KYIV RYSING is a comprehensive study focusing on the business ecosystem of Ukraine, developed by Kyiv Consulting for the purpose of improving the visibility of our country within the global information space.
The name “KYIV RYSING” and particularly the letter “Y”, implies emphasising the real potential of Ukraine and, especially, Kyiv in the context of PAST and PRESENT events, as well as FUTURE plans and opportunities by addressing the conceptual topics: historical prerequisites for the full-scale Russian invasion of Ukraine; the current impact of the war on military, social, economic, and environmental spheres, both in Ukraine and globally; future opportunities and action plans in the development of New Age Ukraine after the victory in the war against Russia.
We believe that Ukraine will offer a variety of business and investment options in the post-war period, as the times of big challenges come with big opportunities. Therefore, the study aims at highlighting the economic potential of our country along with the future global role of strong and democratic Ukraine.
KYIV RYSING study is based on the application of our comprehensive data-driven approach, which allows us to generate and combine insights from different sources. It includes official facts and figures from Ukrainian and international public sources; results of the survey conducted among the Ukrainian population, as well as interviews with opinion leaders, including top business representatives, international politics, and military experts. This approach allows us to evaluate the situation from a 360-degree perspective and share it with our international audience.
The annexation of Crimea in 2014 and the start of the military aggression of Russia in Donbas deprived 20% of the Ukrainian economy, while the total damage amounted to 150 Bn USD. In 2015, real GDP decreased by 9.8% compared to 2014, and during 2014-2016, the Ukrainian economy lost 38% of its GDP because of the banking system crisis. To cope with the growing inflation and budget deficit, the government conducted a number of reforms to stabilise the macroeconomic and fiscal policies. Another disruptive factor impacting the Ukrainian economy was the COVID-19 pandemic that started in 2020, causing a 3.8% decrease in the Ukrainian GDP compared to 2019. But the increased demand for Ukrainian goods, especially metal and agricultural products, revived economic growth in 2021. Before the war, the GDP was forecasted to grow by 3.2% in 2022.
Since 1991, the IT sector in Ukraine has boosted its development thanks to highly professional IT specialists and the growing interest of global tech companies. Google, Oracle, and Ericsson were among the key global firms that established R&D centres in Ukraine. Despite a relatively small share in GDP in 2021 (2.7%), IT services increased their share in service exports to 37%, with the USA and the UK being the leading export destinations. In recent years, the IT sector generated twice as much export revenue as the gas transmission system or 25% of the agricultural sector’s export revenue.
As of 2021, 5,000 IT companies are operating and over 289 thousand IT specialists are employed in Ukraine. IT firms have grown in both size and number, creating a demand for high-quality office spaces with robust tech infrastructure, hosting over 3,000 tech events, and investing approximately 832 million USD in start-ups.
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In 2020, Ukraine launched the Diia application, which enables Ukrainian citizens to use digital documents on their smartphones instead of physical documents for identification and sharing purposes.
During the war, the Ukrainian IT sector managed to slightly strengthen its position compared to other industries. In March-May 2022, the IT sector generated 1.7 Bn USD in sales — 6% higher than in the same period in 2021. Such a positive performance was mainly driven by a successfully implemented remote work scheme, active international contracts, and a general trend towards opening offices outside Ukraine to hedge the operating risks. On the other hand, since February 2022, all exporters, including the IT industry, have been obliged to exchange their revenues into foreign currency at a fixed rate, which is about 10% lower than the market rate, hence lowering the IT industry’s profits.
Although IT companies have successfully moved a part of their employee workforce out of Ukraine and continued operations, the invasion has brought new challenges to the IT sector, provoking uncertainty as to the future path and the development of the IT industry in Ukraine.
The value of Ukrainian land is determined by two main factors, such as fertility and the ability to harvest in local climatic conditions through land reclamation and fertilisation. More than 60% of the territory of Ukraine is covered by ‘chornozem’, a black-coloured soil containing a high percentage of humus, providing a high potential for the agricultural sector. Moreover, Ukraine plays a key role in ensuring global food security, by owning almost 30% of the world’s chornozem. These fertile soils enable the growth of a variety of grains, oil crops, vegetables, and fruits.
In 2021, the agricultural sector in Ukraine had one of the largest shares in the country’s real GDP — 10.3%. In addition, Ukraine has harvested the biggest crop of cereals, legumes, and oilseeds since its independence, thanks to favourable weather conditions and the state aid programme of affordable loans to farmers. As a result, the agricultural export revenue kept growing and reached a record 43.9% of the total Ukrainian exports.
Ukrainian main agricultural products, corn, wheat, and sunflower, are grown throughout the country, primarily in the southern, eastern, and northern regions. In 2021, Ukraine exported more than half (59%) of its corn and wheat harvest, as well as 91% of sunflower oil, becoming the world’s largest sunflower producer and sunflower oil exporter.
To accommodate the entire crop of corn grown in Ukraine in one year:
Ukrainian agricultural production significantly exceeds its domestic consumption, about 70% of all agricultural products are exported. Thus, Ukraine has been participating in ensuring global food security for many years, exporting most of the grain and oil harvest to the countries of Europe, Asia and Africa. From the first days of the Russian war against Ukraine, the Russian military blocked almost all Ukrainian seaports, about 70 ships, the country's main export route, disabling the export of Ukrainian agricultural products, which affected global food security and sharp price increase.
After the blockade of Ukrainian seaports, Ukraine started exporting grain to the EU by railway. Since the launch of grain, sunflower oil, and meal railway export to the EU, Ukraine targets to increase the maximum capacity of transshipment railway stations to about 1.5 million tonnes of grain per month. During March-August 2022, Ukraine exported almost 4.4 million tonnes of grain and about 1 million tonnes of sunflower oil and meal by railroad.
On July 22, Ukraine and Russia signed an agreement, called the Black Sea Grain Initiative, with Türkiye and the United Nations, which enabled to unblock the export of grain and food products from the Ukrainian seaports of Odesa, Chornomorsk, and Pivdenny. As of 9 September, 108 ships left three Ukrainian seaports for grain and food products transportation to more than 20 countries in Asia, Europe, and Africa.
Russia's war against Ukraine also led to fuel and fertiliser price growth worldwide, causing further food shortfalls and price increases. Global food prices rose sharply and reached the highest historical level in March. That was mainly driven by supply shortages of key commodity crops, such as wheat, corn, and oil seeds.
You can explore more about the impact of the Russian invasion of Ukraine on the global market in chapter Present of KYIV RYSING study.
The Antonov An-225 "Mriya", the largest and heaviest airplane ever, was constructed in only one instance in Ukraine in 1988. The cargo plane was built using Ukrainian expertise and resources. The majestic "Mriya" could transport the heaviest of industrial stock, including railway engines, and was big enough to hold 50 cars.
The AN-225 has set over 200 world records, including airlifting the world’s heaviest cargo and the world’s longest cargo. An aircraft held world aviation records for flying heavy payloads. One of them occurred in 2004, when "Mriya" flew a 247-tonne piece of oil pipeline machinery. It has also taken humanitarian aid to disaster scenes as medical supplies and non-lethal military equipment.
Totally, Ukraine had 20 airports with 258 aeroplanes in the park, serviced by 45 operators.
Since the Russian invasion of Ukraine, automotive industry in Ukraine met challenges: various automotive parts producers have stopped their operations in Ukraine, affecting automotive manufacturing in Europe. Despite Ukraine having a small automotive parts industry, it has been a key supplier of wiring harnesses for Volkswagen, Opel, Mercedes-Benz, BMW, Audi and Lamborghini factories in Europe.
Steel, heavy manufacturing, semiconductors, automotive, and other industries that rely on supplies from Ukraine are experiencing shortages of resources and taking action to mitigate the evolving supply chain crisis caused by the Russian invasion of Ukraine.
In 2015, the Natural Gas Market Law was passed with the objective of matching the Ukrainian gas sector with the EU doctrines. The law set the regulatory basis for the unbundling of gas storage facilities, LNG terminals, and distribution system operators. It created access to gas transmission, distribution, and supply networks for the private sector, allowing companies to sell gas to any consumer, including households.
In 2019, the Ukrainian gas market switched from monthly to daily balancing, and an online information exchange platform was launched by the Gas Transmission System Operator of Ukraine (GTSOU) to increase transparency. That year, there were already 347 private companies operating in the wholesale gas market, 408 companies in transmission activities, and 449 companies in gas storage. In line with EU market principles, the state-owned enterprise (SOE) Ukrtransgaz became the gas storage facilities operator, and a new SOE GTSOU has been engaged in natural gas transmission since then.
In 2021, Ukraine was the fourth-largest producer of gas in Europe. The country has one of the largest gas transit infrastructures in the world, with the second-largest storage capacity in Europe.
The Zaporizhzhia Nuclear Power Plant, which consists of six nuclear power units of 1 million kW each, is the largest nuclear power plant in Europe and the 6th largest in the world.
Ukraine is one of the world’s leading nuclear countries by the number of reactors (15 of them being located at 4 nuclear power plants) and net electrical capacity. In order to ensure the robust and safe operations of all these nuclear installations, the country developed a comprehensive security monitoring system.
According to the Energy Strategy of Ukraine 2035, alternative energy in Ukraine, especially nuclear power, which is regarded as one of the most cost-effective low-carbon energy sources, and its generation volume in the total electricity supply is expected to increase. Apart from NPPs, there are also other nuclear objects in Ukraine, such as radioactive waste storage sites, experimental nuclear centres, facilities for the extraction and processing of uranium ore, etc.
Ukraine’s land has mineral resources in high concentrations. Due to the unique raw material base of iron and manganese ores, Ukraine is one of the countries with the most developed ferrous metallurgy in the world.
There are now more than 20,000 mineral deposits in Ukraine, representing 117 distinct mineral categories. Coal, natural gas, manganese, salt, oil, graphite, sulfur, kaolin, titanium, nickel, magnesium, timber, mercury, and gallium are some of them. Over 5% of the world’s iron ore reserves are found in Ukraine. Moreover, Ukraine was the 4th largest country in 2021, which exported 45 million tonnes of iron ore. Also, Ukraine has the potential for a larger exploration of non-metallic minerals, which may reduce the dependence on the import of certain types of raw materials.
Despite the existing risks and limitations regarding the attraction of resources for the recovery of Ukraine from foreign partners, the country’s economy offers a wide range of competitive advantages for investors. These advantages, combined with the necessary financing, should form the basis for building an economy integrated into global production chains, with a high share of value-added products exported to foreign markets. International investors can highly benefit from leveraging the existing and future opportunities in these sectors, as well as multiplying the number of business opportunities and establishing a long-term business in Ukraine. The ambitious benefits of the economy of Ukraine for investors are high coverage of consumer markets, skilled and competitive labour force, a highly promising IT sector, investment opportunities in various industries, numerous finance incentives schemes, a large base of natural resources and raw materials, a developing ecosystem, favourable geographical location and reasonable cost of living and doing business.
The country offers a number of investment opportunities in various manufacturing sectors, including machinery and metallurgy, aerospace, fashion, automotive, and pharmaceuticals. A large manufacturing base, as well as access to talent and markets, create favourable conditions for international investors. Opportunities for European investors in the manufacturing sector of Ukraine are a developed R&D network and business ecosystem, cost efficiency, reliable supply, large production capacity and highly skilled experts.
Ukraine has already been deeply integrated into the global manufacturing supply chains, especially in semiconductors, steel, heavy manufacturing, automotive and aerospace sectors. However, the majority of exported products from Ukraine are low value added, and represent only primary levels of supply chain. Despite this, Ukraine has the potential to expand the high-value added production, integrate more deeply into supply chains, and become a regional manufacturing hub, especially for the European market.
