Ukraine: Potential Sectors for Danish business

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;
 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
 Relatively easy access to Ukraine for EU citizens (no visa for short term
 WTO member (2008), DK-UA Double tax avoidance convention
 100% mobile connection coverage
 41% internet penetration
 Attractive margin rates, higher than in developed countries, and high risks
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
 Health Care products
 Outsourced processing – a new revival in textiles and wood / metal
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
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
 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
Most perspective sectors of the UA economy: Energy Efficiency /
Alternative Energy
 Highly energy-intensive economy - need for energy efficiency and
diversification of resources
 High dependence on import of gas and oil from Russia
 District heating is very much depreciated and needs huge investments
 Ukraine is one of 20 biggest CO2 emitters in the world with >1% of global
emissions, whereas its economy is 0.2% of the global economy
 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% customs duty ; 0% VAT on equipment imports through 2019, but
minimum local content must be observed: 15% in 2012, 30% in 2013 and
50% in 2014 (???)
 Shale gas agreements with Shell and Chevron
Most perspective sectors of the UA economy: Retail Sector
 Population of 45 m people
 A number 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
 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
Most perspective sectors of the UA economy: Health and medical
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
No state support for new and modern technologies
Registration of the pharmaceuticals
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
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”
Danish Business on the map of Ukraine
Who does run a business in Ukraine?
Sell in UA (i.a. via local representation)
Maersk Line
Novo Nordisk, Coloplast, Lundbeck
Rezidor (8 hotels / 1900 rooms in UA)
JYSK (14 stores)
Vestas (~60 x 3 MW turbines by 2013)
Kamstrup, Logstor
Rockwool, H+H
Lego Ukraine
Skov, Skiold
Haldor Topsoe
Produce in UA (via subsidiaries)
Carlsberg (3 breweries; USD 500 m investments)
Danosha + 3 other DK groups of agri investors
(~20,000 sows)
Ciklum (software production, 2,000 IT people)
SimCorp (software production)
Auditdata (software), CDM (software)
Dolle, Gangsø
Sika Footwear
Jahn & Jensen Products (import of food products to
Danish Textiles, Raitex
What Denmark can do to protect and develop Danish business in
 Danish Embassy/Trade Council in Kyiv:
Evaluating market opportunities / market research
Partner search, negotiations
Organizing the meeting programs and seminars
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
Thank you!
Tetyana Kobchenko
Commercial Advisor
[email protected]
+38044 2001268
+38067 4415717

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