- Turkey Ready to Sign FTA
- IMC’s Wheat Yield is Double US Average
- Pivdennyi Port Handles Biggest Monthly Cargo Volume Since Opening in 1978
- Central Bank Reserves Highest Since 2013
- Electric Car Sales Up 53%
- Wizz Air, Ryanair Jostle for Odesa’s Air Market
- New Discount Airlines Plan to Carry 7 Million Passengers on Ukraine Routes This Year
- SkyUp Revives Domestic Flights Lost with USSR
- SkyUp Bets on Zaporizhia as Future Airport for SE Ukraine
- Ze Launches Big E-Government Project
- Internet to Sweep Away Paperwork
- Kyivstar 4G Users Jump 70%
- China’s Huawei to Wire Kyiv Metro for 4G
- China Ban on US Food Imports To Boost Ukraine
- Ze’s Office Promises: Low-Interest Rates in 2020
- Bank Profits Quadruple
- The Mighty Hryvnia Tops Charts
- Foreign Cos. Park Their Gas in Western Ukraine
- Dragon Hungry for More Shopping Centers
Turkey’s President Recep Tayyip Erdogan vows to wrap up free trade talks with Ukraine and to more than double bilateral trade, to $10 billion a year. In a joint press conference with President Zelenskiy in Ankara on Wednesday evening, Erdogan said of the decade-old free trade talks: “Finally, the time has come to finalize the negotiation process on concluding a free trade agreement, negotiations on which have been going on for many years.”
President Zelenskiy has signed a law ratifying the Israel-Ukraine Free Trade Agreement. The Rada passed the law last month. After Israel’s Sept. 17 parliamentary elections, the new Knesset is expected to ratify the law.
Farmers have almost completed the 2019 wheat harvest, threshing 26.6 million tons from 95% of the sown area, the agriculture ministry said yesterday. So far, Ukraine’s farmers have harvested 35.6 million tons of grain, half of the 70 million forecasts for 2019.
Agro giant IMC reports it’s wheat yield rose 15% y-o-y to 6.3 tons per hectare. This is double the USDA 2019 forecast for the US average – 3.19 tons – and the Russia average – 2.67 tons. IMC, listed on the Warsaw Stock Exchange, attributes its high yields to good weather and more efficient farming techniques. Advocates of the creation of a private farmland market in Ukraine said it would inject capital into the countryside, raising the national grain harvest by 50%, to 100 million tons in the mid-2020s.
Farming was Ukraine’s most profitable sector last year, with 86% of farms reporting profits, according to Yuriy Lupenko, director of the National Institute of Agrarian Economics. By contrast, 74% of Ukrainian businesses reported profits. All 22 of Ukraine’s agro giants reported profits, accounting for 12% of the sector’s profits.
Grain exports were up 40% for the first half of this year, compared to the same period last year. Ukraine exported 26.2 million tons of grain, slightly more than half the 50 million tons exported during the entire marketing year, which ended June 30. Corn was king in the first half, accounting for 79% of exports, reports the Institute of Agricultural Economics.
Pivdennii, Ukraine’s deepest and busiest port on the Black Sea, handled 4.7 million tons of cargo in July, the largest monthly volume since the port opened in 1978. Almost 80% of this cargo was exported, with China the top destination. Grains were up 76%, to almost 1 million tons. Ore was up 58%, to 2.6 million tons. During the first half of this year, cargo handling was up 20%, to 23.4 million tons. “We do not plan to stop,” Vitaliy Lipsky, director of Pivdenii port administration, told the Center for Transportation Technologies.
Central bank reserves jumped by 5.8% in July, hitting $21.8 billion, the highest level since 2013. In the biggest single month of purchases since April 2010, the National Bank of Ukraine bought a net $1.3 billion in July, four times the June dollar purchases. Ukraine’s reserves now equal to 3.4 months of imports.
Concorde Capital’s Evgeniya Akhtyrko writes: “This month is going to be relatively easy in terms of payments in foreign currency. Ukraine is to repay around $190 million to the IMF and to redeem local Eurobonds for $124 million. MinFin has no plans in placing local Eurobonds in August, so these outlays are likely to be partially or fully compensated by the NBU’s purchase of foreign currency on the ForEx.”
Dragon Capital forecasts the hryvnia/dollar exchange rate will end the year where it started – UAH 27.5. Reserves end this year down 5% y-o-y to $20 billion. Dragon writes: “We expect foreign inflows to slow in the coming months as global credit markets grew more risk-averse due to renewed US-Chinese trade frictions, while the Finance Ministry has only moderate borrowings need to cover by the end of the year and will likely limit issuance.”
A ‘tax amnesty’ is being discussed by the IMF and Ukraine, Sergey Verlanov, head of the State Tax Service tells Interfax-Ukraine. Following similar measures in Latvia and South Africa, the taxpayer would pay reduced rates – 5-9% – in return for coming clean to authorities for unpaid back taxes. Officials are debating the parameters of an amnesty. Interfax writes: “According to experts, the ‘tax amnesty’ in 2015 ended in complete failure.”
Sales of imported used cars totaled 274,200 through July, a five-fold increase over the first seven months of 2018. Now used imports account for three quarters all first time registrations. However, with consumer confidence returning, sales of new cars jumped 14% y-o-y in July, to 7,600, reports Ukravtoprom, the industry trade association. This is the biggest increase since the used car flood started with the cut in import duties three years ago.
Sales of electric vehicles increased by 53% through July, compared to the same period last year, reports Ukravtoprom. Of the 3,742 cars and 293 commercial vehicles, 91% were used imports. On Tuesday, Zelenskiy signed law introducing green number plates for electric cars and protecting parking spaces with chargers for electric cars. With private companies installing chargers on highways, it is now possible to drive an electric car from Kyiv to Lviv, Odesa, Dnipro, and Kharkiv.
Without waiting for Odesa airport’s long overdue runway, Europe’s two largest discount airlines are elbowing each other to start flights to the “Pearl of the Black Sea.” In dueling announcements Tuesday, Wizz Air said it will start flying from Odesa on the weekend of Nov. 1-3, with flights from Odesa to six EU cities: Berlin-Schönefeld, Bratislava, Budapest, Gdansk, Katowice, and Wroclaw.
Ryanair came back with its new Odesa flights, all starting Oct 28-30. They go to Berlin-Tegel, Gdansk, Katowice, Poznan, and Wroclaw. In June, Ryanair had launched its service from Odesa, with a flight to Krakow. Flights to Poland are popular among migrant workers impatient with the city’s economic stagnation due to corruption and incompetence.
Odesa airport officials are negotiating with Kyiv this summer for another 1.1 billion hryvnia, or $45 million, to complete construction of the new runway. Contracted in 2013 at $63 million, no work was done until 2017 for lack of money. Construction started in 2017 but stopped a few months ago with the 2,800-meter long runway half-built. The State Enterprise Directorate for Construction of the International Airport Odesa says it ran out of money. Also, an audit found that the new concrete may not be hard enough to handle long haul jets, reports the Center for Transportation Technologies.
Despite these setbacks, there were celebrations at Odesa airport last week as the brand new departures terminal opened – for domestic flights. International flights will start using the departures this fall, presumably in time for the Wizz Air and Ryanair flights. Construction started on the Spanish-designed terminal seven years ago. Oddly, the arrivals terminal opened first, two years ago. Happy to foresee the day when arrivals and departures will be reunited once again, Pavel Prusak, the Odesa airport director, said: “The new terminal will allow us to serve our passengers in comfortable modern conditions.”
In the dueling media announcements, Wizz Air and Ryanair released their latest Ukraine numbers Tuesday, with each vying to be seen the largest European carrier serving Ukraine.
Wizz Air said it is increasing its Ukraine routes by half to 53 EU destination. Flying from Kyiv Sikorsky, Lviv and Kharkiv, Wizz Air carried 1.3 million passengers on its Ukraine routes this year through July. Paulina Gosk, a Wizz Air spokesman, predicted to reporters in Odesa that by the end of this year the carrier will carry twice as a man – 2.6 million.
Ryanair says that by October, it will be flying out of the same four Ukrainian cities to 40 EU destinations. With load factors averaging 96%, Ryanair expects to carry 1.4 million passengers on its 113 Ukraine weekly flights this year. In November, Ryanair’s subsidiary, Laudamotion, adds Stuttgart from Kyiv Boryspil. Ryanair started flying from Ukraine one year ago, with a flight from Kyiv Boryspil to Berlin-Schönefeld.
Ukraine’s discount air champion is the start-up, SkyUp, which plans to carry 2.8 million passengers this year. Through June, SkyUp carried 668,500 passengers – 27% on scheduled flights, the rest on charter flights. The most popular destinations for regular flights were: Barcelona, Tbilisi, Batumi, Alicante, and Larnaca. The most popular charters were to Sharm el-Sheikh, Hurghada, Marsa Alam (Egypt), Antalya, and Monastir (Tunisia).
Reviving Ukraine’s 10 biggest regional airports outside of Kyiv is part of SkyUp’s strategy. “I am proud SkyUp gives life to regional airports,” Oleksandr Alba, co-owner of the 14-month old airline, tells UBN. “SkyUp will fly from each and every airport. It’s our commitment to give life to the regions.” Although Ukraine is larger than France, domestic aviation is repressed by the 20% VAT tax levied on all internal sales, he says.
In October, SkyUp launches $20 flights from Kyiv Boryspil to Kharkiv, Lviv and Zaporizhia. “After one hour on board the plane, you will be able to have lunch with partners in Kharkiv or enjoy time with friends from Lviv – at the price of a train ticket,” SkyUp CEO Yevgeny Khainatsky tells Avianews. Also in October, SkyUp will launch flights between Lviv and Kharkiv, connecting Ukraine’s second and third largest cities for the first time since Soviet days. Earlier this summer, SkyUp restored another historic route – Kharkiv-Odesa.
Turning to Lviv, SkyUp plans in October to base a Boeing in Western Ukraine’s dominant airport and to start flights to Dubai, Prague, and Poprad, a Slovakian ski resort town near the Tatra mountains. Separately, Wizz Air starts flights from Lviv to Larnaca, Cyprus. With these flights, Lviv will have 16 airlines flying to a total of 38 destinations, largely in the EU. Ukraine’s fastest-growing regional airport, Lviv saw its passenger flow hit 1.2 million through July, 41% more than during the same period last year. In 2018, traffic was up 48% y-o-y.
From regional airports, SkyUp plans these international flights this fall: Uzhgorod-Sharm El Sheikh, Chernivtsi-Sharm El Sheikh and Antalya, and from Lviv and Kyiv to Poprad. Next year could bring Kyiv-Mykolaiv, Cherkasy-Antalya and basing a jet in Zaporizhia. This summer, SkyUp flies charters from Kherson, Mykolaiv, and Poltava to Antalya and Sharm El Sheikh. Two weeks ago, SkyUp got an unexpected boost when Russian authorities started hourly daytime bus service between Simferopol and the line of control at Kherson. About one-third of SkyUp’s passengers for its Kherson flights to Egypt and Turkey come from Crimea.
SkyUp is betting on Zaporizhia airport as the future dominant airport of Ukraine’s southeast. Bolstering Zaporizhia in the short term, Dnipro airport, 100 km to the north, is to be closed 2020-2021 to rebuild the runway and terminal. Longer-term, a thaw in relations with Russia-controlled Donetsk would bring passengers to Zaporizhia, a 3-hour drive in peacetime.
On Sept 2, Zaporizhia airport closes to all flights for the resurfacing of its cement runway and asphalt aprons. In contrast to Odesa, this work is to be completed in six weeks for $12 million. This is part of airport renovation that includes a new steel and glass terminal capable of handling 1 million passengers a year. Through July, traffic was up 27% to 280,000 passengers. Two weeks ago, President Zelenskiy toured the airport, and authorities assured him that the terminal will open on schedule, in December.
Following the example of Estonia, President Zelenskiy has decreed the creation of a single national website where citizens will perform most interactions with government, including filing taxes, registering land and voting. Last week’s decree sets goals for the Cabinet of Ministers: an audit of Ukraine’s 350 registers by Oct. 31 and launching the unified e-service website for citizens by Jan. 31. Next year, the website is to allow applications for driver’s licenses and online participation in the 2020 population census. By 2021, elections should be conducted by electronic voting.
To sweep away the blizzard of paperwork surrounding the birth of a child, the Zelenskiy administration is implementing ‘eMalyatko’ or ‘eBaby.’ Parents will be able electronically to register their baby’s birth and residence and electronically apply for the child’s passport and tax identification number. Designed with the help of experts and money from Canada, Estonia, Switzerland, and the US, the project is to start Jan. 1. Zelenskiy, a father of a girl and a boy, told government officials last year that under the current system “parents are forced to go through the bureaucratic hell with a baby in their arms.”
“Transparent and reliable work of state registers will be the key to safe business development and effective management of the country as a whole,” Zelenskiy’s digital advisor Mykhailo Fedorov said about the decree. “Most [registers] are completely inefficient and non-transparent…This is the main cause for raiding, corruption and other schemes in providing various state services, such as construction or land industry.”
As part of the “State in a Smartphone,” President Zelenskiy’s digital team is developing a website to allow developers to get building permits without face to face contact with officials, a classic opportunity for corruption. “The system itself automatically understands whether to give you permission or not. Electronic interaction with other registries takes place,” Fedorov told Liga.Tech.
Appealing for joint ventures in broadband internet and electronic identification, Fedorov told member companies of the American Chamber of Commerce last week: “The development of the digital economy should be the number one priority for Ukraine.” Fedorov, the founder of the internet marketing agency SMMStudio, said: “We are obliged to digitally transform existing industries and create favorable conditions for the emergence of new ones. Otherwise, we risk falling behind the world’s leading economies forever. Together with business leaders and the public, we have set clear goals and goals for 2024.”
Moving “one more step closer to digital Europe,” an electronic document generated by Ukraine’s e-archive system in ASiC format and signed using MobileID based on ECDSA, has been tested for compliance with the EU formats. “In practice, this means that Ukraine has fully regulatory and technologically implemented the EU requirements for electronic documents,” Ze!Team said on Facebook. “E-government is not only public things but also complex regulatory and technical work in the back office.”
Zelenskiy’s e-government drives build on work done by the Poroshenko-Groysman government. This year, the number of government services available electronically is increasing by 50%, to 180, Prime Minister Groysman said at a recent startup conference. The outgoing prime minister said: “Now they are talking about ‘the state in the smartphone.’ But in fact, my government has been working for several years to create high-quality electronic services, tools that can be used in various areas of life, including for doing business.”
At the conference, Groysman launched a $16 million Ukrainian National Startup Fund. With IT industry leaders serving as jurors, the Fund will pick early-stage Ukrainian startups for seed money grants of up to $75,000 apiece. Projects are to be completed within two years.
The number of Kyivstar subscribers who use 4G smartphones jumped 70% y-o-y this spring, hitting 10.5 million. Overall, Kyivstar’s smartphone users increased by 19% during the same time, hitting 15.1 million. About 70% of Ukraine’s estimated 40 million people now have access to Kyivstar’s 4G mobile internet, the company reports. For users of Ukraine’s largest cell phone company, Xiaomi and Samsung overtook Apple last year in popularity. Today, the five most popular brands are: Xiaomi – 28%; Samsung – 22%; Apple – 15%; Huawei – 13%; and Meizu – 8%.
Chinese tech giant Huawei, whose networks reach one-third of the world’s population, will now extend into Kyiv’s subway system. Huawei won a tender to build a 4G network running through Kyiv Metro’s 70 km network, connecting its 32 stations. Due for completion at the end of next year, the Kyiv job will be the biggest of all Huawei’s projects in 27 Central, Eastern European and Scandinavian countries, the company says.
Ukraine should benefit from China’s ban on state-run agricultural firms buying food from the US. Ukraine already is the largest supplier of corn and sunflower oil to China. Through May, China rivaled Russia for second place as an importer of Ukrainian goods. The top three importers were: Poland – 6.9%; Russia – 6.4%; China 6.2%. Due to Russia’s new sanctions on trade with Ukraine, China is on track to displace Russia. Food accounts for most of Ukraine’s exports to China.
The central bank bought nearly half a billion dollars last week to keep the hryvnia from continuing to strengthen against the dollar, according to National Bank of Ukraine data. The net $493 million bought last week, was almost double the amount spent the week earlier – $261 million. Since Jan. 1, the central bank has purchased a net $2.7 billion.
To promote medical tourism to Ukraine, President Zelenskiy will propose a list of countries whose nationals can come to Ukraine visa-free for treatment. Zelenskiy spoke at the opening of a medical tourism conference in Truskavets, a mineral springs resort town in the Carpathian foothills, 90 km southwest of Lviv. China and Middle Eastern nations are “promising” markets for medical tourism here, reported Violetta Yanyshevska, president of the Association of Medical Tourism. Last year, about 60,000 foreign tourists came to Ukraine for medical treatment, spending nearly $150 million.
Ukraine will have cheap credit at 12-13% in hryvnia next year, predicts Oleksiy Goncharuk, deputy head of the Office of the President. Goncharuk, considered a leading candidate for Prime Minister, spoke Friday at a breakfast with heads of foreign banks. The central bank forecasts that Ukraine’s prime rate will drop in half over the next two years, from its current level of 17%. Such a sharp drop in bank lending rates would trigger an investment boom.
Bank lending will be helped by a near quadrupling of bank profits, to $1.2 billion, during the first half of this year, compared to the same period last year. “For the second year in a row, banks are making high profits, mainly due to the rapid development of consumer lending, which is growing by about 30% year on year,” Kateryna Rozhkova, first deputy governor of the central bank, said in a press release. “We estimate that in the medium term, high operating efficiency and profitability will continue.” After half of the nation’s banks were closed after the 2014 financial crisis, Ukraine now has 76 banks, 66 of them profitable.
Ukraine’s hryvnia has grown the most in the world this year against the dollar – by 9.1%, according to Reuters latest chart of global foreign exchange rates. Runners-up are: Russia’s ruble +8.3%; Egypt’s pound + 8.1%; and Thailand’s baht + 4.9%. Strengthening the hryvnia are high prices for grain and iron, $3.5 billion in foreign purchases of hryvnia bonds, and labor remittances of $1 billion each month. Weakening the hryvnia are a record number of Ukrainians vacationing in the EU this summer and $4.4 billion trade deficit in goods and services.
The gold rush to hryvnia bonds prompts the world business press to move optimistic forecasts on Ukraine’s economic outlook. In “World-Beating Rally Shows Euphoria as Ukraine Eases Bond Access,” Bloomberg quotes Andreas Schwabe, a Vienna-based analyst at Raiffeisen Bank International AG, saying the outlook for Ukraine “looks the best that it has for a long time…now there are a lot of new people in the parliament, it’s like a new beginning.” The Financial Times follows with a story “In Ukraine, bond markets enjoy a boost from Zelensky effect.” The FT writes: “Ukraine’s markets have soared as overseas investors, who largely fled the country after Russia’s annexation of Crimea, warm to its new reform-minded president Volodymyr Zelenskiy.”
Ukraine’s interest rates, exchange rates, and inflation rates are among statistics available at the click of a mouse of the National Bank of Ukraine’s newly revamped website: www.bank.gov.ua. Launched on Thursday, “the site displays on all devices,” reports the central bank. In London in March, the NBU won the Transparency Award, an international prize sponsored by Central Banking Journal.
Surging world iron prices pushed the EBITDA of Ferrexpo, Ukraine’s largest iron pellet exporter, up 59% during the first half of this year, compared to the same period last year. With this earnings figure hitting $372 million, the Swiss-based company has the cash to fund its $220 million capital expenditure program. By 2021, the company plans to increase pellet output capacity to 12 million tons a year. Listed on the London Stock Exchange at FXPO, Ferrexpo is a constituent of the FTSE 250 Index. Iron ore prices nearly doubled this year on production problems in Brazil and booming steel production in China.
Ukraine’s pipelines carried 53.2 billion cubic meters of gas from Russia to the EU and Moldova during the first seven months of this year, up 4.4% over the same period last year, reports Interfax-Ukraine, drawing on data from Uktransgaz, the state pipeline company. If current rates are maintained, Ukraine will carry 90 bcm, slightly above last year’s level. Next month, at 3-way gas transit talks, the EU is expected to ask for a 10-year transit contract guaranteeing 60 bcm flowing across Ukraine. Russia is expected to argue that it will not need Ukraine after 2021 because Nord Stream 2 will open next year with a capacity of 55 bcm.
Racing to fill its gas reservoirs before gas transit talks start with Russia, Ukraine pumped 2.3 bcm into its underground gas storage facilities in July, the highest monthly figure in four years. At this rate, Naftogaz will reach by Oct. 1 its goal of 20 bcm, enough to get through the winter heating season. If Russia stops sending gas through Ukraine on Jan. 1, when the contract expires, gas flows will have to be reversed, pumping gas from west to east. Last year, Ukraine cuts it natural gas imports by one quarter, thanks to conservation, a mild winter, and growing domestic production.
Four months after launching a duty-free warehouse regime for foreign companies to store natural gas in Western Ukraine reservoirs, 31 foreign companies are storing 1.4 bcm, reports Andriy Kobolyev, CEO of Naftogaz. He writes on Facebook: “This figure significantly exceeds our previous expectations.”
Ukrtransgaz launched Thursday a website to help foreign companies store their gas in Ukraine, the Ukrainian Gas Storage Operator. Already, the platform has 466 registered users from 264 companies. “We provide an opportunity for traders to transport gas at very competitive prices through Ukraine between Poland, Hungary, Slovakia and Romania,” Sergey Makogon, the company’s strategy and business development director, writes on Facebook. “These are the first serious steps to create a regional gas hub with a center in Ukraine.”
Dragon Capital is negotiating to buy two more shopping centers in Ukraine — Sun Gallery in Kryvyi Rih and City Mall Zaporizhzhia – Arricano Real Estate Plc, the owner, announces in a posting on the London Stock Exchange. Listed on the LSE’s Alternative Investment Market, Arricano currently owns five shopping centers in Ukraine, 49.9% of Kyiv’s Sky Mall and land for three sites for development. “Received funds will be meant for the development of portfolio and strengthening of the company’s positions,” Arricano CEO Mykhailo Merkulov told Interfax-Ukraine of the potential sale.
The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.