Economy of Ukraine

Economy of Ukraine
Dnipropetrovsk, Ukraine
Rank	37th
Currency	1 Hryvnia (UAH) = 100 kopiykas
Fiscal year	Calendar year
Trade organizations	CIS, GUAM, and WTO
Statistics
GDP	$335.4 billion (PPP, 2013)[1] $175.5 billion (nominal)
GDP growth	0.36% (2013)
GDP per capita	$7,422 (PPP, 2013) $3,861 (nominal)
GDP by sector	agriculture 10.4%, industry 32.8%, services 56.8% (2012 est.)
Inflation (CPI)	0.6% (CPI, 2012 est.)
Population below poverty line	24.1% (2010, CIA) [2]
Labor force	22.06 million (2009 est.)
Labor force by occupation	agriculture 5.6%, industry 26.0%, services 68.4% (2012)
Unemployment	7.4% (2012 est.)
Average gross salary	306 € / 405 $, monthly (August 2013)[3]
Main industries	coal, electric power, ferrous and nonferrous metals, machinery and transport equipment, chemicals, food processing
Ease of doing business rank	137th[4]
External
Exports	$69.8 billion (2012 est.)
Export goods	ferrous metals and nonferrous metals, fuel and petroleum products, chemicals, machinery and transport equipment, food products
Main export partners	EU 26.6%[5]  Russia 23.7%  Turkey 6.0%  China 4.1% (2012 est.)[6]
Imports	$90.2 billion (2012 est.)
Import goods	energy (mainly natural gas[7]), machinery and equipment, chemicals
Main import partners	EU 31.2%[5]  Russia 19.4%  China 10.2%  Germany 9.6%  Belarus 7.8%  Poland 7.1% (2012 est.)[8]
Gross external debt	$132.4 billion (31 December 2012 est.)
Public finances
Public debt	38.8% of GDP (2012 est.)
Revenues	$53.07 billion (2012 est.)
Expenses	$59.58 billion; note - this is the consolidated budget (2012 est.)
Economic aid	recipient: $409.6 million (2006); International Monetary Fund Extended Funds Facility $2.2 billion (1998)
Credit rating	Standard & Poor's:[9] BB- (Domestic) B+ (Foreign) B+ (T&C Assessment) Outlook: Stable[10] Moody's:[10] B2 Outlook: Stable Fitch:[10] B Outlook: Stable
Foreign reserves	US$24.5 billion (31 December 2012 est.)
Main data source: CIA World Fact Book All values, unless otherwise stated, are in US dollars

The economy of Ukraine is an emerging free market, with a gross domestic product that fell sharply for the first 10 years of its independence from the Soviet Union, then experienced rapid growth from 2000 until 2008. Formerly a major component of the economy of the Soviet Union, the country's economy experienced a deep recession during the 1990s, including hyperinflation and a drastic fall in economic output. In 1999, at the lowest point of the economic crisis, Ukraine's per capita GDP was about half of the per capita GDP it achieved before independence. GDP growth was first registered in 2000, and continued for eight years. In 2007 the economy continued to grow and posted real GDP growth of 7%.^[11] In 2008, Ukraine's economy was ranked 45th in the world according to 2008 GDP (nominal) with the total nominal GDP of 188 billion USD, and nominal per capita GDP of 3,900 USD.

However Ukraine was greatly affected by the economic crisis of 2008 and as a result a 15.1% decrease in Ukraine's GDP took place over 2008 and 2009.^[12] Inflation slowed in July 2009 and stayed at about 8% in 2011.^[13] Deflation was just avoided in 2012.^[14] 0.5% inflation is expected for 2013.^[14] The Ukrainian currency, which had been pegged at a rate of 5:1 to the U.S. dollar, was devalued to 8:1, and was stabilized at that ratio.

There was 3% unemployment at the end of 2008; over the first 9 months of 2009, unemployment averaged 9.4%.^[15] The final official unemployment rates over 2009 and 2010 where 8.8% and 8,4%.^[12] Although according to the CIA World Factbook in Ukraine there are "large number of unregistered or underemployed workers".^[12]

The Ukrainian economy recovered in the first quarter of 2010.^[16] Ukraine's real GDP growth in 2010 was 4.3%, leading to per capita PPP GDP of 6,700 USD.^[12] The resumed growth has been helped by growth in neighbouring Russia and to a lesser extent Turkey.

More than 60% of Ukraine's exports go to other post-Soviet states, with Russia, Belarus and Kazakhstan the most important.^[17]

Natural gas is Ukraine’s biggest import at present and is the main cause of the country’s structural trade deficit.^[7]

Ukrainian politicians have estimated that 40% of its economy is in fact shadow economy.^[18][19] Due to the double nature of the Ukraine economics, official data GDP and average salary have some significant errors and cannot be applied directly in order to truly understand the economic situation in Ukraine.

Overview

List of major companies, not considering banks and insurance companies

Rank	Company Name	Location	Revenue (Mln.  UAH)	Profit (Mln.  UAH)	Employees
1.	Naftogaz Ukrainy	Kiev	61,968.5	11,670.3	682
2.	EnergoRynok	Kiev	40,527.2	183.4	26
3.	Gaz of Ukraine (subsidiary of Naftogaz Ukrainy)	Kiev	31,179.0	128.3	171,500
4.	Metinvest(subsidiary of SCM Holdings)	Donetsk	30,185.2	1,410.6	408
5.	Kryvorizhstal(AcelorMittal)	Kryvyi Rih	22,102.9	4,676.5	42,094
6.	Ilyich Steel & Iron Works(Metinvest)	Mariupol	21,727.1	1,362.1	54,945
7.	Azovstal Steel Works(Metinvest)	Mariupol	21,235.3	1,959.1	20,518
8.	Alchevsk Steel & Iron Works	Alchevsk	15,322.1	−350.4	17,900
9.	TNK-BP Kommers	Kiev	14,816.9	−484.0	427
10.	Lysychansk Petroleum Investment	Lysychansk	14,485.7	−794.1	3,743
11.	Vostokenergo(DTEK)	Kiev	12,968.7	1,985.0	290
12.	Donetskstal Metallurgy	Donetsk	12,911.5	−360.1	10,966
13.	Kyivstar	Kiev	12,799.3	5,559.2	4,905
14.	ZAZ Automobile	Zaporizhia	12,753.5	−390.6	14,943
15.	Industrial Union of Donbas	Donetsk	12,583.5	511.9	519

Ukraine is subdivided into nine economic regions: Carpathian, Northwestern, Podillya, Capital, Central-Ukrainian, Northeastern, Black-Sea-Coastal, Trans-Dnieper, and Donetsk. Those regions were redrawn from the three Soviet economic regions of the Ukrainian SSR: Donetsk-TransDnieper, Southwestern, and Southern.

In 1910, Ukraine's GDP was estimated at 7 per cent of USA^{[citation needed]} (about the same size as the Netherlands). By 2010, Ukraine's GDP had shrunk to 1 per cent of USA. The nation has many of the components of a major European economy - rich farmlands, a well-developed industrial base, highly trained labour, and a good education system. At present, however, the economy remains in poor condition.

Deep recession during the 1990s led to a relatively high poverty rate, but beginning in 2001, as a result seven of straight years of economic growth, the standard of living for most citizens has increased. World Bank report, 2007 notes: "Ukraine recorded one of the sharpest declines in poverty of any transition economy in recent years. The poverty rate, measured against an absolute poverty line, fell from a high of 32% in 2001 to 8% in 2005.^[20] UN notes that absolute poverty in Ukraine already was overcome, there is only relative poverty today.^[21] The macroeconomy is stable, and the hyperinflation of the 1990s has subsided.^{[citation needed]} Ukraine's currency, the hryvnia, was introduced in September 1996.^[22] The economy has continued to grow thanks to exports since 2000, although at uneven speed and being highly affected (circa -15% GDP growth) by the late-2000s recession and the 2008–2009 Ukrainian financial crisis.

As of October 2013 the Ukrainian economy is stuck in recession.^[23] Moody's put Ukraine's credit rating to Caa1 (poor quality and very high credit risk) in September 2013.^[23][24][25] At the time swap markets rated Ukraine's default probability over the next five years at 50 percent.^[23]

Economic growth by years

Natural resources

Ukraine is relatively rich in natural resources, particularly in mineral deposits. Although oil and natural gas reserves in the country are largely exhausted,^[7] it has other important energy sources, such as coal, hydroelectricity and nuclear fuel raw materials.^{[citation needed]}

Industries

In Ukraine covering about 20 major industries, namely power generating, fuel, ferrous and non-ferrous metallurgy, chemical and petrochemical and gas, machine-building and metal-working, forest, wood-working and wood pulp and paper, construction materials, light, food and others.^[27] Industry accounted for 26% of GDP in 2012. The country possesses a massive high-tech industrial base, including electronics, arms industry and space program.

Metal mining and production

Iron mining

Ukraine is rich in mineral deposits, including iron ore (of which it once produced 50 percent of the entire Soviet output), manganese ore (of which it produced 40 percent of world output during the Soviet era), mercury, titanium, and nickel.

Ukraine is one of the world's most important mineral producing countries, in terms of both the range and size of its reserves. There are nearly 8,000 separate deposits, harboring some 90 different minerals, of which about 20 are economically significant. About half of all the known deposits are under exploitation. Coal reserves in Ukraine amount to 47.1 billion tons. The annual domestic demand for coal as fuel is about 100 million tons, of which 85 percent can be satisfied by domestic production. Ukraine has oil and gas fields that meet 10 percent of her oil and 20 percent of her gas consumption, respectively. Ukraine contains natural gas reserves of 39.6 trillion cubic feet, but only about 20 percent of the country's demand is met by domestic production. Deposits of iron ore (estimated at 28 billion tons), manganese ore (3 billion tons), chalk and limestone (1.5 billion tons) are also large in Ukraine. The domestic industrial sector suffers from constant energy shortages and energy supply payment debts totaling about $792 million at the end of 1995.

Steel production

Ukraine has a major ferrous metal industry, producing cast iron, steel and pipes. Among its economy leading companies in that field are Metinvest, Kryvorizhstal, AzovStal, Ilyich Steel & Iron Works, and others. As of 2012, Ukraine is the world's tenth largest steel producer (according to World Steel Association).

Chemical industry

Another important branch is the country's chemical industry which includes the production of coke, mineral fertilizers and sulfuric acid.

Strategic and defense complex

Ukraine is also among the top 10 arms exporters in the world. The signing of recent large contracts may put Ukraine into 6th place among biggest arms traders, after the United States, Russian Federation, France, Germany and Israel.^[28] The output of Ukrainian defense plants grew 58% in 2009, with largest growth reported by aircraft builders (77%) and ship builders (71%).^[28]

Fuel and energy complex

Fuel industry

Ukraine imports 90% of its oil and most of its natural gas. Russia ranks as Ukraine's principal supplier of oil, and Russian firms now own and/or operate the majority of Ukraine's refining capacity. Natural gas imports come from Russia - which delivers its own gas, as well as the gas from Turkmenistan. Instead, Ukraine is transporting Russian gas to the EU through its well-developed gas pipelines system, being Europe's vitally important connection. The country's dependence on Russian gas supplies dramatically affects its economics and foreign policy, especially after the recent major gas dispute.

However, Ukraine is independent in its electricity supply, moreover, exporting it to Russia and other countries of Eastern Europe. This is achieved through a wide use of nuclear power and hydroelectricity. The recent energy strategy intends gradual decreasing of gas- and oil-based generation in favor of nuclear power, as well as energy saving measures, shortening of industrial gas consumption. Reform of the still inefficient and opaque energy sector is a major objective of the International Monetary Fund (IMF) and World Bank programs with Ukraine.

Ukraine is a partner country of the EU INOGATE energy programme, which has four key topics: enhancing energy security, convergence of member state energy markets on the basis of EU internal energy market principles, supporting sustainable energy development, and attracting investment for energy projects of common and regional interest.^[29]

Automotive industry

Ukraine automobile manufacturers produces diesel locomotives, tractors, trucks, buses, trolleybuses, own-designed cars and trams. There are 12 automobile manufacturers in Ukraine includes ZAZ, LuAZ, Bogdan, KrAZ, Eurocar, LAZ.

ZAZ (Zaporizhia Automobile Building Plant) is the main automobile-manufacturer of Ukraine, based in the south-eastern city of Zaporizhia. Beginning of passenger cars manufacturing in Ukraine started in 1959. Totally (from 1960 to 1994) there were 3,422,444 Zaporozhets vehicles manufactured in Zaporizhia and engines with air-cooling in Melitopol. In 2011-2012 Zaporizhia Automobile Building Plant started serial full-scale production of new cars - ZAZ Forza and ZAZ Vida. Bogdan Corporation is a leading Ukrainian automobile-manufacturing group, including several car- and bus-makers of the country. A bus "Bogdan" is the most widespread used small bus for city transportation in most Ukrainian cities. Lviv Bus Factory is one of the major bus manufacturers in Ukraine. It manufactures city buses, coach buses, trolley buses, and special purpose buses.

Aircraft and airspace industry

Ukraine is in the top nine elite countries of the world to possess a full cycle of aerospace hardware engineering and production. Besides to design and production of passenger and transportation aircraft, Ukraine also boasts a network of aircraft repair enterprises, including companies involved in recovery of military planes and helicopters. In March 2007, the Cabinet of Ministers of Ukraine created State aircraft building concern «Aviation of Ukraine» (SACAU), which is governed by the Ministry of industrial policy. Production of An-148 aircraft is now one of the most prospective projects for Ukrainian plane manufacturing industry. The aircraft were engineered by Antonov Scientific and Production Complex Design Office (Antonov ANTK). The largest airplane in the world Antonov An-225 Mriya also designed by Antonov ANTK. It is the biggest heavier-than-air aircraft in terms of length and wingspan in operational service. Gross production of light and ultra light planes in Ukraine does not exceed 200 units per annum. Production of hang-gliders and paragliders of all designs makes nearly 1,000 units each year. Most of produced devices are exported (the buyers of Ukrainian-made ultra light aircraft are the USA, Australia, New Zealand, the United Kingdom, France, etc.).

The entire space rocket industry in Ukraine has been managed by the National Space Agency of Ukraine since 1992. The agency includes 30 enterprises, scientific research institutes, and design offices. Yuzhnoye Design Bureau is in general responsible for creating «Zenit-3SL» carrier rocket. Zenit, as an environmentally safe rocket system, became a world-renown accomplishment of Yuzhnoye Design Office. The system is one of the world best carriers with fully automated processes for take-off and super precise space injection. The National Space Agency of Ukraine, besides to Sea Launch project, is involved in cooperation with American Rockwell Int. Company in search of potential customers for launches of Cyclon carrier rockets produced by YuzhMash Production Union.^[30]

Shipbuilding

The USSR’s collapse put Ukraine’s shipbuilding into a long-term decline. It lasted until 1999 and was mostly due to a minimum volume of state shipbuilding orders. In general, between 1992 till 2003, the 11 shipyards of the country produced 237 navigation units for a total value of USD 1.5 billion. Production facilities are not working near full capacity, and customers are not always timely in paying for services. Growth of production volumes was witnessed at the enterprises of shipbuilding industry over 2000-2006. State support and the opening of free economic zones, foremost at enterprises based in Mykolaiv were of crucial recent developments in Ukraine's shipbuilding industry. Within the Mykolaiv Special Economic Zone, enterprises like Damen Shipyards Okean, Chernomorskiy (Black Sea) Shipbuilding Plant, 61 Communards Shipbuilding Plant, as well as the Raduga (Rainbow) paint and insulation enterprise are implementing investment projects targeted to raise efficiency and quality in primarily export-oriented vessel building through production upgrades. The new engineering developments and high potential of Ukrainian designers give ability to build high quality vessels with competitive prices. There are 49 shipbuilding companies registered in Ukraine. They are able to build a wide range of vessel types: powerboats, barges, bulk carriers (dry cargo ship), tankers, liquefied gas carriers, etc. Ukraine is one of the 10 largest shipbuilding countries in Europe.^[31][32]

Agriculture

Ukraine is the world's largest producer of sunflower oil,^[33] a major global producer of grain and sugar, and future global player on meat and dairy markets. It is also one of the largest producers of nuts. Ukraine also produces more natural honey than any other European country. Because Ukraine possesses 30% of the world's richest black soil, its agricultural industry has a huge potential. However, farmland remains the only major asset in Ukraine that is not privatized.^[34] The agricultural industry in Ukraine is already highly profitable, with 40-60% profits,^[34] but according to analysts its outputs could still rise up to fourfold.^[35]

Forestry, fishing and others

Information technology

Ukraine has a long standing reputation as a major technology region, with a well-developed scientific and educational base. In March 2013 Ukraine ranks fourth in the world in number of certified IT professionals after the United States, India and Russia.^[36] On top of that, the experts recognize both quantitative and qualitative potential of the Ukrainian specialists. In 2011 the number of IT specialists working in the industry reached 25,000 people with 20% growth.^[37] The volume of the Ukrainian IT market in 2013 was estimated to be up to 3.6 billion US dollars.^[36][38]

Infrastructure

Transportation

About 100,000 Ukrainians regularly sail across the world on foreign ships, one of the largest group of Ukrainian labor migrants and the sixth largest number of sailors from any country.^[39] They are attracted by the relatively high salaries of more than $1,000 per month.^[39]

Every major Ukrainian coastal city has a maritime university.^[39]

Communications

Ukraine ranks eighth among the world’s nations in terms of the Internet speed with the average download speed of 1,190 kbit/s.^[40] Five national providers of fixed (DSL, ADSL, XDSL) internet access — Ukrtelecom, Vega Telecom, Datagroup, Ukrnet, Volia, and 5 national operators of mobile internet — MTS, Kyivstar, PEOPLEnet, Utel, and Intertelecom are currently operating in Ukraine. Every regional center and large district center has a number of local providers and home networks.

2011 revenues from Internet service providing in Ukraine reached UAH 4.75 bn^[41]

Almost 20 million Ukrainians had Internet access in December 2012.^[42] In Kyiv 90% of population had internet. The number of Internet users in Ukraine was expected to nearly double by 2015.

The mobile-cellular telephone system's expansion has slowed, largely due to saturation of the market which has reached 125 mobile phones per 100 people.

Trade

The Russian Federation is Ukraine's largest trading partner, with 25.7% of exports and 32.4% of imports in 2012.^[43] The EU is Ukraine's second largest trading partner, with 24.9% of exports and 30.9% of imports in 2012.^[43] An overcrowded world steel market^{[citation needed]} threatens prospects for Ukraine's principal exports of non-agricultural goods such as ferrous metals and other steel products. Although exports of machinery and machine tools are on the rise, it is not clear if the rate of increase is large enough to make up for probable declines in steel exports, which today account for 46% of the country's overall exports.^{[citation needed]}

Ukraine's "business climate" has a very negative reputation.^[44]

Tourism

Ukraine is the 8th most popular tourism destination in Europe with 23 million visitors in 2012.^[45] The country's tourism industry is generally considered to be underdeveloped, but it does provide crucial support for Ukraine's economy. In 2012, the contribution of tourism to the GDP amounted to 28.8 billion UAH, or 2.2% of GDP and directly supported 351,500 jobs (1.7% of total employment).^[46][47]

Shopping tourism

Ukraine's western neighbours (Poles, Slovaks, Hungarians and even Belarusians) are known to come to Ukraine to purchase products and presents, such as food or gasoline, that are cheaper in Ukraine than in their home countries.^[48]

Dental tourism

In the past 20 years many modern dental clinics with high quality dentistry equipment, high quality materials and effective anesthetics were established in Ukraine. They provide patients with high quality dentistry services. But for all that, prices in Ukraine are much cheaper in comparison with Western and Russian clinics. A lot of tourists from USA, European Union and Russia provide a sort of dental tourism.^{[citation needed]}

Recreational tourism and sightseeing

Ukraine has impressive landscapes, ruins of ancient castles, historical parks, vineyards where they produce native wines, unique structures such as Saint Sophia Cathedral or Chersonesos. Officially, there are seven World Heritage Sites in Ukraine. The Carpathian Mountains suitable for skiing, hiking, fishing and hunting. Bukovel — is the largest ski resort in Ukraine situated in the Ivano-Frankivsk Oblast (province) of western Ukraine. The 2010-2011 winter season recorded 1,200,000 day visits with foreigners amounting to 8-10% of all visitors. In 2012 the Bukovel was named the fastest growing ski resort worldwide. The coastline on the Black Sea is a popular summer destination for vacationers, especially Crimea and Odessa. The southern Crimean coast is studded with beach and sun resorts such as Alupka, Yalta, Gurzuf, Alushta, Sudak, and Feodosiya.

Financing, banking, investments

Investments

A political crisis in the middle of 2006 was feared as a threat to economic and investment stability, however, despite the forecasts, the political situation has not scared investors. The GDP showed a good growth rate of 7% in 2007, compared to the previous year. Industrial output has increased. Car sales soared, while the banking sector has expanded, thanks to the arrival of European banks.

International financial institutions

In 1992, Ukraine became a member of the IMF and the World Bank. It is a member of the European Bank for Reconstruction and Development.

In 2008 the country joined World Trade Organization. Ukraine applied for WTO membership in 1993, but its accession process was stalled for 15 years.

IMF

The IMF approved a $2.2 billion Extended Fund Facility (EFF) with Ukraine in September 1998. In July 1999, the 3-year program was increased to $2.6 billion. Ukraine's failure to meet monetary targets and/or structural reform commitments caused the EFF to either be suspended or disbursements delayed on several occasions. The last EFF disbursement was made in September 2001. Ukraine met most monetary targets for the EFF disbursement due in early 2002; however, the tranche was not disbursed due to the accumulation of a large amount of VAT refund arrears to Ukrainian exporters which amounted to a hidden budget deficit. The EFF expired in September 2002, and the Ukrainian Government and IMF began discussions in October 2002 on the possibility and form of future programs.

The IMF granted Ukraine a $16.4 billion loan in October 2008,^[49] of which the government had far received $10.6 billion in May 2010.^[50][51] Further payments were frozen late 2009 after Ukraine raised minimum wages and pensions contrary to IMF recommendations.^[52]

In May 2010 Ukraine was the third largest borrower of the IMF, following Hungary ($11.6 billion) and Romania ($12.5 billion).^[50]

On July 28, 2010 the IMF approved a 29-month $15.15 billion loan to Ukraine.^[53] Among others this led to a 50 percent increase on household natural gas utility prices in July 2010 for Ukrainian consumers (a key demand of the IMF in exchange of the loan).^[54][55] On 20 December 2013 the IMF stated that the Ukrainian government had only partially implemented the agreements reached in 2010 with the fund "and in this connection the program had not been implemented".^[56]

According to Ukrainian Prime Minister Mykola Azarov "the extremely harsh conditions" of a renewed IMF loan (presented by the IMF on 20 November 2013), which included big budget cuts and a 40% increase in natural gas bills, had been the last argument in favor of the Ukrainian government's decision to suspend preparations for signing the Association Agreement between Ukraine and the European Union (EU) of 21 November 2013.^[57][58][59] The decision to put off signing this EU-Ukraine Association Agreement lead to massive, ongoing protests in Ukraine.^[60] On 7 December 2013 the IMF clarified that it was not insisting on a single-stage increase in natural gas tariffs in Ukraine by 40%, but recommended that they be gradually raised to an economically justified level while compensating the poorest segments of the population for the losses from such an increase by strengthening targeted social assistance.^[61] On 10 December President Yanukovych stated "We will certainly resume the IMF negotiations. If there are conditions that suit us, we will take that path".^[62] However, Yanukovych also (once again) stated that the conditions put forward by the IMF were unacceptable "I had a conversation with U.S. Vice President Joseph Biden, who told me that the issue of the IMF loan has almost been solved, but I told him that if the conditions remained... we did not need such loans".^[62]

In December Ukraine again applied to IMF asking for providing money, approximately 20 billion dollars, in order to meet the costs incurred due to signature of Association with European Union.^[63]

Foreign direct investment

Ukraine encourages foreign trade and investment. The Parliament of Ukraine has approved^{[citation needed]} a foreign investment law allowing Westerners to purchase businesses and property, to repatriate revenue and profits, and to receive compensation if the property is nationalized by a future government. However, complex laws and regulations, poor corporate governance, weak enforcement of contract law by courts, and corruption all continue to stymie direct large-scale foreign investment in Ukraine. While there is a functioning stock market, the lack of protection of shareholders' rights severely restricts portfolio investment activities.

As of April 2011 total foreign direct investment stock in Ukraine stood at $44.7 billion.^[64] Statistics from FDi Magazine show Ukraine suffered a year on year decline in foreign direct investment between 2010 and 2013.^[65]

State enterprise InvestUkraine was created^[66] under the State Agency for Investment and National Projects (National Projects)^[67] to serve as a One Stop Shop for investors and to deliver investment consulting services.

Ukraine signed a shale gas exploitation deal with Royal Dutch Shell on 25 January 2013.^[68] The $10 billion deal was the largest foreign direct investment ever for Ukraine.^[68]

Many companies, owned by foreigners, have been successfully operating in Ukraine since its independence. These include companies in agriculture, such as Kyiv-Atlantic Group, founded in 1994 by David Sweere. He sold its business in Minnesota and invested in Ukraine, believing in its huge potential. The company has been operating at a profit since 2002. As a result, he became the fifth richest among the Westerners who made their fortune in Ukraine.^[69]

In December 2013, the government made an agreement with Russia to buy $15 billion of government bonds, and cut the price of natural gas, to support the Ukrainian economy. Prime Minister Mykola Azarov stated that Ukraine had needed external funding of up to $17 billion in 2014 to avoid defaulting on debts.^[70]

Monetary policy and banking

Stock exchange

Insurance business and companies

Legal environment

According to the Global Competitiveness Report 2012-2013 "the country’s most important challenge is the needed overhaul of its institutional framework, which cannot be relied on because it suffers from red tape, lack of transparency, and favoritism".^[71]

Since the late 1990s,^{[citation needed]} the government has pledged to reduce the number of government agencies, streamline the regulatory process, create a legal environment to encourage entrepreneurs, and enact a comprehensive tax overhaul. Outside institutions — particularly the International Monetary Fund^{[citation needed]} — have encouraged Ukraine to quicken the pace and scope of reforms and have threatened to withdraw financial support. But reforms in some politically sensitive areas of structural reform and land privatizations are still lagging.^{[citation needed]}

On June 24, 2010 Ukraine's Foreign Minister Kostyantyn Hryshchenko signed an agreement on free trade with the European Free Trade Association (EFTA).^[72]

According to specialists, a double taxation avoidance treaty with Cyprus (signed in 1982 by the Soviet Union) has cost Ukraine billions of US dollars of tax revenues.^[73][74]

Foreign workers

A number of foreign guest workers come to work in Ukraine, mainly in seasonal farm work and construction industry, especially from neighboring Moldova and Belarus.^[75] Meanwhile, large numbers of Ukrainian guest-workers work in EU countries. The Czech republic, partly due to similarities between the languages, hosts many Ukrainian guest-workers for jobs such as child-care and cleaning.

Environmental issues

Ukraine is interested in cooperating on regional environmental issues. Conservation of natural resources is a stated high priority, although implementation suffers from a lack of financial resources. Ukraine established its first nature preserve, Askania-Nova, in 1921 and has programs to breed endangered species.

The country has significant environmental problems, especially those resulting from the Chernobyl nuclear power plant disaster in 1986 and from industrial pollution. In accordance with its previously announced plans, Ukraine permanently closed the Chernobyl Atomic Energy Station in December 2000. In November 2001, Ukraine withdrew an application it had made to the EBRD for funding to complete two new reactor units to compensate for the energy once produced by Chernobyl. Ukrainian concern over reform conditions attached to the loan - particularly tariff increases needed to ensure loan repayment—led the Ukrainian government to withdraw the application on the day the EBRD Board was to have considered final approval. Work on the so-called "object shelter" to permanently entomb the reactor where the world's worst nuclear accident occurred has been slower than anticipated but continues. Design work as well as structural improvements to the "sarcophagus" erected by the Soviet Union are largely complete, and construction on the new shelter is scheduled to begin in 2004.

Ukraine also has established a Ministry of Environment and has introduced a pollution fee system that levies taxes on air and water emissions and solid waste disposal. The resulting revenues are channelled to environmental protection activities, but enforcement of this pollution fee system is lax.

Miscellaneous data

Household income or consumption by percentage share:

• lowest 10%: 3.4% (2006)^[76]
• highest 10%: 25.7% (2006)^[76]

Industrial production growth rate: 6% (2007 est.),^[76] 6.5 (2008)^[77][78]

Electricity:

• production: 192.1 billion kWh (2006)
• consumption: 181.9 billion kWh (2006)
• export: 10.07 billion kWh (2005)
• import: 20 billion kWh (2006)

Electricity - production by source:

• fossil fuel: 48.6%
• hydro: 7.9%
• nuclear: 43.5%
• other: 0% (2001)

Oil:

• production: 90,400 barrels per day (14,370 m³/d) (2006)
• consumption: 284,600 barrels per day (45,250 m³/d) (2006)
• exports: 214,600 barrels per day (34,120 m³/d) (2004)
• imports: 469,600 barrels per day (74,660 m³/d) (2004)
• proved reserves: 395,000,000 barrels (62,800,000 m³) (1 January 2006 est.)

Natural gas:

• production: 20.85 billion cubic m (2006 est.)
• consumption: 73.94 billion cubic m (2006 est.)
• exports: 4 billion cubic m (2006 est.)
• imports: 57.09 billion cubic m (2006 est.)
• proved reserves: 1.075 trillion cubic m (1 January 2006 est.)

Agriculture - products: grain, sugar beets, sunflower seeds, vegetables, beef, milk

Exchange rates: hryvnia per US$1 – 7.97 (2009), 5.05 (2007), 5.05 (2006), 5.13 (2005), 5.33 (May 2004), 5.30 (October 2002), 5.59 (February 2000), 5.3811 (January 2000), 4.1304 (1999), 2.4495 (1998), 1.8617 (1997), 1.8295 (1996), 1.4731 (1995)

Minimum wage: 1,147 hryvnia per month (as of January 1, 2013),^[79] 649 hryvnia/month (Sep. 2008), 669 hryvnia/month (Sep. 2009)^[77]

Average salary by region

See also

• Tourism in Ukraine
• List of Ukrainian administrative divisions by GRP per capita

Notes

References

External links

• Ministry of Economic Development and Trade website (en)
• State Agency for Investment and National Projects website (en)
• How to go broke owning monopolies by Kyiv Post (March 18, 2010)

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