News Digest from UkraineInvest (December 2, 2018)


Ukraine introduced martial law on 28 November for a 30-day period in ten regions of the country bordering the Russian Federation, Moldova, the Black Sea and the Azov Sea. The move, which came in response to a Russian attack on Ukrainian naval vessels in the Black Sea and evidence of a major Russian military build-up close to Ukraine's borders, is a precautionary measure designed to improve Ukraine's ability to respond to any potential further escalation. Economic indicators suggest a relatively calm response from the business community, with only mild fluctuations to the Ukrainian currency exchange rate following a parliamentary vote on the issue. The temporary imposition of martial law does not place any restrictions on capital and foreign exchange markets, while the National Bank of Ukraine says it sees no threats to the uninterrupted operation of the banking sector. International partners such as the IMF have confirmed that cooperation with Ukraine will not be affected by the temporary imposition of martial law.

German and Ukrainian business and political leaders gather in Berlin
Over 400 business and political leaders from Germany and Ukraine took part in the third annual German-Ukrainian Business Forum in Berlin on 29 November. The Forum, currently in its third year, was officially opened by German Chancellor Angela Merkel and Ukrainian Prime Minister Volodymyr Groysman, reflecting its significance as a platform for strengthening bilateral ties. "Ukraine has proved itself to be an open country, and German business is interested in working here. Ukraine is a place where investments can and should be leveraged," commented Merkel in Berlin. Trade between the two countries rose by 8% in the first eight months of 2018 to reach EUR 4.7 billion, continuing a growth trend dating back to 2016 that has helped cement Germany's place as Ukraine's biggest trading partner within the EU and the country's status as one of the top five foreign investors in Ukraine. Speaking to media outlet DW, the president of the German-Ukrainian Chamber of Industry and Commerce Andreas Lier underlined the current upward dynamic driving bilateral economic relations. "A survey of our members found that 2017 was the best year yet for doing business in Ukraine. This year the positive trend continues," he commented.


VAT exemption on electric car imports extended until 2022. Ukraine’s 2019 state budget includes positive news for importers of electric cars, with the existing VAT exemption policy extended for an additional four years until 2022. This will provide a further boost for the Ukrainian electric car industry as the niche continues to expand. The Ukrainian market for electric cars is currently small but rapidly expanding. Electric car sales in 2017 totalled 2697 units, more than double the overall number in 2016. This trend has continued in 2018, with 4214 electric cars sold in the first ten months of the year.

Parcel taxation policy opens opportunities for local retailers
Beginning in July 2019, Ukrainians will face taxation on all parcels received with a value of above EUR 100. The move is designed to target the flourishing but largely unregulated traffic in items sent to Ukraine from abroad, either by private individuals or international online retailers. Once the restrictions come into force, they are expected to provide a significant boost to domestic retailers who have thus far been the biggest losers of the parcel traffic.

Ukraine brings environmental tax closer towards current EU levels
From 1 January 2019, Ukraine’s environmental tax rate on carbon dioxide (CO2) emissions from stationary sources will rise from UAH 0.41 per ton to UAH 10 UAH per ton. In addition, a gradual annual environmental tax increase of UAH 5 per ton is envisaged until 2023. These measures will bring Ukrainian rates closer into line with the levels already adopted by the EU. The changes will further strengthen the economic argument for high-tech and electric vehicles on the Ukrainian market.


Ukraine launches rail express between central Kyiv and Boryspil International Airport.  A long awaited express train service linking Boryspil International Airport with Kyiv's downtown Central Railway Station was unveiled on 30 November, marking a significant upgrade in the Ukrainian capital's transport infrastructure. Trains will now run around the clock with a capacity of 120 passengers and a ticket price of UAH 80 per one-way journey. The express service brings Ukraine's main air hub into line with European standards and will help to improve transit to the heart of the Ukrainian capital at a time when Kyiv is attracting unprecedented numbers of visitors and welcoming new airlines on a virtually weekly basis. For example, Europe's largest airline Ryanair recently launched flights from the Ukrainian capital to a range of EU destinations.


Estonia wants to join new rail service linking Ukraine to Baltic States
Estonia's railway operator EVR has confirmed an interest in joining the Four Capitals train service linking Kyiv with Minsk, Vilnius and Riga. The weekly service, which was launched on 28 September 2018, has already proven popular and carried over 2,100 passengers during its eight initial trips. Officials in Estonia now hope to expand the railway service to include Tallinn, with talks on the extension of the route set to take place in mid-December. The service is part of Ukrainian efforts to expand rail links to EU countries as Kyiv refocuses on closer ties with Ukraine's European Union neighbors. The past few years have seen the launch of a number of new services to Poland, with additional rail connections to Berlin and Budapest expected in 2019.


Danish furniture retail giant continues to expand its Ukraine presence
Danish furniture and household goods retailer Jysk has announced plans to open a new store in central Ukrainian city Khmelnitskiy as it continues to expand its Ukraine footprint. The new store, which will be located inside the city's Lybid entertainment and shopping complex, will be the third Jysk outlet in Khmelnitskiy and the forty-sixth in total across Ukraine. Jysk's executive director in Ukraine Yevhen Ivanytsia said the opening of a third store in Khmelntskiy was a reflection of high local demand for the company's home furnishing products. Jysk will soon face competition in Ukraine from fellow Scandinavian furniture retailer IKEA, which plans to open its first Ukrainian outlet in spring 2019.


Ukrainian agricultural exports to the EU continue to grow
Agricultural trade between Ukraine and the European Union rose by 5% year-on-year in the first nine months of 2018 and passed the USD 6 billion mark, creating a positive balance of USD 2.2 billion in Ukraine's favor. The largest individual EU member state trading partners for agricultural goods over this period were the Netherlands, Poland, Italy, Spain, Germany and France. Meanwhile, the biggest growth in bilateral agricultural trade was registered with Belgium, with trade increasing by 35% to reach USD 336 million. The EU is currently the second-largest market for Ukrainian agricultural exports behind Asia. In terms of individual countries, India is presently the number one export market for the second consecutive year.

Ukraine confirms record grain harvest as breadbasket boom continues
Ukraine's Agrarian Policy Ministry has confirmed that the 2018 grain harvest has set a new national record. With 98% of crops harvested, the overall total now stands at 68.5 million tons. This is significantly higher than the previous record of 66 million tons established in 2016, with growth attributed to favorable weather conditions and the introduction of greater efficiency measures as Ukraine's agricultural sector continues to modernize. Individual Ukrainian agribusinesses have also reflected this bumper harvest in their results and forecasts. According to Reuters, leading Ukrainian agribusiness Kernel has recently upwardly revised the company's grain exports for the 2018-19 season from 5.4 million tons to 6.2 million tons. Ukraine's agricultural exports have grown at an impressive rate in recent years to occupy an increasingly large share of the country's overall exports, currently accounting for approximately 17% of Ukrainian GDP.

Tunisia gives green light to Ukrainian poultry exporters
Tunisia has lifted restrictions on the import of poultry products from Ukaine, officials in Kyiv have confirmed. The move opens up another potentially attractive North African export market for Ukrainian poultry producers at a time when Ukraine's chicken exports are growing at a rate of around 30%. Ukrainian poultry exports totaled USD 381 million during the first nine months of 2018, up from USD 295 over the same period a year earlier. Poultry formed the largest share of a 21% year-on-year increase in Ukraine's total meat exports during the January-September 2018 period, with the overall total rising to USD 479 million.

Source - Official website of UkraineInvest