EU Market Integration: Ukrainian SMEs

Micro-, small- and medium-sized enterprises (SMEs) make up a large majority of businesses globally, including 99% in the EU and 99.97% in Ukraine. However, Ukrainian SMEs are facing numerous challenges that put their survival at risk, which in turn impacts the country’s economy as a whole, given that  SMEs are responsible for over 63% of employment in Ukraine.

The current socio-economic conditions in Ukraine have amplified the challenges for local SMEs. To tackle these issues effectively, a comprehensive strategy is necessary and a key component of the strategy being pursued by the EU is the integration of Ukrainian SMEs into the European Single Market.

What is European Single Market integration? European market integration refers to the process of a company becoming a part of and functioning within the European Union’s Single Market. SMEs have the potential to contribute significantly to Ukraine’s EU integration because the competitiveness of small businesses is a crucial criterion for EU accession.

This integration offers numerous opportunities, particularly for SMEs, but there are hurdles to overcome. In this article, we will explore the advantages of EU market integration, the related obstacles that arise and look at ways to address them through support programs and initiatives.

Benefits of EU market integration

Accessing the European market offers numerous advantages for businesses:

  • Increased access to partnerships, networks, and customers: Businesses can establish strategic partnerships with suppliers and distributors, which opens up new markets and customer bases. 
  • Access to a larger and more diverse labor force: Businesses can tap into a larger and more diverse labor force, including highly skilled employees. Initially, businesses may encounter difficulties in getting people to relocate, but that could be mitigated significantly by offering remote work possibilities to attract the necessary expertise. 
  • Improved access to support programs and initiatives: Companies that establish themselves in the EU market gain better access to support programs and other initiatives. They can take advantage of a wide range of resources and networks specifically designed for SMEs, such as chambers of commerce, business associations, and favorable regulations.
  • Access to market data and information: Not only does this provide information about potential challenges, but it also highlights opportunities. For instance, there is rising  demand for environmentally and socially responsible products, which can influence producers’ decisions.

Barriers to EU market integration

Market integration and expansion into the EU comes with its own set of barriers to entry:

  • Regulatory compliance: Enterprises interested in operating within the EU Single Market must adhere to strict rules and regulations established by the European Union, for example detailed product specifications or GDPR requirements. SMEs often struggle to meet these requirements when attempting to enter the market. They may lack the necessary knowledge and financial resources to make the necessary adjustments in areas such as registration, taxation, import-export procedures, and different product standards and specifications.
  • Language and cultural barriers: Effective communication is crucial for any business, especially when operating internationally. Understanding the language is one step, but often SMEs struggle with grasping the cultural nuances and norms that influence market dynamics, which are as crucial as speaking the market’s language. 
  • Logistics and supply chain management: In Ukraine, supply chains and logistics are currently unreliable and expensive due to the Russian war of aggression and the still-lasting effects of the COVID-19 pandemic. These external factors have had a lesser impact on the European Union and its member countries.
  • Online sales: To tap into the EU customer base, Ukrainian businesses need to have effective online sales. This is particularly important because most SMEs cannot afford to open local branches. The EU single market favors online shopping.
  • Competition: SMEs entering foreign markets face intensified competition, however,  the same applies to local SMEs that are suddenly confronted by more international competition. To counter this, SMEs must develop a competitive strategy to succeed, which in turn requires extensive market data and information to support improvements to product development and the marketing strategy. 

 

 

Mitigating barriers through support programs

There are various support programs available to help businesses overcome these challenges. These programs specifically aim to prepare SMEs for expansion and export, both within Ukraine and at the EU level. They can assist businesses in addressing and overcoming these challenges through mentoring, expert-led workshops, technical support, access to financing, and community building.

The table below highlights various support programs, and other initiatives, for Ukrainian SMEs targeting EU market integration:

 

Program name and provider Program description Program components Application status*
Preferential Terms | Amazon Amazon has committed to a 12 month extension of an initiative offering a 0% referral fee across Amazon’s European stores to Ukrainian sellers. This can help find new customers and scale business. Technical support, financial assistance Currently open
Support for SMEs from Ukraine | Leverist Leverist offers targeted matchmaking between EU businesses and Ukrainian SMEs looking for partners in the EU market. Mentoring, networking Currently open
Export Support System – Chamber System | System of Chambers of Commerce and Industry A structural unit whose activities are aimed at supporting exporters through the System of Chambers of Commerce and Industry in Ukraine and ensuring coordination of the work of Export Support Centres in Regional CCIs. Technical support Currently open
Export Promotion Office (EPO) | Ministry of Economic Development and Trade of Ukraine (MEDT) The Export Promotion Office is an advisory and consultative body to the MEDT that was created as a one-stop-shop to improve Ukrainian SMEs’ access to export markets through education, information, and support platforms. Technical support, workshops Currently open
Business Bridge | European Union Provides financial support to up to 1500 Ukrainian small and medium-sized companies (SMEs) affected by the war, in the form of vouchers (worth up to € 2,500) to access services and participate in trade fairs in the EU. Technical support Currently open
Erasmus for Young Entrepreneurs – Ukraine | European Union Allows new Ukrainian entrepreneurs to gain business experience in other European countries by matching them with host entrepreneurs in the EU and providing financial support. Financial support, mentoring Currently open
ECA Ukraine | Export Credit Agency (ECA) Ukraine ECA Ukraine offers export credit insurance on a portfolio basis. The purpose is to provide an exporter with financing from the bank for the implementation of a foreign economic contract in the absence or insufficiency of collateral. Financial support Currently open
Re:Build Ukraine | Be an Angel e.v. Empowering Ukrainian single mothers in the EU through personalized mentoring, the program addresses language barriers, business knowledge gaps, and limited job opportunities. Mentoring Currently open
Communication strategies and mentoring support for SMEs within the light of opportunities project | Svitlo Agency Provision of free consultations and services for the development of communication strategies and SMM support for small and medium-sized businesses. Technical support Currently open
Acceleration Program “Brave” – She’s Next! Empowered by Visa

Link #2

| She’s Next! Empowered by Visa and the Project Foundation

The “Brave” vision accelerator, launched with the Ministry of Digital Transformation, supports women’s entrepreneurship, emphasizing learning, development, and community building amidst economic challenges. Expert workshops, mentoring, access to financing Currently open
School of ME – 18:35 | The School of ME (Mindful Entrepreneurship) A rapid business support program for youth-led enterprises. 20 SMEs will receive expert support to develop an individualized plan for business recovery and adaptation, as well as funding to achieve their business goals. Expert workshops, mentoring, access to financing Currently open
eo Business Incubators | American House, USAID, Cornell University A series of lectures, workshops, and webinars covering all the startup and business fundamentals, ending with a Demo Day with the opportunity to pitch to investors. Mentoring, expert workshops, access to financing Currently open
UWE Hub training program 4.0 | UWE Hub Through lectures, training sessions, and mentoring, participants will acquire relevant and practical knowledge for initiating and growing their own business. Expert workshops, mentoring, access to technical support Currently open
Ukraine Response #2 | Phineo Startups Seeking impactful innovations to address the repercussions of the 2022 war on Ukraine, spanning refugee crises, reconstruction, food security, energy, health, and legal challenges. Mentoring Completed. New openings every 2-3 months.
Export support program for Ukrainian business | Diia Business Business representatives (of SMEs) will be provided with marketing, financial, and legal assistance to establish export processes between Ukrainian producers and consumers in Europe. Technical support In progress
Mentoring support for the formation of an individual export plan | Office for the Development of Entrepreneurship and Export A free mentoring test service to assist 10 Ukrainian companies from various sectors to develop individual export plans. Mentoring, technical support In progress
Christmas with Ukraine: a set of craft product companies to enter the EU market | Fine.YUA Craft product companies receive support for European market expansion: product presentation, logistics, payments, design, training, and online ordering. Technical support In progress
“How to create and develop a business in Ukraine” | StartUp Ukraine Empowering war victims and small enterprises, the program offers mentoring support after the completion of a training component. Successful participants can apply for grants to develop their businesses. Expert workshops, mentoring, financial support Currently inactive
School of ME – 18:35 Social Edition | The School of ME (Mindful Entrepreneurship) Support 15 social youth businesses (small and medium-sized), which we will help with expertise to develop an individual plan for recovery and adaptation of doing business, as well as with finances to realize their business goals. Expert workshops, mentoring, access to financing Currently inactive
“Export Compass” | USAID “Dream and Act” initiative Intensive three-month mentoring program that begins its implementation with the aim of supporting youth enterprises that seek to expand their activities outside of Ukraine and master international markets. Expert workshops, mentoring, technical support Currently inactive
DHLgoTrade programme | ICC’s Centre of Entrepreneurship (COE) and DHL The CoE Ukraine will implement the DHLgoTrade training programme in Ukraine to provide capacity-building for SMEs in the region and build resilience of Ukrainian businesses. Expert workshops In progress

*Status as of: January 9th, 2024

 

enpact’s programs for Ukrainian SMEs

From 2022 to 2023, enpact’s FEMEIE program supported 75 women entrepreneurs based in Moldolva (with many originating from Ukraine). In 2023, the International Mentoring Program commenced mentoring support for 10 Ukrainian women-led SMEs. To receive updates about enpact’s upcoming programs for Ukrainian entrepreneurs in 2024, please add your contact details via our sign-up form.


by Gustav Klaphake

Junior Project Associate

Gustav is a Junior Project Associate at enpact. With an international upbringing, he has had the opportunity to gain unique perspectives and insights into international communities and development economics. His fields of expertise include climate change, sustainability as well as urban and regional economics.


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