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Business Profile
Economy: Ukraine has large areas of very fertile land, which gave it its reputation as the ‘bread basket’ of the former Soviet Union. Grain, sugar beet and vegetables are the main crops; a high proportion of agricultural land is devoted to livestock farming. The country is also blessed with mineral resources, particularly coal in the huge Donbass fields, as well as iron ore, manganese and titanium. There are a few reserves of gas and oil but Ukraine has to import over three quarters of its requirements of these products from elsewhere, mainly from the Russian Federation and Turkmenistan. Much of this is still needed to fuel the heavy industries that dominate the country’s manufacturing economy. Metalworking, engineering products (especially machinery and transport equipment) and chemicals are the most important of these. A large proportion of industry was previously devoted to military production but this has sharply declined since the demise of the Soviet Union and drastic cuts in defence budgets.
After some initial reluctance, Ukraine began to dismantle its highly centralised command economy in 1992 and introduce market mechanisms under the guidance of the IMF, which the country joined, along with the World Bank, in the same year. Ukraine also belongs to the European Bank for Reconstruction and Development as a ‘Country of Operation’. Key elements of the programme were privatisation, price reform, trade liberalisation and, as a necessary adjunct, the introduction of a fully convertible currency – the Hryvnya – which came into use in 1995. During the early and mid-1990s, the Ukrainian economy suffered from rapid contraction of about 12 per cent per year, and very high inflation which occasionally touched 400 per cent. Overall, the reform programme has made slow progress due to opposition from entrenched interests and disagreements amongst the pro-reformers over the pace of change. Relations with the IMF and World Bank are not good; the government is presently debating whether to forego further financial support rather than subscribe to IMF diktats. The imminent entry of several of Ukraine’s neighbours into the European Union is another important consideration.
Nevertheless, the economy has made some progress: annual GDP growth during the last four years has been between four and six per cent, while inflation has been reduced to a manageable five per cent. Officially, unemployment is four per cent of the workforce, but a large ‘grey’ economy has evolved which some estimates put at half the size of the legitimate economy. Ukraine’s major trading partners are the Russian Federation, China, Belarus, Turkmenistan and Germany.
Business: Suits, and ties for men, are required for official business. Exchange of business cards is extremely common and visitors are advised to bring company cards. Office hours: Mon-Fri 0900-1800. Lunch tends to be at least one and a half hours.
Commercial Information: The following organisations can offer advice: Chamber of Commerce and Industry, vul. Velyka Zhytomyrska 33, 01601 Kyiv (tel: (44) 212 2911; fax: (44) 212 3353; e-mail: ucci@ucci.org.ua; website: www.ucci.org.ua); or Ministry of Foreign Affairs (see Contact Addresses section); or Ministry of Foreign Economic Relations, Lvovska pl. 8, 254655 Kyiv (tel/fax: (44) 212 5238).
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