DOING BUSINESS IN UKRAINE
Edition 1
Edition 2
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Macroeconomic situation
The key industries of Ukraine
· Ferrous and non-ferrous metallurgy
· Chemical industry
· Heavy engineering
· Shipbuilding
· Automobile industry (buses, automobiles and lorries)
· Aircraft building
· Power industry
Ukrainian economic description:
· Ukraine is an export-oriented country. About 48 % of its profitable part of GDP comes from export of chemical and metallurgical products.
· In the sectoral structure of GDP the part of industry and building is in the average level among neighbors, the level of transportation and communications is rather high (at the same level that Byelorussia and Turkey, that expresses the role of transit flows in these three countries).
· The level of development in the sphere of services is comparatively low (among neighbors it exceeds only Romania, Moldavia and Georgia).
· The ferrous metallurgy (the first place in the CIS countries and Eastern Europe) and fuel and energy complex (inferiors in rank only to Russia) has the largest weight in the industrial complex.
· The weight of food industry is a bit lower then in the Eastern European countries. But it is higher then in Russia, Byelorussia, Georgia and Turkey.
· Ukraine is among 7 largest countries in iron ore mining, cast iron and steel smelting, production of alumina and rolling.
· Ukraine and Kazakhstan are among 10 largest countries in the coal mining (71 million tons).
· There are vast deposits of manganous ore (about 40 % of world deposits), iron ore (more then 12 % of world deposits), mercury (about 8 %), coal (3 %), uranium (1,8 %), potassium salts (2,5 %), phosphorites (2 %), and apatite (29 %).
· Ukraine is among 7 largest countries on sugar, vegetable oil, and pork production.
Key economic forecast
Activity |
1998 |
1999 |
2000 |
2001 |
2002 |
2003 |
2004 |
2005 |
2006F |
2007F |
Real GDP (%YoY) |
-1.9 |
-0.2 |
5.9 |
9.2 |
4.8 |
9.6 |
12.1 |
2.6 |
3.0 |
5.5 |
Industrial
production
(%YoY) |
-1.0 |
4.0 |
12.4 |
14.2 |
7.0 |
15.8 |
12.5 |
3.1 |
2.8 |
10.1 |
Unemployment
rate
year-end (%) |
11.3 |
11.9 |
11.6 |
10.9 |
9.6 |
9.1 |
8.6 |
8.0 |
8.0 |
7.7 |
Nominal
GDP (USDbn) |
41.9 |
31.6 |
31.3 |
38.0 |
41.5 |
49.5 |
64.8 |
80.6 |
93.2 |
110.9 |
GDP
per capita
(USD) |
837 |
636 |
635 |
784 |
864 |
1.040 |
1.371 |
1.717 |
1.992 |
2.379 |
Gross
domestic
saving
(% of GDP) |
18.5 |
22.9 |
24.8 |
23.4 |
23.6 |
22.9 |
23.8 |
24.9 |
25.3 |
26.3 |
Exports (US$bn) |
13.7 |
12.5 |
15.4 |
17.1 |
18.7 |
23.7 |
33.4 |
34.3 |
37.9 |
42.5 |
Imports (US$bn) |
16.3 |
12.9 |
14.9 |
16.9 |
18.0 |
23.2 |
29.7 |
36.1 |
43.5 |
48.9 |
Net FDI (US$bn) |
0.7 |
0.5 |
0.6 |
0.8 |
0.7 |
1.4 |
1.7 |
7.5 |
2.7 |
4.8 |
Net FDI
(% of GDP) |
1.8 |
1.5 |
1.9 |
2.0 |
1.7 |
2.8 |
2.6 |
9.4 |
2.9 |
4.3 |
Foreign
exchange
reserves
(ex gold, US$bn) |
0.8 |
1.0 |
1.4 |
3.0 |
4.2 |
6.7 |
10.7 |
19.0 |
18.4 |
18.0 |
Gross
external debt
(US$bn) |
13.0 |
13.5 |
11.6 |
12.7 |
12.8 |
23.8 |
30.6 |
38.8 |
43.0 |
49.0 |
Gross
external debt
(% of GDP) |
31.0 |
42.7 |
37.2 |
33.5 |
30.8 |
48.1 |
47.3 |
48.2 |
46.1 |
44.2 |
Foreign Direct Investments
Foreign Direct Investments by region
Acquirer |
Target |
Industry |
Price |
Mittal Steel |
Kryvorizhstal |
Metallurgy |
$4.8 bln |
Banka Intessa |
Ukrsotsbank |
Banking |
$1 bln |
Raiffeisen Bank |
Bank Aval |
Banking |
$1 bln |
BNP Paribas |
Ukrsibbank |
Banking |
$ 300 mln |
Sectors of economy where we don’t recommend to invest
Due to the range of reasons the following sectors are not attractive in terms of investments:
Field |
Reason |
Generation and
transportation of electroenergy |
Great influence of the state policy in the branch. |
Retail |
High level of the competitiveness.
But nevertheless, if company has a large network,
it is possible to enter this segment of market. |
Coal industry |
Great influence of the state policy in the branch.
This field is the center o competitive war
between different business groups. |
Oil processing |
This sector is the aim of Russian oil companies,
and includes the element of the state policy. |
The most attractive fields for investment
The analysis of the most attractive fields for investment is done due to the following factors:
- Ukraine has the second highest transportation index in Europe, which is calculated by the European transport agency and includes the volumes of freight flows, which is done through the territory of the country.
- Ukraine is not a member of the European Union and according to the strategy of expansion of the EU its membership isn’t provided in the nearest future. From other side Ukraine borders on EU. That gives Ukraine the great advantages concerning the limitations of the minimal salary and others. It means that the prime cost of the goods, produced in Ukraine would be lower then in the EU countries. In fact, it makes Ukraine the ideal platform for establishment the assembling production and export to Europe with minimal expenditures.
- Ukraine has one of the highest levels of intellectual development. The human capital index – 0.810 (27 place among 119 countries, it’s a high level). In former USSR 30 % of scientific researches were done in Ukraine. Ukraine nowadays has one of the most developed scientific complexes in the world that helped it to execute more then 90 space launches.
- 56 % of the land in Ukraine is arable. 30 % of the world’s black earth.
- Ukraine has one of the largest consumer markets in Europe that attracts here largest companies. But the infrastructure level is lower then average.
Perspective fields for investment:
- Projects regarding development of the transport infrastructure;
- Logistics-warehouse services;
- Real estate, building of the business centers, hotels, entertainment real estate;
- Accomplishing scientific researches;
- Establishment the assembling production for exportation to Europe;
- Sphere of services;
- Financial-banking system;
- Machine-building;
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