Ukraine Country Presentation
UKRAINE:Market of Potential Opportunities
Basic Information
Area (sq km) 603,700 (about twice bigger than Finland/Germany)
Population (million) 46.46 mln. people
Capital Kyiv
Languages Ukrainian, Russian
Literacy rate 98%
Currency Hryvnia (UAH)
Remarkable facts:• Ukraine is the biggest
European country by territory• Ukraine possesses 1/4 of
word’s black soil
Ukraine Country Presentation
Regional Focus: Geographic Structure
• Administrative division: 24 oblasts, 1 autonomous republic of Crimea, and the cities of Kyiv and Sevastopol
• The biggest regions are: Kyiv, Donetsk, Dnipropetrovsk, Odessa and Kharkiv.
Ukraine Country Presentation
History and Current PoliticsSoviet Rule
-1922: Ukrainian Soviet Socialist Republic -After WWII: Rapid urbanization, industrialization and increase in literacy & Ukraine became the centre of Soviet arms industry and high-tech research-Many members of the Soviet leadership came from Ukraine: Nikita Khrushchev and Leonid Brezhnev -Chernobyl (1986)
Ukraine Country Presentation
1991: Independence
Political System• The head of state is the president. He/she is elected by popular vote for a
five-year term
• Legislative Power: Verkhovna Rada (Parliament), which is comprised of 450 deputies who are elected every five years
• The highest executive body is the Cabinet of Ministers. The prime minister is appointed by the president upon the parliament’s consent.
Legal System• Ukraine is a civil law country
• Court System: General, Commercial and Administrative
Ukraine Country Presentation
Economic System
• Ukraine has struggled to shift from a centrally-planned economy to a market environment.• There was a deep recession in 90s. • GDP growth from 2000-2008
Ukraine Country Presentation
Comparison with other Economies
Global Innovation Index (2013)
Ukraine Country Presentation
Ukraine in the Global Political Economy
EU Association Agreement vs Eurasian Customs Union
Ukraine Country Presentation
Economy of Ukraine
• One of the lowest GDPs of the Soviet Republics
• Economy contracted • Barter and the use of surrogate money• A shadow economy swelled • Corruption was rife• Small taxation base
Ukraine Country Presentation
Agricultural Industry Service-oriented
1990s
Economy of Ukraine
• Economy picked up• Cheap Russian gas imports• High export revenue• Poverty rates dropped • 2008 recession• IMF loans 2008, 2010
Ukraine Country Presentation
Agricultural Industry Service-oriented
2000s
Banking & Finance• Two-level structure• The National Bank of Ukraine
(NBU) • Commercial Banks• 50 insurance companies• Other financial intermediaries
Ukraine Country Presentation
Macroeconomic data dynamics: GDP
Ukraine Country Presentation
Macroeconomic data dynamics: exchange rate
Exchange rate: UAH/USD
Ukraine Country Presentation
Comparing with Peers
• Foreign investors come to Ukraine mostly either through Russia or Poland• The countries are close in industry structure, market size and mentality• Ukraine is comparable with Russia in terms of risks.
Opportunities
Risks
-- Ukraine
-- Russia
-- PolandGeneral market characteristics:
•Underutilized investment potential = high growth prospects
•Low level of market saturation•High profit margins (20% average).
Economic Data Ukraine Russia Poland
GDP $ billion, 2012 176 2,014 489
Inflation %, 2012 0.6 5.1 3.6
Exports $ bln., 2012 69.8 529.6 188.5
Imports $ bln., 2012 90.3 334.7 195.4
Ukraine Country Presentation
Formal Requirements: Doing Business• Legal Conditions – Radically modified its Legal system to
match modern conditions– Businesses are subject to licensing by different state agencies– Registering with the tax office– Joint Stock Companies Law protects companies from illegal
seizures• Tax Conditions – Introduced 23 new taxes and levies since
2011– Corporate Income Tax (CIT);– Value-Added Tax (VAT);– Personal Income Tax (PIT);
Ukraine Country Presentation
Formal Requirement: Starting a FirmBureaucratic and Legal hurdles faced when registering a new firm
No. Procedure Time to Complete Associated Costs
1 Pay registration Fee to the Bank 1 day UAH 170
2 Register at the registration office 5 days No Charge
3 Register VAT at the State Tax Authority and obtain a VAT number 10 days No Charge
4 Prepare a seal 2 days UAH 190-250
5 Open a permanent Bank account 1 day Bank's charge
6 Notify the District Tax Inspectorate of the opening of the permanent bank account 2 days No Charge
Ukraine Country Presentation
Informal Requirements: Doing Business
• Informal payments to government officials
• The burden of corruption and regulation does not fall equally on different types of firms
• The informal requirements are considerably less in the Western side of the region
• Payments to stop power outages
Ukraine Country Presentation
Change in Business Environment over time
Ukraine Country Presentation
Ease of Doing Business
• Ukraine (112) ranks lower than Pakistan (110) in Ease of Doing business
• Considerably Higher (47) than Pakistan (105) in Starting a business
• Ranks about the Same (172, 175) in the Getting Electricity Index
Ukraine Country Presentation
• Most revenue generated from Service Industry• Huge Export Industry• 35 corporations from Ukraine represented in
Europe’s top 500 Companies in Revenue (2011)
Ukraine Country Presentation
Large Corporations from Ukraine
Industry StructureShare in industrial output
Processing Industry 40.1%
Other services 13.5%
Trade 10%Agriculture
9.5%
Transport&communica-
tions 9.2%
Construction 4.6%
Extracting industry
4.1%Energy&utilities 3.7%
Education 3%
Healthcare 2.3%
Ukraine Country Presentation
Ukraine Country Presentation
Top 15 Corporations of Ukraine
Ukraine Country Presentation
Global Corporations in Ukraine
• PepsiCo• The Coca-Cola Company• Archer Daniel• Adidas• Exxon Mobil Corp.• Rosneft• Ernst & Young
Brand Perception
• Ukraine gained independence in 1991 • During the 90s it had a poor law enforcement,
corruption and deteriorating infrastructure• Orange Revolution of 2004 garnered Ukraine
international news coverage• Economy improved during the first decade of
the 21st century as investment flew in.
Ukraine Country Presentation
• Dropped from 75th in 2009, to 99th in 2010• 2nd largest Military (Europe)• Large Service Sector• High Literacy Rate • Ranked # 19 on the Emerging Market Energy
Security Growth Prosperity Index (published by the think tank Bisignis Institute, which ranks emerging market countries using government corruption, GDP growth and oil reserve information).
Ukraine Country Presentation
Ukraine as a Brand
Brand Perception
• Ukraine is "the breadbasket of the Soviet Union”• Second largest country in Europe with largest area of
agricultural land• Possesses 30% of the world's richest black soil• Growing IT sector ranking fourth in the world in number
of certified IT professionals• Exported arms worth $1.34b in 2012 making it the 4th
largest arms exporter (Source: SIPRI)• Important tie between Russia and the rest of Europe• Russia supplies 25% of Europe’s gas needs
Ukraine Country Presentation
Grains Meat & Dairy
Steel
Iron ore Honey
Sunflower oil &
Barley
Market leader
Future global leader
Largest producer in Europe
6th largest exporters
5th largest exporters
Major global producer
Ukraine Country Presentation
Investment Opportunities• Agricultural infrastructure such as field granaries and port grain
elevators• Opportunities in Ukrainian banking sector for modern retail
banking technologies• Financial services like Insurance and Leasing. Opportunities exist
for large operator entry, take over of existing companies as well as establishment of brokerage networks across Ukraine.
• Web media and custom software development. Outsourcing elaborate software architecture design projects to developers in Ukraine
• Demand for recreational services and health care medical services is continuing to grow
Ukraine Country Presentation
Opportunities in selected sectors: Retail
• According to the international credit agency A. T. Kearney, Ukraine is the 4th most attractive country in retail after India, Russia and Vietnam
• Retail turnover is estimated to be growing 20% annually
• Market is non-consolidated, at the same time competition remains low
• Metro, Billa, Spar are at the market, Auchan and others are to enter the market
Ukraine Country Presentation
Opportunities in selected sectors: Metallurgy
• 7th largest in the world• 4th place in the world by ore
deposits • 30% of GDP • 500,000 people employed Most
producers have international certificates of quality
• Obsolete equipment• Energy efficiency technologies
is of highest priority
Ukraine Country Presentation
Opportunities in selected sectors: Power industry
• About EUR 13 bn needed to replace the obsolete equipment (60-80%)
• Most of the companies are in private hands• According to Investment Program of Ministry of
Fuel and Energy, Ukraine plans to attract USD 3.5 – 4 bn for energy sector development in 2007 – 2008
• High volume investments from the side of international financial institutions, including the following projects:
– Modernization of power – generation units at Rivnenska and Chmelnicka nuclear power stations (EBRD, USD125 mln loan)
– Development of efficient energy transmission (IBRD, USD196 mln loan)
– Reconstruction of Hydroelectric Power Stations (IBRD, USD103.6 mln loan)
Ukraine Country Presentation
Opportunities in selected sectors: Machine building
• Full cycle of machinery building with wide range of products
• 54 enterprises of the industry are to be privatized in 2007
• Opportunities for outsourcing and joint ventures are virtually unlimited
Ukraine Country Presentation
Opportunities in selected sectors: Food processing
• About 20% share in the output or processing industries
• Accounts for about 15% share of FDI
• Selected foreign investors:
– BBH
– Sun Interbrew
– Nestle
– Kraft
– Coca-Cola
– Wimm-Bill-Dann
Ukraine Country Presentation
Large population, large markets
Large resource base
Low political stability
Low economic stability
Transitional society
Ukraine- An Emerging Market?
Ukraine- An Emerging Market?Declining population- high migration and death rates
Bureaucratic system high in corruption
Outdated technology
Declining economy
Post communist state
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