Ukraineb2b. Business in Ukraine: Doing Business

Reaching the Consumers
Selling
Operating a Business
Investing

Reaching the Consumers

Population in Figures

Total Population:: 45,870,700
Urban Population:: 68.1%
Rural Population:: 31.9%
Density of Population:: 79 Inhab./km²
Men (in %): 46.1%
Women (in %): 54.0%
Annual Growth Rate of the Population:: -0.40%
Medium Age:: 68.2
Ethnic Origins of the Population:: Ukrainians 77.8%, Russians 17.3%, Others 4.9%.

Population of main cities (including suburbs)

Name	Population
Kiev	3,400,000
Charkiv	1,830,000
Dnipropetrovsk	1,360,000
Odessa	1,080,000
Donetsk	1,850,000

Source: Citypopulation.de, 2005 - Last Available Data.

Age of the Population

Life Expectancy in Years
Men:	63.8
Women:	74.9

Source: World Bank, last available data., 2009 - Last Available Data.

Distribution of the Population By Age Bracket in %
Under 5:	4.9%
6 to 14:	9.0%
16 to 24:	14.0%
25 to 69:	60.6%
Over 70:	11.5%
Over 80:	3.4%

Source: United Nations, Department of Economic and Social Affairs, Population Division, Prospects 2010 - Last Available Data.

Household Composition

Total Number of Households (in million)**	17.2
Average Size of the Households**	2.5 Persons

Consumption Expenditure

Purchasing Power Parity	2009	2010	2011	2012 (e)	2013 (e)
Purchasing Power Parity (Local Currency Unit per USD)	3.14	3.57	3.96	4.33	4.68

Definition: Purchasing Power Parity is the Number of Units of a Country's Currency Required to Buy the Same Amounts of Goods and Services in the Domestic Market as USD Would Buy in the United States.

Note: (e) Estimated Data

Household Final Consumption Expenditure	2008	2009	2010
Household Final Consumption Expenditure (Million USD, Constant Price 2000)	45,595	39,120	-
Household Final Consumption Expenditure (Annual Growth, %)	10.5	-14.2	-
Household Final Consumption Expenditure per Capita (USD, Constant Price 2000)	986	849	-
Household Final Consumption Expenditure (% of GDP)	63.9	65.4	65.5

Source: World Bank - Last Available Data.

Consumption Expenditure By Product Category as % of Total Expenditure	2009
Food and non-alcoholic beverages	33.2%
Alcoholic beverages, tobacco and narcotics	5.3%
Clothing and footwear	4.8%
Housing, water, electricity, gas and other fuels	10.3%
Furnishings, household equipment and routine maintenance of the house	3.5%
Health	5.0%
Transport	8.8%
Communication	2.6%
Recreation and culture	3.2%
Education	8.0%
Restaurants and hotels	2.3%
Miscellaneous goods and services	3.3%

Source: UN Data, Last Available Data

Information Technology and Communication Equipment, per 100 Inhabitants	2009
Telephone Subscribers	149.8
Main Telephone Lines	28.7
Cellular Mobile Subscribers	121.1
Internet Users	22.5
PCs	3.9

Source: International Telecommunication Union, Last Available Data

Selling

Distributing a Product

Distance Selling

Type of Products: All types of legal products can be found on the internet.
Evolution of the Sector: Direct selling is constantly progressing. The Ukraine has 1.5 million direct sales agents with a total annual income of up to EUR 389 million.
Direct Marketing Enterprises: Viland, Products for the home. Gateway to online sales websites, All products

Big Names in Distance Selling

Ukraine Direct Selling Association

Distribution Network

Types of Outlet

Supermarkets and Hypermarkets: Food products ATB-market, Silpo, Furshet, Velyka Kyshenya, Amstor
Cash and Cary: Food products Metro
Specialized Shops: All types of non-food products: cosmetics, electronic, home appliances, etc. Kvadrat (in Ukranian), Metrograd, Globus, Brocard Bessarabsskïi, Foxtrot (in Ukranian),Eldorado (in Ukranian), Mega Max, Agromat, Budmax, Nova Linia.
Discount: All types of non-food products: cosmetics, electronic, home appliances, etc. Fozzy, Intermarket, Pakko

Evolution of the Retail Sector

Growth and Regulation: Few structures carry out distribution and the follow-up of imports. The distribution sector remains very traditional and fragmented, but the arrival of foreign competitors could widen the range of products and services, contribute to stabilizing prices and stimulate competition. Franchises are growing, but there is a legal vacuum as far as intellectual property is concerned, and barriers to the development of small companies.
The most developed distribution circuit is retail trade. Food shops can either be non-specialized or specialized in a single range of products. There are also department stores especially in Kiev such as the Department Store Ukraine, the Zum which is the equivalent of Printemps in Paris (Selfridge's in London), the department toystore, Dytiachy Syit - Children's World, the large jeweler's Koschtan, and for perfume and cosmetics, Lancôme.
The market share of non-organized retail is increasingly encroached upon.
Market Shares: Non-organized retail shops have 43% of the market, local shops control 25%, while supermarkets have approximately 12% market share.
Organizations in the Retail Sector: Association of Ukrainian Distributors

Commercial Intermediaries

Trading Companies
Main Actors: The main Ukranian wholesalers are: Fozzy Group, Metro Cash&Carry Ukraine, ATB, Furshet and Velyka Kyshenia. It should be noted that regional wholesalers (such as Donetsk, Amstor, Fozzy Group, Furshet and Lviv Intermarket) have stronger growth than national wholesalers.

Using a Commercial Agent

The Advantages: Sales are accelerated and there is less stockage by going through a commercial agent, you also have direct contact with the clientele and enjoy the advantages of the agent's knowledge of the market.
Elements of Motivation: The main motivating factor for the agent is his commission.
The Average Amount of Commission: The commission amount is negotiated when contracting and depends on the task.
Breach of Contract: The agent has to be notified one month prior to the termination date of the contract.
Finding a Commercial Agent: Alibaba

Setting Up a Commercial Unit

The Advantages: Decision are taken by the parent company, thus simplifying the subsidiary's operation. Ukranian legislation does not impose a minimum size in order to open a subsidiary. It is in the interest (commercial and financial) of foreign companies exporting to the Ukraine to open a branch office.
Where to Be Vigilant: The subsidiary has to deal with a complex and rigid law, which as a precaution, leads to getting in touch with lawyers in order to ensure the proper formation of the company, in terms of legality.
Different Possible Forms of Settlement
A Representative Office: Since a representative office cannot sign a contract in its name, nor do any marketing or distribution of its products, the opening of a branch office is the foreigner's preferred solution.
A Company: It is necessary to register the subsidiary at the Ministry of Economy (cost: approximately UAH 15,000).

Franchising

Evolution of the Sector: To be franchised is very common in the Ukraine. It is the most sought after type of company formation. A fair on franchises takes place every year. For more information on the rights regarding franchise, you can consult the HG.org website.
Some Big Franchises: Specialized franchise consultancy for Central and Eastern European countrie. Franchise gateway in the Ukraine Comprehensive gateway of franchises in the Ukraine
For Further Information: The Civil Code The Commercial Code of Ukraine

Operating a Bussiness

Legal Forms of Companies

Types of Companies and Capital (Max/Min)	Number of Partners/Shareholders and Liability
Private Limited Company Minimum: around EUR 81.82	No minimum. Max: 10 Limited to capital
Public Limited Company Minimum: around EUR 89,600	No minimum nor maximum Limited to capital

Enterprises Federation: Catalogue of leading enterprises in the Ukraine

Business Setup Procedures

Setting Up a Company	Ukraine	Eastern Europe & Central Asia
Procedures (number)	10.00	6.30
Time (days)	27.00	16.30

Source: Doing Business.

For Further Information: Consult Doing Business Website, to know about procedures to start a Business in Ukraine. Business Support Department
The Competent Organization: The formation of a company with foreign shareholding has to be registered with the local administration where the headquarter of the company being formed is situated. It is also necessary to register with the Minisry of Foreign Relations and Trade.

Recovery Procedures

Bankruptcy Laws: The law on the restitution of the debtor's solvency or the declaration of bankruptcy came into force in Janunary 2000.

The Active Population in Figures

	2010
Labor Force	22,060,000

Source: CIA - The world factbook

	2009	2010
Total activity rate	-	58.10%
Men activity rate	65.40%	-
Women activity rate	52.00%	-

Source: UN - United Nations

Employed Persons, by Occupation (% of Total Labor Force)
Agriculture	24.0%
Services	44.0%
Industry	32.0%

Source: NationMaster

For Further Information About the Labor Market: COE, Labor migration Statistics on the Ukranian labor market

Working Conditions

Opening Hours
Legal Weekly Duration: 44 hours for services and trade and 48 hours for industry.
Maximum Duration: It is possible to go over the 40 hours a week for some professions: 44 hours for services and shops and 48 hours for industry. 120 hours per year of overtime is the limit, except in certain categories (managers and other).

Working Rest Day: Saturday and Sunday are the weekly days of rest.
Paid Annual Vacation: The Ukranians have a right to 24 days of paid vacation per year, plus 13 days public holidays, which are not working days.
Retirement Age: 55 for women and 60 for men.
Child Labor and Minimum Age For Employment: The minimum working age is 17 years.

The Cost of Labor

Pay

Minimum Wage: 960 UAH (120 USD). It should be noted that salaries have to be paid twice a month: half the salary every two weeks.
Average Wage: Average monthly gross earnings in Ukraine is UAH 2,083 (USD 268).
Other Forms of Pay
Pay For Overtime: In theory, overtime work can only be imposed in a "case of emergency". Overtime, (not more than 120 hours per year) is paid double.
Pay For Rest Days Worked: If the employee works during a day of rest, he is paid double.
Pay For Night Hours: The night shift is remunerated according to the current collective convention and cannot be below the 120% of the daily rate. For more information, refer to the report on the Regulation of Labor and Employment in the Ukraine published by the Volkov Koziakov & Partners.
Pay For Overtime at Night: Night overtime is paid double.

Social Security Costs

The Areas Covered: Accidents, illnesses, retirement, death, disability, maternity, medical care, family and child benefits and unemployment benefits.
Contributions: Contributions Paid By the Employer: 47.5 %. Contributions Paid By the Employee: 1.5 %.
Competent Organization: Ministry of Labour and social Policy

Management of Human Resources

Recruitment

Method of Recruitment: Some agencies impose their own recruitment methods, some are go betweens.
Recruitment Agencies: There are different types of recruitment agencies in the Ukraine, either specialized in a precise area or targeted at temporary employment. Most of them have their own websites.
Recruitment Websites: Work in Ukraine Work in Kiev Work in Kiev

The Contract

Type of Contract: Employment contracts are regulated by law, collective agreements and individual negotiations. An employee is on probation of 1 to 3 months. During this period, the employee can be dismissed or confirmed. There are three employement contracts: Permanent, temporary and provisional.

Breach of Contracts
Retirement: Retirement age is set at 60 years for men and 55 years for women. It can be premature in certain sectors.
Dismissals: An employer can dismiss an employee for continued bad performance, serious fault, unjustifiable absence of more than 3 hours or prolonged illness of more than four months and company economic problems. An employee can resign with two weeks notice.
Other Possible Methods: For more information, refer to the report on the Ukranian employement market published on the Salans website.
Labor Laws: Labor Law Employement Law

Dispute Settlement

Conciliation Process

Legal Framework: The law that deals with contentious matter between employers and employees in the Ukraine is the International Commercial Arbitration Act.
Procedure: In the case of a dispute. the parties can go to the Ukranian Tribunal of Commerce or an international court, by common agreement. Since 1994, parties can lodge an appeal with an international commercial arbitration court, which is a lot more advantageous.

Judicial Structures

Competent Legal Body: The body in charge of contetious matters between employers and employees in the Ukraine is the International Commercial Arbitration Court.

Social Partners

Social Dialogue and Involvement of Social Partners

The Federation of Ukrainian Trade Unions, which unites 44 unions and 26 regional associations, brings together more than 10 million members.

Unionization Rate

The Ukraine has nearly 15 million unions for an active population of 22 million people.

Unions

Ukrainian Trade Union Federation List of Ukrainian trade unions

Regulation Bodies

Ministry of Labor and Social Policy

Investing

FDI in Figures

Increasing in the recent years, the FDI flux into Ukraine have slowed down due to the global recession and the severe economic crisis affecting the country. Apart from the economic downturn, the inefficient and corrupted legal system, complexity of legislation and regulation, poor contract and enforcement and poor governance constitute serious impediments to investment. This is so despite the fact that the country has its strengths: a large domestic market, proven agricultural potential, energy and mineral resources and a strategic geographic location which makes it a transit hub and a gate to Europe. The main investors in Ukraine are Cyprus, Germany, The Netherlands, UK, Austria, the United States and Russia. Apart form the energy sector, direct foreign investment is concentrated mainly in the banking and food processing sectors. You can refer to the Invest in Ukraine website for more information.

Foreign Direct Investment	2008	2009	2010
FDI Inward Flow (million USD)	10,913	4,816	6,495
FDI Stock (million USD)	46,997	52,021	57,985
Performance Index*, Ranking on 141 Economies	47	45	-
Potential Index**, Ranking on 141 Economies	48	-	-
Number of Greenfield Investments***	125	92	-
FDI Inwards (in % of GFCF****)	23.0	25.9	-
FDI Stock (in % of GDP)	26.1	44.3	-

Source: UNCTAD - Last Available Data.

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.

FDI Inflows By Countries and Industry

Main Investing Countries	2010, in %
Cyprus	22.5
Germany	16.5
The Netherlands	9.6
Russia	7.0
Austria	6.3
UK	5.4
France	4.1
Sweden	4.1

Main Invested Sectors	2010, in %
Financial sector	24.0
Industry	20.7
Real Estate	8.0
Wholesale and retail	10.0

Source: State Statistics of Ukraine - Last Available Data.

Form of Company Preferred By Foreign Investors: Limited liability companies and joint stock companies.
Form of Establishment Preferred By Foreign Investors: A subsidiary is preferred by foreign investors as it is very advantageous.
Main Foreign Companies: You can see the list of the main foreign companies established in the Ukraine.

Why You Should Choose to Invest in Ukraine

Strong Points: The country's main strong points are: - One of the biggest markets in Europe with 47 million consumers; - The most dynamic GDP growth in Europe; - A very good education system. The Ukraine is placed fourth in the world, in terms of specialists with diplomas in the high-tech sector; - A strategic geographical positioning, the country being situated at the entry of Europe, Russia and Asia; - The emerging middle class estimated at 20% of the population; - The presence of investors such as Kraft Foods, Coca-Cola, Hewlett Packard, Cargill, Knauf,Raiffeisen Bank, Credit Agricole and many others; and - The strengthening and reforms of the banking sector's.
Weak Points: The country's weak points are: - The small amount of support given to foreign investors by the law; - The weakness of the national oil company, Naftogaz's, financial situation and the country's permanent risk of being unable to pay its gas bill; - The drop in industrial production in 2009; - A high rate of inflation; - Political instability; - Endemic corruption.
Government Measures to Motivate or Restrict FDI: Following the orange revolution, investment friendly reforms have allowed for the considerable increase of FDI. In effect, the government wishes to strongly attract foreign investors. Except for certain key sectors like banking and telecommunications, most sectors are entirely open to FDI.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Ukraine: The Ukraine has signed 64 investment protection bilateral agreements, namely with the United States and most of the OECD and the CIS countries.
International Controversies Registered By UNCTAD: Disagreement with German regarding a petro-chemical complex.
Member of the Multilateral Investment Guarantee Agency: Yes

Country Comparison For the Protection of Investors

	Ukraine	Eastern Europe & Central Asia	الولايات المتحدة	Germany
Index of Transaction Transparency*	5.0	6.3	7.0	5.0
Index of Manager’s Responsibility**	2.0	4.0	9.0	5.0
Index of Shareholders’ Power***	7.0	6.2	9.0	5.0
Index of Investor Protection****	4.7	5.5	8.3	5.0

Source: Doing Business - Last Available Data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.

Procedures Relative to Foreign Investment

Freedom of Establishment: The administrative formalities depend on the form of company to be created. The Ukrainian agency for the promotion of foreign investment allows you to get information about the authorizations necessary for setting up business.
Acquisition of Holdings: The legislation provides for the possibility of creating a Ukrainian company with foreign investment in a Private Limited Company, in a joint-stock company, or in a 100% subsidiary form, and regulates their constitution and running. Acquisition of holdings in an existing company, especially within the ongoing privatization programme, is subject to the same legal procedures but requires approval from the State Assets Funds.
Obligation to Declare: The agency for the promotion of foreign investment in the country allows you to get information about the authorizations necessary for setting up business.
Competent Organization For the Declaration: Ukrainian Ministry of Finance
Requests For Specific Authorizations: All companies active in the sectors of banking, insurance, security, pharmacy, and the production of alcohol must obtain a State license.

Office Real Estate and Land Ownership

The Possibility of Buying Land and Industrial and Commercial Buildings: It is possible to invest in real estate and non cultivating land.
Risk of Expropriation: The risk of expropriation is still very present in the Ukraine. Ukranian law provides for total compensation in case of expropriation, except for extreme emergency cases.

Investment Aid

Forms of Aid: Overall, the Ukraine does not seem to have a stable policy with regard to investment assistance. The unpredictability of the decisions is puzzling (like the sudden removal of free economic trade zones) and does not reassure foreign investors.
Privileged Domains: Loans, tax-free, simplified administrative procedure to register a company.
Privileged Geographical Zones: High technology and alternative energies.
Free Zones: The law on Special Economic Zones defines three types of areas: free trade zones, regions with special investment regimes and priority development regions.
Organizations Which Finance: Invest in Ukraine

Investment Opportunities

The Key Sectors of the National Economy: Financial sector, agriculture and agro-chemistry.
High Potential Sectors: High technology, agriculture, agro-chemistry, aerospace industry, alternative energy, tourism and hospitality, transport and logistics.
Privatization Programs: The IMF gave recommendations to the Ukraine to further liberalize and to privatize the land owenership sector.
Tenders, Projects and Public Procurement: Tenders Info, Tenders in Ukraine DgMarket, Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: It is impossible to acquire agricultural land.
Sectors in Decline: Due to the crisis, the declining sectors are construction (building), automobile and electronics and the metallurgy sector.

Finding Assistance For Further Information

Investment Aid Agency: Ukraine Gateway Ukrainian investment promotion agency The State Agency of Ukraine for Investments and Innovations
Doing Business Guides: Ukraine Commercial Guide 2010 - Buy USA

Pages

Doing Business