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Oleksii Vitchenko: A call to invest in Ukraine’s tech sector

by Oleksii Vitchenko May 31, 2023 12:55 PM 5 min read
Digital generated image of data in the colors of the Ukrainian flag (Getty Images)
This audio is created with AI assistance

I’ve had many talks with investors and foreign entrepreneurs throughout the last year. And the sentiment that I kept hearing was that IT in Ukraine should not be an investment priority because there are more important industries in need of restoration in Ukraine.

But that’s precisely the point.

Ukrainian tech does not need to be restored. On the contrary, tech is the lifeblood that sustains the bulk of the Ukrainian economy, and it is tech that will take a leading role in the restoration effort.

And I have a few weighty arguments to back my words.

Only export industry in Ukraine to grow in 2022

Throughout the full-scale war, IT was the only industry that operated at full capacity while also increasing its share of exports.

In 2022, we not only reached that benchmark but outpaced it. Companies didn’t downsize but grew, hiring more people and increasing their export capacities. Last year, Ukrainian IT exports grew by almost 6% to reach a total of $7.34 billion, according to the National Bank of Ukraine.

Ukraine’s IT sector contributed to 3.5% of the country’s GDP and experienced $400 million year-over-year growth of exports – these are the highest indicators since the industry’s inception.

In March 2023, the IT sector’s export volume increased by 9.7%, bringing an additional $53 to the Ukrainian budget compared to February. In addition, these indicators are 15% or $79 million higher compared to March 2022. Tech services make up a significant part of the structure of exports – 43%.

Tech continues to be one of Ukraine’s main export-oriented sectors.

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Before Russia launched a full-scale invasion of Ukraine, 27-year-old engineer Maxim Sheremet was engaged in the manufacturing of commercial drones. He worked for the state defense company Ukroboronprom, a strategic manufacturer of weapons and military hardware in Ukraine, and later at Evolve Dynami…

Creates innovative digital products

The power and beauty of Ukrainian tech are that it doesn’t just replicate and adapt technologies that already exist elsewhere – it is also capable of leading the charge and setting trends.

For a few years now, the Ukrainian government has been refining the “government in smartphone” app known as “Diia.” The app has garnered international attention, winning many awards and becoming a sought-after export product. Estonia is already implementing its own version, “mRiik,” based on Diia. Ukraine’s Digital Transformation Ministry communicates with countries across Europe, Africa, and Asia that are interested in our experience.

Diia demonstrated its true power during the onset of the full-scale war, becoming the digital foundation for the country at a time when citizens couldn’t access government aid by other means. Pensions were consistently paid out through the app, and people forced to flee their homes due to Russian aggression had access to valuable documents.

Currently, 14 digital documents and 25 services are available on the application, and over 90 services are available on the portal.

A display featuring silhouettes of people in front of a screen with the Diia app logo as seen during the Diia Summit in Kyiv, Ukraine, on Oct. 5, 2020. (Photo by Sergii Kharchenko/NurPhoto via Getty Images)

Overcomes challenges, from relocations to blackouts

Ukraine’s tech sector showed a high level of adaptability in 2022. According to the Lviv IT Cluster, 85% of IT companies fully or almost fully restored business activity in May. Of this percentage, 63% noted a positive financial result, and 13% an increase in income in the 25-50% range.

That’s not to say that our IT industry, like all other sectors of the economy, didn’t have serious challenges to overcome. According to a survey by the IT Ukraine Association, nearly 71% of IT companies in Ukraine had to undergo unplanned relocations. In 2022, roughly 71% of companies and 75% of employees had to switch to remote work.

However, Ukrainian businesses have managed to overcome these challenges with grace. With generators, Starlinks, and water tanks, many IT companies have maintained operational capabilities and delivered on their projects.

Financial analysts predicted the Ukrainian economy would drop by 32-33% in 2022. What these analysts failed to predict is our ability to adapt and overcome to overshadow these grim predictions.

Lobby X: Promoting modern and effective military recruitment in Ukraine
Editor’s Note: The opinions expressed in the op-ed section are those of the authors and do not purport to reflect the views of the Kyiv Independent. The Armed Forces of Ukraine (AFU) are estimated to have more than tripled its personnel since the full-scale war began on Feb. 24,

According to research by the IT Ukraine Association, 34% of companies claim to have successfully adapted to the new realities, while 43% expect an increase in business volume in 2022. Over 80% of IT companies that have relocated since the start of the full-scale war have committed to returning to Ukraine – 5.6% of these companies have already started the process.

Against the backdrop of the dramatic decline in other industries, the Ukrainian tech sector emerges as the model of stability and growth despite the circumstances.

We have also realized that outsourcing is not an end-all-be-all for our ambitions. In recent years, many Ukrainian product companies have also developed software solutions that are sought after and distributed worldwide.

Our resilience, growth, and ability to perform and innovate are markers of an industry with high potential and exciting prospects both for the industry at large and the people who work in it. Whether we are talking about SaaS, eCommerce, or big data analytics, where there is an opportunity, Ukrainian tech will follow and perform.

It’s up to the investors to decide whether they want to bet on the winning horse.

Editor’s Note: The opinions expressed in the op-ed section are those of the authors and do not purport to reflect the views of the Kyiv Independent.

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