EBRD: Ukraine is making gains in finance reforms

European Bank for Reconstruction and Development says Ukraine has made the most progress. The country saw over 50 shady banks close since 2014.

As a result, the number of banks in Ukraine plummeted from 182 to 121. The closed banks had weak management, opaque structure and excessive lending.

The World Bank hopes Ukraine’s measures will consolidate the country’s banking sector and that the number of banks will decrease to 100 in 2016.

At the same time, the Transition Report 2015-16 shows that there are factors holding back the reform process. However, over the past year “the overall direction has been positive”.

The report refers specifically to significant progress in infrastructure, as cash-strapped governments increasingly saw the value of private-sector involvement in transport links and municipal services.

An annual EBRD publication, the Transition Report uses a series of indicators to track the progress of structural reforms across the EBRD region that includes central and south-eastern Europe, the former Soviet Union and the southern and eastern Mediterranean.

 

Read more on UNIAN

Opportunities for the agricultural sector in Ukraine

Ukraine is sometimes called the bread basket of Europe. The country has a good climate and a lot of highly fertile land known as “chernozem”. That’s why agriculture is always the safe bet in Ukraine.

In 2015 the country became a #1 importer of corn to China, #1 world’s exporter of sunflower seed oil and #3 exporter of grain.

Agriculture accounts for nearly one-tenth of the Ukrainian federal budget and amounts to one-quarter of all exports.

The Ministry of Agrarian Policy and Food of Ukraine has prepared the presentation about investment opportunities in the country. Although it’s geared towards the US investors, it will be helpful for any other interested. Check it out here!

 

 

Doing Business in Ukraine: Ukraine climbed to 83rd position in world rating

According to the World Bank Doing Business rating, which annually assesses conditions of doing business, Ukraine moved from 96th to 83rd position. In 2015 Ukraine managed to improve its indicators in several categories.

Thus, Ukraine showed a positive development in the area of business registration. This is mainly because of implementation of online registration procedures and abolishment of registration fees. In addition, Ukraine also improved its ratings in the area of investor protection.

Nevertheless, under some categories, such as dealing with construction permits, transnational trade and taxation, Ukraine remained to be placed at quite low positions of the rating.

Economic Development and Trade Minister of Ukraine Aivaras Abromavicius said that two years ago the country was 112th, and the current rank shows that it is moving in the right direction.

"Only 82 countries are to be outstripped," the minister said.

He said that the report covers up until H1 2015 and it does not reflect many improvements made in H2 2015. The minister said that the current government started working on December 2, 2014 and the ranking reflects its work only for six months.

Ukraine is 30th in starting a business out of 189 economies. Ukraine has made starting a business easier by reducing the time required for VAT registration and by eliminating business registration fees.

In addition, Ukraine climbed from 185th to 137th in getting electricity: today, it takes 263 days to connect businesses to power lines.

 

The country fell from 43rd to 98th in enforcing contracts and from 70th to 140th in dealing with construction permits.

Ukrainian startups rate their biggest obstacles

Ukraine's turbulent 2014 worsened the investment climate, including venture capital - which dropped in half to $40 million. It's a big problem for the more than 2,000 Ukrainian startups.

A Kyiv Post survey of 47 startups, from e-commerce to mobile applications and hardware products, shows bureaucracy and bribery are key obstacles. Other problems: Russia's war in the east, general investor disinterest, weak corporate legislation, low purchasing ability, a lack of incubators, accelerators and mentors, hryvnia devaluation and poor intellectual property rights protection.

More here

 

Challenging times for the country and the M&A market - Emerging Europe: M&A Report 2014/15

2014 proved to be a challenging year for Ukraine. Download report here

What started in November 2013 as a peaceful demonstration in Kyiv against refusal by the then current Ukrainian President, Viktor Yanukovych, to sign the Association Agreement with the EU, in favour of closer cooperation with Russia, ended in the annexation of Crimea by Russia, ongoing war in Eastern Ukraine and devaluation of the Ukrainian Hryvnia by nearly 50%. Such unfortunate events certainly did not contribute to the stability or growth of the M&A market in Ukraine and resulted in a significant drop in the number and value of M&A deals as compared to previous years. Many deals were put on hold by potential investors in the hope that the crisis would be resolved in the near future.

Our data shows 60% fewer M&A deals in 2014, and a dramatic 81% drop in the total deal value as compared to 2013. The M&A market was dominated by domestic investors, with a number of high profile deals carried out by and amongst Ukraine’s richest businessmen.

The sectors which attracted the highest number and value of deals were finance & insurance, agriculture, wholesale & retail trade and manufacturing. Overall, the finance & insurance sector had the biggest share of total deal value and deal number for the year, accounting to 36% and 23% of the total, respectively. IT and oil & gas also remained strategically important sectors in Ukraine in 2014.

The most notable M&A deals in 2014 included Russia’s Alfa Group’s acquisition of 99.8% of PJSC Bank of Cyprus for a reported €225 million and Austrian AMIC Energy Management GmbH’s €223 million purchase of Lukoil-Ukraine.

Given all the turmoil, at best we see the 2015 M&A market in Ukraine as flat when compared to 2014, with perhaps a small number of high profile M&A deals being carried out by and amongst Ukraine’s elite, alongside further strategic exits from the country. We predict that the most attractive sectors in 2015 will be banking (there are still too many banks, with over 175 operating on the market), agriculture, IT and energy. 2015 may also become a year of privatisations as the Government seeks to follow through on its commitments.

But despite all the turmoil, 2015 could potentially be a year where the country starts to see some light at the end of the tunnel. President Petro Poroshenko is now the President and in June 2014 he signed the long-awaited Association Agreement with the EU. Parliamentary elections followed in October 2014 and more than three-quarters of voters supported political parties which favour closer relations with the West and Ukraine’s course towards Europe. Formation in December 2014 of a new Western-oriented Government completed a series of key political changes in Ukraine in 2014.

Ukraine is currently in need of radical changes and the new Government has pledged to pass an extensive program of reforms in the near future, including those required by the IMF and the terms of the EU-Ukraine Association Agreement. Implementation of these reforms is expected to strengthen the business environment in Ukraine and attract investment. So whilst our prediction is that 2015 will be a relatively uneventful year from an M&A perspective, continued efforts by the Government to eradicate corruption and improve the investment climate could well plant the seeds so as to make Ukraine a more attractive investment destination for both domestic and foreign investors in 2016 and beyond.

Graham Conlon

Partner Corporate Department,

CMS Cameron McKenna PE Sector Co-Leader,

CEE CMS Ukraine

This email address is being protected from spambots. You need JavaScript enabled to view it.

Johannes Trenkwalder

Partner Corporate Department,

CMS Reich-Rohrwig Hainz CMS Ukraine

This email address is being protected from spambots. You need JavaScript enabled to view it.

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