Ukraine

More and more businesses interested in increasing revenues, cutting costs, reaching new clients, greater efficiency, and positioning themselves for future trends are exploring – and investing in – Ukraine.

The Ukrainian opportunities in agriculture, energy, information technology, infrastructure and manufacturing have grown too large for investors to ignore. When combined with a highly skilled workforce, cost-efficiency, strategic geographic location and rapidly-improving business climate, Ukraine has much to offer.

Ukraine is the largest country wholly in Europe strategically located on EU borders, it offers long-term opportunities in a broad range of sectors, many of them involve co-operation with Ukrainian companies. In addition it’s a convenient start-up location for the CIS. Here are just some of the benefits of doing business in this country:

• Highly educated workforce
• Low labor costs
• Good natural resources

It has a broad industrial strong base in ferrous metals and chemicals. This includes much of the former Union of USSR space and rocket industry and a well-developed defense and security sector. This country is a major producer of different agricultural products as well.

According to the World Bank since 2010 Ukraine has done more to improve its business climate than any post-communist country (CEE+CIS).
Ukraine is going through dynamic changes and there are serious efforts underway to make Ukraine a more accessible place to do business.

Macroeconomic progress

• Ukraine’s real GDP +2,5% in 2017
• Real industrial growth +1,6% in Jan-Nov 2018
• International reserves 20,8$ bln at the end of 2018 comparing to 5,6 $ bln in 2015.
• Infrastructure construction and modernization:
• 3800 km of road repairs in 2018
• renovation of fleet of locomotives and railway cars
• dredging of sea ports
• Beskydy railway tunnel opened
• airway companies enter Ukraine (Ryanair, SkyUp, Laudamotion etc).
• Merchandise export growth +19,0 % in 2017
• Re-orientation to EU market – EU share in Ukraine’s merchandise exports rose to 42,1% in 2018 (comparing to 25,4% in 2010).

Reform progress

More reforms enacted in 5 years than in previous 23. Recently, the time to register a business was shortened to just a few days processing.
Stabilization and transformation:

• Decentralization
• Banking sector reforms (more than 90 out of 180 “pockert” banks closed)
• Anti-corruption court law passed (deregulation and transparency)
• EU-UA Association Agreement – DCFTA
• Canada-Ukraine free-trade agreement
  

  Reform progress in Ukraine

EU vector:

Visa-free regime with 90 countries (including Schengen zone)

42,1% share of exports to the EU during 9 months of 2018

Workforce

Many US and European companies have found it easier to work with developers and outsourcing companies in Ukraine than with other traditional outsource countries because of Ukraine’s close alignment to European cultural ideals, values, norms and mentalities.  

This has been a key driver to the accelerating growth of certain spheres of the economy – particularly in IT and manufacturing.
The additional boost found in Ukrainian employees is a drive for growth that comes from the desire to see Ukraine integrated into the global economy and dialogue.

 Education

Ukraine has population of 45 million people, a 99,4% literacy rate and a mandatory 11 years of schooling. Over 70% of people have a secondary degree or higher education. In Ukraine, this desire for education has continued and maintains a strong emphasis on areas that are currently driving global economic growth – particularly in the areas of Science, Technology, Engineering and Mathematics (STEM). As a result, Ukraine is the TOP European country by the number of engineering graduates, with over 130,000 new engineers each year. There are approximately 16,000 IT graduates each year and Ukraine is home to the largest engineering force in Central and Eastern Europe. Over 33,500 students graduate yearly in the area of Sciences.

Location

Ukraine is centrally positioned in Europe, with direct transport access to Asia via the Black Sea, making it ideally situated for manufacturing and trade. With over 170,000 km of roadways, 22,000 km of rail lines and 13 sea ports, Ukraine has the infrastructure to quickly move goods – from grain to auto parts – within the state or beyond the borders. Most major destinations in Europe can be reached in 2 days by truck from Ukraine, which gives it a competitive edge, particularly for manufacturing and food distribution.

 Key international rankings

Ukraine is 7 positions up in 2018 Global Innovation Index (from 50^th to 43^rd place).
In Doing Business 2019 rating, Ukraine has risen by +5 points and took the 71^st place among 190 countries. The country has shown the largest growth in such categories as taxation (increase by 110 points, 54^th place), international trade (+70 points, 78^th place) and protection of investor’s rights (+56 points, 72^nd place).
Also, it should be noted that rating agency Moody’s Investors Service has increased Ukraine’s sovereign rating. It has changed from Caa2 to Caa1, which means the forecast changed from “positive” to “stable”.
In addition, Ukraine ranked 81^st place among 137 countries in the Global Competitiveness Index rating and raised its position in terms of technology adaptation (from 81^st to 77^th place) and infrastructure level (from 78^th to 57^th place).

 Reforms progress:

• Key reforms passed: pension, education, healthcare, judicial, privatization and reform of state-owned enterprises
• Developed anti-corruption infrastructure
• New fiscal policy:
• paper checks replaced with electronic
• further improvements in automatic VAT refunds system
• “single window” during customs clearance
• fight against contraband

Investment attraction

According to the State Statistics Service, the inflow of direct investments (equity capital) in Ukraine in 2018 amounted to USD 2.9 billion.
In 2018, an increase of foreign investments in the Ukrainian economy amounted to USD 685.5 million of direct investments (equity capital).
In 2018, the leading areas of economic activity, in terms of implemented capital investments, are: industry – 34.1%, construction – 9.9%, agriculture, forestry and fishery – 12.5%, information and telecommunications – 5.4%, wholesale and retail trade; repair of motor vehicles and motorcycles – 9.0%, transport, warehousing, postal and courier activities – 8.5%, public administration and defense; compulsory social insurance – 7.8%, real estate transactions – 4.0%.

100 global brands have R&D centres in Ukraine.
Global brands enter Ukraine – ZARA Home, DeFacto, H&M etc; IKEA will soon join them.

Ukrainian legislation does not provide for any special tax regimes for enterprises with foreign investment. However, a foreign investor’s contribution to the share capital of a Ukrainian enterprise with foreign investment made in the form of goods may be exempt from customs duties, provided the goods are not alienated for three years after the contribution.

Fast facts

• Ukraine contains around 5% of the world’s mineral resources

As for stocks iron, manganese, titanium and uranium ore Ukraine is ranked first among European countries and with the mercury ore reserves – secondly (after Spain). Ukraine has some of the world’s largest manganese deposits. Ukraine’s share in global manganese production is 32 %.
Ukraine has Europe’s third-largest shale gas reserves at 1.2 trillion cubic meters.
Ukraine has large reserves of such raw materials as potassium and magnesium salts, table salt, native zeolites, table salt, etc. As to its chemical purity, this salt is the best in the World. Ukraine has deposits of ores of rare metals – zirconium, hafnium, niobium, lithium, beryllium, scandium, tantalum, yttrium, lanthanum, molybdenum, strontium. These metals and their alloys are used in nuclear engineering, electrical engineering, electronics, aero-space engineering.

• Ukraine is known as the “breadbasket of Europe”

Ukraine has 1/4 of all stocks of black soil on the planet and considers as the best land for agriculture.
Ukraine’s farms produce large amounts of potatoes and grains such as wheat, corn (maize), and barley. Ukraine is one of the world’s leading producers of sugar beets.

Being a large grain producer, Ukraine is one of the six world largest exporters, supplying to 80 countries worldwide. The country is also the biggest exporter of sunflower oil and has substantial potential in growing and exporting rapeseed.
Ukraine is the 3^rd largest exporter of honey in the world with the total amount around 70 000 tons.

Industry

Machine-building is the largest Ukrainian industrial sector. It accounts for over one-third of the employed and about a quarter of the total cost of industrial main assets. Among the examples are development of the rocket and space industry (Zenit 3SL, Cyclone), aircraft building (AN-70, AN-140, “Mriya”), production of advanced tankers and large-tonnage vessels, fabrication of turbines for nuclear power plants, highly-efficient gas-pumping installations, equipment for high-voltage power transmission lines, mining equipment, diesel locomotives, tractors etc.

Ukraine’s iron and steel industries are very important due to the fact that the machine building and metal-working industries depend on the production of ferrous and non-ferrous metals, and that metal is the main source of engineering materials and an important export article. The metallurgy sector includes 14 integrated steel making plants, 7 pipe plants, 10 plants producing metallic articles, 16 merchant-coke plants, 17 refractory production plants, 3 ferroalloy plants, 20 non-ferrous metallurgical works, 35 factories reprocessing ferrous and non-ferrous scrap metal, and other enterprises. Food industry is traditionally the major supplier of basic foods, such as sugar, salt, oil, alcohol, confectionery, etc.
Ukraine ranks seventh in the world and fifth in Europe in terms of the number of nuclear reactors operated, total capacity and electricity produced. It has 15 reactors generating about half of its electricity.