Overview of best prospect sectors, major infrastructure projects, significant government procurements and business opportunities.
Agribusiness – CS Ukraine holds a positive long-term view on sales prospects for U.S. agricultural machinery and equipment manufacturers in Ukraine. Although Ukraine is a major global producer, its agricultural sector is under-equipped and much of its existing agricultural machinery is outdated. Overall, 30% of agricultural machinery needs to be replaced. This requirement is concentrated among approximately 10% of Ukrainian companies that need to replace from 70 to 80% of their machinery fleet. Sub-sector best prospects include:
- Tillage equipment
- Seeding equipment
- Sprayers and fertilizer distributors
- Grain storage and handling
- Irrigation Infrastructure
- Agricultural chemicals, including growth enhancers and micronutrients
Defense – Spending growth, high demand for defense equipment, and strong local manufacturing capabilities in some segments of the defense industry are boosting Ukraine’s defense sector. However, factors such as corruption and non-transparent governance on the sector’s overall performance. Strong demand for defense equipment domestically, improvements in the sector’s structure and procurement processes, as well as growing international defense industry collaboration and trade ties will benefit Ukrainian defense manufacturers in the longer term.
In 2019 Ministry of Defense (MOD) financing reached UAH 102.5 billion (approximately $3.42 billion). About $566 million goes for procurement and modernization of weapons and military equipment. Ministry of Internal Affairs financing reached $ 2.7 billion. Overall, 2019 allocations for defense and security reached 5.38% of GDP.
Because of Ukraine’s acute need to reduce its dependence on Russian defense and military equipment, Ukraine seeks to diversify its equipment supplies by purchasing equipment from the U.S. and other Western countries. Sub-sector best prospects include:
- Components for radio communication equipment and radio-electronic components
- Engines for military vehicles
Education - With nearly 5.7 million students in a country the size of Texas, Ukraine is among the largest and most talented international student markets in Europe. Between 2009 and 2016 the number of Ukrainians studying abroad increased by 176% to reach 66,648 students studying in 34 countries. According to the most recent Open Doors Report of the Institute of International Education, 1,928 Ukrainian students went to the U.S. to study in 2018-2019, a 6.1% increase over 2017-2018. CS Ukraine strongly recommends that U.S. schools and universities explore Ukraine as a diversity market. Sub-sector best prospects include:
- Secondary Education
- Community Colleges
- Higher Education
Food Processing and Packaging Equipment - Harmonization of product standards with the European Union (EU) is underway and this, combined with Ukraine’s eventual accession to the EU, will fundamentally and positively affect Ukrainian trade in processed food. With increased trade and price competition, local producers will need to improve their competitiveness by upgrading and modernizing processing and packaging capacities. These changes will provide multiple opportunities for U.S. equipment suppliers. Sub-sector best prospects include:
- Animal fats and vegetable oil production
- Vegetable products/processing (including oils)
- Confectionary products/processing
- Dairy products/processing
- Meat processing
- Food packaging
Medical Equipment — In 2019, the Ukrainian medical device market was worth $524.7 million, and is projected to reach $549.6 million in 2020. Multiple factors are driving this growth: new healthcare legislation, which changes the way healthcare is financed; the comprehensive hospital sector; the ongoing World Bank project approved in March 2015; and Ministry of Health plans to expand the network of clinics in rural areas.
In 2019, imports accounted for 90 % of medical device sales in Ukraine. Major suppliers are China, the U.S., Germany, and Japan. The U.S. share was about 12 % of total imports, with almost 25 % of orthopedics and prosthetics imports. Sub-sector best prospects include:
- Diagnostic imaging equipment (ultrasound, computer tomography, magnetic-resonance tomography)
- Laser surgery devices
- Stents, pacemakers, and other equipment used in the treatment of heart conditions
- Orthopedics & prosthetics
- Dental equipment and materials
Oil and Gas Equipment - Ukraine has taken important steps to diversify fuel supplies and improve oil and natural gas production aiming to increase energy independence. Ukraine’s oil and gas industry plays a significant role in the country’s national energy security strategy. Over the past several years, domestic production has declined; the goal of increasing domestic production creates significant opportunities for U.S. companies in supplying equipment and technology. Sub-sector best prospects include:
Oil & Machinery
- Mobile workover rigs with 125 ton and 180 ton lifting capacity
- Casing pipes for wells, oil well tubing, drilling tubing
- Drilling muds and related services
- Downhole drilling motors and services
- Wide introduction of sidetracking technology
- Oil & gas upstream services
- Wells workover operations
- Seismic exploration works
- Hydraulic fracture works
- Coiled tubing services
Safety & Security - Ukraine’s safety and security market is currently undergoing unprecedented structural change due to multiple challenges, including the recent economic recession, the conflict in eastern Ukraine, and a bump in crime rates. Over the last few years, buyer purchasing power decreased, and low-cost suppliers from Asia flooded the market. In an environment of market contraction and cost-based competition, demand for relatively expensive western safety and security equipment exists primarily in the niche of advanced technology solutions where low-cost suppliers are uncompetitive. Sub-sector best prospects include:
- Document readers
- Biometric readers
- Explosives and drugs detectors
- Fire suppression equipment
- Advanced video surveillance cameras with video analytic capabilities
Infrastructure - Ukraine’s strategic location presents significant development opportunities for investors. Historically, Ukraine has been at the crossroads of world trade routes and a major transit point between Europe and Asia. Ukraine’s transit potential is 200 million metric tons per year, while its utilization is only 25-30 %. In 2019, the Government of Ukraine prepared a package of reforms to bring to changes to Ukraine’s infrastructure. The scale of the package is comparable to the integration of Eastern European countries into the European Union in the 1990’s and 2000’s.
Ukraine plays an essential role for the European Union as one of the key countries for the transportation of goods to and from the EU, especially since the European Parliament approved a transportation infrastructure development project turning the national transportation systems of European countries into a unified trans-European network (the TEN-T program. Ukraine was included in the plans for the European transport network TEN-T initiative, part of the framework of integrating Ukrainian and European transport networks and following the Brussels Eastern Partnership Summit. The plan for construction of the Trans-European Transport Network TEN-T includes 39 Ukrainian infrastructure projects envisaged by the national strategy Drive Ukraine 2030, at a cost of almost $5.3 billion.
It is thought that Ukrainian infrastructure requires an additional $20-25 billion of overall investment by 2030 with $8-10 billion of private investments annually over the next 10 years. The Government of Ukraine is only able to finance about $1.5 billion of infrastructure projects annually.
In 2019 Ukraine announced a number of new developments under the country’s ‘Great Construction’ project. Information on this initiative can be found here: https://www.president.gov.ua/en/news/sim-novih-shkil-bude-zdano-u-volinskij-oblasti-cogo-roku-vol-62169. The government also plans to spend 100 billion UAH ($3.7 billion USD) on road construction alone, which it hoped would create 170,000 jobs.
The primary segments of Ukraine’s infrastructure industry are:
- Transport infrastructure: Ports, harbors and waterways infrastructure, airports, roads, railway, postal and shipping services.
- Construction: residential and non-residential building