Business Update – March 13: Foreigners banned from entering Ukraine, import and export problems

Ukraine closes its borders for foreigners amid the coronavirus pandemic, possibly hurting the country’s international trade. The move is meant to delay the coronavirus spread in Ukraine. Kyiv immigration lawyer Vasyl Cherednichenko said it’s a blanket ban on all foreign passport holders, including foreign truck drivers importing goods into Ukraine. However, foreigners who have Ukrainian residency permits will “more likely” be able to come and go freely. Business travel, metal exports, hotel occupancy are already down.

But the largest border crossing points will remain open to goods, the customs service has claimed. Checkpoints with the largest goods flows will remain open, and cargo transportation across the border will continue, the State Customs Service said on March 13, despite the ban on foreign passport holders entering the country. “In 48 hours, Ukraine will close the border for foreign citizens for two weeks. Ukrainians will be able to freely return home. Cargo will continue to be transported,” the customs authority wrote on Facebook.

The Ukrainian Grain Association (UGA) worries about closing border checkpoints. The UGA reported that the closure of 49 checkpoints (out of 219) should not impede the export of goods from Ukraine, in particular, grain and oilseeds that go through local ports. According to the association, there are no grounds for such a restriction, since no cases of transmission of coronavirus through grain and oilseeds have yet been recorded.

Ukrainians working abroad will likely face more hardships in the weeks to come. Tightened border controls will block many temporary or seasonal workers from traveling throughout Europe, potentially slashing their incomes, imperiling remittances back to the homeland — which accounted for 8% of Ukraine’s economy last year.

Some 4 million Ukrainians are involved in labor migration, with some 2.7 million working abroad at any one time, according to the Centre for Economic Strategy in Kyiv. A third are circular migrants, a fifth are short-term migrants and another fifth are long-term migrants. And an estimated 10% are illegal.

Ukraine’s transport sector has stumbled under the strain of state-imposed quarantine. Airlines continue to cancel flights, while metro and bus systems are being regularly disinfected. Beyond Ukraine, the disruption to airline operations is so massive that carriers have already lost $6 billion and are projected to lose about $113 billion in revenues in 2020, the International Air Transport Association stated on March 5.

As COVID-19 sparks a global economic downturn, Ukraine’s economy is preparing to take further hits. To make matters worse, Ukraine has a new government that has been on the job for just 10 days. There is low confidence that it is ready to take on the crisis.

As Ukrainian businesses prepare, some are already feeling the first sting of a coronavirus slowdown. A nationwide quarantine that will last until April 3 has resulted in border checkpoints closing, flights being canceled or suspended and schools, entertainment centers and cinemas being shut down. Despite government reassurances, business owners are feeling the effects. 

Over half of local businesses are preparing for a sales slowdown and one-fifth could fire staff over the pandemic, a survey has found. Respondents said COVID-19 could equal sales slowdown and cash flow challenges (61%), one-fifth of respondents (12%) said that the virus can cause “headcount optimization” and compensation changes, according to a survey conducted by Deloitte and the American Chamber of Commerce in Ukraine.

The Health Ministry plans to legislate to protect the right to work remotely during the quarantine, Deputy Health Minister and Chief Sanitary Doctor of Ukraine Viktor Liashko said at a briefing after a meeting of the National Security and Defense Council (NSDC) of Ukraine.

Here’s how the government, the banks, and major employers can help the Ukrainians and businesses through the current troubles: Ukraine must prepare for its own coronavirus crisis.