Ukraine As An Emerging Market

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
words black soil
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.
History and Current Politics
Soviet 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)
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 parliaments consent.
Legal System
Ukraine is a civil law country
Court System: General, Commercial and Administrative
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

Comparison with other Economies
Global Innovation Index (2013)
Ukraine in the Global Political
Economy
EU Association Agreement vs Eurasian Customs Union
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

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

Agricultural Industry Service-oriented
2000s
Banking & Finance
Two-level structure
The National Bank of Ukraine
(NBU)
Commercial Banks
50 insurance companies
Other financial intermediaries

Macroeconomic data dynamics: GDP
Macroeconomic data dynamics: exchange rate
Exchange rate: UAH/USD
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
-- Poland
General 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
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);
Formal Requirement: Starting a Firm
Bureaucratic 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
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
Change in Business Environment over time
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
Most revenue generated from Service Industry
Huge Export Industry
35 corporations from Ukraine represented in
Europes top 500 Companies in Revenue
(2011)

Large Corporations from Ukraine
Industry Structure
Share in industrial output
Processing
Industry
40.1%
Other
services
13.5%
Trade
10%
Agriculture
9.5%
Transport&
communica
tions
9.2%
Constructio
n
4.6%
Extracting
industry
4.1%
Energy&
utilities
3.7%
Education
3%
Healthcare
2.3%
Top 15 Corporations of Ukraine
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 21
st
century as investment flew in.

Dropped from 75
th
in 2009, to 99
th
in 2010
2
nd
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 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 4
th

largest arms exporter (Source: SIPRI)
Important tie between Russia and the rest of Europe
Russia supplies 25% of Europes gas needs
Grains
Meat &
Dairy
Steel
Iron ore Honey
Sunflower
oil &
Barley
Market leader
Future global leader
Largest producer in Europe
6
th
largest exporters
5
th
largest exporters
Major global producer
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

Opportunities in selected sectors: Retail
13.4
18.7
25.7
0
5
10
15
20
25
30
2004 2005 2006
Retail turnover, bn. USD
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
Opportunities in selected sectors: Metallurgy
12.2
1.5
6.3
0
5
10
15
2004 2005 2006
Sector growth, %
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
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)
Opportunities in selected sectors: Machine building
Machinery
and
equipment
46%
Electrical
equipment
42.8%
Transport
equipment
11.1%
28.2
7.1
11.6
0
10
20
30
2004 2005 2006
Sector growth, %
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
Opportunities in selected sectors: Food processing
13.4
14.2
10.1
0
2
4
6
8
10
12
14
16
2004 2005 2006
Sector Growth, %
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
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

Ukraine As An Emerging Market

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Ukraine Country Presentation

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