What is the best businesses to start in Ukraine in 2021?

Ukraine’s economy has been growing from the 4-th quarter of 2015 till the end of 2019. In 2020 (mostly due to the COVID-19 pandemic) the economy of Ukraine was in recession from the 1-st quarter of 2020 till the 3-rd quarter of 2020. Beginning from 2014, despite the conflict with Russia, many needed and painful reforms have been made. Since 2017 there were more and more foreign individuals and entrepreneurs coming to Ukraine in order to create capital. Some were coming to promote services, some do make trading or production. The potential of Ukraine is big and there many spheres to discover as in some fields there is no enough competition.

The government of Ukraine makes a huge job in order to boost up economic growth. Although still many changes must be done. Consider that beginning from 2016 VAT tax return problem was solved. Government procurement systems and regulations now hugely minimized bureaucracy and corruption. So if you are reading this article and you have some interest to make money in this prosperous country, but still don’t know what sphere to move in, CLC is happy at least to advise the best spheres of the Ukrainian economy.

In 2019 the biggest problem for our economy was the revaluation of the Ukrainian currency. The improvement of UAH to USD and EUR was not due to the growth of export and it was because of the policy of the Ukrainian Ministry of Finance. It affected the export negatively because of the improvement of our currency Ukrainian goods became more costly. On the other side, it helped to decrease inflation. Anyway, as of the second half of 2020, we see that our currency is devaluating and this is the factor that affects Ukrainian export very positively. Although, most economists expect that UAH to USD rate will be around 26,5 to 28.

Agriculture

Ukraine contains more than 1/3 of the richest soil in the world. For centuries Ukraine was called the breadbasket of Europe. Now we have all the potential to become a granary of the world. Our country is one of the top 10 main agriculture commodities producers worldwide.  As of 2019, Ukraine was using only 30% of its agricultural potential. Considering the growing population and economic growth in many countries (at least before the COVID pandemic), climate changes, and the growth of consumption, it can be a good investment. In 2015 agriculture became the number one sector in Ukraine’s GDP contribution. Still, it is not developed and diversified enough and there is a lot of work to do and a lot of money to make. Another good thing is that the agriculture sector can give needed raw materials at a good price for the food industry. That is why Ukrainian poultry, cheese, and milk products, sweets, meat, and other food productions are growing.

Consider also that there is EU as one of the biggest markets nearby our country with a population of almost 450 million people. This is one of the biggest consuming regions in the world. Most of the goods (except agriculture commodities) to the European Union are supplied by auto trucks. At the same time, Ukraine is not far from the Middle East and the export to that region is growing as well.

You do not have to lease the land and buy tractors to work in the agriculture sector. There are thousands of possible businesses that are related to agriculture to be made. Like fertilizers and agriculture commodities trading, transport services, consulting, the supply of needed equipment and technologies, logistic and storage services, intermediation, etc. Also, there is a high demand for construction services in the agriculture sphere. Many companies that do have a good production still need grain elevators, barns, hangars, etc. Ukrainian government intends to boost up local manufacturing and use needed legal tools for this (like in 2017 there was an additional tax for the export of sunflower seed in order to increase Ukraine sunflower oil production).  

But if you are ready to start farming in Ukraine, please consider that agricultural land can only be leased by foreign citizens or companies. It is not allowed to acquire agricultural land even for Ukrainian individuals and companies before 2021. But there is a big offer of fields to lease. You can find such in any part of Ukraine. Also, there are many medium and small agriculture companies that are being sold due to bad management or some other reasons. Consider that the southern part of Ukraine is good for growing vegetables and fruits, but using irrigation is mostly needed. At the same time central, northern and western Ukraine is good both for vegetables/fruits and grain growing.

Information technology and customer support services

This is the most fast-growing sector of the economy. More than 40% of our clients ordering a company registration in Ukraine intend to make an IT business. There are many IT hubs in Kyiv, Lviv, Dnipro, and Odesa. Our country is one of the best for IT outsourcing. Employment in the information technology field has been tripled since 2012. Ukrainian IT sphere’s yearly demand for employees growth is more than 15%. The biggest problem is that there not so many Ukrainian that speak English well. Some of our clients even start learning Russian or Ukrainian language with the aim of good communication. But tax rates (5% revenue tax and 0% VAT) are very favorable. The medium monthly salary for advanced programmers is $1850 in Kyiv and $1650 in Lviv and Kharkiv. Ukrainians are very clever, fast learning, and creative people. The cost of real estate is also very cheap that helps to reduce spending. For example, monthly rent in a business center in Kyiv is $ 20-40 per square meter. In the suburbs of Kyiv and smaller cities, the medium cost is $10 per square meter.

Renewables

Ukraine’s population is more than 42 million. But our economy depends on imports and most of the energy resources (such as oil, natural gas, and oil) are imported. There is a special tax regime for biofuel and other renewable fuel production in Ukraine. We do have a feed-in tariff for solar, wind, biomass, and hydroelectric production, which is one of the best in Europe. The renewable sector in Ukraine is booming. The bad thing that to go into this business you need to act fast because the tariff depends on the time of commissioning of the power station. The sooner the power station will be constructed and connected to the energy supply system, the higher the tariff will be.

Privatization

Although the breakdown of the Soviet Union was more than 26 years ago, still there are many state-owned companies, factories, and assets in Ukraine. Most of such assets do not have good management. Most of the Ukrainian state-owned businesses are not effective at all. But good management and good owner can make such assets as profitable. Beginning from 2018 the big privatization was launched in Ukraine and thousands of businesses are offered to investors. The sale of such assets is to be made through a public auction, which is the only way to get the real price for a business. The good thing for an investor is that anyway all the assets will be underestimated because many capitalists are afraid to invest in Ukraine due to conflict with Russia. Also in the case of litigation, parties may sue in the High Court of London, and dispute resolution will proceed under English law. This is made in order to provide more guarantees and more confidence for investors. Although there is a rising interest to invest in this country and as it was mentioned before there is much more confidence and prosperity.

Consider that there are two privatization lists of companies: a list of small companies and a list of big companies. Among big ones, you can find big power stations, energy supply companies, chemical factories (even monopolists in certain fields), coal mines, and other mining companies, hotels, and insurance businesses. These enterprises have the potential to generate billions of dollars profit, but for decades were used in order to enrich a small group of people that control it. But most of these assets get donations from the state budget and do not generate profit, but only debts. Some businesses (like President Hotel in Kyiv) are profitable already. We think that this is a good way to acquire an existing business with needed ground and basis for profit.

Production and Manufacturing

Ukrainian employees are the cheapest in Europe. In 2018 medium monthly wage in Ukraine was 50% less than in China. So if you do intend to make a production of goods nearby a huge market (European Union) Ukraine can be a good solution. Logistics with Europe is good. For example, the distance from Kyiv to Vienna or Prague is not more than 1350 kilometers (840 miles). Another important fact is the cost of real estate, which is also very cheap. The total cost to construct a plant in Ukraine can save a lot of investor’s money.

At the same time, Ukraine produces many goods and products already. Our country is a party of WTO and other international organizations. It is strongly recommended to check Ukrainian company before dealing with it.

We hope that this information was useful for you and we hope that you will find success, growth, and prosperity in Ukraine.

 

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