19+ Pros And Cons of Doing Business in Ukraine (Explained)

Ukraine is a wide emerging market offering strategic positioning for developing businesses at the heart of Europe, with strong ties to Russia and the Middle East. A new survey by the World Bank and International Finance Corporation reported that Ukraine stands at 137th position among 185 economies worldwide on business-friendliness. 

Despite this change, local entrepreneurs still face obstacles, with the country ranking in the bottom 20 percent of economies in five of 10 regulatory areas measured by the study. Ukraine, in particular, stands at last in the queue of Eastern Europe and Central Asia on property registration and insolvency resolution. This shows that getting local support is important when doing business in Ukraine, considering the abundance of opportunities that await successful enterprises.

Benefits of Doing Business in UkraineThe Drawbacks of Doing Business in Ukraine
Good Location for BusinessTax Payments
The Economic Growth is GoodThe Registration of a Company
Skilled Labour ForceStarting a Business

Advantages of Doing Business in Ukraine

  • Unique Location for Business

Ukraine enjoys a rare position within the East African zone of sub-Saharan Africa and lies astride the equator. The nation shares its boundaries with Sudan, Kenya, the United Republic of Tanzania, Rwanda, and the Democratic Republic of Congo in the direction of the north, east, south, southwest, and west respectively.

This land-connected location provides the country with a strategic base of command to be a regional center for trade and investment. Ukraine enjoys pivotal trade partnerships that build a viable business market.

  • Fastest Growing Economy

A potential investor considering investing in Ukraine will find a highly liberalized, well-regulated economy in which all sectors are open to investment and free movement of capital from and to the country. The Index of Economic Freedom of 2013 has ranked Ukraine as the eighth freest economy amongst the 46 countries of the sub-Saharan Africa. 

The business operating climate enables full repatriation of earnings after payment of required taxes, as well as 100 percent foreign ownership of the private investment. 

  • Incentive Scheme is a boon

The incentive scheme is structurally incorporated in the tax laws of the country making it non-discriminatory and open to both domestic and foreign investment, depending on the sector and investment level.

To set up a business in South Africa in any sector of the country, international investors have to invest the minimum capital required, aside from those which could threaten the security of the country, is US$ 100,000.

  • Highly Trained Labour

The labor of Ukraine is highly trained and can be trained, good at English speaking, and also the cost in Africa is comparable.

  • Planned Infrastructural Developments

Return on investment is expected to increase to about 7% because of the occuring and planned growth of infrastructure ( roads, rail, energy) resulting from the enlargements of the oil sector (refinery and export of crude oil). Ukraine’s GDP ranges from US$ 25 billion to US$ 26 billion, with an average of 5 to 7 percent steady economic growth. 

After the downturn of the global economic, the Ukraine’s economy was strong, inflation has now stabilized to 6.6 percent. This attracts the attention of the foreign direct investment over the period.

  • Improving Economic Environment

Since 1986 the political and economic climate of the country has been gradually improving and stable. Under the guidance of H.E. Ukraine’s Yoweri Kaguta Museveni has been able to be a regional political stabilizing power that has created a stable atmosphere for businesses to flourish.

Investment protection is also guaranteed under Ukraine’s Constitution and 1991 Investment Code, as well as the various foreign investment-related agreements/treaties Ukraine is a signatory to.

Disadvantages of Doing Business in Ukraine

  • Incorporating a Business

In Ukraine, establishing a company is a laborious process comprising of seven procedures that takes 22 days on averages to complete. That means the most commonly used way for foreign investors to develop the business in Ukraine is a limited liability company.

  • Tradings in Construction Permissions

Ukraine ranks at 182nd position worldwide for the ease of obtaining building permits, and companies have to deal with 20 procedures that takes more than a year to implement.

The expense ($1,262) moreover is more than the OECD average of $78.7. It takes only 74 days for extensive state expertise to request and receive approval of project design drawings and estimates, which epitomize the systematic process.

  • Electrical Constraints

Receiving power will take up to 285 days, costing 192.3 percent of per capita income. The most drawn job is waiting for 53 days for a private electrical design firm to complete and authorize the external link design.

  • Registration of Property

In the most recent World Bank report, Ukraine jumped 15 places for easy registration of a house, although the change still left it in the 149th position. Registration of a property takes far more time than the OECD average at 70 days and 10 procedures.

  • Getting Loans

Obtaining credit is the easiest step, relative to the other tasks, to establish a business in Ukraine. The country is ranked 23rd worldwide and operates a reasonably mature financial system.

  • Investor’s Protection

Ukraine is taking steps to boost the country’s reputation abroad and give investors more security. According to the World Bank, it ranks 117th in the world but the government is implementing constructive intelligence policies, developing the legal climate, and actively collaborating with potential foreign investors.

  • Tax Payments

For companies in Ukraine, paying taxes is the most laborious task as it takes 28 payments in a year and 491 hours in total. Compared with OECD equivalents, centralized social contribution and corporate income tax take a substantial amount of time in general.

  • Trade Across the Borders

Given its ideal location, it is a complicated ordeal to trade across Ukraine’s borders as it requires you to submit the six documents and 30 days for exporting the products, with heavy costs to both import and export containers.

  • Enforcing Contracts

The compliance of contracts is one of the most efficient procedures in Ukraine behind securing credit. Compared to the OECD average of 510 days, it takes 343 days and the related costs are very high.

  • Insolvency

Resolving the insolvency takes 2.9 years, well above the OECD average. It’s also an expensive operation, costing 42 percent of the estate.

Similar Posts:

Was this article helpful?

Did you like this article? Why not share it: