Ukraine has about 2,000 SMEs engaged in the textile and apparel industry. Most of them produce for foreign companies under toll manufacturing schemes (equivalent to outsourcing contracts). With the entrance of countries like Poland, Hungary, Slovakia and Czech Republic into the European Union, many foreign and local investors in such countries are looking further east to minimize their costs. In addition to its strategic location and highly skilled workforce, Ukraine has the advantage to offer high-quality raw materials for uninterrupted production. In 2010, the country ranked 30th in the top exporters of textiles to the EU, and 21st for clothing.
Besides, there is a significant domestic demand for quality branded clothing, especially from the middle class. The latter is ready to pay high prices for goods imported from the EU or the US while the country has talented fashion designers, who need to catch the attention of foreign retailers at international fashion shows to develop their sales.
Strategic direction/ specific schemes and incentives
A number of incentives are offered to companies producing in the country:
Advantageous international trade agreements: GSP+
trade regime with the EU DCFTA under discussion), GSP with the USA, MFN
regime with all WTO member countries;
New Tax Code: full exemption of corporate income tax for light industrial companies;
Tolling raw materials: no import taxes and duties on imported tolling raw materials and ready textiles and clothing if the finished products are exported within 90 days, no export duties or taxes (except customs fees) on finished products made from raw materials purchased in Ukraine;
Automatic VAT refund for exporters and introduction of delayed refund penalty;
Additional incentives can be granted by city councils if the project is considered strategic.
The main advantage of choosing Ukraine for European textile and apparel groups is that the country is competitive for large, medium as well as small quantity orders, which is not the case for China or India because of transport expenses and delivery time. Some opportunities include:
Intermediary production: cotton, wool and linen sub-units, fabrics, button, etc.;
Apparel & textiles outsourcing: “cut-and-make” scheme, fast fashion;
Development of Ukrainian brands and production for both local and international markets;
The key locations are Kiyv, Odessa, Lviev and other major cities.
Some success stories
Picard (Germany), a manufacturer of quality leather bags established in 1928, announced the opening of a facility in Ukraine in 2012. The factory will produce leather goods and employ more than 80 people.
Voronin is a leading enterprise in sewing of high quality men’s garments, with a trading network of over 80 stores in various countries, including Ukraine, America, Europe, Russia, and CIS. Its designer, Michael Voronin, is the most famous Ukrainian fashion designer, called the Master of the men’s suit. He obtained the world recognition thanks to invention of the unique vest model method of suit tailoring without fitting.
Useful links and contacts
Ukrainian Chamber of Commerce and Industry
Ukrainian Guild of Clothes Manufacturers
European Business Association