Ukraine

December 2008

ECONOMY - The Ukrainian economy is plunging: the Ukrainian stock market has plunged by nearly 80% in 2008, hryvna recently hit a seven-year low against the dollar, Prominvest - the 6th largest bank - suffered a run, rating agencies have issued downgrades, inflation is 20% and the loan interests are now back to above 20%.

IMPORT DUTIES - After gaining agreement from the World Trade Organization and the International Monetary Fund, Ukraine may increase import duties to 20% for fish, meat and furniture.

ENERGY - Gazprom will suspend gas supply to Ukraine after Dec 31 if the 2.4bn $ debt to Gazprom is not paid. The Ukrainian natural gas company Naftogaz denied being in debt directly to Gazprom but instead to an intermediary company half-owned by Gazprom and that the debt is only 1.3 bn $. Gazprom pressures Ukrainians also with a possibility to move directly to world market pricing, instead of 2011, in case the dispute is not settled.


October 2008

PARLIAMENT DISSOLVED - Ukrainian experts expect the dissolution of the Ukrainian parliament to weaken further the foreign investors' confidence on the development prospects of the country.

ECONOMY - The 1-9/08 inflation rate in Ukraine was 16.1%. The y-o-y inflation rate in September was 24.6%.

GAS PRICE - Gazprom, Russian energy giant, said that its export gas price for Europe has reached an all-time high of over $500 per 1 000 cubic meters. In the light of this Gazprom suggested that the price for Ukraine could more than double to $400 in 2009. Yulia Tymoshenko commented this by saying that this price would cause an "absolute shock" to the country's economy.

FOREIGN INVESTMENTS - The European Bank for Reconstruction and Development (EBRD) plans to invest 1 Bn EUR into projects in Ukraine by the end of 2008.

STEEL INDUSTRY - Ukraine's steel sector, the backbone of the country's economy, is in "critical" shape and urgent measures are needed to help the industry weather rapidly falling demand, major sector companies warned. A decline would have an extremely negative impact on Ukraine's economic growth prospects.

AVIATION - Several low-cost passenger airlines hope to launch flights in Ukraine during the fall offering less expensive direct flight tickets between Kyiv, European cities and Dubai.


August 2008

ECONOMY - Ukrainian economy grew by 6.4% y-o-y in Jan-May 2008. Industrial production grew by 7.5% y-o-y from Jan-Jun 2008. Manufacturing, particularly machinery and equipment, and trade were the main driving forces, whereas value-added in construction fell.

ECONOMY - Despite high inflation, real disposable income grew by 17.7% y-o-y in Jan-April - again outpacing productivity growth. Loan growth amounted to 74.8% y-o-y in April, although during 2008 banks have become much more strict in giving out loans.

RETAIL - Serbian retailer Delta has agreed to form a partnership with Russian investment group Ritzio to develop network of hypermarkets in Ukraine and Belarus with an investment size over 700 M$.

MANUFACTURING - Polish bathroom fittings manufacturer Cersanit CRSA WA is set to open a new ceramic tiles plant in Ukraine as an action to limit the negative impact of the soaring zloty.

RETAIL - British retailer Marks & Spencer opened its first store in Ukraine in May, last year and intends to open three more.

CONSTRUCTION - Germany's Knauf has decided to suspend its investment activities in Ukraine due to rising inflation and speculation on the real estate market, which have led to the stagnation of the construction sector and a slump of construction materials sales.

BROADBAND - Broadband market revenues in Ukraine jumped 65% to 73 M$ in the first quarter, versus 44 M$ in the same period last year. The total number of broadband internet subscribers in Ukraine has exceeded million residential and corporate customers in the first quarter, up from 620 000 year ago. The number of residential subscribers jumped 75% y-o-y, to 860 000. Broadband internet penetration of Ukrainian households rose year-on-year from 2.8% to 5.0%.


May 2008

ECONOMIC DEVELOPMENT - Ukrainian Real GDP grew in 2007 by 7.6% and by 6 % yoy in Q1/08. Risks have increased as inflation run at 26% in March. High inflation is caused by high food prices and the government?s largesse. The situation is being made worse by Ukraine?s currency being pegged to the US dollar. There seems to be no escape from high inflation due to the Prime Minister Tymoshenko lacking support from the Parliament to push through budgetary amendments and because of her populist policies, designed to broaden her appeal.

EURO 2012 SOCCER CHAMPIONSHIPS - The high level investment framework for the Euro 2012 event was published which divides 17 Bn EUR in the following manner:
12.4 Bn EUR for transport infrastructure
1.6 Bn EUR for sporting venues
3 Bn EUR for tourist facilities

PRIVATIZATION - The Ukrainian government will privatize Ukrtelecom, the incumbent telco, through auction in mid June with a starting price of 2.4 Bn $. The announced starting price is at the lower price range of 2.4-3 bn $ recently mentioned by the Ukrainian government. The current market value of the government owned 67.8% of the company is 2.54 bn $.


March 2008

WTO - The World Trade Organization (WTO) approved the accession terms of Ukraine, paving the way for the country's full membership. Ukraine's legislative body is set to ratify the agreement by July 4, and the country will become a full-fledged WTO member 30 days after the ratification.

PRIVATIZATION - Ukrainian government approved a list of 406 companies set to sell their state-owned shares during 2008. Some of the most significant state shares are in fixed line telephone company Ukrtelekom (68%), Odesa Portside Plant (99.6%), turbine producer Turboatom (75%) and six different energy distributors (25-27%).

BANKING - Intesa Sanpaolo, an Italian banking group, has agreed to pay EUR 504 mln for 100% of Pravex Bank, a mid-sized Ukrainian bank, marking the group's expansion in Eastern Europe. The acquisition comes almost a year after Intesa has failed to buy a bigger Ukrainian bank, UkrSotsBank, when regulators had suddenly delayed the approval of the deal.

BANKING - Russian Sberbank has bought 100% of the Ukrainian bank, NRB, for USD 150bn. The purchase comes on the back of almost two years of negotiations. The bank is to spend USD 125 mln to increase the capital of its Ukrainian operation and open additional branches in order to increase its share of the Ukrainian market to 10% by 2008.

COMMUNICATIONS - Telesystems of Ukraine (the PEOPLEnet trade mark) plans in 2008 to invest USD 90 mln in the development of the company. Recently, the company started providing services in the Dnipropetrovsk region city of Nikopol, and in two months it plans to provide services in another 11 cities: Mykolaiv, Luhansk, Kherson, Sumy, Vinnytsia, Khmelnytsky, Zhytomyr, Mariupol, Poltava, Kremenchuk and Cherkasy.


January 2008

ELECTIONS - The Ukrainian parliament voted on 18th December in favour of the appointment of Yulia Timoshenko as Prime Minister. 226 MPs of the Timoshenko Block and of Our Ukraine/Self Defence led by Viktor Yushenko, ie the strict majority of the 450 seats in Parliament supported her candidature by a show of hands against one abstention. The other parties boycotted the vote. Yulia Timoshenko has won back the place she occupied until September 2005.

BANKING - Israel?s largest bank, Hapoalim, announced the acquisition of a 75.8 percent stake of the Ukrainian Innovation Bank (Ukrinbank) for $136 million. According to Dragon Capital the sale of Ukrinbank confirms continued strong interest among foreign strategic investors toward the Ukrainian banking sector. The acquisitions of 20 Ukrainian banks have attracted $6.8 billion since 2004, according to Dragon Capital analyst Oleh Pronin. He said that a third of the banks were acquired in 2007, with UniCredit Group's recent acquisition of Ukrsotsbank for $2.2 billion and Commerzbank's takeover of a 60 percent stake in Forum Bank for $600 million representing the two largest acquisitions of the year.

ENERGY - Ukraine's state energy firm is near bankruptcy. Ukraine's state energy company Naftogaz is on the verge of bankruptcy and a special commission will be formed to try to save the group. Company's estimated losses for 2007 are 1.0 billion dollars.

LOGISTICS - Private financial - industrial group intends to build container terminal in the territory of the Odessilmash farm machine-building company in Odessa. A representative of Odessilmash says that the capacity of the terminal is TEU 2 - 2.5 million a year, and its construction will cost USD 400 - 500 million. The source specified that the high price of the project in the first place owes to the fact that the company is located beyond the borders of hydro engineering facilities of the Odessa merchant port, which will take extra costs on formation of a water basin, construction of an approach canal and a pier. "Interest in the project construction owes to the active free market demand for Ukrainian container haulage capacities. An important factor is the advantage of our company, which was formed on the basis of a big plant located in the coastal zone," the source said.