The Country Commercial Guide contains the following chapters:
Chapter 1: Doing Business in UKRAINE
The Ukrainian market is poised for renewed growth by 2016, guided by a motivated, reform-minded government that has dedicated itself to rooting out market inefficiencies, improving Ukraine’s business climate, and pursuing deeper economic integration into the global market.
Since the formation of a new government in November 2014, Ukraine has made promising headway toward a brighter economic future, instituting a more transparent government procurement system, simplifying business registration requirements, and beginning the process of harmonizing its business registration procedures with European Union laws. In the coming year, the government’s top reform priorities include judicial reform, the privatization of state-owned enterprises and the further reduction of regulatory burdens.
However, this forward momentum has been attenuated by a forced shift away from traditional trade markets in the East, a dramatic drop in economic output, a sharp currency depreciation, a continuing overreliance on commodity exports, and still-present issues related to endemic corruption, all of which are challenges that will need to be managed for Ukraine’s economic rebirth to come to fruition.
In addition, serious security concerns remain in Eastern Ukraine, specifically in portions of Luhansk and Donetsk oblasts, where continuing attacks by Russia-backed separatists have destroyed key infrastructure and resulted in thousands of deaths.
Understanding that Ukraine’s private sector will be the driving force keeping the economy afloat, the government has taken bold steps to turn the page on the past. In June 2014, Ukraine and the European Union (EU) signed the Deep and Comprehensive Free Trade Area (DCFTA) as part of Ukraine’s broader Association Agreement (AA). Though the EU postponed implementing the DCFTA until January 2016, once in place, the AA and DCFTA will boost trade in goods and services between the EU and Ukraine by progressively cutting tariffs and by aligning Ukraine's rules with the EU's for multiple products.
Since the formation of a new government in November 2014, the Ukrainian Government has shown a newfound commitment to pursuing an ambitious reform agenda that could lead to an overall improvement in the business climate in Ukraine. This bodes well for economic development that was forestalled in the past by widespread corruption and a lack of reform. Despite these positive developments, a variety of market challenges remain, including:
Hopefully, the efforts of Ukraine’s new reform government will reduce these challenges over the course of 2015. Specifically, the government is aiming to implement wide-ranging tax reform in the second half of later in 2015 and implement a new electronic VAT system. It has also introduced an action plan to address property rights issues.
While the pharmaceuticals market has suffered in the last year due to declining purchasing power among consumers, this market is expected to remain attractive due to an aging population and demographic trends. There is also an emerging political consensus on the need to introduce reimbursement and an insurance-based healthcare system, which will boost pharmaceutical expenditures in the long term. Sub-sector best prospects include:
Medical equipment currently used in public hospitals is typically obsolete, having exceeded its period of use. In March 2015 the World Bank approved a $214.73 million five-year loan to develop medical infrastructure and improve the quality of health services in eight regions across Ukraine. This program will directly benefit suppliers of medical equipment. Sub-sector best prospects include:
Because Ukraine’s enormous agricultural sector is under-equipped and much of its existing agricultural machinery is outdated, Ukraine’s agricultural machinery market is expected to remain attractive. Sub-sector best prospects include:
The conflict in the east exposed the Ukrainian armed forces’ lack of sophisticated defense equipment, leading the government to invest $697 million to modernize the military in 2014. Going forward, the government plans to spend $4 billion annually on defense through 2018 and $4.2 billion in 2019. Companies in the well-established defense sector are looking for foreign partners to help modernize domestic production. Sub-sector best prospects include:
In the light of the separatist conflict in eastern Ukraine, safety and security have become critical concerns for both government agencies and individual consumers and the government has placed a strong emphasis on counter-terrorism, homeland security, transportation, screening, and critical infrastructure protection. Sub-sector best prospects include: