[PPT] - Innovation and Opportunity Ukraine the Basics Country Capital PowerPoint Presentation

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Innovation and Opportunity

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Capital Kyiv Area 603,700 𝒍𝒏𝟑 Population 42 mln (3/2019) Government Unitary Parliamentary Presidential Currency Ukrainian hryvnia (UAH) Exchange rate USD/UAH 27.2 (2018) GDP (PPP) $369 billion (2017) Real GDP growth 3.3% (2018) Economy Major industries: energy, metallurgy, chemical industry, manufacturing, massive high- tech industrial base, world player in agriculture, fast developing IT sector Foreign relations 17 FTAs with 46 countries (EU, EFTA, Canada, Israel, etc.) Strategic goals: European and Euro-Atlantic Integration

Skilled human capital:

130,000

engineering graduates annually

Most cost efficient manufacturing platform in Europe

Ideal location:

Eurasian hub

for production, trade and human capital

Country transformation:

pro-Western government focused on improvement of business climate

Sources: State Statistics Service of Ukraine, National Bank of Ukraine, World Bank

Ukraine – the Basics

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Transformation Ukraine

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I. UKRAINE UNDERGOING

TRANSFORMATION

II. CRISIS

20% GDP 60% UAH 7% of territory occupied $15K on current a/c (!!) Gold reserves > 1 mo imports

IV. GROWTH AGENDA

Reforms effect: 2017= ↑2.5%, 2018= ↑3.3%

2014 2017

More reforms enacted in 5 years than in previous 23

Key 2017-2018 reforms adopted Judicial (including Law on Anti-Corruption Court) Health Education Pensions (IMF compliant) Privatization/SOE reform Energy Law on Currency Law on Concessions Law on Inland Waterways EU vector Visa-free regime with 90 countries (including Schengen zone) 40.6% share of exports to the EU in 2018

Strategy 2020

According to the World Bank since 2010 Ukraine has done more to improve its business climate than any post-communist country (CEE+CIS)

adopted underway

Transformation Ukraine

III. STABILIZATION &

TRANSFORMATION -

Institutions-building Macroeconomic stabilization w/IMF support ($3.9 bn approved for 2018-2019) Decentralization Banking sector reforms

> 90 out of 180 “pocket” banks closed

Anti-corruption court / Business Ombudsman De-regulation Transparency / Prozorro EU-UA Association Agreement – DCFTA The Canada-Ukraine Free Trade Agreement The Israel-Ukraine Free Trade Agreement

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Implemented In progress Implemented in other countries Slovak Rep. Slovak Rep. Poland Public procurement e-system Public sector Judicial reform Start of reforms +1 year +2 years +3 years +4 years +5 years Ukraine Poland Georgia Ukraine New police Colombia Singapore Georgia Poland Georgia Slovak Rep. Poland Colombia Anti-Corruption Ukraine Georgia Ukraine Colombia Singapore >5 years Georgia Ukraine Deregulation Economy Energy reform Energy Colombia Poland Ukraine Georgia Slovak Rep. Slovak Rep. Singapore

Ukraine Launched Many Structural Reforms Ahead of its Peers

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Gas market:

~$3.1B annually

Tax administration:

~$1B annually

Public procurement:

~$1.1B annually

Open data:

~$0.7B annually

Economic Effect of Anticorruption Measures

Sources: Ukraine’s Fight against Corruption: the Economic Front (Economic Assessment of Anticorruption Measures Implemented 2014-2018)

~$6B savings or ~6% of GDP annually

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As a Result, Economy is Growing for 13 Consecutive Quarters

*total exports includes exports of goods and services Source: State Statistics Service of Ukraine, Ministry of Economic Development and Trade

40% 34% 32% 32%

2015 2016 2017 9m 2018

Shadow Economy, %

(percentage of GDP)

9.80%

2.30% 2.50% 3.30% 2.20% 2015 2016 2017 2018 1Q2019

GDP Growth, %

(comparing to respective period in previous year)

13%

2.80% 0.40% 1.60%

0.90%

2015 2016 2017 2018 1Q2019

Industrial Production Growth, %

(comparing to respective period in previous year)

26.8%
3.9%

16.8% 10.2% 12.3% 2015 2016 2017 2018 1Q2019

Total Exports* Growth, %

(comparing to respective period in previous year)

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Our Progress is Confirmed by Rise in International Rankings

64 56 50 43

Global Innovation Index

(place)

2015 2016 2017 2018

96 81 80 76 71

Doing Business Index

(place)

2015 2016 2017 2018

31 26 24

Human Capital Index

(place)

2015 2016 2017 2019 Sources: World Bank, European Business Association, World Intellectual Property Organization, World Economic Forum

2.6 2.9 3 3.07 2015 2016 2017 2018

EBA Investment Attractiveness Index (index, as at Year End)

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Ukraine is responding to Global Trends

Over

130,000

new engineering graduates annually

110+

R&D centers in Ukraine owned by multinational corporations Ukraine is

Top-5

supplier of organic products to EU

17 FTAs

with 46 countries including

DCFTA

with EU

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We See Restoration of Investment Activity

5.5 2.5 3.8 4.4 1.9 2.9

15.0
10.0
5.0
5.0

10.0 2013 2014 2015 2016 2017 2018

FDI in Ukraine, $ billion

Gross FDI inflow Net FDI inflow

Source: State Statistic Services of Ukraine *According to new methodology, data on FDI for 2018, in contrast to the previous periods, include Ukraine banks’ reinvested income amounts (calculated by the NBU

n the basis of the retained gaining / losses data according to the share of direct investor participation in their capital)

After sharp decline in 2014-2015, net FDI inflow reached $3.7 billion during 2016 –2018, reflecting a systemic renewal of investment activity Crisis Economic growth

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Ukraine’s Competitive Advantages

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Sources: http://www.tradingeconomics.com

Shrinking Work Force in CEE

historically low unemployment rates
dependence on seasonal workers from Ukraine

(~2 mln Ukrainians temporarily work in Poland)

migration of CEE natives to Western Europe

3

Government Support

Ukrainian government reforms are encouraging Ukrainians to stay and work at home

4

decrease in payroll taxes implementation of vocational education program

business involved in educational program development
first success stories in cybersecurity, sea transportation

and agriculture education

stable increase in wages

Problem of work force availability in CEE Skilled Human Capital

2

130 105 93 75 71 66 56 48 39

Top European Countries by Number of Engineering Graduates,

thousand people

8.8% 3.9% 3.7% 5.3% 6.1% 3.3%

Ukraine Romania Hungary Slovakia Poland Czech Republic

Unemployment Rate, %

(as of Dec 2018)

Ukraine Competitive Advantages – Labor

350 1170 1210 1260 1310 1370 Ukraine Romania Hungary Slovakia Poland Czech Republic

Average Salary*, USD

(as of Jan 2019)

Competitive Labor Costs

*salary includes employee social security tax, personal income tax and/or other employee taxes, if any

4.2x

1

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Sources: https://ec.europa.eu/eurostat; http://www.nerc.gov.ua/; https://tradingeconomics.com (data for 1st half 2018)

0.0246 0.0257 0.0243 0.0289 0.0304 0.0256

Ukraine Romania Hungary Slovakia Poland Czech Republic

Natural gas, EUR/KWh

0.0595 0.0831 0.084 0.1166 0.0876 0.0733

Ukraine Romania Hungary Slovakia Poland Czech Republic

Electricity, EUR/KWh

Ukraine Competitive Advantages – Utilities

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Sources: http://www.tradingeconomics.com

18% 16% 9% 19% 21% 19%