Investor considerations
- Ukraine's population is 46.8 million people.
- The annualised growth rate from 2000 to 2006 exceeded 7% (including 7.1% in 2006).
- Growth for 2007 is expected to be greater than 5%.
- Hints for business visitors
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Content
1.1 Introduction
Ukraine is located in the heart of Eastern Europe and occupies a land area of 603,700 sq km, which makes it the second largest country in Europe after Russia. It neighbours Poland, Slovakia, Hungary, Moldova and Romania to the west, Russia to the east, Belarus to the north and the Black Sea to the south.
Ukraine proclaimed independence on 24 August 1991, following the dissolution of the Soviet Union. On 1 December 1991, 90.3% of those who voted approved a referendum formalizing independence from the Soviet Union. The Union formally ceased to exist on 25 December 1991, at which time Ukraine's independence was recognized officially by the international community.
1.2 Government structure
The Head of State is the President. He is elected by popular vote for a five-year term. The current President is Viktor Yushchenko, who was sworn in on 23 January 2005.
Legislative power is exercised by a single-chamber Parliament, the Verkhovna Rada, which comprises 450 deputies and is elected every four years. The last parliamentary elections were held in March 2006 when, for the first time, all of the members were elected by party-list proportional representation.
The highest Executive body is the Cabinet of Ministers. It is headed by the Prime Minister (currently Viktor Yanukovych).The Cabinet of Ministers is nominated by the parliamentary majority and approved by the President.
As Ukraine is transitioning from a presidential into a parliamentary republic, the "balance of powers" between the President, Parliament and the Cabinet of Ministers may be changing.
Administratively, Ukraine is comprised of 24 regions and the Autonomous Republic of Crimea. The cities of Kyiv and Sevastopol also have a special legal status.
1.3 Legal system
Ukraine is a civil law country.
The Constitution, adopted in June 1996, sets out the structure of the national government, as well as its powers and functions. The powers of government are divided into three branches - legislative, executive and judicial.
Laws adopted by Parliament are forwarded to the President for signature. If the President signs the law, or fails to act within a 15-day period, the law is considered officially promulgated. The President has the right to veto legislation within the 15-day period, but such a veto can be overcome by Parliament with a two-third majority.
The Constitutional Court of Ukraine is the sole organ of constitutional jurisdiction of Ukraine. The 18 justices are appointed for a one-time, nine-year term. The President, Parliament, and a Congress of Ukrainian judges each appoint six justices. The justices select the Chief Justice from among themselves.
The court system in Ukraine has three branches:
- The commercial court system consists of local commercial courts (one in each region, plus Kyiv and Sevastopol), appeal courts, and the Supreme Commercial Court. The commercial courts generally resolve disputes between legal entities.
- The district court system decides civil disputes and criminal cases, including cases filed by individuals that are not private entrepreneurs. The structure consists of local district courts, regional appellate courts and the Supreme Court of Ukraine.
- Disputes involving state authorities will ultimately be dealt with through the Administrative court system. The Code of Administrative Procedure was adopted in 2005 to regulate court procedures in such disputes. However, the system is still being developed. In the meantime, disputes involving state authorities are generally decided in the commercial court or in a district court system, depending on whether the plaintiff is a legal entity or an individual.
The Supreme Court of Ukraine is the highest court, and has the power to review decisions of all three branches of the court system.
As an alternative to litigation, Ukraine allows for third party arbitration. Ukrainian law also allows foreign companies to include provisions in their contracts, including those with Ukrainian entities, that allow for arbitration by international arbitration institutions.
1.4 People
Population
Ukraine's population in July 2006 was estimated at 46.8 million people, which is 3.5% lower than the population in the last census in 2001. Five cities have a population close to or exceeding one million people, including Kyiv with 2.7 million people.
Ukraine follows the principle that a person may be a citizen of only one country. It is estimated that Ukrainian nationals make up 78% of the population, while Russian nationals account for 17%. More than two-thirds of the population live in urban areas. Females constitute 54% of the population.
Religion
A majority in the population are members of one of the branches of the Orthodox Church. National holidays are celebrated on Orthodox Christmas (January 7), Easter and Holy Trinity Day (see Appendix A for a list of holidays for 2007). Around 8% of the population are Roman Catholic, while 4% are Muslim, concentrated mainly in the Autonomous Republic of Crimea.
Language
The official language is Ukrainian, although a majority of the population is bilingual, speaking both Ukrainian and Russian fluently. English is also used in business, although not extensively. Many government websites have an English version.
Living standards
Per capita income has been rising, but average wages remain comparatively low. For 2006, the average monthly salary for employees in Ukraine was UAH 1,041 (USD 206). Averages salaries in Kyiv were more than 40% higher than any other region in the country.
Despite these statistics, Ukraine has developed an affluent middle class. Minimum rents in Kyiv exceed USD 300 per month and Ukraine has one of the fastest-growing passenger car markets in Europe (with more than 300,000 units sold in 2006). Restaurant prices in Kyiv are approaching, if not exceeding, those of major European cities.
Ukraine has a sizeable unofficial (hidden) economy. The Ministry of Economy in 2006 estimated the size to be at least 29% of GDP while other commentators suggest that the true level is significantly higher.
Unemployment
The official unemployment rate at 2006 year end was 2.7%, but this may not reflect the situation throughout the country. Estimates range between 7% and 9%.
1.5 Economy
Following eight years of declining GDP, the Ukrainian economy grew at an annualised rate exceeding 7% from 2000 to 2006. Some momentum has been lost, however, as needed economic reforms have not fully progressed. Growth for 2006 was 7.1%, while 2007 growth is expected to be greater than 5%.
A summary of key economic indicators for Ukraine is provided in following table
 | 2003 | 2004 | 2005 | 2006 |
| GDP (USD billion) | 50,1 | 64,9 | 84,1 | 106,1 |
| GDP growth, % | 9,6 | 12,1 | 2,6 | 7,1 |
| GDP per capita (USD) | 1,049 | 1,367 | 1,759 | 2,206 |
| Inflation (year-end), % | 8,2 | 12,3 | 10,3 | 11,6 |
| Budget balance (% of GDP) | -0,2 | -3,2 | -1,8 | -2,1 |
| Officially registered unemployment (year-end), % | 3,5 | 3,5 | 3,1 | 2,7 |
| ILO unemployment (year-end), % | 9,1 | 8,6 | 7,2 | 6,8 |
| USD/UAH exchange rate (average) | 5,33 | 5,32 | 5,13 | 5,05 |
| New foreign direct investment (USD billion) | 1,4 | 1,7 | 7,5 | 6,3 |
| External debt (USD billion) | 10,7 | 12,1 | 11,7 | 10,3 |
| Exports FOB (USD billion) | 23,7 | 33,4 | 35,0 | 45,9 |
| Imports CIF (USD billion) | 23,2 | 29,7 | 36,2 | 48,9 |
| Credit Rating | | | | |
| - Standard & Poors | B | B+ | BB- | BB- |
| - Moody's | B1 | B1 | B1 | Ba3 |
| - Fitch | B+ | B+ | BB- | BB- |
| Foreign Exchange Reserves (USD billion) | 6,9 | 9,5 | 19,4 | 21,2 |
Transport
Ukraine has a well-developed transport infrastructure, and is readily accessible by land or air. Ukraine has a railway network of 22,000 kilometres, and 169,400 kilometres of highways. Ukraine has 16 airports open to commercial air traffic. Most international flights go to Boryspil International Airport, about 40km southeast of Kyiv, although limited international airports also operate in Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Kharkiv, Lviv (Sknilow airport), Odesa and Simferopol.
Communications
The mobile cellular telephone system has been expanding in recent years at a rapid rate. The three main mobile operators report that they have more than 50 million subscribers between them. There are estimated to be more than seven million internet users in Ukraine, and more than 90,000 internet hosts.
1.6 Foreign trade
Russia and the European Union account for more than half of Ukraine's trade. By contrast, although the national currency is effectively pegged to the US dollar, the US is a relatively small trade partner, accounting for only 3.2% of exports and 2.0% of imports for 2006. Steel accounts for more than 40% of Ukraine's exports.
Ukraine imports 90% of its oil and most of its natural gas. The country is heavily dependent on Russia for the supply of natural gas, and this has a significant impact on Ukraine's economics and foreign policy.
