.”