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To escape the war, Ukraine’s factories are moving west

Aug. 15, 2022 Updated Mon., Aug. 15, 2022 at 12:42 p.m.

By Liz Alderman and Erika Solomon New York Times

LVIV, Ukraine — It is an unusual arrangement for unusual times: Above a factory floor in Lviv, Ukraine, where Volodomyr Mysysk has relocated his furniture-making business, he and his 15 employees have become roommates. They have brought their children and their dogs, and they share a kitchen above the machinery where they spend their days reviving a company that could have been destroyed by the war.

But Mysysk, 23, and his workers, who came to Lviv from the bombarded city of Kharkiv in eastern Ukraine, have benefited from a spirit of solidarity and a government policy that aims to rescue industries threatened by an invading Russian army and help reassemble them, piece by piece, in cities along Ukraine’s western frontier.

This region is quickly being remade into the new economic heartland of Ukraine, with more than 200 transplanted businesses that make just about everything, including paint, construction materials and parts for electric vehicles.

Factories in Russian-occupied areas were packed up and moved on trains and trucks, and are being resurrected in the west. Manufacturers are creating jobs and hunting for skilled workers. Now closer to Poland — Ukraine’s gateway to Germany and western Europe — the reborn businesses are forging ties with the European Union, which Ukraine hopes to join soon.

“The main motivation for them to come here is that they stay in Ukraine,” said Andriy Moskalenko, the deputy mayor of Lviv responsible for economic affairs. “Whether they come from Kharkiv, Kyiv, Chernihiv — they are all Ukrainian. We have to support them,” he added, “because Russia has destroyed a lot.”

Ukraine’s economy is expected to contract by more than one-third this year. Inflation is rising and is likely to climb above 30%, the country’s central bank recently said, and the finance minister recently announced the country had reached an agreement to stop paying some foreign creditors.

Under a government relocation program, Mysysk was able to offer workers at his small company, Roomio, an opportunity: Join him in the relative safety of Lviv and keep their jobs, although it meant living in close quarters with their boss until they could find their own lodgings.

Emotionally, it wasn’t always easy: “I tried not to look depressed, because I wanted to encourage everyone,” said Mysysk, who moved large chunks of the assembly line to Lviv in a bakery truck lent by a neighboring bread maker. It took a month to move everything out of the old factory, by then pockmarked from shelling and gunbattles.

“I would smile and say everything is good, even when I wasn’t sure I believed it,” he said.

But the financial and political support that companies such as his have received, Mysysk said, has been an inspiration — and a reminder of just how critical businesses are for helping keep the economy afloat.

Bigger companies are working as fast as possible to piece themselves back together — although it is a daunting task trying to map out a business plan amid the constant uncertainty of war.

Oleksandr Oskalenko, managing director of Pozhmashina, a maker of firetrucks and agricultural vehicles, halted production in March at its sprawling, modern factory in Chernihiv, the site of a brutal siege by the Russians, and looked to the safety of his 550 employees.

“Things had been developing really well in Ukraine,” he said. “We still had problems with corruption, but those problems were getting less, and the economy was improving. But with Russia’s invasion, half of the country stopped working.”

When Ukrainian President Volodymyr Zelenskyy announced an economic program in April to rescue businesses from the war-torn east, Oskalenko jumped at the chance. “We took the factory apart piece by piece and put it onto trains to be shipped out,” he said.

The government offered tax breaks and the free transport of equipment on Ukrainian railways. Lviv and other cities nearby have competed fiercely to lure the newcomers, offering additional financial sweeteners including cheap warehouse space, free legal counsel and fast-track paperwork to set up new operations quickly.

Beyond the 200 companies that have already moved, another 800 have applied for relocation, said Volodomyr Korud, vice president of Lviv’s Chamber of Commerce.

On a recent weekday, a team of welders worked to remake Pozhmashina’s paint shop inside a mammoth Soviet-era warehouse, attaching massive steel beams under streaks of sunlight through broken windows overhead. Once it is finished, agricultural trucks will emerge in fresh coats of olive green and fire engines in cherry red.

Even so, Oskalenko said, it is hard to know when things will get back to business as usual.

“The Russians have destroyed big industrial centers that produced energy, chemicals and steel,” he said. “Agricultural fields in occupied areas aren’t producing,” he added. “So making a business plan one to two years out is impossible.

“But this has given us a perspective for the future,” Oskalenko said, smiling as he surveyed the rebirth of his old factory. “There are no trenches here, so it helps.”

The war has also brought a flood of Ukrainians to settle in the relative safety of the west, with large numbers looking for work. For executives such as Pavlo Chernyak, head of Matro Luxe, one of Ukraine’s biggest mattress makers, relocating to Ukraine’s western frontier opens what he sees as a great opportunity to offer employment to some of the tens of thousands of people who lost jobs because of the war.

Under whizzing bullets and a hail of Russian rockets, he said, he moved over half of Matro Luxe’s equipment from factories in Kyiv and Dnipro, in the east, and plans on expanding the business. Mattresses are in demand at a time of war — not only for soldiers but also for families in bomb shelters or displacement centers. And whenever the war ends, he expects the demand to only grow amid a reconstruction boom.

Chernyak has vowed to expand his workplace in Lviv of 40 people up to 200 in six months and up to 500 by the end of the year.

“To me, it’s most important to keep workplaces for people — we need to keep as many jobs here as possible in order to sustain our economy, pay our taxes,” he added.

Even as they hunt for skilled workers, the replanted businesses face additional challenges operating in a wartime economy upended by supply shortages and damaged infrastructure.

At the new location for NPO Rost, a maker of interiors for passenger trains, a managing director, Alexander Pletiuk, is scrambling to fulfill orders in a small warehouse. Before Russia’s invasion, the company operated a 33-acre modernized plant in the now-embattled city of Zaporizhzhia.

Today, Pletiuk’s warehouse space in Lviv is tiny by comparison, and its production capacity is just 10% of the old site. “We’re trying to meet all our contracts as fast as possible while settling into an empty space that doesn’t even have electricity yet,” he said.

A handful of employees were trying to fill orders for train windows — but they were missing essential pieces needed to make the windows airtight. Because of the war’s effect on Ukraine’s supply chain, Pletiuk said, it now takes twice as long to procure glass. Fuel costs have more than doubled.

The company signed contracts with clients before the war at fixed prices, but now expenses have surged: Metal prices are 50% higher. And investments must be made in the new warehouse to bolster production capacity.

Still, Pletiuk said, “When we win this war, we will have a lot more to do.” Russian attacks have damaged at least 3,900 miles of railways in Ukraine. And many of the railway cars that ferried refugees and supplies will need to be refurbished and new ones ordered.

He is not alone in seeing a boon: An irony of the great migration of eastern businesses is that it has not always led to financial hardship — but gain.

Now, just about 60 miles from Poland, Mysysk realized it would be easier to export Roomio’s furniture to European customers from Lviv than it was in Kharkiv. After emailing companies around Europe, he has gotten new clients in Denmark and Slovenia — his first export opportunities.

“In Ukraine, it’s considered cool to work with European countries. So, I felt really happy when the first contract was made,” he said. “For our work — I hate to say this, but it’s actually going better for us.”

His company is not the only one now starting to find new business in Europe, a trend he believes is important — not just for helping Ukraine keep its economy alive during the war but for fostering closer ties with the European Union.

“The more we are connected, the more the governments of the European Union and Ukraine will understand we should be one,” he said.

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