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Innovative Ukraine

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INNOVATIVE UKRAINE 2019 INNOVATIVE UKRAINE 4 INTRODUCTION 5 EXECUTIVE SUMMARY 6 IT INDUSTRY OF UKRAINE 10 UKRAINIAN HIGH-TECH INDUSTRY HIGHLIGHTS 12 INTERNATIONAL RANKINGS 14 TRENDS 16 INVESTMENTS 19 COMPANIES 22 R&D 24 GOVERNMENT 25 ECOSYSTEM INITIATIVES 29 TALENT POOL AND EDUCATION 32 DESTINATIONS IN UKRAINE 35 OTHER INDUSTRIES 48 MEASURES ON IT DEVELOPMENT IN UKRAINE 51 ESTIMATED EFFECTS OF THE ABOVE MEASURES 52 RECOMMENDATIONS TO THE WESTERN POLICYMAKERS 53 NOTES 54 LIST OF SOURCES 3 EXECUTIVE SUMMARY • Ukraine’s IT industry has become one of the proving the process of destructing counterfeit factors driving the country’s economic growth: goods, adopting a law establishing the Nation- the industry’s exports totaled $4 billion USD, al Authority on Intellectual Property of Ukraine, or 9% of the country’s total exports. In 2018, and intensifying international cooperation at investments into the IT industry reached $337 the highest level through the facilitation of a million USD, which amounted to 14% of the consistent dialogue between the Presidential total foreign investments. These results were Offices of Ukraine and the USA. Dmytro Yeromin achieved with the efforts of 184,000 persons UNIT.City, Managing Partner • Among other measures the government must employed in the IT industry (1.2% of the na- implement to create the conditions for accel- tion’s total workforce). erated growth of the IT industry are: establish- • Ukraine’s IT industry continues to exhibit rapid ing the legislative framework for software de- growth: in the last five years, its export volume velopment on a “customer-owned” basis (i.e. has doubled, total investments quadrupled, when software is developed in Ukraine but is and every year Ukrainian universities turn out the property of a nonresident customer), in- 23,000 new IT specialists. The IT industry also stituting a government loan program for the fuels the growth of related industries, such education and training of IT specialists, and as biotech, agrobiotech, pharmabiotech, and optimizing the process of employment for for- Anatoly Motkin aerospace. The further growth of the IT indus- eigners in Ukraine. StrategEast, President INTRODUCTION try is restrained by several systemic factors: a • The implementation of these measures by This report is the joint product of UNIT.City, the As a typical Eurasian country whose economy is in flawed state system of protecting intellectual the Ukrainian government would additionally largest IT cluster in Ukraine, and StrategEast. We transition, Ukraine is along the path leading from property (Ukraine is included in the Special accelerate the growth rate of Ukraine’s GDP have decided to join our efforts because we share a natural resource-based economy to a knowl- 301 Report Priority Watch List), far-from-per- by 1-2% per annum, increase the exports of the understanding of the great importance that the edge-driven one. Our goal is to facilitate the ac- fect customs legislation as it concerns IT, ab- Ukraine’s IT industry by $1-1.5 billion USD, cre- IT industry plays in the development of Eurasian celeration of such transition by developing the IT sence of a uniform government policy or state states. industry in Ukraine. ate 30,000-40,000 new jobs, and bring $80-120 system of supporting education in the field of million USD in additional tax revenues to the For these young states, where reforms are un- Incorporated in this report is an in-depth under- IT, and excessive bureaucratization which ob- Ukrainian budget every year. der way, the IT industry is not simply a source of standing of the Ukrainian IT industry and of the structs the employment of highly-skilled for- substantial export revenues and well-paid jobs. Its obstacles that are restraining its growth. This un- eign specialists in Ukraine. • We recommend Western policymakers, inter- role is paramount: it becomes a point of intersec- derstanding is based on the everyday experience national financial institutions, and represen- • The improvement of the intellectual property tatives of the global IT industry to provide the tion for young specialists and the Western world. of the UNIT.City experts. The report then proposes protection system in Ukraine would help in- By choosing a career in the industry, IT specialists the ways for the Ukrainian IT industry’s integra- following support to proposed reforms for the crease the number of orders placed with the maintain close and constant interaction with their tion into the global ecosystem and recommends Ukraine’s IT industry: endorse legislative ini- Ukrainian IT industry by Western companies. Western colleagues, adopt the Western corporate an action plan for Western policymakers, financial tiatives related to the reorganization of the IP The key measures the Ukrainian government culture, and integrate into the global IT industry. institutions, and global IT companies, which they protection system, explore the possibility of This means operating in a world where rules are can follow to facilitate the global integration of the must take to develop intellectual property pro- co-funding a special Ukrainian state loan pro- shared by all countries and where values such as Ukrainian IT industry. Those proposals and recom- tection system include: reorganizing the sys- gram to fund education in the IT industry, in- the rule of law and IP protection rights are an inte- mendations are based on the extensive interna- tem for collective management of proprietary corporate the development of the Ukrainian IT gral aspect of society. As the IT industry in Eurasian tional experience of StrategEast. copyright and related rights, legislative defini- industry into foreign policy agenda, and stimu- states develops, a constantly increasing number of We are sure that our joint report will be of great tion and consolidation of the specific principle late investments by Western IT companies into young people will adopt those values and spread use to anyone who is interested in the success of IP rights exhaustion, working on the pro- the Ukrainian IT industry. them to all other areas of their life, thus also raising of economic and social reforms in Ukraine and is cedure of customs clearance suspension, im- the bar for the government and non-governmental committed to making Ukraine a prosperous coun- institutions in their countries. By this the IT indus- try with Western values. try greatly contributes to the transformation of the public sector and society in the Eurasian states in accordance with the principles of transparency and accountability. 4 5 Specialization of large IT companies, by the number of employees 80-200 200-800 800+ Services 70 43 14 Products 15 10 4 GIC 14 16 0 Total 99 69 18 According to the official data around 50% of the the companies reside in Kharkiv, Dnipro, Lviv companies are registered in Kyiv. Also a lot of and Odesa. Photo credit: UNIT.City IT-related legal entities by the city, in % UKRAINE’S IT INDUSTRY According to the official records of the first half ing companies may be lower. At the same time Odesa 4.5 of 2018 there are 12,534 IT-related legal enti- one company may own a few different legal en- ties registered in Ukraine. It is worth noting that tities simultaneously, which may also affect the Lviv 5.0 liquidated companies are also accounted in the official statistics, which represents a number of statistics, therefore a number of actually operat- legal entities on the whole. Dnipro 6.0 Kharkiv 7.5 A number of IT-related legal entities registered in Ukraine in 2014-18, in thousands 14 Others 25.4 12,6 11,7 Kyiv 51.7 12 10,9 10,2 0 10 20 30 40 50 60 10 9,6 9,0 8,2 8,5 7,6 8 7,2 The Ukrainian IT industry is a successful compet- exports and economy on the whole, the IT in- itor on a global market and is a reliable source dustry has been showing a stable growth of 6 of foreign currency revenue which strengthens 11-26% annually. the UAH currency. Thus, despite the decline in 4 IT services export in the 1st and 2nd half, USD mln 2 3500 0 forecasted H1 2014 H2 2014 H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018 H2 2018 3000 2500 According to unofficial data there are around range of clients (EPAM, GlobalLogic, Netcrack- 2000 4,000 companies, majority of which have 80 em- er and others), around 15% work as Global In- 1500 ployees or less, however a lot of people work in House Centers (GIC) for one parent company 1000 companies with over 80 employees. 2,309 com- (Wargaming.net, Ring, Samsung R&D Institute 500 panies are active on the labor market. Ukraine, Oracle) and 15% create their own prod- uct (Genesis, EVO, Terrasoft). 0 A sampling allows us to assume that around 2013 2014 2015 2016 2017 2018 70% of companies provide services to a broad 6 7 Therefore, the importance of IT services in 50% comes from the USA, the UK is on the sec- with individual entrepreneurs, a unified tax paid also 3.4 bigger than individual income tax per Ukraine’s export structure is growing. For in- ond place. Ukrainian companies also have a long by an active individual entrepreneur is also tak- one employee on the average in the country. stance, IT services were 3rd in Ukraine’s export record of cooperation with Germany, Canada, Is- en into account. Nevertheless, its size in IT was of services after the services of processing of rael, Sweden, and Switzerland. Despite positive goods and pipeline transport. trends the Ukrainian market still cannot boast a State tax revenue per one employee, UAH thousands large amount of orders.
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