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  • Private Freight Trains To Roll
  • EIB to Finance Kharkiv Metro Expansion
  • New HR System for Civil Servants
  • Credit Fund for Small Farmers to Buy Land
  • Naftogaz May Take Gas for Debt
  • Kernel Sunflower Oil Plant
  • Starting Sunday: Nationalists Vow Maidan Encampment 

The Cabinet of Ministers approves a plan to start a pilot project for the use of private locomotives on selected routes, official sources report. The project is aimed a testing new rules and opportunities for private freight trains. Companies are not now allowed to use their own locomotives on main routes. All track is controlled by state-owned Ukrainian Railways.

Alexander Paraschiy of Concorde Capital writes: “It might take a couple of years for this pilot project to reach a full liberalization of the locomotive market. Such liberalization could bring some positives for Ukrainian Railways in the short term, but will definitely be risky for the company in the long term.”

Ukrainian Railways launches a competition to pick an insurance provider for passenger accident insurance, reports the company’s press service. Interested companies can apply online until Dec.18.

The Rada ratifies an agreement with the European Investment Bank on the financing of metro projects in Kharkiv. Earlier this year, Kharkiv and the EIB signed an agreement to provide a €160 million loan with a repayment period of 25 years. “The project envisages the construction of a new section of the third metro line with two stations: Derzhavinskaya and Odeska, as well as the Oleksiivske station (with a connecting branch to the third metro line), which will reduce trip times from downtown to the south districts. The acquisition of new rolling stock is also planned.”

Germany grants 90,000 transit permits to Ukrainian carriers for 2020, which is 12% more than in 2019, reports Ukraine’s Infrastructure Ministry. Germany also will allocate 2,000 permits for transport vehicles that meet the special Euro 4 and 5 criteria.

Ukraine launches test version of ProClick, a centralized human resource management system covering over 200,000 civil servants, Prime Minister Honcharuk writes on Facebook. He says: “ProClick will replace a lot of cumbersome procedures and automate many things.” The Finance Ministry and Digital Transformation Ministry will collaborate on the new project. Next year, all civil servants are to work under this system.

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A European Business Association study shows Ukrainian businesses view Ukraine’s tax system negatively. Only 18% of respondents evaluate the tax reporting and tax administration process positively. Of respondents, 33% find the process burdensome.

The Rada passes legislation aimed at boosting transparency in the real estate industry and eliminating corruption schemes. Starting in January, the government will introduce a new system for real estate appraisal which gives notaries the right to access a centralized database to verify property ownership.

With a private farm land market to start next October, the government is setting up a private credit fund for small agricultural producers so they can obtain cheap credit to buy land, according to the Finance Ministry. The goal is to “promote equal opportunities for agricultural producers while opening access to credit for the purpose of acquiring agricultural land.”

Ukraine’s central bank purchased $867.8 million in November to boost its foreign currency reserves, according to the NBU.

Kernel buys sunflower oil plant belonging to the Hellas oil extraction plant in Kropyvnytskyi, which the company has already been operating since 2016 under an agreement. “The plant has a processing capacity of 274,000 tons of sunflower seeds per year, the purchase price is equivalent to $21 million,” the company announced. Kernel is the world’s largest producer and exporter of sunflower oil completing FY2019 with a net profit of $179 million.

The Commercial Court of Kyiv reverses a decision made by the Antimonopoly Committee of Ukraine on April 25, to impose a $2 million fine on TAS group. TAS, a holding company with businesses in finance, heavy industry, and real estate allegedly had violated economic competition laws when it purchased a controlling stake in Dneprometiz, a metal hardware manufacturing company.

The Rada approves the new EU agreement increasing poultry export quotas. Ukraine ranks third among poultry exporters to the EU, behind Thailand and Brazil. In 2018, Ukraine exported 51,000 tons of poultry products to the EU or 7.6% of the total EU meat imports of poultry.

Ukraine’s central bank allows international money services company PayRun to enter the market, according to a National Bank of Ukraine press release. 

  • E-Services for Foreigners
  • New Customs Service Starts Sunday
  • Ukrainian Honey Heads to China
  • UkrPoshta will Deliver Pensions
  • Ukrgasbank Financing for Zaporizhia’s New Airport Terminal
  • Hires Deloitte & Touche to Audit Naftogaz
  • New Loans for SMEs
  • Tracking Timber

Some e-services will be available for foreign citizens, according to Alexander Bornyakov, Ukraine’s Deputy Minister for Digital Transformation. Speaking at the 2019 Ukrainian Wealth Management Forum in Kyiv, Bornyakov said that his team is working on creating new services such as e-residency and banking from abroad, which could be used by repatriates and foreign entrepreneurs. President Zelenskiy has promised to deliver “the state in a smartphone” which is aimed at digitizing all critical state services. Earlier this year, the president noted that Ukraine lags behind much of the rest of the ex=USSR n the development of e-governance.

The new Customs Service started Sunday, according to a Cabinet of Minister’s post on Facebook. “Finally, we are officially launching the new Customs Service, which will allow us to more effectively transform the customs sector, implement planned infrastructure projects, significantly change our staff,” said Maxim Nefyodov, the new head of the Service. “We continue to work on rebooting the service, breaking the negative customs stereotype that has been forming over the years, and smuggling flows into the country.” The new Customs was created from scratch and based on four elements: modern European infrastructure, uniform and clear rules, fast and convenient service, and new personnel.

Swedish IT company Beetroot acquires ONLINICO, a Ukrainian IT company based in the Poltava region, according to a Beetroot press release. “I hope that ONLINICO’s integration with Beetroot will positively affect the Kremenchuk IT community and the city in general,” — says Andriy S’omak, founder of ONLINICO. Separately, Beetroot also acquired Swedish consultancy company Aducera Consulting AB. “Beetroot will become the leading IT supplier blending consultants in both Sweden and Ukraine, with a people-centered culture,” said Beetroot CEO Andreas Flodström.

Ukraine and China sign bilateral agreements on the export and import of honey and canola meal, reports Ukraine’s State Service for Food Safety and Consumer Protection. A major importer of Ukrainian agriculture products, China displaced Russia this year as Ukraine’s largest single nation trading partner. In the first five months of 2019, agricultural trade between countries amounted to more than $860 million.

UkrPoshta will begin to deliver pensions and other payouts in 2020, according to a Facebook post by Minister of Infrastructure Vladislav Krykliy. “Over 4 million Ukrainians, in particular, over 800,000 people with disabilities receive pensions and cash payments through Ukrposhta. Thanks to today’s government decision, Ukrposhta will deliver pensions and subsidies in 2020.” UkrPoshta, a state-owned enterprise, says it offers a wide range of services covering 100% of the territory of Ukraine. It has over 11,000 branches and employs more than 30,000 postmen. Since 2017, the company’s revenue has doubled, to $334 million.

Ukrgasbank is financing the final construction of the new terminal at Zaporizhia airport, according to the bank’s Deputy Chairman Yevhen Metzger. The bank has issued another $3 million bringing the total amount of funding to $13 million.  With more and more international flights, Zaporizhia launches today a flight to Tel Aviv, on SkyUp.

The government is hiring Deloitte & Touche USC to audit Naftogaz for 2019-2020, according to an official press release. Recently Zelenskiy signed a law on the unbundling of Naftogaz production and pipeline divisions.

A new program offering loans at 5-9% a year to small and medium-sized enterprises will start Feb. 1, Prime Minister Honcharuk writes on Facebook. “To participate, you will need a business plan, a positive financial background and credit reputation and payment discipline.” He noted that “every Ukrainian has the right to support from the state.”

Of Ukraine’s 83 distilleries, 40 are actually operational, Timofey Milovanov, Minister of Economic Development, Trade, and Agriculture, writes on Facebook. According to him, a recent audit revealed that 22 out of 83 distilleries are in unsatisfactory condition and do not meet the minimal technical requirements.

An online wood auction system will be launched in April, introducing an electronic timber accounting framework, writes Prime Minister Oleksiy Honcharuk on Facebook. “Since April 2020, we have been launching a pilot project of e-auctions for the sale of wood. We are also introducing a unified state system of electronic wood turnover, which we will create on the basis of the current industry information and telecommunication system.”

  • Ukraine Onboard FACTA
  • Corruption in SoEs Costs 1% GDP
  • Blockchain Auctions
  • IKEA to Launch E-commerce In Kyiv
  • Zelenskiy Reveals “Come Back and Stay” Program
  • Ukraine and Russia Agree On Oil Transit
  • The President’s Approval Takes a Hit

The Rada amends legislation to comply with the provisions of the United States Foreign Account Tax Compliance Act (FACTA), fully implementing a bilateral agreement between Ukraine and the US signed February 7, 2017, reports Interfax-Ukraine. FATCA requires all US taxpayers to report assets exceeding $50,000 in value in any given year which are held outside of the country. Non-U.S. Foreign Financial Institutions and Non-Financial Foreign Entities are also required to comply to this law by disclosing the identities of US citizens and the value of their assets held in their banks to the Internal Revenue Service or the FATCA Intergovernmental Agreement. “One more victory, one more step forward! Forward to the exchange of financial information with the USA and the world,” writes the Finance Ministry. Currently, the 2017 FACTA agreement only allows for a one-way exchange of information. Around the world, major banks including HSBC, Commerzbank, and Deutsche Bank, following the enactment of the FACTA, either limited services for US citizens or stopped serving American clients to mitigate high compliance costs.

Ukraine loses 1% of GDP each year from corruption in state-owned enterprises, according to the Ministry of Economy. “Resistance to change is fierce in state-owned businesses. There are 3,733 state-owned enterprises. There is an enormous amount of corruption. NABU estimates the state’s corruption losses at $751 million, which is 0.5% of GDP. These are only the known cases. We know that at least the same amount will be discovered in cases not yet identified,” said Deputy Minister of Economic Development, Trade, and Agriculture Pavel Kuhta. “Now the situation has changed. I, as a person in charge of this area, have no reason to say that there is no support. There is support, there is a mandate, there is a willingness [to change this].”

For the first time, Ukraine manages to successfully place government bonds denominated in USD at a rate of less than 4%, writes the Ministry of Finance on Facebook. At Tuesday’s auction, the average weighted yield of 1.2-year government bonds denominated in US dollars at the auction was 3.88%, a reduction by 362 basis points. The average weighted yield of two-year bonds stayed at 4.08%.

In October 2019, the average nominal wage in Ukraine was UAH 10,727 or about $450, which is 16.4% higher than last year’s average wage, reports the State Statistics Service of Ukraine.

SETAM, the state-owned Agency for Investigation and Asset Management, completed 23,202 auctions via blockchain technology generating $259 million, reports Ukrinform. “Ukraine is moving towards blockchain, and we are already actively using this modern technology, earning billions of hryvnias. After the introduction of blockchain, the average auction prices increased from 12% to 18%,” said Victor Vyshnev, CEO of SEAM. Blockchain technology was implemented by the State e-Government Agency, BitFury International and the Eastern Europe Fund with the support of the Ministry of Justice.

IKEA plans to open its first e-commerce store in Kyiv in the spring of 2020, reports Novoye Vremya Business citing the company. “In order to make the IKEA range of functional products with attractive design and prices as affordable as possible to Ukraine as soon as possible, the company has decided to launch e-commerce first. The expected launch date is spring 2020. At the same time, IKEA reaffirms its commitment to Ukraine and plans to open the first physical store in Kyiv as soon as possible after the launch of e-commerce.” The Swedish furniture giant made the decision to enter the Ukrainian market in 2017, but its plans to open a store in Kyiv’s Ocean Plaza shopping center were never realized. Instead, IKEA has signed an agreement to open a store in the Blockbuster Mall.

President Zelenskiy launches the “Come Back and Stay” program aimed at offering Ukrainians abroad incentives to return and start a business. In a Facebook video, Zelenskiy says “If you have always been wanting to open your own coffee shop, car dealership, barbershop, or expand your business, cheese factory, furniture store or anything else, please come back and stay.” The program offers five-year loans up to $62,000 at a rate of 5% for an existing or new business that will create at least two jobs; loans at 7% for new or existing revenues of $1 million but does not create new jobs; loans at 9% for businesses with between $1 million and $2 million in revenue and wish to grow.

Ukraine and Russia have renewed an agreement on oil transit for 10 years. Ukraine’s Ukrtransnafta reports it has extended the existing contract with Russia’s Transneft on the transit of oil for ten years starting from January 1, 2020, until January 1, 2030.

The central bank has established new disclosure requirements for financial institutions regarding consumer banking services. The purpose of the new disclosure requirements is to provide complete, transparent and comprehensible information on consumer services. In turn, recommendations for dealing with appeals are intended to ensure the quality of review of appeals by banks and the self-correcting of identified violations of consumer rights. Banks need to change information about services. on websites and in advertising to meet the requirements. Realizing that it takes time and resources, the NBU gives financial institutions 6 months to adapt”

Ukrposhta launches a new channel for delivering packages between Poland and Ukraine, reports Interfax-Ukraine. The company says it hopes to delivery parcels from Poland to Ukraine within 3-6 days. Ukrposhta will work with Greece-based SMART Forwarding and the Polish company InPost. In the near future, the company says it plans to launch similar channels for the international delivery of parcels to Ukraine from Italy, Great Britain, and Germany.

Zelenskiy’s approval ratings fall. According to a survey by the Kyiv International Institute of Sociology, 52 percent of respondents said they approve of the president’s job performance, down from 73 percent in September.

  • German Co. Buys Ukraine’s Biopharma
  • EU Launches Financing for Agri-SMEs
  • Tech Startup Fund
  • E-Passports Online This Year
  • New Car Sales Up
  • Lviv Airport Traffic Stays Strong 

STADA, the German pharmaceutical giant, will buy the drug production business of Ukraine’s Biopharma. For an undisclosed sum, STADA will buy factories in Bila Tserkva, 85 km south of Kyiv. An investment of Horizon Capital and Dutch development bank FMO, Biopharma now exports products to 36 countries. Peter Goldschmidt, STADA CEO, said: “We see great potential in the Ukrainian market. Thanks to this acquisition, we will become an important player in the Ukrainian pharmaceutical market with a strong local manufacturing presence.” Konstantin Efimenko, the managing partner of Biopharma, said: “This is the first investment by a strategic investor in the pharmaceutical industry in the history of Ukraine and the first European investment since 2014.”

Voices from the Ukrainian Investment Roadshow in London: 

Dmytro Shymkiv, chairman of Darnitsa Group, the drug maker, on the STADA purchase: Pharma in Ukraine is highly profitable. It is growing at 11% a year to become a $3 billion market in 2020.”

Julia Bereshchenko, business development director for Astarta, the sugar company, on Ukraine’s ‘cheap land’: “Land lease costs are up by one third this year, due to the appreciation of the currency.”

Thorstein Jenssen, senior VP corporate finance of NBT on changing green tariffs: “Renewables have an odd business model: all CAPEX has to be paid up front, payable through 25 years of revenues.

The European Investment Bank launches the Agri-Food Value Chain Project to support small and medium-sized enterprises in Ukraine. Backed by a loan of up to €400m from the EU bank, the program is to help Ukrainian farms and food processors benefit from the Deep and Comprehensive Free Trade Area or DCFTA.

Ukraine’s government plans to allocate $18 million to finance startups, reports the press service of the Cabinet of Ministers. “The Government will not directly interfere with business,” said Prime Minister Oleksiy Honcharuk. “We will enhance Ukrainian economic development and create more jobs.” Targets will include artificial intelligence, big data, blockchain, cybersecurity, defense, healthcare, travel, financial technology, educational technology, e-commerce, and the internet of things.

Ukraine’s State Property Fund plans to auction off 147 items in December via the ProZorro electronic system. The initial total value of the lots is $11.5 million.  Up for sale are: a transport complex in Kryvyi Rih; the Prikarpattya Health Complex in Ivano-Frankivsk; unfinished construction near Kyiv’s Shuliavska metro station; shares in the Mirogoschanskyi Agrarian Institute; and a research plant belonging to the Institute of Materials Science of National Academy of Sciences of Ukraine. So far this year, 511 small-scale privatizations have been completed.

The government will receive $4.5 million from the sale of three large state-owned entities, reports the State Property Fund. Properties sold were: a wholesale market in Kyiv’s Brovary suburb; the Center for Certification of Building Materials, Products and Structures; and Ukraine Tourism company. Prime Minister Honcharuk promises more, saying: “Privatization is one of the key priorities of the Government and one of the effective ways of leveraging investment and combating inefficient property management.”

Electronic driver’s licenses and passports will be available this year. In the social media selfie video, President Zelenskiy says: “We are working on a large digitalization project in the country. An electronic driver’s license and a registration certificate will be on your iPhone soon, soon, soon. This application has already been sent by our team to Google Play and the App Store, and this year Ukrainians can start using it. But this is only the beginning.”

New car sales are up 6% in the first 11 months of 2019 when compared to the same period in 2018. Between January and November 2019, 79,300 new passenger cars were purchased and officially registered in Ukraine, Ukravtoprom reports. France’s Renault was the most popular brand, followed by Japan’s Toyota and Korea’s KIA.

Ukrzaliznytsia plans to modernize 40 passenger cars and purchase 26 new wagons in 2020, reports the Center for Transportation Strategies. $20 million will be spent on refurbishing older passenger cars while $25 million is earmarked for purchases. Over the past four years, Ukrzaliznytsia has bought 70 new passenger cars and updated another 200.

Lviv airport passenger traffic is up 33% in the first 11 months of 2019 when compared to the same period in 2018, the airport reports. The number of flights increased by 24%. Through November, passenger flow exceeded 2 million, compared to 1.5 million in 2018.

Ukraine’s Windrose Airlines launches regular flights from Ivano-Frankivsk to Kyiv, Dnipro, and Bucharest. Both airports and airlines are controlled by Igor Kolomoisky. Flights will operate on Mondays and Fridays on Embraer 145 regional jets.

  • Ukraine Racks Up Record Grain Harvest
  • Ukraine Goes Cashless
  • Rail Stations as Shopping Centers: Private Operators to Get Their Chance 

Ukrainian farmers have harvested a record 74.3 million tons of grain and legumes, reports Tymofiy Milovanov, Minister of Development of Economy, Trade, and Agriculture. The harvest is 6% greater than last year’s harvest of 70.1 million tons, also a record. Average yields are up 5%, to 4.93 tons per hectare.

Five months into the grain marketing year, Ukraine has exported 24.4 million tons, 35% more than this time last year. During the last July 1-June 30 marketing year, Ukraine exported 50 million tons of grain.

Confirming Ukrainians’ reputation as fast adapters to new technology, the number of contactless and tokenized payment cards has increased by 70% since January. With 6.7 million contactless and 1.9 million tokenized cards now in use in Ukraine, they account for 22% of active payment cards, reports the National Bank of Ukraine. According to Mastercard, Ukraine is now among the top 10 European countries for using these technologies.

At the same time, the number of point of sale terminals in Ukraine has increased by 14% to 318,400, the central bank reports. Of these, 89% allow for contactless payments. Noncash payments account for half of all purchases in Ukraine, a portion the government wants to increase next year to 55%, says Serhiy Kholod, deputy chairman of the central bank.

Citing roads as “one of three economic pillars on which economic growth will rest for the next five years,” Prime Minister Honcharuk says March 1 will be the kickoff date for 2020 highway construction season: $1.4 billion spent on rebuilding 4,000 km of roads. By the end of the Zelenskiy presidency, in 2024, the government plans to rebuild 24,000 of road, linking all 24 regional capitals with high-quality highways.

In time for the holiday cargo surge, Poland has granted Ukraine 5,000 more trucking permits for December, reports Infrastructure Minister Vladislav Krikliy. Earlier this year, Poland cut the number of permits for Ukrainian truckers by 38%, to 160,000. Ukrainian officials complain to Warsaw and to Brussels that Poland is violating Ukraine’s free trade pact with the EU. Ukrainian truckers complain that Poland is pressuring them to emigrate, to drive for Poland’s chronically understaffed trucking companies.

To speed border crossings into Poland, construction starts this spring on separating passenger and cargo traffic at the M-10 highway approach to the Lviv region’s Krakovets checkpoint. Similar work is planned for four other checkpoints into Poland: Rava Russka, Smilnits, Grushev, and Ustilug.

Good news for skiers: Ukrzaliznytsia plans to transfer the Ivano-Frankivsk railway station to a concession. Over the next two years, a private operator would modernize the station, expand retail, and create a ‘multi-modal’ hub for ski buses to the Carpathian mountains, Evhen Kravtsov, CEO of the state railroad, said on a visit to the Western Ukrainian city. He said only half of the station’s space is used and it generates only $500,000 in rents.

Through public tenders, the government plans to transfer half a dozen rail stations to private operators, including Kyiv, Darnitsa, Dnipro, Chop, Mykolaiv, and Khmelnytskyi. Kravtsov said Kyiv’s central rail station has higher “passenger traffic than in any shopping center” and the adjacent McDonald’s station “is among the three most visited in the world.” Despite this footfall, the rail station lost almost $100,000 under state administration.

Low cost airlines are fast changing patterns of Ukrainians working abroad, says Chady El Tennir, president of Milan-based Ernest Airlines. Targeting the estimated 500,000 Ukrainians who work in Italy, Ernest now sees many Ukrainians flying home every month. “Before they went home once a year – and by bus,” the executive tells the UBN. Next spring/summer, Ernest plans to add five more city pairs: Lviv-Bologna, Odesa-Milan; and from Kyiv Sikorsky to Bari, Trieste and Venice.

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.