UKRAINE: Market of Growing Opportunities Country Presentation Finpro Ukraine 2007

Ukraine Country Presentation Basic Information Area (sq km)603,700 (about twice bigger than Finland/Germany) Population (million)46.46 mln. people CapitalKyiv LanguagesUkrainian, Russian Literacy rate98% CurrencyHryvnia (UAH) Remarkable facts: Ukraine is the biggest European country by territory Ukraine possesses 1/4 of word’s black soil

Ukraine Country Presentation Regional Focus: Geographic Structure Administrative division: 24 oblasts, 1 autonomous republic of Crimea, and the cities of Kyiv and Sevastopol The biggest regions are: Kyiv, Donetsk, Dnipropetrovsk, Odessa and Kharkiv.

Ukraine Country Presentation Regional Focus: Population Structure 5 biggest regions account for 34.5% of the total population Usual expansion path of foreign business: Kiev – Donetsk – Dnipropetrovsk – Odessa – Zaporizhya – Lviv Kyiv city accounts for: 6% of the population 19% of retail turnover 27% of construction activities 33% of FDI attracted.

Ukraine Country Presentation Comparing with Peers Foreign investors come to Ukraine mostly either through Russia or Poland The countries are close in industry structure, market size and mentality Ukraine is comparable with Russia in terms of risks. Opportunities Risks -- Ukraine -- Russia -- Poland General market characteristics: Underutilized investment potential = high growth prospects Low level of market saturation High profit margins (20% average). Economic DataUkraineRussiaPoland GDP $ billion, Inflation %, Exports $ bln., Imports $ bln.,

Ukraine Country Presentation Macroeconomic data dynamics: GDP GDP growth dynamics rate has been the highest among European countries during recent years

Ukraine Country Presentation Macroeconomic data dynamics: inflation and exchange rate Exchange rate: UAH/USD CPI

Ukraine Country Presentation Industry Structure Share in industrial output

Ukraine Country Presentation Sector Growth, , %

Ukraine Country Presentation Foreign Direct Investments in Ukraine, end of period, bln. USD FDI dynamics in recent years has been one of the fastest among the developing European countries, however the by aggregated volumes of FDI Ukraine is still far behind the comparable countries: Poland USD 80 bn, or USD 2,100 per capita Russia USD142 bn, or USD 1,000 per capita Ukraine USD 22 bn, or USD 458 per capita

Ukraine Country Presentation Foreign Trade: imports from Finland, mln EUR Imports from Finland accounts for 1,3% of Ukrainian total import.

Ukraine Country Presentation Finnish Companies in Ukraine Today about 60 companies representing Finnish businesses operate in Ukraine FDI: Konecranes Ruukki Sanitec Tikkurila Trading activities: UPM - Kymmene Abloy M-Real Orion Corporation (pharmaceutics) Oras Nokian Renkaat Huurre Cold Stores Aspokem

Ukraine Country Presentation SWOT analysis of Finnish companies doing business in Ukraine Strength High reputation of the quality of Finnish products High credibility of Finnish companies Good match of Finnish technologies and products to the existing demand Weaknesses Week knowledge about the market Slowness in making decisions Low awareness of Finnish brands due to the lack of advertisement and publicity Low level of penetration to the market Opportunities High demand for equipment and technologies in many sectors Energy efficiency projects Cooperation in high-tech sector Outsourcing Threats Managing Ukrainian risks especially in the beginning stage of development Relationships with partners and clients

Ukraine Country Presentation Opportunities in selected sectors: Construction Market of construction materials retailers is 35-40% full, thus it is far from saturation Sector of construction has been the third fastest growing among others in 2006 from EUR 15 to 20 bn will be invested: 3 five-star hotels, 10 four-star and three- star hotels 2 stadiums of 35,000 seats and reconstruction of several existing stadiums to 75,000 seats renovation of roads, airports etc.

Ukraine Country Presentation Opportunities in selected sectors: Retail According to the international credit agency A. T. Kearney, Ukraine is the 4th most attractive country in retail after India, Russia and Vietnam Retail turnover is estimated to be growing 20% annually Market is non-consolidated, at the same time competition remains low Metro, Billa, Spar are at the market, Auchan and others are to enter the market

Ukraine Country Presentation Opportunities in selected sectors: Metallurgy 7th largest in the world 4th place in the world by ore deposits 30% of GDP 500,000 people employed Most producers have international certificates of quality Obsolete equipment Energy efficiency technologies is of highest priority

Ukraine Country Presentation Opportunities in selected sectors: Power industry About EUR 13 bn needed to replace the obsolete equipment (60-80%) Most of the companies are in private hands According to Investment Program of Ministry of Fuel and Energy, Ukraine plans to attract USD 3.5 – 4 bn for energy sector development in 2007 – 2008 High volume investments from the side of international financial institutions, including the following projects: Modernization of power – generation units at Rivnenska and Chmelnicka nuclear power stations (EBRD, USD125 mln loan) Development of efficient energy transmission (IBRD, USD196 mln loan) Reconstruction of Hydroelectric Power Stations (IBRD, USD103.6 mln loan)

Ukraine Country Presentation Opportunities in selected sectors: Machine building Full cycle of machinery building with wide range of products 54 enterprises of the industry are to be privatized in 2007 Opportunities for outsourcing and joint ventures are virtually unlimited

Ukraine Country Presentation Opportunities in selected sectors: Food processing About 20% share in the output or processing industries Accounts for about 15% share of FDI Selected foreign investors: BBH Sun Interbrew Nestle Kraft Coca-Cola Wimm-Bill-Dann

Ukraine Country Presentation Methodology and Contacts The information presented in the slides is based on the State Committee of Statistics data, National Bank of Ukraine, World Markets Research Centre data, research agencies, industry experts opinions, and other publicly available sources. Finpro Ukraine, Finland Trade Center Embassy of Finland 16 Striletska St., office Kyiv, Ukraine Tel.: Fax: