FEU investment eng.

DISCOVER

INVESTMENT OPPORTUNITIES

OF UKRAINE ALONG

WITH UKRAINIAN

EMPLOYERS

The Joint Representative Body

of the Party of Employers

at the National Level – Leader of Ukrainian

Corporate World’s Public Opinion

The Joint Representative Body of the Party of Employers at the National Level (JRB)

is a supreme nationwide representative body of all-Ukrainian employers

organizations formed on the 7th of July 2009. JRB brings together over 20

all-Ukrainian employers organizations. JRB’s key objective is representing

Ukrainian employers’ consolidated position in the course of state social, labor and

economic policies implementation.

On the 2nd of December 2010, Mr. Dmitry Firtash, Head of the Board of Directors

Group DF was elected JRB’s Chairman. According to Mr. Firtash, having Ukrainian

employers voice heard and their proposals implemented requires consistent work

on a daily basis and consolidation of their resources and capacities in pursuit of

shared goals. This can only be attained through putting in place an integrated

managerial structure. In this connection, Dmitry Firtash, along with other employers

movement leaders, in early 2011 made a decision to launch the Ukrainian

employers unification movement on the premises of the Federation of Employers of

Ukraine (FEU).

The FEU Unification Congress convened on 29 November 2011 pursues the

strategic goal of having the majority of Ukraine’s major employers organizations join

the FEU. By this token, the largest ever all-Ukrainian organization of employers in

the country’s history will be established.

Upon such unification, the FEU is expected to represent interests of companies

collectively employing over 5 million workers and generating up to 70 percent of the

national GDP.

EMPLOYERS MOVEMENT OF UKRAINE

3

FEDERATION OF EMPLOYERS OF UKRAINE

Dear colleagues,

2011 has been a jubilee year for Ukraine. 20 years ago our country proclaimed its independence and

started to write a new page of its history.

I believe that Ukrainians have achieved an impressive lot over these two decades. We were granted a

market economy status, Hryvnia has taken hold as a stable currency, Ukraine has become a fully fledged

subject of international relations deeply integrating in the international community. But most importantly,

Ukrainians themselves changed dramatically: they have come to believe in ourselves, learned to respect

and be responsible for private ownership. A new class of individuals that effectively did not exist 20 years

ago has emerged – the class of business people.

These are the people who, notwithstanding all the hardships, believed in Ukraine and invested their money,

forces and time in it creating a good deal of jobs. Their hard work and perseverance leads them to success

for Ukraine. I am proud to refer myself to this category and I suggest that you look at Ukraine with my eyes.

I can see Ukraine as one of the principal centers of Europe’s economic growth in a short term already. All

prerequisites for it are there: Ukraine is the largest European state whose territory is almost 10 percent

larger than that of France, its 46-million strong population is comparable with the population of Spain.

Ukraine therefore is one of the largest markets in Europe definitely doomed to growing. Of no lesser

DMITRY FIRTASH’ ADDRESS

importance, Ukraine boasts a uniquely favorable geographical position which makes it an extremely

advantageous target for deploying production here with an eye on further exports. In the West we have

common borders with the EU, in the East we neighbor Russia, our sea ports in the South serve as excellent

gateways to markets of the Middle East, Asia and Africa. Couple these advantages with the human capital

benefits: highly skilled, talented people working in Ukraine, and you will see that Ukraine does feature a

huge industrial and investment potential.

A number of national economy sectors feature remarkable competitive edges: engineering, chemical

sector and metallurgy. I would like to specifically touch upon the prospects for Ukrainian agribusiness.

Ukraine is capable of playing a key role in attaining the UN Millennium Development Goal – the global fight

against starvation on the planet. Ukraine accumulates 25 percent of black soil resources of the world and

75 percent of European black soils. Possessing all these assets, our country is perfectly in a position to

become one of the world leaders in food production.

If you share my vision of Ukraine’s future and its opportunities, you will appreciate it that our country is one

of the most promising investment destinations in the world where existing risks appear to be quite

acceptable relative to the potential return.

This being said, as the Joint Employers of Ukraine, we are working on a daily basis towards improving

conditions for doing business and investing in Ukraine. We regard it to be one of the top priorities in our

work. Ukrainian employers are committed to helping our international partners interested in doing

business and investing their capitals in Ukraine.

I hope this information will help you discover the opportunities our country offers.

Welcome to Ukraine!

4

Dmitry Firtash

Ukrainian investor, entrepreneur,

Head of the Joint Employers Movement,

Head of the Board of Directors Group DF

Dear colleagues,

2011 has been a jubilee year for Ukraine. 20 years ago our country proclaimed its independence and

started to write a new page of its history.

I believe that Ukrainians have achieved an impressive lot over these two decades. We were granted a

market economy status, Hryvnia has taken hold as a stable currency, Ukraine has become a fully fledged

subject of international relations deeply integrating in the international community. But most importantly,

Ukrainians themselves changed dramatically: they have come to believe in ourselves, learned to respect

and be responsible for private ownership. A new class of individuals that effectively did not exist 20 years

ago has emerged – the class of business people.

These are the people who, notwithstanding all the hardships, believed in Ukraine and invested their money,

forces and time in it creating a good deal of jobs. Their hard work and perseverance leads them to success

for Ukraine. I am proud to refer myself to this category and I suggest that you look at Ukraine with my eyes.

I can see Ukraine as one of the principal centers of Europe’s economic growth in a short term already. All

prerequisites for it are there: Ukraine is the largest European state whose territory is almost 10 percent

larger than that of France, its 46-million strong population is comparable with the population of Spain.

Ukraine therefore is one of the largest markets in Europe definitely doomed to growing. Of no lesser

importance, Ukraine boasts a uniquely favorable geographical position which makes it an extremely

advantageous target for deploying production here with an eye on further exports. In the West we have

common borders with the EU, in the East we neighbor Russia, our sea ports in the South serve as excellent

gateways to markets of the Middle East, Asia and Africa. Couple these advantages with the human capital

benefits: highly skilled, talented people working in Ukraine, and you will see that Ukraine does feature a

huge industrial and investment potential.

A number of national economy sectors feature remarkable competitive edges: engineering, chemical

sector and metallurgy. I would like to specifically touch upon the prospects for Ukrainian agribusiness.

Ukraine is capable of playing a key role in attaining the UN Millennium Development Goal – the global fight

against starvation on the planet. Ukraine accumulates 25 percent of black soil resources of the world and

75 percent of European black soils. Possessing all these assets, our country is perfectly in a position to

become one of the world leaders in food production.

If you share my vision of Ukraine’s future and its opportunities, you will appreciate it that our country is one

of the most promising investment destinations in the world where existing risks appear to be quite

acceptable relative to the potential return.

This being said, as the Joint Employers of Ukraine, we are working on a daily basis towards improving

conditions for doing business and investing in Ukraine. We regard it to be one of the top priorities in our

work. Ukrainian employers are committed to helping our international partners interested in doing

business and investing their capitals in Ukraine.

I hope this information will help you discover the opportunities our country offers.

Welcome to Ukraine!

5

6FEDERATION OF EMPLOYERS OF UKRAINE

1 Ukraine on the business map of the World 8

2 Export and transit potential of Ukraine 10

3 Foreign trade and key centres for business of Ukraine 12

4 Human capital of Ukraine 16

5 Key Industries of Ukraine 18

6 Investments into Ukraine 24

7 Cooperation with the Federation of Employers of Ukraine 26

CONTENTS

7

TERRITORY: #1 country in Europe 603 700 sq. m 10 % larger

than France

POPULATION: 5 country in Europe 46 million like Spain

GDP 2010 (PPP): ranking 13th in Europe $300 billion like Switzerland

In 2011 GDP growth in Ukraine estimated to reach 4,7%

EU GDP growth outlook in 2011 1,7%

UKRAINE ONTHE BUSINESS MAPOF THE WORLD

1

KIEV


The total of investments in Ukraine’s

infrastructure in connection with

EURO¡2012 is $6 billion. The Euro Cup is a huge investment in the

country’s image too. The total of EURO football matches visitors in

Ukraine is estimated to be some 5 million while the telecast will be

watched by 1 billion viewers.

Ukraine possesses one of Europe’s richest funds of arable lands – the

total square is 42 million sq. m. The country accounts for 75 percent

of black soils of Europe and 25 percent of the world black soils.

Possessing such a wealth of assets, Ukraine may become a global

leader in food production.

Ukraine ranks among the world’s top five exporters of barley, corn,

sunflower seeds and oil, rye, wheat, dairy products.

According to BrainBench, the number of certified IT¡specialists in

Ukraine puts the country in the 4th place in the world rating.

Ukraine is a manufacturer of the world’s heaviest weight lifting aircraft

Antonov¡255.

Ukraine ranks among the world’s top five nitrogen fertilizers

exporters.

Ukraine ranks 8th in the world steelmakers rating.

Ukraine boasts the largest deposits of graphite, lithium and titanium in

Europe.

Ukraine is potentially one

of the major centers

of Europe’s economic growth in a short term

Key facts about Ukraine:

9

RUSSIA AND one of the world’s

CIS COUNTRIES fastest¡growing markets

36% percent of Ukrainian exports

EUROPE is one of the most voluminous markets

of the world


ASIA AND AFRICA new vibrantly growing markets


Population – 230 million,

GDP growth in Russia and CIS

countries in 2011 – over 4 percent

Population of 500 million people

with an average GDP per capital

rate of $32,700

GDP growth in Asia in 2011 –

over 6 percent,

in Africa – over 3.5 percent

RUSSIA AND CIS COUNTRIES

36%EUROPE

27%

ASIA AND AFRICA

33%


Share of Ukrainian export to the World's Regions

Ukraine is rightly considered to bridge Europe with Asia as the

shortest cut connecting these two continents crosses its territory:

4 out of 10 international transport corridors traverse Ukraine.

Notwithstanding this advantage, the transportation, logistical and

export infrastructure potential of Ukraine is far from being fully

realized.

The development of Ukraine’s transport infrastructure alone is

estimated to raise over US$100 billion until the year 2020. According

to estimates of the Ministry of Infrastructure of Ukraine, US$55 billion

will be committed to the land road construction sector, US$17 billion

worth of investments – in railroad reformation project; US$13 billion –

in river and maritime transport and US$15 – in air transport.

The projected growth in grains export from Ukraine will also

necessitate sizeable investments into the country’s export

infrastructure in the shortest term.

EXPORT AND TRANSIT POTENTIAL OF UKRAINE

2

The unique strategic

geographical position

of Ukraine determines its excellent export

and transit potential

11

FOREIGN TRADE AND KEY CENTRES FOR BUSINESS OF UKRAINE

Presently, Ukraine is a party to 1700 international foreign trade arrangements having entered into over

3000 bilateral agreements. Among others, Ukraine is a permanent UN member cooperating with a number

of international institutions: International Monetary Fund, International Finance Corporation, Council of

Europe, European Bank of Reconstruction and Development, etc.

3

Ukraine is deeply integrated in the global trade relations.

Ukraine’s foreign trade turnover in 2011

reached US$112 billion

In 2008, Ukraine acceded to the World Trade

Organization. In the current year, Ukraine signed a

Free Trade Zone Agreement with CIS countries and

at present, active discussions of Ukraine ’s

associated membership in the EU are underway.

Key centres for business in Ukraine

Behind Kyiv, the cities of Kharkiv, Donetsk,

Dnipropetrovsk, Odesa and Lviv, with populations

of over 1 million can be singled out as the most

successfully developing cities with relatively high

consumer

disposable income.

Kyiv, the capital and seat of government (officially

registered population 2.8 million, experts

estimate 4+ million including daily job migrants,

regional population 1.7 million), a region

specialising in science and education, retailing,

light industry, and services.

Kharkiv, (city population 1.5 million, regional

population 2.8 million), centre of industrial

(machine building), agricultural and

science¡intensive sectors (e.g. aerospace),

well¡known for its IT¡outsourcing capacities;

Dnipropetrovsk, (city population 1.0 million,

regional population 3.4 million), an area of mineral

resources and steel production;

Donetsk, (city population 1.0 million, regional

population 4.5 million), located in the mining

centre of the country and an area of ferrous metals;

Odesa, (city population 1.0 million, regional

population 2.4 million), southern port city and

region of machine building, metal working, food

and chemicals; and

Lviv, (city population 0.7 million, regional

population 2.5 million), is the main city in the west

of the country, located in a region of

agricultural/food production, and oil processing,

well¡known for its IT¡outsourcing capacities.


19%

5%

5%

13%

7%

34%

11%

0

6%

Ukrainian exports breakdown in 2010

Ukrainian exports dynamics over 2007 – 2010

Vegetable and animal fats

Foods

Mineral products

Chemicalproducts

Metal products

Machineryand electricaccessories

Vehicles

Otherproducts

10

20

30

40

50

60

70

80

90

49.25

66.95

39.70

51.43

2007 2008 2009 2010

13

$ b

ln


0

Ukrainian imports breakdown in 2010

Ukrainian imports dynamics over 2007 – 2010

10

20

30

40

50

60

70

80

90

60.67

85.54

45.44

60.74

2007 2008 2009 2010

24%

4%

35%

6%

7%

13%

Foods

Mineral products

Polymer materials and rubber

Metal products

Machinery

Other products

11%Chemical products

15

$ b

ln


HUMAN CAPITALOF UKRAINE

4

Ukraine is a country featuring a high degree

of human capital development which offers

excellent opportunities for high¡tech sectors

advancement

Key Facts

17

22 million economically active citizens reside in Ukraine.

The total of students in Ukraine is 2 million of which 0.6 million major in sciences and technical disciplines.

Ukraine ranks 11th in the world ’s top¡100 countries rating in the field of IT¡outsourcing and high¡tech

services (Global Services 100 List, 2010).

90 percent of Ukrainian students claim speaking English (source: The Gorshenin Institute, 2011)

About 50 thousand international students go to Ukrainian Universities which ranks Ukraine among ten

leading countries of the world.

There are over 800 universities and colleges in Ukraine.


Metallurgy is the major sector of Ukraine’s

economy largely determining the nation’s

economic development.

In 2010, the metallurgical sector accounted for

about 20 percent of the state’s industrial

production output. In addition to that, metallurgy is

a strategic contributor into the Ukrainian exports

volumes accounting for 30 to 40 percent of the

national export total.

According to the World Steel Association (WSA)

data, in 2011 Ukraine ranked 8th in the global steel

makers rating (with production growth rate

recorded at 18.1 percent).

The national metallurgy development is seriously

fostered by the availability of a unique raw

materials base in the country: e.g. Ukraine

accumulates 20 percent of the world’s reserves of

manganese ores and 5 percent of iron ores. In

addition to that, Ukraine boasts abundant deposits

of coke¡coal, fluxing stone, fire¡resistant clay,

ferrous alloys – all the resources essential for

setting up metallurgical production. Notably, all

these resources are concentrated in a relatively

limited territory which is an advantage unmatched

in other countries.

KEY INDUSTRIESOF UKRAINE

5

Ukraine is an industrial¡agrarian state.

Notwithstanding a high agricultural potential, Ukraine ’s economy is driven

primarily by its industry. The industrial production growth index over

the period from January through October 2011 was 8.2 percent vis¡à¡vis

the last year.

Metallurgy

Fuel and energy complex of Ukraine lays a

reliable foundation for developing the country’s

production capacity.

Ukraine’s energy sector is one of the principal

pillars of its economy development. Today, it fully

meets the domestic requirement in electric energy

while the surplus is being exported.

According to the World Energy Council’s

conclusion, Ukraine ranks seventh in the world

rating of national coal deposits.

A major weakness and a potential threat to

Ukraine’s energy security is its insufficient

extraction of domestic natural gas and, therefore, a

high degree of dependence on the Russian gas

imports. Seeking to diversify natural gas supplies,

Ukraine is eyeing investment in the development of

gas fields at the Black Sea shelf, putting up

LNG¡terminals and introduction of technologies of

shale gas extraction. The reserves of this valuable

energy source in Ukraine are estimated to be

among the most abundant in Ukraine.

Fuel and energy complex

19

The chemical sector of Ukraine is a basic sector

of the national economy having strategic

importance for the country’s export potential.

The chemical products’ share in the Ukrainian

export breakdown is 8 to 10 percent. Over 70

percent of the produced outputs, including mineral

fertilizers, soda ash, titanium dioxide are destined

for export.

Ukraine possesses a unique infrastructure for

ammonium and nitrogen fertilizers export. A unique

2417¡kilometer¡long ammonium transportation

pipeline Togliatti – Gorlovka – Odessa traverses

Ukraine, and Yuzhniy port – the pipeline terminal – is

the place from where about 30 percent of the

world’s urea and ammonium are being shipped to

international destinations.

Furthermore, Ukraine is one of the global leaders in

titanium dioxide production and export which is

largely owed to a unique raw materials base.

The titaniferous ores deposits in Ukraine equal

some 20 percent of the world’s reserves.

The production output of the Crimean Soda Plant,

the only soda ash producer in Ukraine, covers 2

percent of the global demand for this product.

The chemical sector


KEY INDUSTRIES OF UKRAINE

Ukraine’s engineering complex includes all engineering

subsectors significantly proudly boasting an impressive research

and professional potential.

The engineering sector of Ukraine accounts for over 22 percent of the

country’s total hired labor. Ukraine manufactures equipment for

metallurgy, oil and gas business, chemical industry, mining, energy

sector, railroad transportation (locomotives, passenger and cargo

cars, etc.), automotive vehicles, agriculture, food production, metal

processing and other industrial branches.

The share of Ukrainian engineering in the Ukrainian export breakdown

is approximately 15 percent.

Ukrainian aerospace industry and aircraft building is a matter of the

national pride. Ukraine is a member of the “Space Club” bringing

together the few countries with a capacity of launching satellites with

the country’s own launch vehicles. August of 2011 saw a launch of a

Ukrainian satellite SICH¡2 designed for agricultural resources

controlling, environmental monitoring, pollution assessment and

natural resources exploration.

Ukraine boasts a well¡developed capacity for civil and military aviation

production. A special jewel in this crown is the world’s heaviest weight

lifting aircraft Antonov 255 ‘Mriya”. At present, an effort towards

organizing serial production of regional¡range aircraft Antonov 140

and Antonov 148 is being actively pursued in parallel with a series of

other projects. The government of Ukraine intends to raise up to

US$140 billion worth of investments for these projects.

Ukraine’s engineering complex

21


Agriculture is one of the most attractive sectors

of Ukraine’s economy in the shortest term in

connection with the growing topicality of the

international food security challenge.

42 million hectares of Ukrainian lands (about 71

percent of the total territory of the country) are

available for doing agricultural business. Ukraine

accounts for a quarter of the global black soils and

three quarters of European black soil reserves.

Today Ukraine ranks third in the world rating of

grains exporting countries and the Ukrainian

Agrarian Confederation estimates that the country

will improve its performance on the international

market. The grains export in 2011 – 2012 is

estimated to total in 50 – 55 million tons, while corn

export is expected to almost double, reaching 12.5

million tons (last season, corn export was recorded

to be 5.3 million tons).

Analysts estimate the potential agricultural

production capacity at the level of US$60 billion of

which the export share will be up to US$40 billion.

In parallel with the agrarian sector development,

agriculture¡related industries open very good

prospects too. Production of 30 percent of the

economic structure of Ukraine is intertwined with

the agrarian business.

Agriculture

Ukraine’s banking system is stable. The majority

of international banking groups are already

doing business in Ukraine.

Ukraine has a two¡tier banking system which, as of

1 November 2011, consists of 176 commercial

banks and a central bank – the National Bank of

Ukraine.

As of 1 January 2011, the share of foreign capital in

banks’ equities was recorded at an approximately

41 percent level. The following major international

banking groups are represented in Ukraine ’s

banking sector today: Societé Generale, Citigroup,

BNP Paribas, SEB. Citigroup, ING, Crédit Agricole,

Intesa Sanpaolo, RZB and others.

The National Bank of Ukraine has reported that

over the period from January through October

2011, Ukrainian banks’ aggregate capital has

featured a 12 percent growth reaching the total of

US$20 billion. The aggregate asset portfolio of

Ukrainian banks is estimated to be over US$150

billion.

Banking system

23KEY INDUSTRIES OF UKRAINE

As of the 1st of July 2011, the total of (equity)

investments in Ukraine was recorded at the level of

US$48 billion (official statistics). Major

transnational (global) corporations like Kraft

Foods, Coca¡Cola, Hewlett Packard, Cargill, Knauf,

Raiffeisen Bank, Credit Agricole are already doing

business in Ukraine.

According to the World Bank estimates, the net

influx of foreign investments in Ukraine equals

some 4.2 percent of the national GDP (2010 data).

Over 9 months of 2011, the total of foreign

investments in Ukraine was US$5.3 billion which

marks a 1.5¡time increase against last year’s

statistics.

In 2010, about 31.4 percent of foreign investments

were channeled into industrial sectors; 33.7

percent – in financial sector; 10.7 percent – in

commerce; 10.6 percent – in real estate sector.

The list of major investor¡countries is topped by

Cyprus (22.2 percent), followed by Germany (15.8

percent), the Netherlands (10.5 percent), Russia

(7.6 percent) and others (2010 data).

In 2006 – 2007, the number and volume of

merger/acquisition transactions in Ukraine went up

dramatically. In 2008 ¡2010, due to global financial

system’s uncertainty and instability, this market

halted. In 2011, the total volume of

merger/acquisition transactions is estimated to

equal some US$6 billion.0

1

2

3

4

5

6

7

8

9

$ b

ln

7.9

6.2

4.4 5.34.7

2007 2008 2009 2010 10М 2011

INVESTMENTS INTO UKRAINE

6

Over the period of its

independence, Ukraine has raised

US$48 billion worth of equity

investments

Foreign Direct Investments in Ukraine

In the nearest future, the following sectors will top

the list of investment¡attractive industrial

branches: energy generation and energy

efficiency; oil and gas industry; telecommunica¡

tions; commercial real estate; transport infrastruc¡

ture; agriculture and engineering projects.


0

2000

4000

6000

8000

10000

12000

14000

16000

18000

$ m

ln

NU

MB

ER

OF

DE

ALS

NUMBER OF DEALS

VALUE

0

100

200

300

400

500

600

700

800

6 879

15 337

7 0157 572

5 577

2006 2007 2008 2009 10М 2010

Source: Dealwatch, Tomson, Ernst&Young estimates

Mergers and Acquisitions

The following investment factorsdeserve special attention:

about 50 percent of foreign investments in Europe are made in

industrial production whereas in Ukraine, the situation is different

(ca. 15 percent), which implies a substantial potential in this

investment segment;

in the EU, about 25 percent of foreign investments are channeled

into software developments and business services provision while in

Ukraine the same index is as low as 13 percent; thus, this investment

target seems to be quite interesting;

the importance of investment in agriculture which, as was

mentioned above, accumulates an enormous potential of supplying

food to the EU is undeservedly neglected which is quite insensible

given the amounts and quality of Ukrainian black soils (that were not

being chemically treated for 5 years) and proximity to European

markets;

integration processes across the region have boosted an outsourcing

services market that has become especially vibrant in the EU over the past 5

years. Ukraine, on contrast, accounts for as little as 3 percent of this market

capacity which sends a very powerful message of excellent investment

opportunities in this �eld (high educational level, availability of natural

resources, infrastructure development level, etc.)

25

The FEU is a non¡governmental organization having developed excellent

relations with domestic state and local power authorities, cooperating with

them along the lines of national and regional economic development

programs.

Cooperation with the FEU considerably reduces risks associated with doing

business in Ukraine as we have a clear understanding of markets and

nuances of Ukrainian business environment.

Over 8000 corporations representing major sectors of Ukraine’s national

economy are FEU members. Most of them are open for cooperation with

international partners in foreign trade and investment fields.

COOPERATIONWITH THE FEU

7

FEU is your reliable business partner in Ukraine

Reasons to cooperate with the FEU:

The FEU is promoting a foreign economic vector of business cooperation.

Along these lines, the FEU is providing support to its foreign partners in the

following endeavors:

Investment consulting: search for and assessment of objects and projects

for investments in Ukraine, legal and organizational support to transactions,

search for project financing;

Export from Ukraine: search for business partners in Ukraine, legal and

organizational support to exporting products from Ukraine;

Information and analytical advice: business plans assessment, market

assessment, product competitiveness assessment, legal advice on

taxation customs regulations and other pieces of legislation of Ukraine.


Contact:

Ivan Dovganych,

Deputy Director General

for International Relations

tel: +380 44 251 70 39

+380 44 251 70 62

e¡mail: [email protected]

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