GAINING MOMENTUM AND ECONOMIC DEVELOPMENT
The Ukraine ranks 43rd in the world in terms of size (603,700 km2)and 25th in terms of population (46.5 m). According to the latest UN estimates, Ukraine’s population is declining due to low birth rates and emigration. Ukraine has in total six large urban centres, five of which boast more that a million inhabitants. Population density is highest in industrialised regions in the east of the country, particularly in the Donbass area. Kyiv is by far the biggest urban centre, with over 2.5 m residents.
The most noticeable positive development in 2005-06 was a substantial boost in foreign investment flows. Even taking into account the fact that more than 50% of FDI in the last two years was generated by one-off purchases of Ukraine’s giant steel-mill Kryvoryzhstal by Mittal Group and leading local bank Aval by Raiffeisen International (in the biggest private M&A deal Ukraine has ever seen), the country is now clearly on the map of many foreign investors. They are queuing up to buy banking and insurance institutions, real estate, food-processing, metallurgy, mining, telecoms and tourism assets. The genie in the bottle, foreign investors say, is about to be released. Besides Raiffeisen International, a number of Austrian insurance companies and European production companies with regional headquarters in Vienna have entered the Ukrainian market recently. Germany and Austria have been among the top-10 biggest sources of FDI for the past 15 years.
Despite a number of obvious challenges – slowing GDP growth, higher energy prices, and rising inflation – the overall economic outlook for Ukraine in 2007 is positive. Above all, there is a lot of unrealized innate potential which the country will benefit from as it enjoys an unprecedented level of FDI, introduction of new technologies and transfer of know-how. There is much hope that new government will eventually enter the WTO, thus breaking the mould of the last decade that has left Ukraine deprived of much-needed foreign investment and consigned the country to the low pace of economic development. Moreover, Ukraine has many key assets to be privatized. This could stimulate a great deal of new investment inflows – not only through privatizations themselves but also indirectly, as such deals attract attention to Ukraine’s general potential.
Thus, Ukraine is now rebounding and catching with other former-communist bloc countries. With rising of employees incomes and productivity levels increase, even though a lack of political consensus over privatization and economic policy continues to divide its political elite.
HOT DESTINATION: NATURAL ADVANTAGES
One reason Western European investors have looked to Ukraine is simply its location. It seems a natural next step for multinationals whose presence has already extended as far as Romania and Bulgaria, which acceded the EU on January 1, 2007. Moreover, it is a good place from which to service the EU. Ukraine also uses EU guidelines in some of its economic rules and standards. And, since it has a Free Trade Agreement with Russia and the other CIS members, some international companies use it as a platform to export in both directions.
Ukraine has plentiful natural resources itself and also is an important transit country for energy and products between the EU and Russia or Asia. Three out of nine trans-European transport corridors run across Ukraine, and it has an extensive Black Sea coastline with several major ports. Moreover, the government has made improving the transport infrastructure a top priority.
Apart from Ukraine’s strategic location, many investors like the fact that it is itself a large emerging market. It has over 46m inhabitants, fast-growing consumption, low saturation, and little competition in many sectors. As the market matures and becomes filled with more and more businesses striving for higher professional standards, there will be opportunities for consultants, accountants firms and lawyers.
Even with numerous risks and bureaucracy, it is an increasing trend for an initial foreign investment in a business to be made by a local entity, but for a strategic foreign partner to come on board several years later with know-how, technology, development plans, experience and capital.
LABOUR MARKET: EDUCATION; PERSONNEL AND EMPLOYMENT
Ukraine retains the legacy of a rigorous and scientific-oriented Soviet education system. It was the second-most important R&D centre for defense and industrial engineering in the USSR. Although the Ukrainian government spends 20% of its budget – some 5% of GDP – on education, it is not enough given that the overall size of GDP is still quite small. Education is compulsory for everyone between ages 6-15. The country has 10 universities and a large number of specialized academies.
Ukraine is noted for its human resources, whom investors describe as intelligent and industrious – not to mention well educated and highly skilled. For example, locals are highly motivated, affording opportunities even in fields such as aerospace, biology and nanotechnology. Labor is cheap, with salaries around one-forth of Central European levels. There is high unemployment, particularly in the west, as well as potentially in numerous mono-industrial towns if and when they are forced to restructure.
Nevertheless, business executives warn that it can be difficult to find top level staff. Professionals able to represent global firms tend to want high salaries, and be already in good positions. Thus, for all the skilled labour, many local companies which foreign investors want to buy need great improvement from the technical know-how side. Recruiting market is maturing very fast.
Minimum wage is currently UAH 400.- per month. 12 (with an optional premium) monthly salaries are paid in Ukraine per year. Income tax for personnel is flat at 15%. The social security contribution (payroll tax cap of UAH 7.875.-) cost for employer constitutes 37.4% of wage, while only 3,5% for the employee, with 0.66 up to 13.8% shared between them as compensation for professional illnesses.
COMPETENT ON-SITE PERSONNEL CONSULTING
Dmitri Lisyeyenko has been consulting clients in Ukraine since 2005. Mr. Lisyeyenko with his team operates the HILL office in the heart of picturesque Kiev. Clients benefit greatly from the profound knowledge of local languages and culture possessed by the consultants and economic psychologists.
As a one-stop-supplier our services include branch-specific personnel search & selection services, as well as salary benchmarking. The internationally versed and multilingual consultancy team (besides English even Georgian and Chinese are spoken) is in the best position to accompany both European and Asian companies in their business contacts and investments in Ukraine.
HILL Ukraine is assisted in this process by the experience and expertise of the HILL Group. Over 30 years of personnel and management consultancy, scientific methodology, and an extensive network in Europe and central Asia enables HILL to provide successful consultancy in the areas of personnel and management for numerous firms in diverse branches.
Please direct your inquiries to:
 |
HILL International Ukraine | Kiev
Dmitri Lisyeyenko, Managing Director
tel +380 44 2533734 mobile +380 50 3627902 mail office@hillint.kiev.ua
|
