Plant and flowers exports to the Ukraine are characterised by corruption. Lorry drivers still need to bring their brown envelopes to Kiev, or they’re kept waiting by the side of the road. Heavy funding from IMF and the EU will hopefully put an end to these practices over the next couple of years.
The good news is, that there are figures about the plant and flower exports from the Netherlands to the Ukraine. The bad news is that they’re out-of-date and unreliable. The most recent figures concern the year 2014. The export value of plants and flowers from the Netherlands to the Ukraine reached €19 that year – 11.2 million for cut flowers and 7.8 million for plants. This was 43% less than in 2013.
Comtrade can provide more up-to-date figures for the exports of roses and chrysanthemums specifically. The values for chrysanthemums show a decline. According to the statistics, chrysanthemum exports to Ukraine reached a value of €7.4 million in 2014. The previous year, it was still at €12.9 and in 2013 it was as high as €15 million. The export value for roses from the Netherlands went up during those same years, from €2.7 million to €2.8 million. Rose exports from big competitors such as Colombia and Ecuador (main supplier of roses) on the other hand, went down dramatically.
This decline can partly be explained by the hard economic times in Ukraine. The economy has suffered from revolutions and conflicts the past couple of years, including those in Crimea and in Donetsk Lugansk, and is recovering only very slowly.
Ukranian Vadim Kharytonchuk of De Gooijer International (DGI) tells us about his wife, who borrowed € 20,000 from friends in 2012, to start a flower shop. “She didn’t have anything herself and she didn’t know a thing about flowers. Two years later, she’d recouped all the money. If she were to open a shop nowadays, she wouldn’t be able to recoup in ten years. It’s pure poverty over there.”
Kharytonchuk explains that the salaries are low and the inflation is high. With an average salary of 150 euro per month, people can’t afford flowers. The Ukrainian currency, hryvnia, might have been fairly stable lately, but compared with 2014, the exchange rate against the euro has really gone down.
Unreliable
But in general, the export figures aren’t very reliable, according to Koos van der Meij of the VGB and Vadim Kharytonchuk. DGI has one very big customer plus a few smaller ones in Ukraine and they export chrysanthemums and small roses and also more expensive flowers such as large ranunculus and hydrangea.
Kharytonchuk and Van der Meij say that exporters invoice ‘differently’. How come? When the goods arrive at customs clearance in Kiev, inducements are to be paid on the value of the plant and flower loads. Corruption is a big problem; if you don’t pay, your lorry isn’t allowed to drive on. “Even if all the paperwork is in order, they’ll think of something”, says Kharytonchuk.
But this experience isn’t shared by all exporters. Stokolex exports flower bulbs to Ukraine and is doing pretty well. They’ve even managed to increase their sales, at the expense of the other five Dutch companies that export bulbs to this country. The bulbs go to forcing greenhouses in Ukraine, there are a few large ones and a lot of small family businesses.
Arno Kleijbroek of Stokolex, who works and lives in Ukraine, indicates that they import all bulbs by themselves, which is how they avoid having to deal with corruption. “We chose deliberately not to make use of all sorts of vague constructions or shady deals. We take care of all the paperwork ourselves and as long as you tick all the boxes, they won’t be able to find a reason to get you.
So, Stokolex really benefited when the import duties were reduced from 20% to 5% on the 1st of January 2016. The official fees for flowers and plants are 5% and 7.5% respectively now, but they continue to remain much higher than that, because of all sorts of additional fees, is the experience of most exporters.
Association Agreement
The reduction of import duties was part of the free trade agreement between Ukraine and the EU. That free trade agreement is part of the Association Agreement between the two parties. The free trade agreement has already been implemented, but the Association Agreement still needs to be ratified by the Netherlands. Ultimately, the import duties on flowers, plants, bulbs and cuttings should be zero.
Kuno Jacobs of Nova Exhibitions organised Flowers Expo Ukraine in Kiev last week. Eurovision winner Jamala was there for the naming ceremony of one of Stokolex’s new tulips. Jacobs feels that things are improving with regards to customs clearance in Kiev.
Jacobs: “The past three years, we’ve seen more improvements at the border than during all of fifteen years before that. This has everything to do with the Association Agreement with the EU. Bribery and corruption are fought within the framework of the agreement. It’s a slow process. I think it’s important for the IMF and the EU to set clear conditions for all the bags of cash they’re handing to Ukraine. They aren’t just giving the money away like that of course; Ukraine has to meet certain requirements. Once they’ve met those, they’ll get the money. The fact that Ukraine is led by the IMF and the EU like that, is positive.”
Kleijbroek agrees that things are moving in the right direction. “The EU and the IMF are ready to provide large sums of money. Most of this hasn’t been paid out yet, because of all sorts of procedures.”
Kharytonchuk on the other hand, has little faith in the Association Agreement. The corruption won’t go away. “I don’t understand why the IMF is giving money to Ukraine. They’ll never get it back. It’s all going straight to the president’s pockets. As a result, the only party that will benefit from the Association Agreement is the EU. EU countries will be able to purchase cheaply in Ukraine, but Ukraine itself won’t see a difference. And it isn’t good for the Netherlands either. The Ukrainians will come to the Netherlands to look for jobs.”
