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Official Name: Ukraine

Internet Domain: .ua
International Dialing Code: +380

Table of Contents

Location and Size Credit and Collections
Government Risk Assessment
Legal System Business Climate
Economy Business Protocol
Comparative Economic Indicators Other Sources of Info

Location and Size

Located in Eastern Europe between Poland, Romania and Moldova on the west and Russia on the East, Ukraine’s area is approximately 603,550 sq. km. (233,000 sq. mi.), making it slightly smaller than Texas.

Government

Parliamentary democracy.

  • Executive branch: chief of State-President Viktor Yanukovych, head of government-Prime Minister Mykola Azarov, Cabinet of Ministers selected by the prime minister except for foreign and defense ministers which are selected by the president
  • Legislative branch: 450-member unicameral parliament
  • Judicial branch: Supreme Court, Constitutional Court

Legal System

Based on civil law. Ukraine has not accepted compulsory International Court of Justice (ICJ) jurisdiction. (What does this mean?)

Local commercial courts of Ukraine have jurisdiction over disputes between legal entities, including foreign legal entities. Commercial courts are also in charge of administering bankruptcy cases.

Investors criticize Ukraine's legal system for its inefficiency, burdensome procedures, unpredictability, corruption, and susceptibility to political interference. Even when favorable decisions are obtained, investors claim the decisions are sometimes not enforced.


Economy

With rich farmlands, a well-developed industrial base, highly trained labor, and a good education system, Ukraine has the potential to become a major European economy. After a robust expansion beginning in 2000, Ukraine’s economy experienced a sharp slowdown in late 2008, which continued through 2009. Real GDP contracted 14.1% in 2009, but is forecast to grow over 3% in 2010.

In 2009, financial aid from the IMF (International Monetary Fund) saved Ukraine from financial disaster but did not prevent a deep recession. Economic activity collapsed due to a weakness of domestic and foreign demand and the fall of the hryvnia (Ukraine’s currency).

Leading Markets (2009): Russia 21.1%, Turkey 5.3%, China 3.8%

Leading Exports-commodities: ferrous and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, food products

Leading Suppliers (2009): Russia 28%, Germany 8.6%, China 6.1%, Kazakhstan 4.9%, Poland 4.9%

Leading Imports-commodities: energy, machinery and equipment, chemicals

Top Industries: coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food processing

Top Agricultural Products: grain, sugar beets, sunflower seeds, vegetables; beef, milk

Comparative Economic Indicators – 2009

Ukraine Poland Romania Moldova Russia USA
Population* (millions) 45.4 38.5 22.2 4.3 139.4 310.2
Population growth rate* (%) -0.62 -0.05 -0.16 -0.72 -0.47 0.97
Literacy 99.4
2001
99.6
2009
97.3
2002
99.1
2005
99.4
2002
99.0
2003
Unemployment rate (%) 4.8 8.9 7.6 2.6 8.9 9.3
Inflation (%) 12.3 3.4 5.0 0.0 11.9 -0.7
Population below
poverty line (%)
35.0
2009
17.0
2003
25.0
2005
29.5
2005
15.8
2007
12.0
2004
GDP (USD billions) 294.3 690.1 255.4 10.0 2,116.0 14,260.0
GDP real growth rate (%) -14.1 1.7 -7.2 -7.7 07.9 -2.4
GDP per capita** (USD) 6,400.0 17,900.0 11,500.0 2,300.0 15,100.0 46,400.0
Public debt (% of GDP) 30.0 47.5 20.0 31.3 6.9 52.9
Exports (USD billions) 41.5 134.7 38.1 1.2 295.6 994.7
Imports (USD billions) 45.6 141.7 49.2 3.1 196.8 1,445.0
Currency Hryvnia
UAH
Zioty
PLN
New Lei
RON
Leu
MDL
Rouble
RUB
Dollar
USD
Exchange rates (per USD) 06/28/2010 7.7 3.3 3.5 12.5 31.0 na
Exchange rates (per EUR) 06/28/2010 9.6 4.1 4.3 15.5 38.3 1.2

Data from CIA World Factbook

* July, 2010 estimates
** PPP - Purchasing Power Parity

Credit and Collections

Dispute Resolution

For many years, the lack of adequate rule of law, fair and impartial dispute resolution mechanisms, and enforcement of domestic court and international arbitration decisions have plagued investment disputes in Ukraine. Currently, there is no single point of contact in the Ukrainian government to help resolve business and investment disputes involving foreign companies.

Most U.S. businesses have little confidence in Ukrainian courts. Commercial contracts may permit the parties to use international arbitration or specified foreign courts to settle disputes. Although Ukrainian legislation recognizes international arbitration decisions, in practice such decisions can be very difficult to enforce in Ukraine.

Ukraine enacted an international commercial arbitration law in February 1994, which parallels commercial arbitration laws set forth by the United Nations Commission on International Trade Law. Ukraine is a member of the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitration Awards. However, enforcing foreign arbitration awards in the Ukraine is difficult as enforcement procedures are regulated by a number of statutes.

Risk Assessment

Coface Country Rating: D (high risk)
Coface Business Climate Rating: C (moderate to high risk)

ONDD* Commercial Risk: C (high risk)
*The Belgian Export Credit Agency

Ducroire Delcredere rates the Ukraine’s political and commercial risk as high (political risk 6 out of 7; commercial risk C (highest risk.)

Business Climate

Ukraine’s economy is burdened by excessive government regulation, corruption, and lack of law enforcement.

Market Access: Ukraine encourages foreign trade and investment. Foreigners have the right to purchase businesses and property, to repatriate revenue and profits, and to receive compensation in the event property were to be nationalized by a future government.

Customs and Duties: Imported goods entering Ukraine often must be "cleared" by a number of state bodies, some of which do not operate 24 hours a day, causing extended delays. Burdensome customs clearance procedures are a disincentive to investment in Ukraine.

Commercial law: The Ukraine has two codes covering commercial transactions which often directly contradict each other: (1) the Civil Code is generally market-oriented and modern; and (2) the Commercial Code, which is often contrary to market economy principles. In addition, both codes have gaps in regulation. The existence of these two codes creates uncertainty in planning and structuring transactions. Problems arising from these two codes also surface in the resolution of disputes, as the courts are unable to resolve the conflicting provisions, or are not able to fill in the gaps in regulation that arise from missing provisions in both codes. Another issue causing confusion is the fact that other commercial laws have not been harmonized with these codes.

Transparency of Regulatory System: Complex and vague laws and regulations, poor corporate governance, and weak enforcement by the courts has discouraged broad foreign direct investment in Ukraine.

Intellectual Property Rights (IPR): The government of Ukraine has substantially improved its enforcement of IPR in recent years, in part to meet its WTO accession requirements as well as to fulfill expectations as it negotiates a free trade agreement with the European Union. However, internet piracy is a growing problem and many Ukraine-based websites offering pirated material for download do so with the full knowledge of their Internet Service Providers (ISPs). Industry groups estimate that out of the roughly 400 ISPs in Ukraine, 150-160 of them support websites offering pirated material.

Microsoft has complained that Local Area Networks (LAN), some of which cover entire Ukrainian cities, allow for widespread software piracy. On-line mail order sites also distribute pirated material.

Trademarked and copyrighted goods must be registered for a fee in the Customs Service's rights holder database in order to be guaranteed protection. However, counterfeit goods, including products that contain protected trademarks, remain readily available in Ukraine.

Civil IPR lawsuits remain rare because of a general lack of confidence in Ukraine's legal system, and because there are few judges properly trained in IPR law.

Conversion and Transfer Policies: The 1996 Law "On Foreign Investment" guarantees the "unhindered transfer" of profits, revenues, and other proceeds in foreign currency after taxes and other mandatory payments. Foreign exchange is readily available at market-determined rates. However, repatriation of hard currency of over $50,000 (per transaction) must be approved by the National Bank of Ukraine, which charges a fee to review the transaction.

Economic Freedom: Ukraine’s economic freedom score is 46.4, making its economy the 162nd freest in the 2010 Index. Its score is 2.4 points lower than last year, reflecting reduced scores in six of the 10 economic freedoms. Ukraine is ranked 43rd out of 43 countries in the Europe region, and its overall score is lower than the world average.

Corruption: Corruption is another issue that has discouraged foreign direct investment in Ukraine. There is a high tolerance for corrupt practices throughout Ukrainian society and the country's progress towards efficient standards of opposing corruption at federal and regional levels has been slow. Both petty and grand scale corruption thrive in Ukraine, and have a sustained impact on companies, state decision-making and the daily lives of citizens. Further information on corruption in the Ukraine.

Political Violence: Ukraine is largely free of significant civil unrest. Occasionally, mass demonstrations occur in larger cities, usually sponsored by individual political organizations.

There also have been increasing incidents of racially motivated violence. Groups of "skinheads" and neo-Nazis target people of Asian, African, or other non-European descent, as well as religious minorities.

For more detailed information on Ukraine’s business climate, visit the 2010 Investment Climate Statement – Ukraine, of the U.S. Department of State.

Business Protocol in the Ukraine

Although direct communication is valued in the Ukraine, there is also an emphasis placed on delivering information in a sensitive manner. Once a relationship has developed, people will then feel more comfortable speaking frankly. In general, Ukrainian businesspeople are less formal than in many other countries.

Sources for further information on doing business in Ukraine

American-Ukrainian Chamber of Commerce and Industry

Embassy of the United States, Kyiv, Ukraine

Legal Aspects of Doing Business in Ukraine 2010, Gide Loyrette Nouel International Law Firm

Ukraine Embassy, Washington, DC

Ukraine’s Business Culture, TryUkraine

Ukrainian American Chamber of Commerce

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This information is provided by ABC-Amega Inc. Providing international receivable management and debt collection services for exporters to more than 200 countries including Ukraine. For further information, contact info@abc-amega.com.

This report represents a compilation of information from a wide variety of reputable sources.

Comparative Economic Indicators: CIA World Factbook

Risk Assessment information: Provided with permission by Coface Country Rating.

Exchange Rates: OANDA.com The Currency Site.