Ukraine – a Budding Destination for Your Shared Service Center October 2018 General Overview
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Ukraine – a Budding Destination for Your Shared Service Center October 2018 General Overview Ukraine continues to be an attractive new retail new international market for different industries. 37 brands >5 airlines Since our previous report, which was H&M, IKEA, Under Armour, Zara Home, etc. Qatar Airways, Ryanair, Brussels Airlines, etc. released in October 2017, the following major brands entered the Ukrainian new technological new international market. >3 services 2 hotel chains Apple Pay, Google Pay, Xoom, etc. Aloft, Mercure Six shared service centers (SSC), a vast number of BPOs (business process >60 BPOs >100 R&Ds outsourcing ) and R&D centers successfully BPOs provide the following services: TOP-20 IT/R&D companies key facts: data entry, customer support, >40k IT specialists, clients from Europe, operate and now are expanding operations accounting, etc. UK, USA from Fortune 500 in Ukraine. Several companies are currently considering Ukraine as a destination for SSC/R&D. We hope to announce new names soon. Location Country Approximate Foundation Company Industry Services in Ukraine of Origin Headcount Year Logistics, procurement, AB InBev Food processing Kharkiv Belgium 600 2009 HR and financial services Gruma Food processing Cherkasy Mexico Financial services n/a n/a EMEA SSC Pereyaslav- Financial services, procurement, KOSTAL Automotive Germany n/a 2006 Khmelnytsky sales, R&D, and other functions NESTLE Food processing Lviv Switzerland Financial services 1089 2010 PwC Service Professional Audit, tax 350 Lviv United Kingdom 2018 Delivery Center services and advisory services (target) Personnel administration, VEON Telecommunications Lviv The Netherlands financial services, procurement, 247 2016 (Vimpel Com) and other functions Source: official companies’ websites Recent reforms Ease of Doing Business rank Change of Doing Business indicators from 2012 to 2017 and developments have a favorable impact 2017 76 Dealing with Construction Permits 148 on Ukraine’s business 2016 80 Paying Taxes 122 environment. Ukraine Registering Property 85 is steadily improving 2015 83 Getting Electricity its ranking in ‘ease of doing 38 2014 96 business’, showing Protecting Minority Investors 36 advancement primarily 2013 112 Trading across Borders 26 in deregulation Resolving Insolvency 8 and paying taxes. 2012 137 Starting a Business -2 Getting Credit -6 Source: Doing Business by the World Bank Enforcing Contracts* -40 *Based on our experience, the enforcement of contracts in Ukraine in terms of time and cost may be substantially improved on a case-by-case basis by means of engaging professional assistance for negotiation and shaping the agreements 2 Proximity to Operations Ukraine has significantly improved air connectivity with other countries. 10.5 m +27.5% New airlines and lowcosters entered Total number of passengers in 2017 Increase in passenger traffic in 2016/2017 the Ukrainian market, making logistics easier and more affordable in terms of both intercity and international UTC +3 U TC +2 flight connection. Summer timezone (March – October) Winter timezone (October – March) Operating international airports Hubs: Munich, London Heathrow, Warsaw, New York, Amsterdam, Paris, Doha, Istanbul, and 70+ cities Hubs: Vienna, Istanbul, Munich, Warsaw, Rome, Hubs: Warsaw, Madrid, Tel Aviv, Vienna, Milan, Istanbul, and 15+ cities and 5+ cities Kyiv Kharkiv Lviv Hubs: Tel Aviv, Vienna, Poltava and 3+ cities Vinnytsia Ivano-Frankivsk Dnipro Chernivtsi Zaporizhzhia Odesa Kherson Hubs: Vienna, Warsaw, Dubai, Prague, Istanbul, and 8+ cities Visa requirements Visa-free regime for Ukrainian passport Ukraine’s migration policy allows citizens of 68 countries to use a visa-free regime. Visa is not holders required for a stay of up to 90 days within a 180-day period for EU, UK, USA, UAE, Canada, etc. Passport Power Visa is required 24 Rank (out of 90) Other countries must get the Ukrainian visa to enter the country. Visa-free (including For certain countries a simplified visa application process is available. 91 Schengen area and the CIS countries) E-visa Visas upon arrival in airports Since April 2018 foreigners-holders Foreigners holding passports of these of passports of 45 specified 31 countries** may apply for their Visa on arrival 41 countries* may apply for single-entry short-term (C type) 15-day Ukraine’s electronic visa (e-Visa). tourist or business visas on arrival Single entry tourist or business at "Boryspil" / "Kyiv (Zhuliany)" / 66 Visa required visa valid for up to 30 days. "Odesa" international airports. * Australia, Indonesia, New Zealand, Saudi Arabia, Mexico, Qatar, etc. Scan QR-code to see the whole list of countries ** Australia, India, Malaysia, New Zealand, Singapore, etc. Scan QR-code to see the whole list of countries 3 Labor Availability Ukraine is a country with significant high-qualified labor potential. More than 14 million people with advanced education live and work in Ukraine. Educational Statistics in Ukraine Kyiv Lviv Kharkiv UAI (universities, academies, institutes) 289 UAIs in 2017/2018 Dnipro Students at the UAI 1.33 mln students in 2017/2018 Odesa Graduates from the UAI 360k graduates in 2017 Educational Statistics by selected regions in 2017/2018 Kyiv City 70 352k 95k Number of students by specialty Odesa Region 21 93k 28k Economics/Finance 247k Dnipropetrovsk Region 24 94k 26k Kharkiv Region 35 154k 38k Information Technology 82k Lviv Region 22 109k 28k Technological 104k Labor force with advanced education in 2016/2017 Lithuania 1.21 1.19 67.4 4% Slovakia 1.99 1.97 Ukraine’s labor force with advanced education in 2016* Hungary 3.32 3.24 Czech Republic 3.80 3.85 Ukraine 14.40 14.01 Romania 7.15 7.21 Poland 14.36 14.15 2015 2016 2017 *Statistics on 2017/2018 is pending 4 Labor Costs There is a variety of high-qualified and experienced workers in Ukraine with the reasonable level of remuneration level. Net salaries for selected professions provided by Adecco Ukraine* Vacancy Dnipro Kharkiv Kyiv Lviv Odesa Accountant min $243 $243 $329 $260 $292 avg $274 $303 $445 $330 $592 max $305 $363 $561 $401 $892 Call center employee min $214 $178 $350 $283 $178 avg $294 $267 $621 $587 $356 max $375 $357 $892 $892 $535 Customer relations specialist min $250 $250 $321 $232 $214 avg $300 $321 $627 $366 $321 max $350 $392 $933 $500 $428 Financial analyst min $210 $140 $250 $140 $210 avg $420 $510 $710 $470 $520 max $1070 $1070 $1860 $890 $1200 Technologist/Design engineer min $250 $210 $210 $290 $140 avg $410 $520 $640 $540 $500 max $890 $1500 $1500 $1070 $1200 IT Administrator min $350 $550 $600 $500 $500 avg $900 $1000 $1000 $1000 $1000 max $1500 $1500 $1800 $1400 $1600 QA min $480 $500 $500 $480 $440 avg $1100 $1300 $1500 $1350 $1200 max $2250 $2850 $3000 $2700 $2600 IT Developer min $500 $650 $700 $600 $700 avg $1700 $1750 $2090 $2000 $1800 max $3700 $4000 $4000 $4000 $4000 *Net salary does not include additional pay for the knowledge for foreign language skills. Additional bonus should apply. Country avg. salary, USD, incl. employer tax Officially employed Private entrepreneurs (widely used in IT industry) Ukraine 316 2017 395 2018 22% Lithuania 1130 Social security 5% 1431 contribution rate* Income tax 989 Romania 1464 1307 Poland 1379 18% 1342 Personal income tax** Slovakia 1586 Hungary 1285 1606 1.5% Czech Republic 1473 1961 Temporary military tax** *Social security contribution is payable by employer and private entrepreneurs. The base for social security contribution calculation is caped, thus, it can not exceed ~ $440per employee per month. Nominal amount (<$30) per month is paid by every private entrepreneur ** Personal income tax and military tax is payable by employee on PAYE basis 5 Office Market The Ukrainian office market has overcome the crisis: business is stepping up boosted by the tenants’ keen interest in new office space. Kyiv Lviv Kharkiv New office premises expected to be placed in operation in the five selected cities make approximately 10% of GLA in each city. Dnipro Basic Odesa indicators Kyiv 1,820,000 23-29 10% 2.93 1H 2018 Lviv 200,000 12-16 6% 0.76 GLA, m2 Q3 2017 Prime rent, Kharkiv 312,000 10-15 1% 1.45 Q3 2017 $/sq m/month Dnipro 268,000 10-14.5 1% 1.00 Vacancy rate, % Q3 2017 Official population, Odesa 250,000 12-16 5% 1.01 mln inhabitants Q3 2017 Social Progress Index Deloitte UA Income Group 48, 50A Zhylyanska St. Kyiv, 01033 Tier 1 (Very High) Tier 2 (High) Tier 3 (Upper Middle) Tier 4 (Lower Middle) Tier 5 (Low) Tier 6 (Very Low) Incomplete Data According to Annual Survey «Social Development Index 2018», Ukraine ranks 64th among 146 countries, with an improved score of 69.30 out of 100 (vs. 68.35 in 2017). 6 Methodology In this report, we chose We highlighted the following factors the labor market as compared with to focus on Ukrainian potential that play a vital role when considering other CEE countries, and an office and competitive advantages opening or relocating an SSC: an overview market analysis. We selected five of the as a destination for an SSC. of air logistics (proximity to operations), largest Ukrainian cities for providing background information. Category Overview Date Source Proximity According to the 2017 Global Shared Service Survey, proximity to operations to operations is considered one of the most important rationales for companies that are contemplating relocating or opening a new SSC. In this section, we provided information on international air connections with the five largest cities and all cities with operating international airports. Air connectivity was analyzed based on: • The quantity of operational international airports As of Official airport websites, State Aviation and the map of flights October 2018 Administration of Ukraine • Ukraine’s migration policy as regards Ukrainian visa requirement As of Ministry of Foreign for foreign nationals October 2018 Affairs of Ukraine • The Ukrainian Global Passport Power Rank 2018 Passport Index Labor This section contains the educational statistics of Ukraine as part of the 2018 State Statistics availability labor availability indicator in the country.