Ukraine slide package for a foreign investor

Elisa AroAugust 2015

www.utu.fi/pei

Contents

1. General information 3

2. Economic development 11

3. Political scene 18

4. Prosperity and consumption 22

5. External economic relations 27

6. Additional information 33

The information in this document is complied from a variety of sources.The Pan-European Institute assumes no responsibility for the completeness or accuracy of the information.

3

Source: CIA The World Factbook

1. General informationa) Geographical facts

Land area:579 330 sq km

Border countries:Slovakia 97 km, Hungary 128 km, Romania 601 km, Poland 535 km, Belarus 1 111 km, Moldova 1 202 km, Russia 1 944 km

Distance from Kiev to someEuropean capitals:Moscow 756 kmHelsinki 1 139 kmBerlin 1 205 kmParis 2 024 kmLondon 2 132 kmMadrid 2 861 km [www.geobytes.com]

4

1. General informationb) Administrative divisions and territorial constitution

•24 Provinces (”oblasts” in Ukrainian):

Cherkasy, Chernihiv, Chernivtsi, Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Kharkiv, Kherson, Khmelnytskiy, Kyiv, Kirovohrad, Luhansk, Lviv, Mykolayiv, Odesa, Poltava, Rivne, Sumy, Ternopil, Vinnytsya, Volyn, Zakarpattya, Zaporizhya, Zhytomyr

•1 Autonomous Republic:

Autonomous Republic of Crimea

• 2 Municipalities:

City of Kyiv, City of Sevastopol

Note: The status of the Autonomous Republic of Crimea and the municipality of Sevastopol in Ukraine remain unclear due to the current political situation. Plenty of countries do not recognize Russia's annexation of Ukraine's Autonomous Republic of Crimea and the municipality of Sevastopol nor their redesignation as the Republic of Crimea and the Federal City of Sevastopol.

Sources: CIA The World Factbook; State Statistics Service of Ukraine

5

1. General informationc) Population

Population:

45 245 900 (2014)

Major cities: (As of May 1, 2015*)City of Kyiv (capital) 2 849 125Dnipropetrovsk 3 265 326Donetsk (estimation) 4 272 071Kharkiv 2 710 510Lviv 2 515 862Odesa 2 381 946

Share of urban population:

69% of total population (2014)

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

6

1. General informationd) Total population change

Source: State Statistics Service of Ukraine

46,546,2 46,0 45,8 45,6 45,5 45,4 45,2

40

41

42

43

44

45

46

47

48

2007 2008 2009 2010 2011 2012 2013 2014

Population (million)

7

1. General informatione) Basic facts

Industries:Coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food processing

Agriculture products:Grain, sugar beets, sunflower seeds, vegetables, beef, milk

Natural resources:Iron ore, coal, manganese, natural gas, oil, salt, sulfur, graphite, titanium, magnesium, kaolin, nickel, mercury, timber, arable land

National Currency:Hryvnia, UAH Official exchange rates of Hryvnia:

1 EUR = UAH 23,861 USD = UAH 21,391 RUB = UAH 0,329

Source: CIA The World Factbook; Exchange rates according to the National Bank of Ukraine13th of August 2015.

8

1. General informationf) Ethnic groups

Source: CIA The World Factbook

Ukrainian 77,8%

Russian 17,3%

Other ethnic groups 4,9%

Other ethnic groups include:Belarusian 0,6%Moldovan 0,5%Crimean Tatar 0,5%Bulgarian 0,4%Hungarian 0,3%Romanian 0,3%Polish 0,3%Jewish 0,2%Other 1,8%

9

1. General informationg) Transport infrastructure

Airports 187

Ports and terminals Feodosiya (Theodosia), Illichivsk, Mariupol', Mykolayiv, Odesa, Yuzhnyy

Railways 21 619 km

Roadways 169 694 km

(approx. 98% paved roadways)

Waterways 1 672 km

Ukraine has a strategic position at the crossroads between Europe and Asia. The country also offers an important route for oil and gas exports from Russia to Europe.

Source: CIA The World Factbook

10

1. General informationh) Largest companies in Ukraine by revenues 2014

Company Industry Revenue from sales (mln €) Net income (mln €)

1 Metlnvest Manufacturing 9 619,0 294,4

2 DTEK Energy & Resources 8 721,6 313,1

3 Energorynok Energy & Resources 8 033,1 4,7

4 Naftogaz of Ukraine Energy & Resources 7 010,8 -1 176,6

5 Ukrzaliznytsia Consumer Business & Transportation 4 796,9 51,2

6 Megapolis Ukraine Consumer Business & Transportation 2 696,8 84,4

7 ATB Market Consumer Business & Transportation 2 646,1 22,1

8 ArcelorMittal Kryvyi Rih Manufacturing 2 604,0 -144,5

9 Fozzy Group Consumer Business & Transportation 2 390,6 N/A

10 Kernel Consumer Business & Transportation 2 100,6 86,0

Source: Deloitte, Top 500 companies in the Central Europe 2014

11

2. Economic developmenta) GDP growth

Year GDP (at prices of the previous year)

GDP per capita (at prices of the previous year)

1 Q 2015 296,7 billion UAH Not available

2014 1 365,1 billion UAH Not available

2013 1 404,3 billion UAH 32 553 UAH

Source: State Statistics Service of Ukraine,Excluding the Autonomous Republic of Crimea, the City of Sevastopol and part of the anti-terrorist operation zone.Exchange rates according to the National Bank of Ukraine 13th of August 2015: 1 EUR = 23,86 UAH

5,5

0,2 0

-6,8

-8

-6

-4

-2

0

2

4

6

8

2011 2012 2013 2014

GDP Growth (%)

GDP growth (%) at 2010 constant prices.

12

2. Economic developmentb) GDP by types of economic activity 2013*

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

Manufacturing29 %

Wholesale and retail trade

13 %

Others11 %

Hospitality, transport and communication

11 %

Agriculture, forestryand fishing

10 %

Financial, insurance and real estate

8 %

Construction5 %

Industry, incl. energy5 %

Mining and quarrying5 %

Public administration and defence, social security

3 %

13

2. Economic developmentc) Labor force

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

2011 2012 2013 2014*

Population(total resident)

45 598 200 45 453 300 45 372 700 45 245 900

Economically active population(of working age)

20 247 900 20 393 500 20 478 200 19 035 200

Unemployed(of working age)

1 731 700 1 656 600 1 576 400 1 847 100

Unemployment rate(% of population of working age)

8,6% 8,1% 7,7% 9,7%

14

2. Economic developmentd) Employment by sectors 2014

Source: State Statistics Service of Ukraine

31%

17%16%

4%3%

28%

0%

5%

10%

15%

20%

25%

30%

35%

Trade, hotels,restaurants,

transport andcommunication

Agriculture,forestry and fishing

Industry Construction Finance, insuranceand real estate

Others

15

2. Economic developmente) Industrial production growth rate (% to the previous year)

Source: State Statistics Service of UkraineExcluding the Autonomous Republic of Crimea and the City of Sevastopol, for IV quarter of 2014 also excluding the part of the anti-terrorist operation zone.

108%

99%96%

90%

0%

20%

40%

60%

80%

100%

120%

2011 2012 2013 2014

16

2. Economic developmentf) Industrial production growth rate by industries 2014

Industry 2014 (% to the previous year)

Transport vehicles and equipment -35,7%

Computer, electronic and optical products -22,1%

Coke and refined petroleum -21,3%

Machinery and equipment -20,6%

Metallurgy and finished metal -14,5%

Chemicals and chemical products -14,2%

Mining and quarrying -13,7%

Non-metallic mineral products -8,8%

Electricity, gas, steam, air conditioning -6,6%

Wood, paper and printing -4,0%

Textile -1,4%

Foodstuffs, beverages and tobacco 2,5%

Source: State Statistics Service of Ukraine

17

2. Economic developmentg) Bank reserves, external debt & account balance

2011 2012 2013

Total reserves 31,79 billion USD 24,55 billion USD 20,41 billion USD

External debt stocks 135,50 billion USD 135,87 billion USD 147,71 billion USD

Current account balance -10,23 billion USD -14,34 billion USD -16,52 billion USD

Sources: The World Bank;Exchange rates according to the Bank of Finland14th of August 2015: 1 EUR = 1,1171 USD

18

3. Political scenea) Democracy

Democracy Index 2014Regime type: Hybrid regime

Overall rank 92/167

Overall score* 5,42

Electoral process & pluralism(on a scale from 0 to 10)

5,83

Functioning of government(on a scale from 0 to 10)

3,93

Political participation(on a scale from 0 to 10)

5,56

Political culture(on a scale from 0 to 10)

5,00

Civil liberties(on a scale from 0 to 10)

6,76

Source: Economist Intelligence Unit* On a scale from 0 to 10, 0 is the lowest score.

19

3. Political sceneb) Business freedom

Ranking index Rank of Ukraine/

Total number of countries

World Democracy Audit overall ranking

(World Audit, January 2015)

113/150

Press Freedom ranking

(World Audit, January 2015)

99/150

Global Competitiveness Index 2014-2015

(World Economic Forum)

76/144

(-8 change to the previous year)

The 2015 Index of Economic Freedom

(The Heritage Foundation)

162/178

Corruption Perceptions Index 2014

(Transparency International)

142/175

(Corruption score 26 on a scale 0-100)

Ease of Doing Business 2015

(World Bank)

96/189

(+16 change to the previous year)

20

3. Political scenec) The most problematic factors for doing business

Source: The Global Competitiveness Report 2014-2015Note: Respondents were asked to select the five most problematic factors for doing business and to rank them. The bars show the responses weighted according to their rankings.

0,6 %

0,8 %

1,1 %

1,7 %

1,7 %

1,8 %

3,4 %

4,1 %

4,3 %

7,7 %

8,0 %

8,8 %

10,5 %

13,9 %

14,0 %

17,8 %

0,0 % 2,0 % 4,0 % 6,0 % 8,0 % 10,0 % 12,0 % 14,0 % 16,0 % 18,0 %

Poor work ethic in national labor force

Inadequately educated workforce

Poor public health

Crime & theft

Inadequate supply of infrastructure

Insufficient capacity to innovate

Restrictive labor regulations

Foreign currency regulations

Tax regulations

Tax rates

Inflation

Inefficient government bureaucracy

Government instability/coups

Access to financing

Policy instability

Corruption

Percent of responses

21

3. Political scened) Taxes, government spending, public debt

Sources: The Heritage Foundation; The World Bank; International Monetary Fund

Taxes, government spending and debt

Corporate tax rate (2014) 18,0 %

The average tariff rate (2012) 2,1 %

Government spending of GDP (2013) 48,2 %

Government gross debt of GDP (2013) 41,0 %

22

4. Prosperity and consumptiona) Growth rate of nominal and real wages of employees (% to the previous year)

Source: State Statistics Service of Ukraine

118% 118%

115%

108%106%

110%109%

114%

108%

94%

80%

85%

90%

95%

100%

105%

110%

115%

120%

2010 2011 2012 2013 2014

Nominal Real

23

4. Prosperity and consumptionb) Household real disposable income growth

(1 Q of each year, % to the corresponding period of previous year)

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea, the City of Sevastopol and part of the anti-terrorist operation zone.

4%

9%11%

8%

2%

-24%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

2010 2011 2012 2013 2014 2015*

24

4. Prosperity and consumptionc) Structure of household total expenditures 2014*

Source: State Statistics Service of Ukraine, * Excluding the Autonomous Republic of Crimea, the City of Sevastopoland part of the anti-terrorist operation zone.Exchange rates according to the National Bank of Ukraine13th of August 2015: 1 EUR = 23,86 UAH

Average monthly total expenditure per household 2014: 4049 UAH

1,2 %

2,5 %

2,7 %

4,1 %

4,3 %

5,1 %

5,1 %

5,4 %

7,8 %

11,7 %

12,6 %

37,5 %

0% 5% 10% 15% 20% 25% 30% 35% 40%

Education

Restaurants and hotels

Communication

Furnishings, household equipment, house maintenance

Recreation and culture

Clothing and footwear

Health

Miscellaneous goods and services

Alcoholic beverages, tobaccos and narcotics

Transport

Housing, water, electricity, gas and other fuels

Food and non-alcoholic beverages

25

4. Prosperity and consumptiond) Consumer price indices

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

Year 2008 2009 2010 2011 2012 2013 2014*

CPI (annual variation in %) 25,2% 15,9% 9,4% 8,0% 0,6% -0,3% 12,1%

125%

116%

109%108%

101% 100%

112%

90%

95%

100%

105%

110%

115%

120%

125%

130%

2008 2009 2010 2011 2012 2013 2014*

26

4. Prosperity and consumptione) Retail trade turnover (billion UAH)

Sources: State Statistics Service of Ukraine;Exchange rates according to the National Bank of Ukraine13th of August 2015: 1 EUR = 23,86 UAH

530

675

804

884 904

0

100

200

300

400

500

600

700

800

900

1 000

2010 2011 2012 2013 2014

Bill

ion

UA

H

27

5. External economic relationsa) Development of foreign trade in goods (billion USD)

Sources: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.Exchange rates according to the Bank of Finland 14th of August 2015: 1 EUR = 1,1171 USD

39,70

51,43

68,39 68,8163,31

53,90

45,44

60,74

82,61 84,66

76,96

54,43

0

10

20

30

40

50

60

70

80

90

2009 2010 2011 2012 2013 2014*

Bill

ion

USD

Exports Imports

28

5. External economic relationsb) Foreign trade structure 2014*

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

Food commodities

31 %

Metals28 %

Machinery, equipment &

vehicles13 %

Mineral products

13 %

Chemical products

6 %

Wood & paper bulk

4 %

Textiles 2 %

Others3 %

Exports

Mineral products 32 %

Machinery, equipment &

vehicles21 %

Chemical products

12 %

Food commodities

11 %

Metals6 %

Textiles 4 %

Wood & paper bulk

3 %

Others11 %

Imports

29

5. External economic relationsc) Major export and import partners 2014*

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

Russian Federation

18%

Turkey7%

Egypt5%

China5%

Poland5%

Italy5%

India3%

Belarus3%

Germany3%

Hungary3%

Exports

Russian Federation

23%

China10%

Germany10%

Belarus7%

Poland6%

United States4%

Italy3%

Hungary3%

Turkey2%

France2%

Imports

30

5. External economic relationsd) FDI inflows (billion USD)

Sources: UNCTAD STAT; UNCTAD World Investment Report 2015;Exchange rates according to the Bank of Finland 14th of August 2015: 1 EUR = 1,1171 USD

4,82

6,50

7,21

8,40

4,50

0,41

0

1

2

3

4

5

6

7

8

9

2009 2010 2011 2012 2013 2014

Bill

ion

USD

31

5. External economic relationse) FDI stock (billion USD)

Sources: UNCTAD STAT; UNCTAD World Investment Report 2015;Exchange rates according to the Bank of Finland 14th of August 2015: 1 EUR = 1,1171 USD

2000 2010 2014

FDI inward stock 3,88 billion USD 57,99 billion USD 63,83 billion USD

FDI outward stock 0,17 billion USD 7,96 billion USD 9,71 billion USD

32

5. External economic relationsf) Inward FDI (equity capital) by countries 2014*

Source: State Statistics Service of Ukraine* Excluding the Autonomous Republic of Crimea and the City of Sevastopol.

Cyprus30%

Germany13%

Netherlands11%

Russian Federation6%

Austria6%

United Kingdom5%

Virgin Islands, British4%

France4%

Other countries23%

33

6. Additional informationa) Business services and authorities

BUSINESS SUPPORTING SERVICES

Finpro Ukraine, Finland Trade Center

www.finpro.fi/web/finpro-eng/contact/ukraine

State Agency for Investment and National Projects of Ukraine

www. ukrproject.gov.ua/en

SOME AUTHORITIES

Verkhovna Rada of Ukraine (Parliament)

www.rada.gov.ua

Ministry of Economic Development and Trade of Ukraine

www.me.gov.ua

Ministry of Finance Of Ukraine

www.minfin.gov.ua

Ministry of Foreign Affairs of Ukraine

www.mfa.gov.ua

National Bank of Ukraine

www.bank.gov.ua

Information subject to changes

34

6. Additional informationb) Embassy and European Comission’s Delegation

Embassy of Finland, Kyiv, Ukrainewww.finland.org.ua

Embassy of Finlandvul.Striletska, 1401901 KyivTel. +380 44 278 7049E-mail: sanomat.kio@formin.fi

Delegation of the European Union to Ukrainewww.eeas.europa.eu/delegations/ukraine

Delegation of the European Union to Ukraine101 Volodymyrska St. 01033 KyivTelephone: +380 44 390 8010E-mail: delegation-ukraine@eeas.europa.eu

Information subject to changes

35

6. Additional informationc) Other sources

CIA World Factbookhttps://www.cia.gov/library/publications/the-world-factbook/index.html

Economist Intelligence Unit, EIUwww.eiu.com

European Bank for Reconstruction and Development, EBRDwww.ebrd.com

Eurostatwww.ec.europa.eu/eurostat

International Labour Organization, ILOwww.ilo.org

International Monetary Fund, IMFwww.imf.org

Information subject to changes

36

6. Additional informationc) Other sources

State Statistics Service of Ukrainewww.ukrstat.gov.ua

The World Bankwww.worldbank.org

United Nations Economic Commission for Europe, UNECEwww.unece.org

Unicefwww.unicef.org

Information subject to changes