DEPUTY MINISTER OF ECONOMY BOYTSUN NATALIA

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1 Ministry of economy of Ukraine DEPUTY MINISTER OF ECONOMY BOYTSUN NATALIA

2 Comparison of GDP Growth Rates versus previous year, % versus 1990, % Within the the period of of January-July 2008, the the nominal GDP GDP constituted bl bl UAH (%) I I-II I-III I-IV I-V I-VI I-VII I-VIII I-IX I-X I-XI I-XII Ministry of Economy of Ukraine

3 Foreign Trade of Ukraine (Goods and Services) by foreign trade balance data (percent change over the same period of the previous year) (right scale ) - Balance (left scale) - Exports (left scale) - Imports Jan.- June (mln. USD) Ministry of Economy of Ukraine

4 Foreign Trade of Ukraine (Goods and Services) by payment balance data (percent change over the same period of the previous year) , (mln. USD) Jan.- March 2008 (right scale ) - Balance (left scale) - Exports (left scale) - Imports Ministry of Economy of Ukraine

5 Swiss investment to Ukraine by branches Switzerland holds a 9th place in the list of foreign investors of Ukraine among the countries of Europe. Switzerland invests in the Ukrainian enterprises 632,9 million US dollars which is about 1,9% from the total volume of foreign investments to Ukraine. Manufacturing industry; 10,90% Others; 0,50% Trade and maintenance; 11,90% Processing industry; 36,50% Engineering; 12,20% Food industry; 13,60% Extractive industry; 14,40% Ministry of Economy of Ukraine

6 Foreign Direct Investment Ist halt of 2008 Net Growth (US $ in millions) change over the same period of the previous year (%) FDI Inflow, (left scale ) mln. USD Net growth as to the previouse period, (right scale) (%) (%) Ministry of Economy of Ukraine

7 Dynamics of the Trade in Goods Indicators of Ukraine with the EU, bln. dol.usa Jan.- June 2008 Export 4,94 5,76 7,87 9,77 9,2 12,08 13,91 8,61 Import 4,65 5,41 7,75 9,37 11,87 16,19 22,21 13,99 Trade turnover 9,59 11,18 15,63 19,15 21,08 28,28 36,13 22,61 Balance 0,28 0,34 0,11 0,4-2,66-4,1-8,3-5,38 Ministry of Economy of Ukraine

8 Swiss-Ukrainian Business Forum, 18 th September 2008 LEGAL ISSUES OF INVESTMENT IN UKRAINE Maksym Lavrynovych Lavrynovych & Partners LLC, Ukraine Managing partner

9 UKRAINE'S COMPETITIVE ADVANTAGES 47 million consumers the greatest market in Eastern Europe Strategic location at the crossroads of East-West and North-South trade routes Dynamic economic growth in the past five years one of the highest in Europe Extensive transport infrastructure with the railroad system, Black Sea ports, and PanEuropean Transport Corridor roadways Highly competitive, well-educated, skilled workforce Ideal platform for manufacturing and exporting

10 FORMS OF FOREIGN INVESTMENTS Ways of foreign investments into Ukraine: acquisition of the shares in existing legal entities in Ukraine; establishment of the legal entities, subsidiaries, offices, etc. on the territory of Ukraine which will conduct the business activity; acquisition of the real estate or movable property; acquisition of rights to land plots and the right to use natural resources on the territory of Ukraine; acquisition of other proprietary rights; business activity on the basis of joint venture, concessions, product distribution agreements. Since 1997 the Agreement between Ukraine and the Swiss Confederation about the attraction and mutual protection of investments has been effective

11 STATE REGISTRATION OF FOREIGN INVESTMENTS Ukrainian legislation does not provide the concept of mandatory state registration of foreign investments The state registration of foreign investments is carried out within the three working days after their actual was made. Unregistered foreign investments do not provide an investor with the special privileges and guarantees foreseen by Ukrainian legislation

12 ESTABLISHMENT OF A PRESENCE IN UKRAINE Incorporation of a legal entity (company) The main types of Ukrainian companies: Join-Stock Company and Limited Liability Company Requirements to the Join-Stock Company s chartered capital hryvnias, approximately (since October, 1,2008) Requirements to the Join-Stock Company s shareholders one or more persons. Establishment of the Join-Stock Company - 6 months Requirements to the Limited Liability Company s chartered capital hryvnias approximately (since October, 1,2008) Requirements to the Limited Liability Company s members- from 1 to 10 persons Establishment of the Limited Liability Company- 3 weeks Restrictions applied to foreign investors as to establishing the legal entities: Foreign legal entities and citizens, as well as stateless persons are prohibited from establishing television and radio companies in Ukraine. Companies with foreign investments exceeding 30% of their equity cannot establish and operate publishing houses. Opening a representative office in Ukraine - not a legal entity - conducts its activity on the basis of the Power of Attorney issued by the parent company - keeps books, submits the tax declarations under the same conditions as Ukrainian legal entities

13 Grounds for economic concentrations: - mergers and acquisitions, - leas of the major part of the assets, - setting up a new company, etc. ANTIMONOPOLY (ANTI-TRUST) REGULATIONS Obtaining the Antimonopoly Committee of Ukraine s (AMCU) consent on concentration is necessary: 1) In case either the aggregate value of the worldwide assets or the aggregate worldwide turnover of all participants exceeds 12 millions; and At least two of the participants have worldwide assets or worldwide turnover of over 1 million; and At least one participant has assets or turnover in Ukraine exceeding 1 million. 2) A part of the certain market either a regional or national in Ukraine exceeds 35 percents The AMCU s consent on concentration shall be obtained prior to closing the M&A transaction, registration of new company, executing lease agreement, etc. Obtaining of the consent takes approximately months

14 REAL ESATE AND LAND LAW Ukrainian legislation s restrictions concerning non-resident s ownership right: Non-residents can not possess the agricultural land plot. But they have a right to use and lease a land plot. Non-residents can possess the unagricultural land plot It is important: There are no restrictions and limitations for non-residents to own real estate in Ukraine

15 UKRAINE JOINED THE WORLD TRADE ORGANIZATION Import duty s decrease Simplifying the capital movement and access to Ukrainian markets in particular banking and insurance

16 LABOR LAW Permission for employment in Ukraine for foreign citizens: Decision about granting the permission is made not later than 30 days after submission of respective documents. The permission is given for up to - one year. This term can be continued. The permission is not necessary for foreign citizens with permanent residence in Ukraine. The CEO of legal entity in Ukraine may be a party to specific labor contract with shareholders. This contract gives more flexibility to an employer comparing to ordinary employment agreements

17 Swiss-Ukrainian Business Forum, 18 th September 2008 Thank you for your attention! Maksym Lavrynovych Managing partner "Lavrynovych & Partners" Law Firm 14/24, Klovskiy uzviz, of.101, Kyiv, 01021, Ukraine tel.: fax:

18 1 Inflation: under control? GDP Growth / Inflation (%) 25,5 12,1 9 13,5 2,6 9,1 7,1 12,8 7,6 5,8 9,0 4,5 7,5 5, F 09F 10F GDP Growth ( %) Inflation (%) Sika Ukraina

19 Lessons learned : 2 3 phases of building up market presence 1. Enthusiasm big potentials investment heartily welcome 2. Disillusion lots of red tape who to trust? 3. Perseverance 100 % commitment a must think multinational act local Sika AG

20 3 Success Factors Show your commitment found a local company Ensure proper control (corporate governance) Be honest no tricks no black money Focus on few target markets Select your customers : focus on creating value for the customers provide thorough training strong emphasis on payments (credit policy) Sika AG

21 4 "People make the difference" Top people are crucial for success: High demand and goal orientation No Expats (unless they speak the language) Foster a climate of entrepreneurial thinking, mutual respect and teamwork "Sika Spirit" Sika AG

22 5 Sika s experience Human resources - In general salaries are still on a lower level than in EU, specialists / managers already on EU level. but higher need for personnel (less effective, bureaucracy). E.g. bookkeeping is very intensive from the beginning. Sika Ukraina

23 6 Sika s experience Human resources - Young people after university are motivated and enjoy the working climate in Western companies. Education is still very specialized and not practice oriented. Companies have to be ready to train and develop their people. Sika Ukraina

24 Sika s experience Human resources 7 Training in practical application, organizational skills and working methods are essential. Sika Ukraina

25 Sika s experience Human resources 8 Training in practical application, organizational skills and working methods are essential. Sika Ukraina

26 Sika s experience Investment in real estate 9 - lack of officially designated industrial land -> difficult to find a suitable land plot. - land is usually not developed, investment in infrastructure necessary (electricity, gas, telephone lines, water, etc.) - due diligence difficult without knowledge of special local conditions -> local consultants. Participation in a business park makes sense. Currently some developers began to establish business parks. Sika Ukraina

27 Closing Remarks Ukraine has a big potential and offers huge business opportunities. We believe in this market. - You have to be ready to invest into your employees and develop them. - The decision to enter the Ukrainian market has to be clear and needs full effort. - Use the experience of other Western companies. Sika Ukraina

28 1 1 Have success in Ukraine! Дякую! Спасибо! Sika Ukraina