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Evergreen and challenging opportunities at the big market next to EU Seminar Export Steps

Evergreen and challenging opportunities at the big market next to EU Seminar Export Steps. Why does somebody run a business in Ukraine?. A limited choice globally; limited finance; overestimated S-E Asia 45 m of retail customers 2012 : import of goods USD 90 bln ; GDP USD 176 bln ;

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Evergreen and challenging opportunities at the big market next to EU Seminar Export Steps

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  1. Evergreen and challenging opportunities at the big market next to EU Seminar Export Steps

  2. Why does somebody run a business in Ukraine? • A limited choice globally; limited finance; overestimated S-E Asia • 45 m of retail customers • 2012: import of goods USD 90 bln; GDP USD 176 bln; • Geographical proximity to EU and former USSR markets • High retail prices (meat, clothes prices = EU prices) • Relatively low cost of labor, agro land rent and some other resources • Relatively understandable national culture, similar to Eastern European patterns • Relatively easy access to Ukraine for EU citizens (no visa for short term visits) • WTO member (2008), DK-UA Double taxavoidance convention • 100% mobile connection coverage • 41% internet penetration • Attractive margin rates, higher than in developed countries, and high risks

  3. Most perspective sectors of the UA economy • Agricultural production and Food processing • IT – outstaffing, outsourcing, software development • Energy Efficiency / Renewable Energy / District Heating • Retail trade (2012: USD 98 bln turnover (food + non-food) after 14% y/y growth) • Health Care products • Outsourced processing – a new revival in textiles and wood / metal processing

  4. Most perspective sectors of the UA economy: Agro Production and Food Processing • 1/2 of national export • Agro land is not for sale; unstable legal environment • 1/3 of black soil of the world; 50 m ha of arable land in Ukraine • Annual production of grain 45-55 m tonnes of grains (2013 harvest is at 55 m) and annual internal consumption of 25 m • High profitability of farming business in Ukraine. The good players reach on average EUR 450 EBIDTA/ha • Ideal geographic localization of Ukraine close to its major off takers (Europe, Middle East, Turkey, North Africa, China) with easy access to sea

  5. Most perspective sectors of the UA economy: IT Software Development, e-commerce • One of global top 10 software development players (~ USD 1.5 bln / year export) • 30 thousand of IT developers • ~ 10 Danish owned IT companies • IT companies demonstrate 15-25% growth annually • Outsourcing to Ukraine: • Software development • Call centers • Accounting / reporting • IT support • Favorable tax regime for IT companies and IT developers • 41% of population internet penetration, mostly social networks • 15% of population use smart phones • Rapidly growing volume of on-line trade and services inside Ukraine

  6. Most perspective sectors of the UA economy: Energy Efficiency / Alternative Energy • Highly energy-intensiveeconomy- needfor energyefficiencyand diversification of resources • High dependence on import of gas and oil from Russia • District heating is very much depreciated and needs huge investments • Ukraine isone of 20 biggestCO2 emittersin the worldwith >1% of globalemissions, whereasitseconomyis0.2% of the globaleconomy • State support - green tariffs - rates comparable to EU levels • National grid obliged to connect renewable sources to the network • Guaranteed off-take by the State Energy Company through 2029 • 0% customsduty; 0% VAT on equipment imports through 2019, but minimum localcontentmustbe observed: 15% in 2012, 30% in 2013 and 50% in 2014 (???) • Shale gas agreements with Shell and Chevron

  7. Most perspective sectors of the UA economy: Retail Sector • Population of 45 m people • Anumber of consumers can afford purchasing high-quality food products • Food trade outlets exceeded 48,000 in 2012 • Approximately 10-15 % of all Ukrainian gas stations (~ 7,000) have stores that sell packaged food products • Urban life style changes increase demand for semi-finished and ready-to-cook products • Frequently changing trade legislation and policies often impact trade. Import tariffs were lowered by WTO accession but threatened with hikes “to protect Balance of Trade.” • Rapid development of local manufacturers of ready-to-cook products creates tough competition for similar imported goods • Difficulties in finding a reliable partner or distributor

  8. Most perspective sectors of the UA economy: Health and medical sector • A lot of smokers in UA but HEALTH is IMPORTANT • Big market of 45 mln people • Local state health support is weak • A lot of professional companies are in the sector • Good reputation of Danish medicine • Pharmaceuticals • Equipment • No state support for new and modern technologies • Registration of the pharmaceuticals

  9. Challenges to expect • Ever changing regulations • Ruined roads • Unreliable municipal infrastructure • Larger businesses experience smaller problems in Ukraine • Strong competition from Ukrainians, Russians, Middle East and China • Typical Europeans’ mistakes: Ukraine is like Texas in 19th century – take it seriously, apply your professionalism, be persistent

  10. Ukraine has proved to be a difficult country to do business in/with • High level of corruption, too complicated taxation (22 different taxes), weak investor protection • Malfunctioning and politicized court system • Lack of support from local authorities, extortion via “charity” • Low European languages proficiency, underdeveloped business culture • #137 out of 183 World Bank’s most recent Ease of Doing Business ranking (#152 in 2012) • “2 hours of flight away / 30 years behind”

  11. Danish Business on the map of Ukraine

  12. Who does run a business in Ukraine?

  13. What Denmark can do to protect and develop Danish business in Ukraine? • Danish Embassy/Trade Council in Kyiv: • Evaluating market opportunities / market research • Partner search, negotiations • Organizing the meeting programs and seminars • Lobbying • Defending the interests of Danish companies working in Ukraine • Highlighting the activities of the Danish companies in Ukraine • Relatively large, organized and active Danish/EU lobby • Danish Business Association (Lviv) • Nordic/Scandinavian business clubs • EBA (European Business Association) • AmCham(Amercian Chamber of Commerce) • EKF export guaranteeing • State-owned IFU is ready to come up with additional financing

  14. Thank you!Tetyana KobchenkoCommercial Advisortetkob@um.dk+38044 2001268+38067 4415717

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