Post-war reconstruction: will the Ukrainian business survive harmonization with the EU standards – McKinsey expert discusses risks and opportunities

Since European integration will be an important element of the post-war reconstruction of Ukraine, it is important for the Ukrainian economy to capitalize on the benefits provided by the European market, but treat the issue of full synchronization with the EU moderately, believes Oleksandr Kravchenko, Managing Partner at McKinsey & Company in Ukraine, who took part in a special event organized by NV “Dialogs on Ukraine’s Restoration”.

Kravchenko commented on the question of Regional Director of NEQSOL Holding Ukraine Volodymyr Lavrenchuk, who moderated the discussion, regarding whether post-war integration into Europe could impede on the development of the Ukrainian business and whether it is ready for the European regulations.

“We need to have a pragmatic approach to integration with the European Union,” emphasized Kravchenko. He believes there are several factors that will help realize this approach, including capitalizing on the current trends in the EU impacting its economic processes. Kravchenko listed three examples of such processes:

• Strong push of the EU towards decarbonization;
• EU’s aspiration for strategic autonomy, specifically reducing dependence on supplies from China;
• Technology development and digitization.

Oleksandr Kravchenko explained that as a part of decarbonization, the EU and its member states allocate funding comparable to the needs for reconstruction of Ukraine, in particular reconstruction of its companies. For example, Germany recently announced allocation of EUR 50 billion to help companies reduce carbon emissions.

“Ukraine is well positioned both in terms of location and natural resources to play an important role in the decarbonization processes in Europe: we have low-carbon electricity, important minerals that may be of interest to the EU in terms of reducing dependence on China, and there is also a logistical advantage. These are the examples, where we can pragmatically integrate into the EU and gain access to the funding Europe allocates for modernization of its economy,” emphasized the managing partner of McKinsey & Company in Ukraine.

He also believes it expedient to localize production in Ukraine as much as possible, so “that we could supply not only raw materials, but also processed products.” “Does this mean that Ukraine must fully transition to European standards? It seems to me it does not,” added Kravchenko. He noted that there are European countries that, for example “in the issues of environmental safety continued to comply with national standards and took a longer time to transition to European standards.”

Kravchenko believes that this kind of approach can become a part of the Ukraine’s integration strategy to the EU. “If we are talking about green products, it is one thing to supply green cement or green steel to the EU and get a premium for this product, at the level of 10-20% of production output. It is another thing to obligate Ukrainian companies comply with these standards, when Ukrainian consumers pay this amount,” noted the expert.

“It is important to seek the right balance, because there are certain risks, but we need to approach this pragmatically, capitalize on the benefits the European market provides and take a more cautious approach to full synchronization with Europe,” stressed Kravchenko.

A new event “Big Day with NV. Dialogues on Ukraine’s Restoration” is taking place on June 8 in Kyiv, from 10:30 am until 17:30 pm. NV invited leading diplomats, experts, businessmen, and politicians to an independent platform to discuss post-war restoration of Ukraine.

Speakers include U.S. Ambassador to Ukraine Bridget Brink; Ukrainian Minister for Communities, Territories, and Infrastructure Development, Oleksandr Kubrakov; Dragon Capital CEO Tomas Fiala; Regional Director of NEQSOL Holding Ukraine Volodymyr Lavrenchuk; Ukrainian Defense Minister Oleksii Reznikov; Executive Director of Union of Ukrainian Entrepreneurs Kateryna Hlazkova; Managing Partner of McKinsey & Company in Ukraine Oleksandr Kravchenko; Kyiv Mayor Vitali Klitschko; Naftogaz Board Chair Oleksiy Chernyshov, and others.

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