Introduction to Ukraine
Ukraine a Country with great potential
This article is designated to provide you with brief introduction to Ukraine, a country with ancient history, deep cultural roots and exclusive geopolitical location. In Ukraine you will find beautiful nature, pleasant climate, hospitable people and bright traditions.
Although there are many challenges in Ukraine, given its low cost, skilled workforce, excellent geographic location, and rich natural resources, Ukraine is increasingly becoming an attractive place for foreign investors.
Well connected to eastern and western Europe
Ukraine is located in the South-Eastern part of Europe, in the East European Plain. The total area of Ukraine is 603,628 square kilometers, which is 5.7% of Europe’s territory and 0.44% of the world’s (44th in size among the countries in the world and the first among the countries, which are entirely in Europe).
It shares borders with Belarus on the north, Poland, Slovakia and Hungary – on the west, Romania and Moldova – on the south-west, Russia on the east and northeast. Ukraine is crossed by many rivers that flow into the Black sea and Azov sea.
In Ukraine there are two mountain ranges – the Carpathian Mountains in the west and the Crimean Mountains in the south. The highest point of Carpathian Mountains in Ukraine – Hoverla (2061 m), at the same time this is the highest point of the country. The maximum height of the Crimean Mountains is 1,545 m.
The country is divided into 27 administrative units. The capital is Kiev – a vibrant city with dynamic environment and rich history. Other main cities are Odessa, Lviv, Kharkiv, Donetsk, Dnipropetrovsk, Chernivtsi, and Vinnystya.
At present due to the proxy war between Ukraine and Russian, part of the territory of Ukraine is recognized as occupied territory (Crimea and part of territory of Ukraine in the East of Ukraine, including Donetsk, Lughansk and their region).
Approximately 43 million today
According to the State Statistics Service of Ukraine, as of April 1, 2016 population of Ukraine was 42 millions and 708 thousands of people (excluding the temporarily occupied territories of the Autonomous Republic of Crimea and Sevastopol). Ukraine stands #8 in size by population among approximately 50 countries of Europe.
According to the latest census 78% of population are Ukrainians, 17.3% – Russian, and less than 1% are Belorussians, Bulgarians, Hungarians, Poles. The urban population is 69.1%, rural population – 30.9%. Population density – 74.3 persons / km².
The first time when people settled in Ukraine was more than 45 thousand years ago. Tribes of polanians, northerners, White Croats, Drevlians and others were the first settlers. It is them who in a relatively short period (8-9 century), formed the Ukrainian nation. The initial settlement began to form near the Black Sea, Azov Sea and the Carpathian region. Gradually they migrated into territories of Ukraine.
Main language is Ukrainian but English is popular among younger generation
The official language of Ukraine is Ukrainian language. Ukrainian is the language of documentation, government and public organizations, laws, judicial proceedings, official media. At international competition in Paris in 1934, Ukrainian language was officially recognized as the second most melodic language in the world after Italian and the third most beautiful language after French and Persian.
Second most wide-spread language is Russian, almost most of the country’s population speaks both Ukrainian and Russian. Russian can be also used as business language; documents in Russian do not require translation into Ukrainian.
In practice some regions of Ukraine are more Ukrainian-speaking (mainly western and central regions of Ukraine), whereas in the south and east of the country population speak mostly in Russian. In some regions of Ukraine, we can find small groups of people that speak Hungarian, Moldavian, Romanian, Polish, Yiddish, Bulgarian, Gagauz and other languages.
Nowadays English learning is very wide spread among younger generation and is taught in schools from the very beginning. In fact, President of Ukraine Petro Poroshenko has signed a decree on declaring 2016 as the year of the English language in Ukraine. The explosive growth of IT sector in Ukraine and Ukraine’s increasingly closer cooperation with the Western world has been the key factors in popularization of the English language.
Ukraine guarantees freedom of religion
Ukraine is a secular state, the country’s constitution guarantees freedom of religion. Approximately 75% percent of the population consider themselves believers in God. The vast majority of the religious population (over 88%) are Orthodox Christians. Christianity was spread here in X-XII centuries.
According to official statistics, Ukraine has 55 religious organizations of different religious beliefs.
A moderate-continental climate
Remoteness from the oceans, continental Eurasia and mainly flat nature of Ukrainian territory determine the country’s climate as a moderate-continental climate, which changes from the west to the east. With the growth of continentality, summer becomes hotter and the winter colder, amount of precipitations decreases.
Temperature plays a significant role in shaping the climate, which is characterized by significant fluctuations. Mostly temperatures in the coldest month (January) are below zero (average 0° … -7° C) and the warmest (July) – (+ 18° … + 23° C.) The seasonal temperature regime significantly varies from one region to another. Periods when the average temperature exceeds 20°C, in the south last more than four months, in the west and north about three months. Frosty period with an average temperature below 0°C, is ranging from 1-2 months in the south and about 4 months in the north-east of the country.
The most pleasant time is late spring (from mid April to May) and early autumn (September to mid October), when the temperature ranges from 13° to 20° C in average.
Unfortunately, the governing institutes are weak and corruption is common at all levels
If you are planning to conduct business in Ukraine, you should become familiar with its political system. This will help you better understand some of the complexity and bureaucracy in the country. According to Ukrainian constitution, Ukraine is a democratic parliamentary-presidential republic and unitary state.
Since 7th of June, 2014 President of Ukraine is Petro Poroshenko. According to Constitution of Ukraine, the President of Ukraine is not allowed to be leader of any political party. Petro Poroshenko formally is not leader of any party, however he was appointed as honorable leader of Block of Petro Poroshnko (former Party “Solidarnist”), which was founded by him in 2000 and that has most number of votes in Ukrainian Parliament.
The state power is divided between 3 branches:
- legislative – Ukrainian Parliament called “Verkhovna Rada of Ukraine” and consists of 450 deputies
- executive – consists of central and local state executive bodies headed by the Cabinet of Ministers of Ukraine; at present Volodymyr Groysman is Prime Minister of Ukraine (appointed on the 25th of July, 2016)
- judicial – consists of the Constitutional Court of Ukraine, specialized courts (commercial courts, administrative courts) and courts of general jurisdiction
At local level some legislative and executive powers are assigned to municipal authorities (city counsels), which are elected by residents of specific territorial unit.
In Ukraine there are more than 300 registered political parties whereas there is no strong party which has trust and essential support among Ukrainian people. Currently Ukrainian Parliament is composed out of representatives of 10 parties which composed 8 deputy factions/groups. Such large number of political parties and absence of real leaders is one of the key source of country’s instability and keeps down economic growth of Ukraine. Due to failure of the governing party to fulfill its pre-election promises, at the next election people usually give their votes for opposition parties. Such practice leads to short term planning by Ukrainian politicians, constant instability in Ukrainian political system and definitely has negative impact on Ukrainian business.
Ukrainian political system has been often characterized as systematically corrupt. In Ukraine citizens as well as businesses have low level of trust in Ukrainian Government. Since entering into the Association Agreement with EU, Ukraine has taken a path to Euro-integration. With constant pressure from the international society, slow but steady attempts are being made towards strengthening of government institutes and elimination of corruption Ukraine.
Attempts are being made to root out corruption in judicial system and other organs of Ukraine
The judicial system of Ukraine consists of the Constitutional Court of Ukraine and courts of general jurisdiction. The Constitutional Court of Ukraine is responsible for official interpretation of Constitution of Ukraine as well as inspection of laws and international treaties to correspond Ukrainian Constitution; courts of general jurisdiction resolve private, business, criminal disputes and disputes with state and municipal authorities.
Courts of general jurisdiction have a three-tier court system: courts of first instance (local courts), courts of appeal and courts of cassation. Disputes in cassation are resolved by the respective chamber of the Supreme Court of Ukraine (depending on essence and parties of dispute).
The Supreme Court of Ukraine is the highest court of general jurisdiction, which ensures the consistency of judicial practice Ukraine. Its conclusions on use of law are obligatory for all the other courts of general jurisdiction. Note that Ukraine uses the civil law legal system, so court precedents is not source of law in Ukraine (apart from rules of law implementation, given by the Supreme Court of Ukraine in its conclusions). There are two specialized courts in Ukraine: the Supreme Court on IP Disputes and the Supreme Anti Corruption Court. These two courts act as courts of first instance for the respective disputes.
Additionally, Ukraine has:
- International Arbitration Court, which is responsible for resolution of disputes related to foreign economic agreements or foreign investments, providing that parties to such disputes has agreed to assign dispute resolution to such arbitration court; and
- Mediation Courts – private courts which are entitled to resolve private disputes as assigned by the parties in writing; however number of disputes can not be assigned to the mediation courts, e.g. family spouse, insolvency disputes, others as defined by law.
Ukraine is a party to numerous bilateral treaties, which allow enforcement of decisions of foreign courts on the territory of Ukraine (in cases of disputes with non-residents of Ukraine), and conventions which secure enforcement of arbitral awards (such as the Convention on the Recognition and Enforcement of Foreign Arbitral Awards dated 10th of June, 1958).
Ukraine judicial system is considered corrupted at all levels. Ukrainians as well as Ukrainian companies are frequent applicants to the European Court of Human Rights (around 13 % of all the applications) seeking protecting of their rights.
Reformation of Ukrainian judicial systems is one of the most urgent tasks for Ukrainian government on the way to EU integration and foreign investment in Ukraine. Recently, Ukrainian Parliament adopted a number of laws aimed at reforming the judicial system of Ukraine and bringing it to international standards, including amendments to the Constitution of Ukraine and law of Ukraine “On Judiciary and Status of Judges” .
The national currency of Ukraine is Hryvnia (UAH)
In 1996, hryvnia (UAH) was approved as the national currency of Ukraine. It is named after the Kievan Rus hryvna, old currency, which was a silver bar.
Since its introduction, hryvnia has seen many ups and downs over the years that have been mostly tied to the various financial and political crises in Ukraine and internationally. A brief history of the currency is as follows:
- Right after the introduction of hryvnia in 1996, it traded around at 1.76/$1.
- During the 1998 Russian crisis, hryvnia fell to around 5.5/$1.
- Since April 2005, National Bank of Ukraine maintained a fixed official rate of 5.05/$1 for about three years.
- By the end of December 2009 during the global financial crisis, hryvnia exchange rate to the US dollar fell to 8.00/$1.
- In 2014, as a result of the political and the resulting economic crisis in Ukraine, hryvnia started to fall sharply against US dollar and has not yet recovered since. As of October 2016, it traded around 26.00/$1.
Ukrainian export economy ranks 52nd in the world. The country’s main export products are metals, agriculture products, and IT services comprising more than 50% of the total exports. Ukraine is characterized by the low export rates of high-tech goods and services except perhaps the IT sector. This reflects the underdeveloped structure of Ukrainian economy which is primarily based on the price and the cost of natural resources and labor.
The IT sector has been a bright spot in Ukraine’s economy in recent years growing at the rate of 25% annually. The country is fast becoming an outsourcing destination for IT services due to low cost and well-educated IT workforce. Industry estimates show that IT now accounts for about 3 percent of Ukraine’s gross domestic product and could rise to 15 percent by 2020.
Ukraine’s main imports include:
- Refined Petroleum
- Petroleum Gas
- Packaged Medicaments
- Coal Briquettes
GDP & Economy
From 2000 until the global financial crisis of 2008/2009, Ukraine experienced a positive amid fluctuating annual GDP growth. In 2009 as a result of the crisis, Ukrainian economy fell into recession and GDP declined by 15%. From 2010 until 2013, Ukraine’s economy started to recover slowly and showed a positive GDP growth.
2014-Present: Political Conflict with Russia
Towards the end of 2013, protests in the country and political conflict with Russia caused another recession in Ukraine. Lots of Ukrainian exporters which had traditionally tight business relationships with Russia suffered severely from stricter border and customs control regime with Russia (until 2012 exports to Russia amounted 25.7% of all Ukrainian export). Moreover, annexation of Crimea by Russia and the War in Donbass (anti-terroristic operation as per Ukrainian Government interpretation) which started in the spring of 2014, significantly damaged Ukrainian economy. As a result, GDP in 2014 and 2015 shrank by -6.8 and -12% respectively. According to the World Bank, inflation reached 48,7% in 2015 and the national currency Hryvnia fell from 8 UAH per 1 to USD to 25 UAH per 1 USD.
Due to the significant fall of Ukrainian Hryvnia, the National Bank of Ukraine has been tightly regulating currency market of Ukraine with strict temporary measures which blocked foreign currency and foreign investments outflow from Ukrainian economy. The International Monetary Fund (IMF) has approved a four-year loan program worth about $17.5 billion (given in tranches over 2015 and 2016), subject to conditions regarding economic reforms. Over the last two years, Ukrainian Government has been implementing a number of reforms and currently is in the process of slow easing of currency control restrictions. The World Bank as well as Ukrainian Government expect Ukraine to experience an economic growth rate of around 1% in 2016 .
Summing It Up
Ukraine is the largest country in Europe by territory. The country has excellent strategic location, considerable natural resources, and a well-educated and low cost workforce. Due to Ukraine’s historic ties with Russia and the oligarch-style system of governance, the country’s political, economic, and judicial institutes have not evolved and matured sufficiently since its independence in 1991. As a result, the country suffers from confusing regulatory regime, significant red-tape, and wide-spread corruption at all levels of society.
Political events of 2013/2014 have allowed Ukraine to free itself from the clutches of Russia and the country is seeking closer relationship with European Union and the West. This transition is forcing Ukraine to address problems with its governing institutes and gradual reforms are being made to improve ease of doing business, get rid of corruption and red-tape, re-invent the judicial system, and make the country an attractive destination for international investors.
With all said and done, Ukraine is a country with great investment potential and those who are willing to explore and take advantages of the opportunities at present will no doubt have a significant lead over late comers.