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Doing Business in Ukraine:

2014 Country Commercial Guide for U.S. Companies

The Country Commercial Guide contains the following chapters:

  • Doing Business in Ukraine
  • Political and Economic Environment
  • Selling U.S. Products and Services
  • Leading Sectors for U.S. Export and Investment
  • Trade Regulations and Standards
  • Investment Climate
  • Trade and Project Financing
  • Business Travel
  • Contacts, Market Research and Trade Events
  • Guide to Our Services

Chapter 1: Doing Business in UKRAINE

Market Overview

The Ukrainian market is poised for progress, 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. This ambitious agenda is buoyed by a population eager for stability, change, and a return to prosperity.

Since the ouster of former President Yanukovych in late-February, Ukraine has made promising headway towards a brighter economic future, instituting a more transparent government procurement system, simplifying business registration requirements, and signing the economic portion of its Association Agreement with the European Union.

However, this forward momentum has been attenuated by a shifting regional trade dynamic, Ukraine’s overreliance on commodity exports, and still-present issues related to endemic corruption, 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 Luhansk and Donetsk oblasts, where violent clashes between the Russia-backed separatists and Ukrainian forces have escalated in recent months and have resulted in hundreds of injuries and deaths. Russian forces have occupied the Crimean Peninsula in support of the Russian Federation's attempted annexation of Crimea and these forces are likely to continue to take further actions in the Crimean Peninsula consistent with Russia's continuing occupation of this part of Ukraine.

Ukraine’s private sector, made up of a diverse range of local and foreign companies, has been the driving force keeping the economy afloat, creating jobs, and generating tax revenues. Major infrastructure projects are needed to improve basic quality of life standards and with the generosity of the donor countries, funding is available.

The government has sent strong signals that it welcomes foreign investment, and has already taken bold steps to turn the page on the past.

Market Challenges

The Ukrainian Government has shown a newfound commitment to pursuing a reform agenda that could lead to an overall improvement in the business climate in Ukraine. Ukrainian officials have displayed a respect for the needs of Ukraine’s citizenry and understand that economic growth is dependent upon avoiding the shortfalls of the previous regime. This bodes well for economic development that was forestalled in the past by greed on a massive scale.

The protection of property rights can be problematic and intellectual property rights are almost universally not respected. In addition, a variety of market challenges remain, including:

  • Transparency of regulatory systems
  • An underdeveloped banking system
  • Capital markets are hindered by a preference for real rather than portfolio investment
  • There is no access to over 5,000 state-owned enterprises which have historically relied on GOU subsidies due to the fact they are typically inefficient and often unprofitable. Competition is barred in these industries where new technology could lead to a significant improvement in efficiencies and profitability.
  • Export financing resources are limited due to the fact that many Ukrainian firms are not prepared to meet export credit agencies transparency requirements, such as providing three years of audited company financials.
  • Corruption, although designated as a priority for the new government, will take time and dedication to eliminate.

Market Opportunities

The Ukrainian pharmaceutical 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. This will boost pharmaceutical expenditures in the long term and provide pharmaceutical manufacturers with significant growth potential.

Medical equipment currently used in public hospitals is typically obsolete, having exceeded its period of use. Given the limited financial resources of most public health institutions, replacement will be slow until the State budget situation improves. As a consequence, the lack of resources in public hospitals has stimulated steady growth in the number of private clinics and practitioners. Sub-sector best prospects include:

  • Diagnostic imaging equipment (ultrasound, computer tomography, magnetic-resonance tomography)
  • Emergency medical equipment (ambulances, mobile hospitals)
  • Operating rooms
  • Telecommunication equipment for telemedicine
  • Laser surgery devices
  • Dental equipment and materials
  • Laboratory equipment

In 2015 Ukraine will host the European Basketball championship, FIBA EuroBasket. The infrastructure build-up for the FIBA EuroBasket has created a growing demand for safety and security equipment technology such as: high-tech sensing and detection devices and equipment, advanced surveillance and access control systems, as well as airport security equipment. Sub-sector best prospects include:

  • Screening and X-Ray systems for airports, seaports, customs, and public facilities
  • Access control systems
  • Equipment for detection of explosives and drugs
  • Security cameras for large facilities
  • Wireless security solutions

Ukrainian farmers, large and small, prefer foreign manufactured agricultural machinery because of its dependability and state-of-the-art technology. Although the current government announced plans to stimulate local production of agricultural machinery, it is not yet clear what specific measures they plan to introduce to this effect. Sub-sector prospects include:

  • Grain storage upgrades
  • Grain-handling and conservation technologies (e.g. dryers)
  • Harvesters, combines and tillage equipment
  • Animal husbandry (production of pork, dairy)
  • Biomass to Energy technology - (boilers, pelleting lines, and anaerobic digesters)
  • Fruits and vegetables processing and storage

The oil and gas industry has the potential to play a significant role in providing energy security. This sector is considered both strategic and essential for Ukraine to become independent from foreign suppliers.

  • Gas production and storage technology
  • Gas compressor units
  • Pumping equipment (functioning below 6,000 feet)
  • High-efficiency oil and gas exploration and drilling equipment and technologies
  • Drilling technology for offshore projects deeper than 200 feet
  • Oil transport infrastructure equipment
  • Valves, pumping equipment, compressors
  • Automation and control equipment for oil pipelines and oil refineries
  • Petrol station equipment

Market Entry Strategy

  • The ideal market entry strategy is to find the right partner. The Commercial Service in Ukraine offers a variety of matchmaking services for this purpose.
  • Do your due diligence. Commercial Service can help you with an International Company Profile (ICP), which provides a thorough assessment of a prospective company, including information such as its financial standing, as well as references from creditors and customers.
  • Start small, build a relationship, and test the market.
  • Don’t forget the Foreign Corrupt Practices Act (FCPA). It is a useful tool for you and your partner, providing a solid basis for building a transparent, aboveboard relationship.
  • As your business grows so will your business relationship.
  • Remember the Commercial Service is in Ukraine to support US business interests abroad – so take advantage of our counseling services.
  • Commercial Service can explain the processes of company registration, product certification, and licensing - whatever it takes to facilitate your market entry, including identifying financing sources if needed.
  • Getting up and running, the Commercial Service Team in Ukraine has significant experience helping US companies and their local partners with problems from clearing Customs, to promoting business to prospective clients. Our Single Company Promotion service provides valuable support and visibility for your company.
  • Stay in touch with the Commercial Service if you suspect or have identified potential problems. We can guide your company and direct you to helpful resources.

In addition, please take note that all our market research is available in the U.S. Government Export Portal, free to registered users. Just login and read it!

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