Ukraine 2012 FEB

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U A Lev R Iul This report was prepared as an acco employees, makes any warranty, expre completeness, or usefulness of any info would not infringe privately owned right necessarily constitute or imply its endors opinions of authors expressed herein d contained in this report have been gaine work is not cited and you are the originat Ukraine vel One - General Country Report Petitioned by www.precedent-ilf.com Reference work completed by liya Alexandrovna Ustimenko ount of work sponsored by Precedent ILF. Pr ess or implied, or assumes any legal liability or ormation, apparatus, product, or process disclo ts. Reference herein to any trademark, manuf sement, recommendation, or favoring by Preced do not necessarily state or reflect those of Pre ed from the internet and other sources and work tor of said work please send a letter to Precedent February, 2012 e t Precedent ILF, nor any of their responsibility for the accuracy, osed, or represents that its use facturer, or otherwise, does not dent ILF thereof. The views and ecedent ILF. The entire works k is cited where possible. If any ILF for reference.

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Ukraine General Country Report February 2012

Transcript of Ukraine 2012 FEB

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UkraineA Level One - General Country ReportPetitioned bywww.precedent-ilf.com

Reference work completed byIuliya Alexandrovna Ustimenko

This report was prepared as an account of work sponsored by Precedent ILF. Precedent ILF, nor any of theiremployees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy,completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its usewould not infringe privately owned rights. Reference herein to any trademark, manufacturer, or otherwise, does notnecessarily constitute or imply its endorsement, recommendation, or favoring by Precedent ILF thereof. The views andopinions of authors expressed herein do not necessarily state or reflect those of Precedent ILF. The entire workscontained in this report have been gained from the internet and other sources and work is cited where possible. If anywork is not cited and you are the originator of said work please send a letter to Precedent ILF for reference.

February, 2012

UkraineA Level One - General Country ReportPetitioned bywww.precedent-ilf.com

Reference work completed byIuliya Alexandrovna Ustimenko

This report was prepared as an account of work sponsored by Precedent ILF. Precedent ILF, nor any of theiremployees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy,completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its usewould not infringe privately owned rights. Reference herein to any trademark, manufacturer, or otherwise, does notnecessarily constitute or imply its endorsement, recommendation, or favoring by Precedent ILF thereof. The views andopinions of authors expressed herein do not necessarily state or reflect those of Precedent ILF. The entire workscontained in this report have been gained from the internet and other sources and work is cited where possible. If anywork is not cited and you are the originator of said work please send a letter to Precedent ILF for reference.

February, 2012

UkraineA Level One - General Country ReportPetitioned bywww.precedent-ilf.com

Reference work completed byIuliya Alexandrovna Ustimenko

This report was prepared as an account of work sponsored by Precedent ILF. Precedent ILF, nor any of theiremployees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy,completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its usewould not infringe privately owned rights. Reference herein to any trademark, manufacturer, or otherwise, does notnecessarily constitute or imply its endorsement, recommendation, or favoring by Precedent ILF thereof. The views andopinions of authors expressed herein do not necessarily state or reflect those of Precedent ILF. The entire workscontained in this report have been gained from the internet and other sources and work is cited where possible. If anywork is not cited and you are the originator of said work please send a letter to Precedent ILF for reference.

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Background/History................................................................................................................................................ 5Geography............................................................................................................................................................. 11Population ............................................................................................................................................................. 14Government........................................................................................................................................................... 19Economy ............................................................................................................................................................... 23Communication..................................................................................................................................................... 52Transportation ....................................................................................................................................................... 88

Amnesty International......................................................................................................................................... 119United Nation Development Program ................................................................................................................ 126

Figure 1 The Baptism of Grand Prince Vladimir................................................................................................... 6Figure 2. St Andrew's Cathedral ............................................................................................................................ 7Figure 3 Kievo-Pecherskaya Lavra........................................................................................................................ 7Figure 4 Pectoral. ................................................................................................................................................... 8Figure 5 Sophia Oranta .......................................................................................................................................... 8Figure 6: Map of Ukraine .................................................................................................................................... 11Figure 7 Relief map. ............................................................................................................................................ 13Figure 8 Ethnic composition of Ukraine.............................................................................................................. 15Figure 10 Ethno-linguistic map of Ukraine. ........................................................................................................ 16Figure 9 Ethnic Ukrainians in Ukraine (2001) .................................................................................................... 16Figure 11 Population of Ukraine (in millions) from 1950 to 2009...................................................................... 17Figure 12 Verkhovna Rada Main Session Hall.................................................................................................... 19Figure 13 National Flag of Ukraine. .................................................................................................................... 19Figure 14 Ukraine: Coat of Arms ........................................................................................................................ 20Figure 15 Yuliya Tymshenko(former prime minister) and the President of Ukraine Viktor Yanukovich.......... 21Figure 16 Parties and blocs in Ukraine ................................................................................................................ 22Figure 17 Hryvnia, national currency, Banknote................................................................................................. 30Figure 18 Main Macroeconomic indicators ......................................................................................................... 33Figure 19 Real GDP Growth Percentage Points .................................................................................................. 33Figure 20 Ukraine's Goods Export....................................................................................................................... 34Figure 21 World Carbon Steel Prices .................................................................................................................. 34Figure 22 Ukraine: Production Of Mineral Commodities ................................................................................... 37

TABLE OF CONTENT...

Bibliography ....................................................................................................................................................... 140

Military ..................................................................................................................................................................93Transnational Issues.............................................................................................................................................106World Health Organization Profile ..................................................................................................................... 111

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Figure 23 Grain Harvest....................................................................................................................................... 38Figure 25 Net FDI................................................................................................................................................ 39Figure 24 Consumer Sentiment Index ................................................................................................................. 39Figure 26 Fiscal Deficit ....................................................................................................................................... 40Figure 27 The Global Competitiveness Index 2011-2012 rankings and 2010-2011 comparisons...................... 42Figure 28 The Global Competitiveness Index 2011-2012................................................................................... 42Figure 29 The Global Competitiveness Index 2011-2012: Basic Requirements................................................. 43Figure 30 Ukraine: World Back Rating ............................................................................................................... 43Figure 31 World Bank Breakdow ........................................................................................................................ 44Figure 32 Ukraine - Strength and Weaknesses .................................................................................................... 45Figure 33 Selected Indicators, by Topic .............................................................................................................. 46Figure 34 The Global competitiveness Report - World Economic Forum.......................................................... 47Figure 35 Global Competitiveness Index in Detail.............................................................................................. 48Figure 36 Teledensity compared with population ............................................................................................... 57Figure 37 Regional levels of mobile penetration, Q3 2007 ................................................................................. 59Figure 38 Effective mobile price per minute in a sample of Eastern and Central European countries, 2007 ..... 60Figure 39 Mobile penetration and Total Outgoing Minutes of Use in Ukraine................................................... 60Figure 40 Economic Impact of the mobile communications industry in Ukraine. .............................................. 61

Figure 44 Mobile operators' market shares over time.......................................................................................... 65Figure 45 Mobile connections and mobile penetration in Ukraine over time. .................................................... 65Figure 46 Percentage of prepaid and postpaid customers for each operator (2007)............................................ 66Figure 47 ARPU levels over time, UAHs............................................................................................................ 66Figure 48 Earnings and Subscriber base.............................................................................................................. 67Figure 49 Vkontakte.ru overview. ....................................................................................................................... 76Figure 50 Odnoklassniki.ru overview.................................................................................................................. 77Figure 51 Twitter overview. ................................................................................................................................ 77Figure 52 Facebook overview............................................................................................................................. 78Figure 53 Ukr.net overview. ................................................................................................................................ 78Figure 54 Livejournal overview........................................................................................................................... 79Figure 55 Number of Credit cards. ...................................................................................................................... 79Figure 56 Web money.......................................................................................................................................... 79Figure 57 Programming languages in Ukraine. ................................................................................................... 87Figure 58 Railway map of Ukraine...................................................................................................................... 89Figure 59 Odessa port .......................................................................................................................................... 91Figure 60 Officers and MiG-29 fighter planes of the Ukrainian Air Forces ....................................................... 93Figure 61Threats and Challenges in the Sphere of National Security and Defense ............................................ 96Figure 62 Functional Components of the Security and Defense Sector of Ukraine ............................................ 97Figure 63 Armed Forces’ Command and Control Elements’, at the end of 2010 ............................................... 98Figure 64 International cooperation 2007-2010 .................................................................................................. 99Figure 65 Bilateral cooperation with countries defense institutions.................................................................. 100Figure 66 Multi-lateral cooperation in 2010...................................................................................................... 100

Figure 41 Mobile value chain in Ukraine in 2007(UAHs millions) .................................................................... 62

Figure 43 Increasing Intangible benefits enjoyed by consumers in Ukraine...................................................... 63Figure 42 Productivity impact of mobile communication.................................................................................. 63

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Figure 67 The List of forces and means defined for participation in the Planning and Review Process .......... 101Figure 68 Operation capabilities development of NBC unit ............................................................................. 102Figure 69 Participation of Ukrainian Contingents and Personnel in Peacekeeping Operations 2010............... 104Figure 70 Diplomatic relations of Ukraine ........................................................................................................ 107Figure 71 Ukraine: WHO health profile (part 1) ............................................................................................... 111Figure 72 Ukraine: WHO health profile (part 2) ............................................................................................... 112Figure 73 Mr. Oliver Adam, UN Resident Coordinator in Ukraine .................................................................. 119Figure 74 Evaluation of the HIV/AIDS Situation in Ukraine as of the End of 2008 and Forecast Indicators for2015.................................................................................................................................................................... 138

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Background/History

Identification

Ukrainian nationhood begins with the Kyivan Rus. This Eastern Slavic state flourished from the ninth to thethirteenth centuries on the territory of contemporary Ukraine, with Kyiv as its capital. The name Ukraine firstappeared in twelfth century chronicles in reference to the Kyivan Rus. In medieval Europe cultural boundarycodes were based on a native ground demarcation. Ukraine, with its lexical roots kraj (country) and krayaty (tocut, and hence to demarcate), meant "[our] circumscribed land." The ethnonym Rus was the main self-identification in Ukraine until the seventeenth century when the term Ukraine reappeared in documents. Thisethnonym of Rus people, Rusych (plural, Rusychi ), evolved into Rusyn , a western Ukrainian self-identificationinterchangeable with Ukrainian into the twentieth century. Ruthenian , a Latinization of Rusyn , was used bythe Vatican and the Austrian Empire designating Ukrainians.

History overview

The territory of Ukraine was a key center of East Slavic culture in the Middle Ages, before being dividedbetween a variety of powers. However, the history of Ukraine dates back many thousands of years. Theterritory has been settled continuously since at least 5000 BC, and is also a candidate site of the origins of theProto-Indo-European language family. The horse was first domesticated on the territory of Ukraine.The first identifiable groups to populate what is now Ukraine were Cimmerians, Scythians, Sarmatians, andGoths, among other nomadic peoples who arrived throughout the first millennium B.C. These peoples werewell known to colonists and traders in the ancient world, including Greeks and Romans, who establishedtrading outposts that eventually became city-states. Slavic tribes occupied central and eastern Ukraine in thesixth century A.D. and played an important role in the establishment of Kyiv. Kievan Rus Prince Volodymyrconverted the Kievan nobility and most of the population to Christianity in 988. Situated on lucrative traderoutes, Kyiv quickly prospered as the center of the powerful state of Kievan Rus. In the 11th century, KievanRus was the largest state in Europe. Conflict among the feudal lords led to decline in the 12th century. Mongolraiders razed Kyiv in the 13th century. From the 13th to the 16th century, Kiev was under the influence ofPoland and western Europe. During that time, Ukrainians began to conceive of themselves as a distinct people,a feeling that survived subsequent partitioning by greater powers over the next centuries. Ukrainian peasantswho fled the Polish effort to force them into servitude came to be known as Cossacks and earned a reputationfor their fierce martial spirit and love of freedom.

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The negotiation of the Union of Brest-Litovsk in 1596 divided the Ukrainians into Orthodox and UkrainianCatholic faithful. In 1654, Ukraine asked the czar of Moscovy for protection against Poland, and the Treaty ofPereyasav signed that year recognized the suzerainty of Moscow.The agreement was interpreted by Moscow as an invitation to take over Kiev, and the Ukrainian state waseventually absorbed into the Russian Empire. The 19th century found the region largely agricultural, with a fewcities and centers of trade and learning. The region was under the control of the Austro-Hungarian Empire inthe extreme west and the Russian Empire elsewhere. Ukrainian writers and intellectuals were inspired by thenationalistic spirit stirring other European peoples existing under other imperial governments and weredetermined to revive Ukrainian linguistic and cultural traditions. Taras Shevchenko (1814-1861), national heroof Ukraine, presented the intellectual maturity of the Ukrainian language and culture through his work as a poetand artist. The Russian Government, however, imposed strict limits on attempts to elevate Ukrainian culture,even banning the use and study of the Ukrainian language. When World War I and the Russian revolutionshattered the Habsburg and Russian empires, Ukrainians declared independent statehood. In 1917 the Central

Rada proclaimed Ukrainian autonomy and in 1918, following the Bolshevikseizure of power in Petrograd, the Ukrainian National Republic declaredindependence under President Mykhaylo Hrushevskiy. After 3 years ofconflict and civil war, however, the western part of Ukrainian territory wasincorporated into Poland, while the larger, central and eastern regions wereincorporated into the Soviet Union. The Ukrainian Soviet Socialist Republicwas officially created in 1922. Ukrainian culture and education flourishedduring the twenties, but with Stalin's rise to power and the campaign offorced collectivization beginning in 1929, the Soviet leadership imposed acampaign of terror that ravaged the intellectual class.The Soviet Government under Stalin also created an artificial famine (called“Holodomor” in Ukrainian) as part of his forced collectivization policies,which killed millions of previously independent peasants and othersthroughout the country. Estimates of deaths in Ukraine from the 1932-33Holodomor alone range from 3 million to 7 million.When the Nazis invaded the Soviet Union in 1941, some Ukrainians,

particularly in the west, welcomed what they saw as liberation fromFigure 1 The Baptism of Grand Prince Vladimir.

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Communist rule, but this did not last as they quickly came to understand thenature of Nazi rule. Nazi brutality was directed principally against Ukraine'sJews (of whom an estimated 1 million were killed), but also against manyother Ukrainians. Babyn Yar in Kyiv was the site of one of the most horrificNazi massacres of Ukrainian Jews, ethnic Ukrainians, and many others.Kyiv and other parts of the country were heavily damaged.After the Naziand Soviet invasions of Poland in 1939, the western Ukrainian regions wereincorporated into the Soviet Union. Armed resistance against Sovietauthority continued as late as the 1950s.During periods of relative liberalization--as under Nikita Khrushchev from1955 to 1964 and during the period of "perestroika" under MikhailGorbachev--Ukrainian communists cautiously pursued nationalistobjectives. The 1986 explosion at the Chornobyl (Chernobyl in Russian)nuclear power plant, located in the Ukrainian SSR, and the SovietGovernment's initial efforts to conceal the extent of the catastrophe from itsown people and the world, were a watershed for many Ukrainians inexposing the severe problems of the Soviet system. Ukraine became anindependent state on August 24, 1991, and was a co-founder of theCommonwealth of Independent States (CIS) following the dissolution of theSoviet Union, although it has not officially joined the organization.

Although final independence for Ukraine was achieved in 1991 with thedissolution of the USSR, democracy and prosperity remained elusive as thelegacy of state control and endemic corruption stalled efforts at economicreform, privatization, and civil liberties. A peaceful mass protest "OrangeRevolution" in the closing months of 2004 forced the authorities to overturna rigged presidential election and to allow a new internationally monitoredvote that swept into power a reformist slate under Viktor YUSHCHENKO.Subsequent internal squabbles in the YUSHCHENKO camp allowed hisrival Viktor YANUKOVYCH to stage a comeback in parliamentaryelections and become prime minister in August of 2006.

An early legislative election, brought on by a political crisis in the spring of2007, saw Yuliya TYMOSHENKO, as head of an "Orange" coalition,installed as a new prime minister in December 2007. Viktor YANUKOVUYCH was elected president in aFebruary 2010 run-off election that observers assessed as meeting most international standards. The followingmonth, the Rada approved a vote of no-confidence prompting Yuliya TYMOSHENKO to resign from her postas prime minister. The president, Viktor Yanukovych, is expected to keep a grip on power in 2012-15,including through control of parliament and the government. Public disillusionment with the president,however, may boost the opposition. Relations with Russia have been tense, owing to gas disputes and Ukraine'sstated intention to push for deeper economic links with the EU. If relations with the EU continue to deteriorate,Russia will have a better chance to gain greater influence over the Ukrainian economy.

Figure 2. St Andrew's Cathedral

Figure 3 Kievo-Pecherskaya Lavra

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Urbanism, Architecture, and the Use of Space

A prototypical architectural tradition was found byarcheologists studying ancient civilizations in Ukraine.Excavations of the Tripillya culture (4,000–3,000 B.C.E. )show one- and two-room houses with outbuildings withinconcentric walled and moated settlements. The sophisticatedarchitecture of Greek and Roman colonies in the Black Searegion in 500 B.C.E. –100 C.E. influenced Scythian housebuilding. The architecture of later Slavic tribes was mostlywooden: log houses in forested highlands and frame houses inthe forest-steppe. The Kyivan Rus urban centers resembledthose of medieval Europe: a prince's fortified palace surroundedby the houses of the townsfolk. Tradesmen and merchants livedin suburbs called posad. Stone as a building material becamewidespread in public buildings from the tenth century, andtraditions of Byzantine church architecture—cross plan anddomes—combined with local features. Prime examples of thisperiod are the Saint Sophia Cathedral in Kyiv (about 1030s)and the Holy Trinity Church over the Gate of the Pechersk

Monastery (1106–1108).Elements of Romanesque style, half-columns and arches, appear in Kyivan Rus church architecture from the twelfth century, principally in theSaint. Cyril Church in Kyiv (middle-twelfth century), the Cathedral of the Dormition in Kaniv, and the SaintElias Church in Chernihiv. Ukrainian architecture readily adopted the Renaissance style exemplified by theKhotyn and Kamyanets'-Podil'skyi castles, built in the fourteenth century, Oles'ko and Ostroh castles of thefifteenth century, and most buildings in Lviv's Market Square. Many Ukrainian cities were ruled by theMagdeburg Law of municipal self-rule. This is reflected in their layout: Lviv and Kamyanets' Podil'skyi centeron a city hall/market square ensemble. Ukrainian baroque architecture was representative of the lifestyle of thekozak aristocracy. At that time most medieval churches were redesigned toinclude a richer exterior and interior ornamentation and multileveldomes.The most impressive exponents of this period are the bell tower ofthe Pechersk Monastery and the Mariinsky Palace in Kyiv, Saint George'sCathedral in Lviv, and the Pochaiv Monastery. A unique example ofbaroque wooden architecture is the eighteenth century Trinity Cathedral informer Samara, built for Zaporozhian kozaks. The neoclassical park andpalace ensemble became popular with the landed gentry in the lateeighteenth century. Representative samples are the Sofiivka Palace inKamianka, the Kachanivka Palace near Chernihiv, and the palace inKorsun'-Shevchenkivskyi. Ukrainian folk architecture of the seventeenthand eighteenth centuries shows a considerable influence of baroqueornamentation and neoclassic orders while preserving traditional materialslike wood and wattled clay. Village planning remained traditional,centered around a church, community buildings, and marketplace. The

Figure 5 Sophia Oranta

Figure 4 Pectoral.

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streets followed property lines and land contours.

Village neighborhoods were named for extendedfamilies, clans, or diverse trades and crafts. Thistoponymy, dating from medieval times, reappearedspontaneously in southern and eastern Ukrainiantowns and cities, such as Kherson, Mykolaiv, andSimferopol that were built in the eighteenth century.Throughout the nineteenth century and into thebeginning of the twentieth century, the empirearchitectural style came to Ukraine from the West.Modern urban planning—a grid with squares andpromenades—was applied to new cities.

At the beginning of twentieth century, there was a revival of national styles in architecture. A nationalmodernism combined elements of folk architecture with new European styles. A prime exponent of this style isVasyl' Krychevs'kyi's design of the 1909 Poltava Zemstvo Building.Soviet architecture initially favoredconstructivism as shown in the administrative center of Kharkiv and then adopted a heavy neoclassicismpejoratively called totalitarian style for major urban centers. Post-World War II architecture focused onmonobloc projects reflecting a collectivist ideology. However, contemporary Ukrainians prefer single houses toapartment blocs. The traditional Ukrainian house has a private space between the street and the house, usuallywith a garden. Striving for more private space people in apartment buildings partition original long hallwaysinto smaller spaces. Dachas (summer cottages) are a vital part of contemporary Ukrainian life. Laid out on agrid, dacha cooperatives provide summer rural communities for city dwellers.

Etiquette

Social interaction in Ukraine is regulated by etiquette similar to the rest of Europe. Some local idiosyncrasiesare a personal space of less than an arm's length in business conversations and the habit of drinking alcohol atbusiness meetings, a relic of Soviet times.

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Religion

Religious beliefs are central to Ukrainian culture.Ukraine experienced a revival of many religions:Ukrainian Orthodox, Ukrainian Catholic,Protestantism, Judaism—including Hasidism—andIslam. The constitution and the 1991 Law onFreedom of Conscience and Religion provide forseparation of church and state and the right topractice the religion of one's choice.

Ukrainian Orthodox clergy are educated in divinityschools such as the Kyiv Theological Academy.The Ukrainian Catholic Church, banned in Soviettimes, needs priests and provides a wide array ofeducational programs at the Lviv Theological

Seminary. Protestant denominations, principally Baptists and Seventh-Day Adventists, train their ministerswith the assistance of American and Western European mission programs. The numerically small RomanCatholic clergy is assisted by pastoral visitors from abroad. Since the time of independence, Jewish rabbis havebeen completing their studies in Israel. Muslim clergy is educated in Central Asia and Turkey.

Ukrainian Orthodox and Catholic Churches share historic, ritual, and national heritages. Popular cultureincorporated many ancient pagan rituals into a folk version of Christianity. Orthodox priests still performexorcisms by the canon of Saint Basil the Great. The Holy Virgin icon and the spring of the Pochaiv OrthodoxMonastery are believed to have miraculous healing powers. Zarvanytsia in western Ukraine is a place of holypilgrimage for Ukrainian Catholics. The grave of the founding rabbi of Hassidism, situated near Uman', is apilgrimage site for Hasidic Jews.

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GeographyAreatotal: 233,089 sq mi (603,550 sq km)countr y com par iso n to th e worl d: 46 Thelargest country wholly in Europe.[15])

land: 93% 579,330 sq kmwater : 7% 24,220 sq kmco mp arat iv e : slightly smaller than TexasGeographic coordinates 49 00 N, 32 00 E

The Outermost Points of Ukraine’s Territory:In the north: Petrivka (village, Chernihiv oblast);In the south: Cape Sarych (Autonomous Republicof Crimea);In the west: Chop (town, Zakarpatia oblast);In the east: Chervona Zirka (village, Luhanskoblast).

Maritime claims: territorial sea: 12 nmexclusive economic zone: 200 nmcontinental shelf: 200 m or to the depth of

Evaluation extremes:lowest point: Black Sea 0 mhighest point: Hora Hoverla 2,061 m

Total Land Boundaries: 4,558 km.

Coastline: 2,782 km

Neighboring Countries: Bordered by (clockwise)Romania (169 km), Moldova (939 km), Romania(362 km) and Hungary (103 km) on the southwest,Slovak Republic (90 km) on the west, Poland (428km) on the northwest, Belarus (891 km) on thenorth, and Russia (1,576 km) on the north and onthe east.

Climate: The climate of Ukraine is mostlytemperate continental. A subtropical Mediterraneanclimate is prevalent on the southern portions of theCrimean Peninsula. The average monthly

temperature in winter ranges from -8° to 2° C(17.6° to 35.6° F), while summer temperaturesaverage 17° to 25° C (62.6° to 77° F). The BlackSea coast is subject to freezing. Precipitationgenerally decreases from north to south; it isgreatest in the Carpathians, where it exceeds morethan 1500 mm (58.5 in) per year, and least in thecoastal lowlands of the Black Sea, where itaverages less than 300 mm (11.7 in) per year.

Terrain: Almost the entire country of Ukraine is aflat plain, with elevations generally below 350 m .Most of Ukraine consists of fertile plains (steppes)and plateaus. The Carpathian Mountains intrude atthe extreme west, and on the southern coast of theCrimean Peninsula the Crimean Mountains arelocated. The highest point in Ukraine is Mt. Hoverlain the Carpathians, with an elevation of 2061 m.

Land use: Ukraine has extremely fertile black-earth soils in the central and southern portions,totaling more than a half of the territory. Accordingto the estimates, arable land is 56%, permanentcrops: 2%, meadows and pastures: 12%, forest

Figure 6: Map of Ukraine

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GeographyAreatotal: 233,089 sq mi (603,550 sq km)countr y com par iso n to th e worl d: 46 Thelargest country wholly in Europe.[15])

land: 93% 579,330 sq kmwater : 7% 24,220 sq kmco mp arat iv e : slightly smaller than TexasGeographic coordinates 49 00 N, 32 00 E

The Outermost Points of Ukraine’s Territory:In the north: Petrivka (village, Chernihiv oblast);In the south: Cape Sarych (Autonomous Republicof Crimea);In the west: Chop (town, Zakarpatia oblast);In the east: Chervona Zirka (village, Luhanskoblast).

Maritime claims: territorial sea: 12 nmexclusive economic zone: 200 nmcontinental shelf: 200 m or to the depth of

Evaluation extremes:lowest point: Black Sea 0 mhighest point: Hora Hoverla 2,061 m

Total Land Boundaries: 4,558 km.

Coastline: 2,782 km

Neighboring Countries: Bordered by (clockwise)Romania (169 km), Moldova (939 km), Romania(362 km) and Hungary (103 km) on the southwest,Slovak Republic (90 km) on the west, Poland (428km) on the northwest, Belarus (891 km) on thenorth, and Russia (1,576 km) on the north and onthe east.

Climate: The climate of Ukraine is mostlytemperate continental. A subtropical Mediterraneanclimate is prevalent on the southern portions of theCrimean Peninsula. The average monthly

temperature in winter ranges from -8° to 2° C(17.6° to 35.6° F), while summer temperaturesaverage 17° to 25° C (62.6° to 77° F). The BlackSea coast is subject to freezing. Precipitationgenerally decreases from north to south; it isgreatest in the Carpathians, where it exceeds morethan 1500 mm (58.5 in) per year, and least in thecoastal lowlands of the Black Sea, where itaverages less than 300 mm (11.7 in) per year.

Terrain: Almost the entire country of Ukraine is aflat plain, with elevations generally below 350 m .Most of Ukraine consists of fertile plains (steppes)and plateaus. The Carpathian Mountains intrude atthe extreme west, and on the southern coast of theCrimean Peninsula the Crimean Mountains arelocated. The highest point in Ukraine is Mt. Hoverlain the Carpathians, with an elevation of 2061 m.

Land use: Ukraine has extremely fertile black-earth soils in the central and southern portions,totaling more than a half of the territory. Accordingto the estimates, arable land is 56%, permanentcrops: 2%, meadows and pastures: 12%, forest

Figure 6: Map of Ukraine

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GeographyAreatotal: 233,089 sq mi (603,550 sq km)countr y com par iso n to th e worl d: 46 Thelargest country wholly in Europe.[15])

land: 93% 579,330 sq kmwater : 7% 24,220 sq kmco mp arat iv e : slightly smaller than TexasGeographic coordinates 49 00 N, 32 00 E

The Outermost Points of Ukraine’s Territory:In the north: Petrivka (village, Chernihiv oblast);In the south: Cape Sarych (Autonomous Republicof Crimea);In the west: Chop (town, Zakarpatia oblast);In the east: Chervona Zirka (village, Luhanskoblast).

Maritime claims: territorial sea: 12 nmexclusive economic zone: 200 nmcontinental shelf: 200 m or to the depth of

Evaluation extremes:lowest point: Black Sea 0 mhighest point: Hora Hoverla 2,061 m

Total Land Boundaries: 4,558 km.

Coastline: 2,782 km

Neighboring Countries: Bordered by (clockwise)Romania (169 km), Moldova (939 km), Romania(362 km) and Hungary (103 km) on the southwest,Slovak Republic (90 km) on the west, Poland (428km) on the northwest, Belarus (891 km) on thenorth, and Russia (1,576 km) on the north and onthe east.

Climate: The climate of Ukraine is mostlytemperate continental. A subtropical Mediterraneanclimate is prevalent on the southern portions of theCrimean Peninsula. The average monthly

temperature in winter ranges from -8° to 2° C(17.6° to 35.6° F), while summer temperaturesaverage 17° to 25° C (62.6° to 77° F). The BlackSea coast is subject to freezing. Precipitationgenerally decreases from north to south; it isgreatest in the Carpathians, where it exceeds morethan 1500 mm (58.5 in) per year, and least in thecoastal lowlands of the Black Sea, where itaverages less than 300 mm (11.7 in) per year.

Terrain: Almost the entire country of Ukraine is aflat plain, with elevations generally below 350 m .Most of Ukraine consists of fertile plains (steppes)and plateaus. The Carpathian Mountains intrude atthe extreme west, and on the southern coast of theCrimean Peninsula the Crimean Mountains arelocated. The highest point in Ukraine is Mt. Hoverlain the Carpathians, with an elevation of 2061 m.

Land use: Ukraine has extremely fertile black-earth soils in the central and southern portions,totaling more than a half of the territory. Accordingto the estimates, arable land is 56%, permanentcrops: 2%, meadows and pastures: 12%, forest

Figure 6: Map of Ukraine

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and woodland: 10%, other: 20%. In 2008irrigated land was 21,790 sq. km

Inland Waterways: Most major rivers flow southto the Black Sea; they include the Dnipro River incentral Ukraine, the Southern Bug and Dnestr riversin the west, the Donets, River in the east, and theDanube in the far south. The Western Bug flowsnorthward through the western part of the countryand joins the Vistula, which empties into the BalticSea.

Total renewable water resources: 139.5 cu km(1997)

Fresh water withdrawal(domestic/industrial/agricultural)Total: 37.53 cu km/yr (12%/35%/52%)per capita: 807 cu m/yr (2000)

Natural hazards: n/a

Natural resources: (iron-ore, coal, manganese,natural gas, oil, salt, sulfur, graphite, titanium,magnesium, kaolin, nickel, mercury, timber, arableland)According to the experts, Ukraine containsapproximately 5 per cent of the total mineralresources. Ukraine has deposits of more than 80types of mineral. The Donetsk Basin contains hugereserves of high-quality coal and the nearby iron-ore deposits of Kryvy Rih are equally rich. Other

Ukraine's mineral resources include manganese,mercury, titanium, chromium, nickel, bauxite,uranium, phosphate, sulfur and peat.Development of the above mentioned mineralresources under concession agreements along withtransportation and refining of oil and gas are amongthe most promising areas for foreign investments

Environment - current issues inadequate suppliesof potable water; air and water pollution;deforestation; radiation contamination in thenortheast from 1986 accident at Chornobyl' NuclearPower Plant

Environment - international agreementsparty to: Air Pollution, Air Pollution-NitrogenOxides, Air Pollution-Sulfur 85, Antarctic-Environmental Protocol, Antarctic-Marine LivingResources, Antarctic Treaty, Biodiversity, ClimateChange, Climate Change-Kyoto Protocol,Desertification, Endangered Species,Environmental Modification, Hazardous Wastes,Law of the Sea, Marine Dumping, Ozone LayerProtection, Ship Pollution, Wetlandssigned, but not ratified: Air Pollution-PersistentOrganic Pollutants, Air Pollution-Sulfur 94, AirPollution-Volatile Organic Compounds

Geography – note strategic position at thecrossroads between Europe and Asia; second-largest country in Europe

Overview

At 603,700 square kilometres (233,100 sq mi) and with a coastline of 2,782 kilometres (1,729 mi), Ukraine isthe world's 44th-largest country. It is the largest wholly European country and the second largest country inEurope (after the European part of Russia, before metropolitan France).[i][5] It lies between latitudes 44° and53° N, and longitudes 22° and 41° E. The Ukrainian landscape consists mostly of fertile plains (or steppes) andplateaus, crossed by rivers such as the Dnieper (Dnipro), Seversky Donets, Dniester and the Southern Buh asthey flow south into the Black Sea and the smaller Sea of Azov. To the southwest, the delta of the Danubeforms the border with Romania. Its various regions have diverse geographic features ranging from thehighlands to the lowlands. The country's only mountains are the Carpathian Mountains in the west, of whichthe highest is the Hora Hoverla at 2,061 metres (6,762 ft), and the Crimean Mountains on the Crimean

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peninsula, in the extreme south along the coast.[101] However Ukraine also has a number of highland regionssuch as the Volyn-Podillia Upland (in the west) and the Near-Dnipro Upland (on the right bank of Dnieper); tothe east there are the south-western spurs of the Central Russian Uplands over which runs the border withRussia. Near the Sea of Azov can be found the Donets Ridge and the Near Azov Upland. The snow melt fromthe mountains feeds the rivers, and natural changes in altitude form a sudden drop in elevation and create manyopportunities to form waterfalls of Ukraine. Despite this, the country faces a number of major environmentalissues such as inadequate supplies of potable water; air and water pollution and deforestation, as well asradiation contamination in the north-east from the 1986 accident at the Chernobyl Nuclear Power Plant.Recycling toxic household waste is still in its infancy in Ukraine.[102]

Climate

Ukraine has a mostly temperate continental climate, although a more Mediterranean climate is found on thesouthern Crimean coast. Precipitation is disproportionately distributed; it is highest in the west and north andlowest in the east and southeast. Western Ukraine receives around 1,200 millimetres (47.2 in) of precipitationannually, while Crimea receives around 400 millimetres (15.7 in). Winters vary from cool along the Black Seato cold farther inland. Average annual temperatures range from 5.5 °C (41.9 °F)–7 °C (44.6 °F) in the north, to11 °C (51.8 °F)–13 °C (55.4 °F) in the south.[109]

Natural resources

Significant natural resources in Ukraine include: iron ore, coal, manganese, natural gas, oil, salt, sulfur,graphite, titanium, magnesium, kaolin, nickel, mercury, timber, and arable land.

Figure 7 Relief map.

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Population

Age structure: 0-14 years: 13.7% (male3,186,606/female 3,014,069)15-64 years: 70.8% (male 15,282,749/female16,673,641)65 years and over: 15.5% (male 2,294,777/female4,682,865) (2011 est.)

Median age: total: 39.9 yearsmale: 36.7 yearsfemale: 43.1 years (2011 est.)HDI 0.710[6] (high) (76th)

Population:45,134,707 (July 2011 est.)country comparison to the world: 28

Population growth rate:-0.622% (2011 est.)county comparison to the world: 224

Birth rate:9.62 births/1,000 population (2011 est.)country comparison to the world: 198

Total fertility rate:1.28 children born/woman (2011 est.)county comparison to the world: 211

Net migration rate:-0.09 migrant(s)/1,000 population (2011 est.)country comparison to the world: 120

Urbanization:urban population: 69% of total population (2010)rate of urbanization: -0.1% annual rate of change(2010-15 est.)

Sex tatio:at birth: 1.065 male(s)/femaleunder 15 years: 1.06 male(s)/female15-64 years: 0.92 male(s)/female65 years and over: 0.49 male(s)/femaletotal population: 0.85 male(s)/female (2011 est.)

Ethnic c groups:Ukrainian 77.8%, Russian 17.3%, Belarusian 0.6%,Moldovan 0.5%, Crimean Tatar 0.5%, Bulgarian0.4%, Hungarian 0.3%, Romanian 0.3%, Polish0.3%, Jewish 0.2%, other 1.8% (2001 census)

Religions:Ukrainian Orthodox - Kyiv Patriarchate 50.4%,Ukrainian Orthodox - Moscow Patriarchate 26.1%,Ukrainian Greek Catholic 8%, UkrainianAutocephalous Orthodox 7.2%, Roman Catholic2.2%, Protestant 2.2%, Jewish 0.6%, other 3.2%(2006 est.)

Languages:Ukrainian (official) 67%, Russian 24%, other(includes small Romanian-, Polish-, and Hungarian-speaking minorities) 9%

School life expectancy (primary to tertiaryeducation):total: 15 yearsmale: 14 yearsfemale: 15 years (2008)

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Population

Age structure: 0-14 years: 13.7% (male3,186,606/female 3,014,069)15-64 years: 70.8% (male 15,282,749/female16,673,641)65 years and over: 15.5% (male 2,294,777/female4,682,865) (2011 est.)

Median age: total: 39.9 yearsmale: 36.7 yearsfemale: 43.1 years (2011 est.)HDI 0.710[6] (high) (76th)

Population:45,134,707 (July 2011 est.)country comparison to the world: 28

Population growth rate:-0.622% (2011 est.)county comparison to the world: 224

Birth rate:9.62 births/1,000 population (2011 est.)country comparison to the world: 198

Total fertility rate:1.28 children born/woman (2011 est.)county comparison to the world: 211

Net migration rate:-0.09 migrant(s)/1,000 population (2011 est.)country comparison to the world: 120

Urbanization:urban population: 69% of total population (2010)rate of urbanization: -0.1% annual rate of change(2010-15 est.)

Sex tatio:at birth: 1.065 male(s)/femaleunder 15 years: 1.06 male(s)/female15-64 years: 0.92 male(s)/female65 years and over: 0.49 male(s)/femaletotal population: 0.85 male(s)/female (2011 est.)

Ethnic c groups:Ukrainian 77.8%, Russian 17.3%, Belarusian 0.6%,Moldovan 0.5%, Crimean Tatar 0.5%, Bulgarian0.4%, Hungarian 0.3%, Romanian 0.3%, Polish0.3%, Jewish 0.2%, other 1.8% (2001 census)

Religions:Ukrainian Orthodox - Kyiv Patriarchate 50.4%,Ukrainian Orthodox - Moscow Patriarchate 26.1%,Ukrainian Greek Catholic 8%, UkrainianAutocephalous Orthodox 7.2%, Roman Catholic2.2%, Protestant 2.2%, Jewish 0.6%, other 3.2%(2006 est.)

Languages:Ukrainian (official) 67%, Russian 24%, other(includes small Romanian-, Polish-, and Hungarian-speaking minorities) 9%

School life expectancy (primary to tertiaryeducation):total: 15 yearsmale: 14 yearsfemale: 15 years (2008)

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Population

Age structure: 0-14 years: 13.7% (male3,186,606/female 3,014,069)15-64 years: 70.8% (male 15,282,749/female16,673,641)65 years and over: 15.5% (male 2,294,777/female4,682,865) (2011 est.)

Median age: total: 39.9 yearsmale: 36.7 yearsfemale: 43.1 years (2011 est.)HDI 0.710[6] (high) (76th)

Population:45,134,707 (July 2011 est.)country comparison to the world: 28

Population growth rate:-0.622% (2011 est.)county comparison to the world: 224

Birth rate:9.62 births/1,000 population (2011 est.)country comparison to the world: 198

Total fertility rate:1.28 children born/woman (2011 est.)county comparison to the world: 211

Net migration rate:-0.09 migrant(s)/1,000 population (2011 est.)country comparison to the world: 120

Urbanization:urban population: 69% of total population (2010)rate of urbanization: -0.1% annual rate of change(2010-15 est.)

Sex tatio:at birth: 1.065 male(s)/femaleunder 15 years: 1.06 male(s)/female15-64 years: 0.92 male(s)/female65 years and over: 0.49 male(s)/femaletotal population: 0.85 male(s)/female (2011 est.)

Ethnic c groups:Ukrainian 77.8%, Russian 17.3%, Belarusian 0.6%,Moldovan 0.5%, Crimean Tatar 0.5%, Bulgarian0.4%, Hungarian 0.3%, Romanian 0.3%, Polish0.3%, Jewish 0.2%, other 1.8% (2001 census)

Religions:Ukrainian Orthodox - Kyiv Patriarchate 50.4%,Ukrainian Orthodox - Moscow Patriarchate 26.1%,Ukrainian Greek Catholic 8%, UkrainianAutocephalous Orthodox 7.2%, Roman Catholic2.2%, Protestant 2.2%, Jewish 0.6%, other 3.2%(2006 est.)

Languages:Ukrainian (official) 67%, Russian 24%, other(includes small Romanian-, Polish-, and Hungarian-speaking minorities) 9%

School life expectancy (primary to tertiaryeducation):total: 15 yearsmale: 14 yearsfemale: 15 years (2008)

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Figure 8 Ethnic composition of Ukraine.

Death rate:15.74 deaths/1,000 population (July 2011 e6st.)country comparison to the world:

Infant mortality rate:total: 8.54 deaths/1,000 live birthscountry comparison to the world: 158male: 10.71 deaths/1,000 live birthsfemale: 6.23 deaths/1,000 live births (2011 est.)

Life expectancy at birth:total population: 68.58 yearscountry comparison to the world: 150male: 62.79 yearsfemale: 74.75 years (2011 est.)adult prevalence rate:1.1% (2009 est.)country HIV/AIDS comparison to the world: 44

Education expenditures:5.3% of GDP (2007)country comparison to the world: 48

Nationality: noun: Ukrainian(s)adjective: Ukrainian

HIV/AIDS - people living with HIV/AIDS:350,000 (2009 est.)country comparison to the world: 17

HIV/AIDS - deaths:24,000 (2009 est.)country comparison to the world: 15

Literacy:Definition: age 15 and over can read and writetotal population: 99.4%male: 99.7%female: 99.2% (2001 census)

Unemployment, youth ages 15-24:total: 14.9%country comparison to the world: 76male: 15.2%female: 14.5% (2005)

Major cities - population: KYIV (capital) 2.779million; Kharkiv 1.455 million; Dnipropetrovsk1.013 million; Odesa 1.009 million; Donetsk971,000 (2009)

Overview

According to the Ukrainian Census of 2001, ethnic Ukrainians make up 77.8% of the population. Othersignificant ethnic groups are the Russians (17.3%), Belarusians (0.6%), Moldovans (0.5%), Crimean Tatars(0.5%), Bulgarians (0.4%), Hungarians (0.3%), Romanians (0.3%), Poles (0.3%), Jews (0.2%), Armenians(0.2%), Greeks (0.2%) and Tatars (0.2%).[2] The industrial regions in the east and southeast are the mostheavily populated, and about 67.2 percent of the population lives in urban areas.[167][168]

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Demographic crisis

Ukraine has been in a demographic crisis since the 1980s becauseof its high death rate and a low birth rate. The population isshrinking by over 150,000 a year. The birth rate has recovered inrecent years from a catastrophically low level around 2000, and isnow comparable to the European average, but would need toincrease by another 50% or so to stabilize the population. In 2007,the country's population was declining at the fourth fastest rate inthe world.[169] Life expectancy is falling. The nation suffers a highmortality rate from environmental pollution, poor diets,widespread smoking, extensive alcoholism, and deterioratingmedical care.[170][171] In the years 2008 through 2010, more than

1.5 million children were born in Ukraine, compared to fewer than 1.2 million during 1999–2001 during theworst of the demographic crisis. Infant mortality rates have also dropped from 10.4 deaths to 8.9 per 1,000children under one year of age. This is still high in comparison, however, to many other nations. According tothe United Nations poverty and poor health care are the two biggest problems Ukrainian children face. Morethan 26 percent of families with one child, 42 percent of families with two children and 77 percent of familieswith four and more children live in poverty, according to United Nations International Children's EmergencyFund. In November 2009 Ukrainian human rights ombudsman Nina Karpacheva stated that the lives of manyof Ukraine’s 8.2 million children remain tough.[172] According to the Constitution, the state language of Ukraineis Ukrainian. Russian, which was the de facto official language of the Soviet Union, is widely spoken,especially in eastern and southern Ukraine. According to the 2001 census, 67.5 percent of the populationdeclared Ukrainian as their native language and 29.6 percent declared Russian.[210] Most native Ukrainianspeakers know Russian as a second language.

Figure 10 Ethno-linguistic map of Ukraine.

Figure 9 Ethnic Ukrainians in Ukraine (2001)

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Demographic crisis

Ukraine has been in a demographic crisis since the 1980s becauseof its high death rate and a low birth rate. The population isshrinking by over 150,000 a year. The birth rate has recovered inrecent years from a catastrophically low level around 2000, and isnow comparable to the European average, but would need toincrease by another 50% or so to stabilize the population. In 2007,the country's population was declining at the fourth fastest rate inthe world.[169] Life expectancy is falling. The nation suffers a highmortality rate from environmental pollution, poor diets,widespread smoking, extensive alcoholism, and deterioratingmedical care.[170][171] In the years 2008 through 2010, more than

1.5 million children were born in Ukraine, compared to fewer than 1.2 million during 1999–2001 during theworst of the demographic crisis. Infant mortality rates have also dropped from 10.4 deaths to 8.9 per 1,000children under one year of age. This is still high in comparison, however, to many other nations. According tothe United Nations poverty and poor health care are the two biggest problems Ukrainian children face. Morethan 26 percent of families with one child, 42 percent of families with two children and 77 percent of familieswith four and more children live in poverty, according to United Nations International Children's EmergencyFund. In November 2009 Ukrainian human rights ombudsman Nina Karpacheva stated that the lives of manyof Ukraine’s 8.2 million children remain tough.[172] According to the Constitution, the state language of Ukraineis Ukrainian. Russian, which was the de facto official language of the Soviet Union, is widely spoken,especially in eastern and southern Ukraine. According to the 2001 census, 67.5 percent of the populationdeclared Ukrainian as their native language and 29.6 percent declared Russian.[210] Most native Ukrainianspeakers know Russian as a second language.

Figure 10 Ethno-linguistic map of Ukraine.

Figure 9 Ethnic Ukrainians in Ukraine (2001)

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Demographic crisis

Ukraine has been in a demographic crisis since the 1980s becauseof its high death rate and a low birth rate. The population isshrinking by over 150,000 a year. The birth rate has recovered inrecent years from a catastrophically low level around 2000, and isnow comparable to the European average, but would need toincrease by another 50% or so to stabilize the population. In 2007,the country's population was declining at the fourth fastest rate inthe world.[169] Life expectancy is falling. The nation suffers a highmortality rate from environmental pollution, poor diets,widespread smoking, extensive alcoholism, and deterioratingmedical care.[170][171] In the years 2008 through 2010, more than

1.5 million children were born in Ukraine, compared to fewer than 1.2 million during 1999–2001 during theworst of the demographic crisis. Infant mortality rates have also dropped from 10.4 deaths to 8.9 per 1,000children under one year of age. This is still high in comparison, however, to many other nations. According tothe United Nations poverty and poor health care are the two biggest problems Ukrainian children face. Morethan 26 percent of families with one child, 42 percent of families with two children and 77 percent of familieswith four and more children live in poverty, according to United Nations International Children's EmergencyFund. In November 2009 Ukrainian human rights ombudsman Nina Karpacheva stated that the lives of manyof Ukraine’s 8.2 million children remain tough.[172] According to the Constitution, the state language of Ukraineis Ukrainian. Russian, which was the de facto official language of the Soviet Union, is widely spoken,especially in eastern and southern Ukraine. According to the 2001 census, 67.5 percent of the populationdeclared Ukrainian as their native language and 29.6 percent declared Russian.[210] Most native Ukrainianspeakers know Russian as a second language.

Figure 10 Ethno-linguistic map of Ukraine.

Figure 9 Ethnic Ukrainians in Ukraine (2001)

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Fertility and natal policies

The current birth rate in Ukraine, as of 2010, is 10.8births/1,000 population, and the death rate is 15.2deaths/1,000 population. The phenomenon of lowest-lowfertility, defined as total fertility below 1.3, is emergingthroughout Europe and is attributed by many topostponement of the initiation of childbearing. Ukraine,where total fertility (a very low 1.1 in 2001), was one of theworld's lowest, shows that there is more than one pathway tolowest-low fertility. Although Ukraine has undergone

immense political and economic transformations during1991–2004, it has maintained a young age at first birth andnearly universal childbearing. Analysis of official national

statistics and the Ukrainian Reproductive Health Survey show that fertility declined to very low levels withouta transition to a later pattern of childbearing. Findings from focus group interviews suggest explanations of theearly fertility pattern. These findings include the persistence of traditional norms for childbearing and the rolesof men and women, concerns about medical complications and infertility at a later age, and the link betweenearly fertility and early marriage.[175] To help mitigate the declining population, the government continues toincrease child support payments. Thus it provides one-time payments of 12,250 Hryvnias for the first child,25,000 Hryvnias for the second and 50,000 Hryvnias for the third and fourth, along with monthly payments of154 Hryvnias per child.[138][176] The demographic trend is showing signs of improvement, as the birth rate hasbeen steadily growing since 2001.[177] Net population growth over the first nine months of 2007 was registeredin five provinces of the country (out of 24), andpopulation shrinkage was showing signs of stabilisingnationwide. In 2007 the highest birth rates were in theWestern Oblasts.[178] In 2008, Ukraine emerged fromlowest-low fertility, and the upward trend hascontinued since then, except for a slight dip in 2010due to the economic crisis of 2009. In total, Ukrainehas 457 cities, 176 of them are labeled oblast-class,279 smaller raion-class cities, and two special legalstatus cities. These are followed by 886 urban-typesettlements and 28,552 villages.[121] Ukraine producesthe fourth largest number of post-secondary graduatesin Europe, while being ranked seventh in population.At the 1994 International Conference on Populationand Development (ICPD) in Cairo, 179 countries,including Ukraine, agreed that population anddevelopment are inseparably linked and thatpopulation issues have paramount importance for

Figure 11 Population of Ukraine (in millions) from 1950 to 2009.

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Fertility and natal policies

The current birth rate in Ukraine, as of 2010, is 10.8births/1,000 population, and the death rate is 15.2deaths/1,000 population. The phenomenon of lowest-lowfertility, defined as total fertility below 1.3, is emergingthroughout Europe and is attributed by many topostponement of the initiation of childbearing. Ukraine,where total fertility (a very low 1.1 in 2001), was one of theworld's lowest, shows that there is more than one pathway tolowest-low fertility. Although Ukraine has undergone

immense political and economic transformations during1991–2004, it has maintained a young age at first birth andnearly universal childbearing. Analysis of official national

statistics and the Ukrainian Reproductive Health Survey show that fertility declined to very low levels withouta transition to a later pattern of childbearing. Findings from focus group interviews suggest explanations of theearly fertility pattern. These findings include the persistence of traditional norms for childbearing and the rolesof men and women, concerns about medical complications and infertility at a later age, and the link betweenearly fertility and early marriage.[175] To help mitigate the declining population, the government continues toincrease child support payments. Thus it provides one-time payments of 12,250 Hryvnias for the first child,25,000 Hryvnias for the second and 50,000 Hryvnias for the third and fourth, along with monthly payments of154 Hryvnias per child.[138][176] The demographic trend is showing signs of improvement, as the birth rate hasbeen steadily growing since 2001.[177] Net population growth over the first nine months of 2007 was registeredin five provinces of the country (out of 24), andpopulation shrinkage was showing signs of stabilisingnationwide. In 2007 the highest birth rates were in theWestern Oblasts.[178] In 2008, Ukraine emerged fromlowest-low fertility, and the upward trend hascontinued since then, except for a slight dip in 2010due to the economic crisis of 2009. In total, Ukrainehas 457 cities, 176 of them are labeled oblast-class,279 smaller raion-class cities, and two special legalstatus cities. These are followed by 886 urban-typesettlements and 28,552 villages.[121] Ukraine producesthe fourth largest number of post-secondary graduatesin Europe, while being ranked seventh in population.At the 1994 International Conference on Populationand Development (ICPD) in Cairo, 179 countries,including Ukraine, agreed that population anddevelopment are inseparably linked and thatpopulation issues have paramount importance for

Figure 11 Population of Ukraine (in millions) from 1950 to 2009.

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Fertility and natal policies

The current birth rate in Ukraine, as of 2010, is 10.8births/1,000 population, and the death rate is 15.2deaths/1,000 population. The phenomenon of lowest-lowfertility, defined as total fertility below 1.3, is emergingthroughout Europe and is attributed by many topostponement of the initiation of childbearing. Ukraine,where total fertility (a very low 1.1 in 2001), was one of theworld's lowest, shows that there is more than one pathway tolowest-low fertility. Although Ukraine has undergone

immense political and economic transformations during1991–2004, it has maintained a young age at first birth andnearly universal childbearing. Analysis of official national

statistics and the Ukrainian Reproductive Health Survey show that fertility declined to very low levels withouta transition to a later pattern of childbearing. Findings from focus group interviews suggest explanations of theearly fertility pattern. These findings include the persistence of traditional norms for childbearing and the rolesof men and women, concerns about medical complications and infertility at a later age, and the link betweenearly fertility and early marriage.[175] To help mitigate the declining population, the government continues toincrease child support payments. Thus it provides one-time payments of 12,250 Hryvnias for the first child,25,000 Hryvnias for the second and 50,000 Hryvnias for the third and fourth, along with monthly payments of154 Hryvnias per child.[138][176] The demographic trend is showing signs of improvement, as the birth rate hasbeen steadily growing since 2001.[177] Net population growth over the first nine months of 2007 was registeredin five provinces of the country (out of 24), andpopulation shrinkage was showing signs of stabilisingnationwide. In 2007 the highest birth rates were in theWestern Oblasts.[178] In 2008, Ukraine emerged fromlowest-low fertility, and the upward trend hascontinued since then, except for a slight dip in 2010due to the economic crisis of 2009. In total, Ukrainehas 457 cities, 176 of them are labeled oblast-class,279 smaller raion-class cities, and two special legalstatus cities. These are followed by 886 urban-typesettlements and 28,552 villages.[121] Ukraine producesthe fourth largest number of post-secondary graduatesin Europe, while being ranked seventh in population.At the 1994 International Conference on Populationand Development (ICPD) in Cairo, 179 countries,including Ukraine, agreed that population anddevelopment are inseparably linked and thatpopulation issues have paramount importance for

Figure 11 Population of Ukraine (in millions) from 1950 to 2009.

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national and international development 130.

In so doing, the conference adopted a 20-year Programme of Action which Ukraine, in partnership withUNFPA has focused on. The overall situation in Ukraine with regard to population anddevelopment is characterized by the UNFPA and by the Government of Ukraine as a demographic crisis, dueto a combination of factors including low birth rates, high mortality, poor health (includingreproductive health and the health of children), decreasing longevity, population aging, incomestratification/poverty and labour migration. Having peaked in 1992 at 52.4 million, Ukraine’s population hassince decreased to 45.96 million as of 1 January 2010 which amounts to a decrease in population of6.28 million people (or over 12%, in 18 years). According to the UN, 80% of this decrease is a result ofdepopulation, while 20% is attributed to migration movements. The demographic situation is especiallycritical in rural areas of Ukraine, where in the two thirds of the regions mortality ratios exceed the rate ofbirth twofold. Average life expectancy at birth in Ukraine is 68.27 years (2007-2008 calculations) and hassignificant gender disparities: for men it is 62.51 years and for women it is 74.28 years. The share ofolder persons in Ukraine remains steady for a number of years: about one fifth of the population reached theage of 60, which is comparable with the European averages. Ageing is much faster in rural areas thanin urban settlements due to rural-urban migration of younger population. There are gender disparities inageing: the youngest men live in towns and cities, while the oldest women live in villages – one third of rural-residing women are above 60. The total “demographic load” (proportion of people of non-working age to 1,000people of working age) in 2001 was 723 i.e. 629 for cities and towns and 950 for rural settlements.People above working age constituted 57% of the demographic load while in 1989 they were only 44%.According to population projections, by 2050 every third resident of Ukraine will be over 60. The HIVepidemic has an impact on Ukraine’s demography through its effect on the morbidity and mortalityrates. The majority of all HIV infections are among those in the most active reproductive age (20-34). Thedisease affects their capacity for childbearing, and Ukraine has persistently declining birth rates. Given theshrinking size of the young adultgroups and the persistent demographicdecline, even modest increases inadult HIV prevalence rates couldresult in a strong long-termdemographic impact.

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Government

Country name:Conventional long form: Ukraineconventional short form: nonelocal long form: nonelocal short form: UkrayinaGovernment type: republic

Capital:name: Kyiv (Kiev)geographic coordinates: 50 26 N, 30 31 E

Flag description:two equal horizontal bands of azure (top) andgolden yellow represent grain fields under a blueskytime difference: UTC+2 (7 hours ahead ofWashington, DC during Standard Time)daylight saving time: +1hr, begins last Sundayin March; ends last Sunday in October

Administrative divisions: 24 provinces (oblasti,singular - oblast'), 1 autonomous republic*(avtonomna respublika), and 2 municipalities(mista, singular - misto) with oblast status**;Cherkasy, Chernihiv, Chernivtsi, Crimea orAvtonomna Respublika Krym* (Simferopol'),

Dnipropetrovs'k, Donets'k, Ivano-Frankivs'k,Kharkiv, Kherson, Khmel'nyts'kyy, Kirovohrad,Kyiv**, Kyiv, Luhans'k, L'viv, Mykolayiv,Odesa, Poltava, Rivne, Sevastopol'**, Sumy,Ternopil', Vinnytsya, Volyn' (Luts'k), Zakarpattya(Uzhhorod), Zaporizhzhya, Zhytomyr Note:administrative divisions have the same names astheir administrative centers (exceptions have theadministrative center name following inparentheses)

Independence: 24 August 1991 (from the SovietUnion); notable earlier dates: ca. A.D. 982(VOLODYMYR I consolidates Kyivan Rus), 1648(establishment of Cossack Hetmanate)

National holiday: Independence Day, 24 August(1991); note - 22 January 1918, the day Ukrainefirst declared its independence (from Soviet Russia)and the day the short-lived Western and Greater(Eastern) Ukrainian republics united (1919), is nowcelebrated as Unity Day

Constitution: adopted 28 June 1996 Constitutionalchanges to reduce the powers of the presidencyrelative to parliament took effect at the start of2006, giving parliamentarians the leading role informing the cabinet. However, the transition to a

Figure 12 Verkhovna Rada Main Session Hall

Figure 13 National Flag of Ukraine.

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Government

Country name:Conventional long form: Ukraineconventional short form: nonelocal long form: nonelocal short form: UkrayinaGovernment type: republic

Capital:name: Kyiv (Kiev)geographic coordinates: 50 26 N, 30 31 E

Flag description:two equal horizontal bands of azure (top) andgolden yellow represent grain fields under a blueskytime difference: UTC+2 (7 hours ahead ofWashington, DC during Standard Time)daylight saving time: +1hr, begins last Sundayin March; ends last Sunday in October

Administrative divisions: 24 provinces (oblasti,singular - oblast'), 1 autonomous republic*(avtonomna respublika), and 2 municipalities(mista, singular - misto) with oblast status**;Cherkasy, Chernihiv, Chernivtsi, Crimea orAvtonomna Respublika Krym* (Simferopol'),

Dnipropetrovs'k, Donets'k, Ivano-Frankivs'k,Kharkiv, Kherson, Khmel'nyts'kyy, Kirovohrad,Kyiv**, Kyiv, Luhans'k, L'viv, Mykolayiv,Odesa, Poltava, Rivne, Sevastopol'**, Sumy,Ternopil', Vinnytsya, Volyn' (Luts'k), Zakarpattya(Uzhhorod), Zaporizhzhya, Zhytomyr Note:administrative divisions have the same names astheir administrative centers (exceptions have theadministrative center name following inparentheses)

Independence: 24 August 1991 (from the SovietUnion); notable earlier dates: ca. A.D. 982(VOLODYMYR I consolidates Kyivan Rus), 1648(establishment of Cossack Hetmanate)

National holiday: Independence Day, 24 August(1991); note - 22 January 1918, the day Ukrainefirst declared its independence (from Soviet Russia)and the day the short-lived Western and Greater(Eastern) Ukrainian republics united (1919), is nowcelebrated as Unity Day

Constitution: adopted 28 June 1996 Constitutionalchanges to reduce the powers of the presidencyrelative to parliament took effect at the start of2006, giving parliamentarians the leading role informing the cabinet. However, the transition to a

Figure 12 Verkhovna Rada Main Session Hall

Figure 13 National Flag of Ukraine.

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Government

Country name:Conventional long form: Ukraineconventional short form: nonelocal long form: nonelocal short form: UkrayinaGovernment type: republic

Capital:name: Kyiv (Kiev)geographic coordinates: 50 26 N, 30 31 E

Flag description:two equal horizontal bands of azure (top) andgolden yellow represent grain fields under a blueskytime difference: UTC+2 (7 hours ahead ofWashington, DC during Standard Time)daylight saving time: +1hr, begins last Sundayin March; ends last Sunday in October

Administrative divisions: 24 provinces (oblasti,singular - oblast'), 1 autonomous republic*(avtonomna respublika), and 2 municipalities(mista, singular - misto) with oblast status**;Cherkasy, Chernihiv, Chernivtsi, Crimea orAvtonomna Respublika Krym* (Simferopol'),

Dnipropetrovs'k, Donets'k, Ivano-Frankivs'k,Kharkiv, Kherson, Khmel'nyts'kyy, Kirovohrad,Kyiv**, Kyiv, Luhans'k, L'viv, Mykolayiv,Odesa, Poltava, Rivne, Sevastopol'**, Sumy,Ternopil', Vinnytsya, Volyn' (Luts'k), Zakarpattya(Uzhhorod), Zaporizhzhya, Zhytomyr Note:administrative divisions have the same names astheir administrative centers (exceptions have theadministrative center name following inparentheses)

Independence: 24 August 1991 (from the SovietUnion); notable earlier dates: ca. A.D. 982(VOLODYMYR I consolidates Kyivan Rus), 1648(establishment of Cossack Hetmanate)

National holiday: Independence Day, 24 August(1991); note - 22 January 1918, the day Ukrainefirst declared its independence (from Soviet Russia)and the day the short-lived Western and Greater(Eastern) Ukrainian republics united (1919), is nowcelebrated as Unity Day

Constitution: adopted 28 June 1996 Constitutionalchanges to reduce the powers of the presidencyrelative to parliament took effect at the start of2006, giving parliamentarians the leading role informing the cabinet. However, the transition to a

Figure 12 Verkhovna Rada Main Session Hall

Figure 13 National Flag of Ukraine.

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more parliamentary system sparked power strugglesbetween the president and the government.Following an appeal by the new president, ViktorYanukovych, in late 2010 the Constitutional Courtrescinded the constitutional reform of 2006. Thepresident can now determine the candidacy of theprime minister independently of parliament, andalso has the right to appoint and dismiss cabinetmembers. The president can now dismiss thegovernment without parliament's consent.

Legal system: civil law system; judicial review oflegislative acts

Suffrage: 18 years of age; universal

Executive branch:chief of state: President Viktor YANUKOVYCH(since 25 /02/2010) head of government: PrimeMinister Mykola AZAROV (since 11 March 2010);First Deputy Prime Minister Andriy KLYUYEV(since 11 March 2010);Deputy Prime MinistersBorys KOLESNIKOV and Serhiy TIHIPKO (bothsince 11 March 2010)cabinet: Cabinet of Ministers nominated by thepresident and approved by the Rada(For moreinformation visit the World Leaders website )note: there is also a National Security and DefenseCouncil or NSDC originally created in 1992 as theNational Security Council; the NSDC staff is taskedwith developing national security policy ondomestic and international matters and advising thepresident; a Presidential Administration helps draftpresidential edicts and provides policy support tothe presidentelections: president elected by popular vote for afive-year term (eligible for a second term); electionlast held on 17 January 2010 with runoff on 7February 2010 (next to be held in 2015)electionresults: Viktor YANUKOVYCH elected president;percent of vote - Viktor YANUKOVYCH 48.95%,Yuliya TYMOSHENKO 45.5%, other 5.6 writtenin 1862, were revised in 2003

National symbol(s) trident (tryzub)

National anthem:name: "Sche ne vmerlaUkraina" (Ukraine HasNot Yet Perished)

lyrics/music: PaulHUBYNSKYI/MikhailVERBYTSKYI note:music adopted 1991,lyrics adopted 2003; thesong was first performedin 1864 at the UkraineTheatre in Lviv; thelyrics, originally

Legislative branch:unicameral Supreme Council or Verkhovna Rada(450 seats; members allocated on a proportionalbasis to those parties that gain 3% or more of thenational electoral vote; members to serve five-yearterms)elections: last held on 30 September 2007 (nextmust be held in 2012 or sooner if a ruling coalitioncannot be formed in the Rada)election results: percent of vote by party/bloc -Party of Regions 34.4%, Block of YuliyaTymoshenko 30.7%, Our Ukraine-People's SelfDefense Bloc 14.2%, CPU 5.4%, Lytvyn Bloc 4%,other parties 11.3%; seats by party/bloc - Party ofRegions 175, Block of Yuliya Tymoshenko 156,Our Ukraine-People's Self Defense 72, CPU 27,Lytvyn Bloc 20

Figure 14 Ukraine: Coat of Arms

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more parliamentary system sparked power strugglesbetween the president and the government.Following an appeal by the new president, ViktorYanukovych, in late 2010 the Constitutional Courtrescinded the constitutional reform of 2006. Thepresident can now determine the candidacy of theprime minister independently of parliament, andalso has the right to appoint and dismiss cabinetmembers. The president can now dismiss thegovernment without parliament's consent.

Legal system: civil law system; judicial review oflegislative acts

Suffrage: 18 years of age; universal

Executive branch:chief of state: President Viktor YANUKOVYCH(since 25 /02/2010) head of government: PrimeMinister Mykola AZAROV (since 11 March 2010);First Deputy Prime Minister Andriy KLYUYEV(since 11 March 2010);Deputy Prime MinistersBorys KOLESNIKOV and Serhiy TIHIPKO (bothsince 11 March 2010)cabinet: Cabinet of Ministers nominated by thepresident and approved by the Rada(For moreinformation visit the World Leaders website )note: there is also a National Security and DefenseCouncil or NSDC originally created in 1992 as theNational Security Council; the NSDC staff is taskedwith developing national security policy ondomestic and international matters and advising thepresident; a Presidential Administration helps draftpresidential edicts and provides policy support tothe presidentelections: president elected by popular vote for afive-year term (eligible for a second term); electionlast held on 17 January 2010 with runoff on 7February 2010 (next to be held in 2015)electionresults: Viktor YANUKOVYCH elected president;percent of vote - Viktor YANUKOVYCH 48.95%,Yuliya TYMOSHENKO 45.5%, other 5.6 writtenin 1862, were revised in 2003

National symbol(s) trident (tryzub)

National anthem:name: "Sche ne vmerlaUkraina" (Ukraine HasNot Yet Perished)

lyrics/music: PaulHUBYNSKYI/MikhailVERBYTSKYI note:music adopted 1991,lyrics adopted 2003; thesong was first performedin 1864 at the UkraineTheatre in Lviv; thelyrics, originally

Legislative branch:unicameral Supreme Council or Verkhovna Rada(450 seats; members allocated on a proportionalbasis to those parties that gain 3% or more of thenational electoral vote; members to serve five-yearterms)elections: last held on 30 September 2007 (nextmust be held in 2012 or sooner if a ruling coalitioncannot be formed in the Rada)election results: percent of vote by party/bloc -Party of Regions 34.4%, Block of YuliyaTymoshenko 30.7%, Our Ukraine-People's SelfDefense Bloc 14.2%, CPU 5.4%, Lytvyn Bloc 4%,other parties 11.3%; seats by party/bloc - Party ofRegions 175, Block of Yuliya Tymoshenko 156,Our Ukraine-People's Self Defense 72, CPU 27,Lytvyn Bloc 20

Figure 14 Ukraine: Coat of Arms

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more parliamentary system sparked power strugglesbetween the president and the government.Following an appeal by the new president, ViktorYanukovych, in late 2010 the Constitutional Courtrescinded the constitutional reform of 2006. Thepresident can now determine the candidacy of theprime minister independently of parliament, andalso has the right to appoint and dismiss cabinetmembers. The president can now dismiss thegovernment without parliament's consent.

Legal system: civil law system; judicial review oflegislative acts

Suffrage: 18 years of age; universal

Executive branch:chief of state: President Viktor YANUKOVYCH(since 25 /02/2010) head of government: PrimeMinister Mykola AZAROV (since 11 March 2010);First Deputy Prime Minister Andriy KLYUYEV(since 11 March 2010);Deputy Prime MinistersBorys KOLESNIKOV and Serhiy TIHIPKO (bothsince 11 March 2010)cabinet: Cabinet of Ministers nominated by thepresident and approved by the Rada(For moreinformation visit the World Leaders website )note: there is also a National Security and DefenseCouncil or NSDC originally created in 1992 as theNational Security Council; the NSDC staff is taskedwith developing national security policy ondomestic and international matters and advising thepresident; a Presidential Administration helps draftpresidential edicts and provides policy support tothe presidentelections: president elected by popular vote for afive-year term (eligible for a second term); electionlast held on 17 January 2010 with runoff on 7February 2010 (next to be held in 2015)electionresults: Viktor YANUKOVYCH elected president;percent of vote - Viktor YANUKOVYCH 48.95%,Yuliya TYMOSHENKO 45.5%, other 5.6 writtenin 1862, were revised in 2003

National symbol(s) trident (tryzub)

National anthem:name: "Sche ne vmerlaUkraina" (Ukraine HasNot Yet Perished)

lyrics/music: PaulHUBYNSKYI/MikhailVERBYTSKYI note:music adopted 1991,lyrics adopted 2003; thesong was first performedin 1864 at the UkraineTheatre in Lviv; thelyrics, originally

Legislative branch:unicameral Supreme Council or Verkhovna Rada(450 seats; members allocated on a proportionalbasis to those parties that gain 3% or more of thenational electoral vote; members to serve five-yearterms)elections: last held on 30 September 2007 (nextmust be held in 2012 or sooner if a ruling coalitioncannot be formed in the Rada)election results: percent of vote by party/bloc -Party of Regions 34.4%, Block of YuliyaTymoshenko 30.7%, Our Ukraine-People's SelfDefense Bloc 14.2%, CPU 5.4%, Lytvyn Bloc 4%,other parties 11.3%; seats by party/bloc - Party ofRegions 175, Block of Yuliya Tymoshenko 156,Our Ukraine-People's Self Defense 72, CPU 27,Lytvyn Bloc 20

Figure 14 Ukraine: Coat of Arms

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Judicial branch: Supreme Court; ConstitutionalCourt

Political parties and leaders:Block of YuliyaTymoshenko-Batkivshchyna (BYuT-Batkivshchyna) [Yuliya TYMOSHENKO];Communist Party of Ukraine or CPU [PetroSYMONENKO]; European Party of Ukraine[Mykola KATERYNCHUK]; Forward Ukraine![Viktor MUSIYAKA]; Front of Change [ArseniyYATSENYUK]; Lytvyn Bloc (composed ofPeople's Party and Labor Party of Ukraine)[Volodymyr LYTVYN]; Our Ukraine [ViktorYUSHCHENKO]; Party of Industrialists andEntrepreneurs [Anatoliy KINAKH]; Party ofRegions [Viktor YANUKOVYCH]; Party of theDefenders of the Fatherland [Yuriy KARMAZIN];People's Movement of Ukraine (Rukh) [BorysTARASYUK]; People's Party [VolodymyrLYTVYN]; Peoples' Self-Defense [YuriyLUTSENKO]; PORA! (It's Time!) party [VladyslavKASKIV]; Progressive Socialist Party [NatalyaVITRENKO]; Reforms and Order Party [ViktorPYNZENYK]; Sobor [Anatoliy MATVIYENKO];Social Democratic Party [Yevhen KORNICHUK];Social Democratic Party (United) or SDPU(o)[Yuriy ZAHORODNIY]; Socialist Party of Ukraine

or SPU [Oleksandr MOROZ]; Strong Ukraine[SERHIY TIHIPKO]; Ukrainian People's Party[Yuriy KOSTENKO]; United Center [ViktorBALOHA]; Viche [Inna BOHOSLOVSKA]

Political pressure groups and leaders:Committee of Voters of Ukraine [AleksandrCHERNENKO]; OPORA [Olha AIVAZOVSKA]

International organization participation:Australia Group, BSEC, CBSS (observer), CE,CEI, CICA (observer), CIS (participating member,has not signed the 1993 CIS charter although itparticipates in meetings), EAEC (observer), EAPC,EBRD, FAO, GCTU, GUAM, IAEA, IBRD,ICAO, ICC, ICRM, IDA, IFC, IFRCS, IHO, ILO,IMF, IMO, IMSO, Interpol, IOC, IOM, IPU, ISO,ITU, ITUC, LAIA (observer), MIGA, MONUSCO,NAM (observer), NSG, OAS (observer), OIF(observer), OPCW, OSCE, PCA, PFP, SECI(observer), UN, UNCTAD, UNESCO, UNIDO,UNMIL, UNMISS, UNWTO, UPU, WCO, WFTU,WHO, WIPO, WMO, WTO, ZC

Political forces at a glance

Ukraine is a middle-income country in Eastern Europewith a history of cultural, social, economic and politicaldevelopment spanning several thousand years. Foralmost 20 years since its independence Ukraine hasstarted to transition itself to a market economy andhas focused on reforming and modernizing itseconomy and governance as well as ensuringequitable distribution of benefits of economic growthand overall social justice.As noted by the Government of Ukraine, the

country has significant geopolitical potential: anadvantageous geographical location, favorableclimate, unique natural resources and high level

Figure 15 Yuliya Tymshenko(former prime minister) and the President ofUkraine Viktor Yanukovich

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of education and training of the population. Ukraine is a republic with a unicameral parliament otherwisereferred to as the Verkhovna Rada, a President and a judiciary. In February 2010 Viktor Yanukovych (leader ofthe Party of Regions faction in the Parliament of Ukraine and the then leader of the Official Opposition) waselected President of Ukraine. His Election Programme envisaged system reforms with the following keypriorities: economic reform, social protection reform (demographic revival of the nation), and healthcarereform and, as such, these priorities have been reflected in a “State Programme for Economic andSocial Development for 2010”. The government is based on a parliamentary coalition between the Party ofRegions (PoR) of the new president, Viktor Yanukovych, the Lytvyn Bloc of the parliamentary speaker, andthe Communist Party of Ukraine (CPU). The coalition,which has 235 votes in the 450-seat parliament, alsoincludes a number of individual deputies from theopposition Our Ukraine-People's Self-Defence (OU-PSD; formerly aligned with the previous president,Viktor Yushchenko) and the Yuliya Tymoshenko Bloc(YTB) of the previous prime minister. The currentgovernment replaced the outgoing one—which wasbased on a parliamentary coalition between the YTB,the OU-PSD and the Lytvyn Bloc—in March 2010,following the January-February presidential election.In April the Constitutional Court ruled the coalitionconstitutional after a challenge by the opposition.Next elections: The next parliamentary election will be heldin October 2012 and the next presidential election is scheduled for October 11th. Yuliya Tymoshenko, theformer prime minister, was sentenced to seven years in prison. She has also been barred from holding publicoffice for three years.She has been on trial since June 2011 for abuse of office after signing the contractbetween the state oil and gas company Naftogaz Ukraine and Russian energy giant Gazprom. At the time,Gazprom had increased the price of gas by 40 per cent and Ukraine was under pressure to solve the impasse inorder to supply national needs. Tymoshenko struck a deal struck with Russian President Vladimir Putin that theprosecution alleges caused the state a loss of $194.6 million. It also alleges that she did not get the approval ofth Cabinet of Ministers for the decision. There are two other cases pending against Yuliya Tymoshenko. On 30December 2010, she was charged for abuse of office over the receipt of 180 million Euros from the sale of agreenhouse gas quota to a Japanese company. She is also charged with having delayed signing an order inDecember 2009 for the customs clearance of 1000 Opel Combo cars. The delay allegedly resulted in a budgetloss of $4.6 million. The conviction has not completely derailed negotiations over an association deal with theEU including free trade, but it has killed hopes of any implementation in the near term. This may push Ukrainecloser to Russia.

Figure 16 Parties and blocs in Ukraine

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EconomyOverview

After Russia, the Ukrainian republic was far and away themost important economic component of the former SovietUnion, producing about four times the output of the next-ranking republic. Its fertile black soil generated more thanone-fourth of Soviet agricultural output, and its farmsprovided substantial quantities of meat, milk, grain, andvegetables to other republics. Likewise, its diversified heavyindustry supplied the unique equipment (for example, largediameter pipes) and raw materials to industrial and miningsites (vertical drilling apparatus) in other regions of the

former USSR. Shortly after independence in August 1991, the Ukrainian Government liberalized most pricesand erected a legal framework for privatization, but widespread resistance to reform within the government andthe legislature soon stalled reform efforts and led to some backtracking.

Output by 1999 had fallen to less than 40% of the 1991 level. Ukraine's dependence on Russia for energysupplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to externalshocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirementsand 100% of its nuclear fuel needs. After a two-week dispute that saw gas supplies cutoff to Europe, Ukraineagreed to 10-year gas supply and transit contracts with Russia in January 2009 that brought gas prices to"world" levels. The strict terms of the contracts have further hobbled Ukraine's cash-strapped state gascompany, Naftohaz. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the paceand scope of reforms. Ukrainian Government officials eliminated most tax and customs privileges in a March2005 budget law, bringing more economic activity out of Ukraine's large shadow economy, but moreimprovements are needed, including fighting corruption, developing capital markets, and improving thelegislative framework.

Ukraine's economy was buoyant despite politicalturmoil between the prime minister and presidentuntil mid-2008. Real GDP growth exceeded 7% in2006-07, fueled by high global prices for steel -Ukraine's top export - and by strong domesticconsumption, spurred by rising pensions andwages. Ukraine reached an agreement with theIMF for a $16.4 billion Stand-By Arrangement inNovember 2008 to deal with the economic crisis,but the Ukrainian Government's lack of progress inimplementing reforms has twice delayed therelease of IMF assistance funds. The drop in steelprices and Ukraine's exposure to the globalfinancial crisis due to aggressive foreign

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EconomyOverview

After Russia, the Ukrainian republic was far and away themost important economic component of the former SovietUnion, producing about four times the output of the next-ranking republic. Its fertile black soil generated more thanone-fourth of Soviet agricultural output, and its farmsprovided substantial quantities of meat, milk, grain, andvegetables to other republics. Likewise, its diversified heavyindustry supplied the unique equipment (for example, largediameter pipes) and raw materials to industrial and miningsites (vertical drilling apparatus) in other regions of the

former USSR. Shortly after independence in August 1991, the Ukrainian Government liberalized most pricesand erected a legal framework for privatization, but widespread resistance to reform within the government andthe legislature soon stalled reform efforts and led to some backtracking.

Output by 1999 had fallen to less than 40% of the 1991 level. Ukraine's dependence on Russia for energysupplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to externalshocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirementsand 100% of its nuclear fuel needs. After a two-week dispute that saw gas supplies cutoff to Europe, Ukraineagreed to 10-year gas supply and transit contracts with Russia in January 2009 that brought gas prices to"world" levels. The strict terms of the contracts have further hobbled Ukraine's cash-strapped state gascompany, Naftohaz. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the paceand scope of reforms. Ukrainian Government officials eliminated most tax and customs privileges in a March2005 budget law, bringing more economic activity out of Ukraine's large shadow economy, but moreimprovements are needed, including fighting corruption, developing capital markets, and improving thelegislative framework.

Ukraine's economy was buoyant despite politicalturmoil between the prime minister and presidentuntil mid-2008. Real GDP growth exceeded 7% in2006-07, fueled by high global prices for steel -Ukraine's top export - and by strong domesticconsumption, spurred by rising pensions andwages. Ukraine reached an agreement with theIMF for a $16.4 billion Stand-By Arrangement inNovember 2008 to deal with the economic crisis,but the Ukrainian Government's lack of progress inimplementing reforms has twice delayed therelease of IMF assistance funds. The drop in steelprices and Ukraine's exposure to the globalfinancial crisis due to aggressive foreign

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EconomyOverview

After Russia, the Ukrainian republic was far and away themost important economic component of the former SovietUnion, producing about four times the output of the next-ranking republic. Its fertile black soil generated more thanone-fourth of Soviet agricultural output, and its farmsprovided substantial quantities of meat, milk, grain, andvegetables to other republics. Likewise, its diversified heavyindustry supplied the unique equipment (for example, largediameter pipes) and raw materials to industrial and miningsites (vertical drilling apparatus) in other regions of the

former USSR. Shortly after independence in August 1991, the Ukrainian Government liberalized most pricesand erected a legal framework for privatization, but widespread resistance to reform within the government andthe legislature soon stalled reform efforts and led to some backtracking.

Output by 1999 had fallen to less than 40% of the 1991 level. Ukraine's dependence on Russia for energysupplies and the lack of significant structural reform have made the Ukrainian economy vulnerable to externalshocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirementsand 100% of its nuclear fuel needs. After a two-week dispute that saw gas supplies cutoff to Europe, Ukraineagreed to 10-year gas supply and transit contracts with Russia in January 2009 that brought gas prices to"world" levels. The strict terms of the contracts have further hobbled Ukraine's cash-strapped state gascompany, Naftohaz. Outside institutions - particularly the IMF - have encouraged Ukraine to quicken the paceand scope of reforms. Ukrainian Government officials eliminated most tax and customs privileges in a March2005 budget law, bringing more economic activity out of Ukraine's large shadow economy, but moreimprovements are needed, including fighting corruption, developing capital markets, and improving thelegislative framework.

Ukraine's economy was buoyant despite politicalturmoil between the prime minister and presidentuntil mid-2008. Real GDP growth exceeded 7% in2006-07, fueled by high global prices for steel -Ukraine's top export - and by strong domesticconsumption, spurred by rising pensions andwages. Ukraine reached an agreement with theIMF for a $16.4 billion Stand-By Arrangement inNovember 2008 to deal with the economic crisis,but the Ukrainian Government's lack of progress inimplementing reforms has twice delayed therelease of IMF assistance funds. The drop in steelprices and Ukraine's exposure to the globalfinancial crisis due to aggressive foreign

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borrowing lowered growth in 2008 and the economy contracted more than 15% in 2009, among the worsteconomic performances in the world; growth resumed in 2010, buoyed by exports.

External conditions are likely to hamper efforts for economic recovery in 2011.Ukraine's compliance with theIMF's terms was extremely poor. In July 2010 the new government sealed a new IMF program, totalingUS$15.2bn over the next two and a half years. Fiscal consolidation will be a priority. Improving the situation ofthe almost bankrupt state energy firm, Naftogaz, is vital. A deal with Russia in April 2010 lowering the price ofgas imports will help, but domestic gas prices will probably need to be raised again after an initial 50%increase in August 2010. Shoring up the banking sector is also a focus under the IMF program. Medium-termchallenges include improving the poor business climate. Taxation: Personal income is taxed at 15% and 17%.The corporate tax rate is 23% and value-added tax (VAT) is 20%. Foreign trade: Ukraine remains dependent onRussia for most of its energy imports, and Russia is still an important market for Ukrainian metals andmachine-building. Ukraine has nevertheless made progress in diversifying into new markets, including the EUand Asia. Exports to Europeexceed those to Russia, but aredominated by products of lowvalue added.

Looking back at the first twodecades of transition, theoverwhelming sense is of acountry performing well below itspotential. Ukraine has a vastopportunities to benefit from thenext phase of globalization givenits enviable geographic location,abundant natural resources, andeducated labor force. The countrywill require deep fiscal andstructural reforms to realize its fullpotential. The decisions thatUkraine’s leaders take now andover the next three years could make the difference between a low-growth, muddle-through scenario and ascenario of rapid modernization, turning Ukraine into a powerhouse in Eastern Europe. By now Ukraine has totackle its fiscal crisis to restore macroeconomic credibility and create fiscal space for investments needed tosupport private sector growth. Also, country needs to improve its investment climate and fix the financialsystem to attract private sector investment. And, of course, Ukraine needs to tackle the problems with publicsector governance through deep public sector, judicial and administrative reforms.

Undoubtedly, Ukraine has it all, proven resources (the good), trade barriers (the bad) and corruption (the ugly).In spite of the challenges to doing business in Ukraine – foreign companies are in the market – small, mediumand large companies all recognize the vast potential of the Ukrainian market. Many have been doing businessin Ukraine for more than 15 years.As the 2nd largest country in Europe, Ukraine is sitting at a cross roads, and is potentially the richest country interms of resources, in all of Europe - across the board.

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• Land area of 233,000sq/miles, 53% of which is arableblack soil that has yet to evenapproach full agriculturalproduction capacity.• Diverse mineral resourcesin quantity such as iron ore, coal,manganese, natural gas, oil, salt,sulfur, graphite, titanium,magnesium, kaolin, nickel andmercury.• Established industrialdevelopment in the coal, electricpower, ferrous and non-ferrousmetals industries; machinery andtransport equipment, chemicalsand food processing industries.• Human resources – apopulation of approximately 46 million, with a literacy rate of 99.7% where most adults have a secondary orhigher education.• Ukraine is also a member of the WTO since 2008 – a clear indicator that Ukraine intends to be part ofthe international business community.• Unfortunately, Ukraine inherited a Soviet style bureaucracy that has stifled economic development andstymied the best efforts of three successive governments (since independence) to stimulate economicdevelopment. Add to the mix corruption that is so entrenched, it’s impossible to tell where the government endsand the corruption begins.

The analysis of economic developments over the last decade shows that Ukraine has built up a number of fiscaland banking sector vulnerabilities, and thus faces serious challenges, as discussed below.

On the fiscal side:

■ Ever increasing public infrastructure needs (including repairs to existing deteriorated infrastructure) wereestimated by the World Bank’s Public Finance Review (PFR) (2006) to require USD100 billion between 2006and 2015. Given the type of basic infrastructure needed, this would imply at least tripling the current level ofpublic infrastructure spending of 2 percent of GDP (average 2000-8).■ Despite more than doubling import gas prices in foreign currency, a significant depreciation of the UAH, anddouble-digit inflation over the last three years, utility tariffs have been adjusted only marginally since 2006.Domestic household utility tariffs (mainly for gas and heating) are well below cost recovery.In the absence of a program of tariff increases, Naftogaz and utility enterprises may risk bankruptcy whilstinfrastructure deteriorates, causing more inefficiencies and further fiscal pressures.■ Ukraine’s demographic trends and the already large population of pensioners (more than 14 million) presentsignificant sustainability challenges. The unreformed pension system and Ukraine’s aging population threatensshort-term fiscal viability (with growing deficits that are becoming un- financeable) and long-termsustainability (by 2020 there will be almost one pensioner for each contributor in the system, and the ratio will

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worsen sharply after that). Yet many pensioners receive a small pension in nominal terms. Reforms are neededto protect current and future pensionersand ensure reasonable pension payouts that are more in line with contributions.■ The rapidly aging profile will also place pressures on service delivery (see World Bank PFR II), burdeningthe public health care system, particularly in the area of long-term care. These trends also affect the educationsystem that has shrinking cohorts of students. In education, quality needs to be improved to build up the skillsdemanded by the economy, but without spending additional resources. This will require a shift away from theSoviet-era input norms to pure student financing through the existing intergovernmental financing systems,which can only be done through staffing and network rationalization. The process of staffing and networkrationalization is at the core of the reforms in both the health care and education systems.■ Given the already high average tax burden and high marginal rates on direct taxes, fiscal space cannot beachieved by increasing tax rates or with tax administration procedures that deter self compliance. This isparticularly true while VAT tax exemptions and international double taxation treaties and loopholes continue toerode the tax base, and VAT refund arrears hinder exporters in a moment when the economy needs them themost. On the contrary, it is important to create a more stable and less onerous tax system that has a broaderbase and attracts investors.■ With large fiscal deficits (and quasi-fiscal deficits), public and publicly guaranteed debt will continue togrow. Without corrective measures this could impact the costs of external financing to the whole economy overthe medium term as capital markets become more selective.■ All of the above needs to be tackled whilst gradually reducing the footprint of the government in theeconomy, to crowd in the private sector.

On the banking sector side:

■ The banking sector is undercapitalized and vulnerable to even minor shocks and to further increases ofunrecognized NPLs.■ Transparency needs to be improved to regain trust. The system continues to be plagued with lack ofinformation on individual bank operations and results (the disclosure of which is common practiceinternationally). Lack of transparency in relation to ultimate bank ownership reduces trust and hamperseffective supervision.■ Lack of trust, coupled with the consumption boom, has also been driving domestic savings down. Ukraine’ssavings level as a share of GDP has declined steadily since 2004.

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■ The interference of vested interests slows the rehabilitation process and reduces the value of time-sensitiveassets in problem banks. More broadly, the existing representation of commercial banks in the supervisorycouncil of the regulator hinders governance.■ Regulation remains weak, despite progress made in 2009.■ The banking sector needs consolidation to intermediate domestic savings more efficiently. In its currentcomposition, with more than 175 banks (many of them small banks with significant connected lendingoperations), and without stronger prudential regulation including countercyclical provisioning practices, thesystem will be less resilient to future shocks.

The key constraints to growth are the following:

■ Ukraine’s limited and deteriorated infrastructure is unable to support private sector growth. Publicinfrastructure needs are large and essential to support growth. Low levels of public infrastructure spending areat the core of the problem. But there is no fiscal space to increase public investments.■ Macroeconomic imbalances and concerns, particularly regarding fiscal policy, have kept capital in flowsaway.■ Marginal rates on direct taxes are high. Although the average tax burden is not significantly higher than inother European countries, it is high compared to countries with the same level of income and other emergingeconomies. Compliance costs are also high for taxpayers (including frequent and burdensome inspections).■ While access to finance was not an issue prior to the crisis, it has come to the fore in the context of sharpdeleveraging in the banking sector.■ Ukraine has low returns to education, which could imply that labor constraints are not binding on growth, butthe data may be problematic due to wage compression and underreporting of income. Other evidence suggeststhat a shortage of technical skills is a growing obstacle to firm growth, especially for more dynamic businesses.■ There are significant deficiencies in real estate (including land), contractual, and intellectual property rights.■ Regulatory and other barriers to entry are high. Entry and operation costs are particularly burdensome forgrowing export sectors.■ Governance and corruption concerns are a key issue discouraging FDI

The evaluation of selected sub-sectors in the manufacturing, services, and agriculture sectors showed thefollowing main constraints by sector:

Short-term issues:

■ Lack of financing (for both working capital and investments): all sectors.■ VAT refund arrears: agriculture, food processing, steel, machine building, exporters.

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Structural issues:

■ High tax rates and burdensome tax administration inspections: all sectors.■ Inadequate transport and energy infrastructure: metallurgy, machine building, agriculture, food processing,and energy.■ High transport tariffs and weak reliability: metallurgy and agricultural production.■ Inadequate export logistics infrastructure: agriculture, food processing, wholesale and retail trade.■ Land policy issues: agriculture, food processing, wholesale and retail trade.■ Institutional and regulatory framework that imposes high entry and exit barriers and high operational costs,and consequently limited competition: all sectors (except banking).■ Intellectual property rights: machine building, sophisticated (light) manufacturing of durable goods.■ Inadequate technical skills: steel and machine building.

The key micro underpinnings of growth in the economy point to the following:

■ Barriers to entry and exit hamper the economy’s ability to allocate resources efficiently and thus drag downproductivity growth. Entry and exit rates of firms are low compared to other countries. Barriers to entry andexit related to the regulatory and legislative framework may explain poor firm dynamism. The moderatereforms undertaken have not done enough to stimulate firm dynamism. In the service sector, entrants are onaverage more productive than incumbents, which suggests high entry barriers. The average firm that exits themarket (across sectors) does so with an extremely low productivity level. While it is normal that firms exit withlower productivity levels than the average incumbent, in the case of Ukraine this gap is extremely large,indicating weak market selection incentives that allow firms to survive at low levels of productivity for a longtime.■ Indicators proxying concentration and competitive pressures suggest low levels of competition in Ukraine’seconomy. Competition in the manufacturing sector seems to have increased only marginally since 2001, whileheavy industry competition has been stagnant or declining. High mark-ups prevalent in the business/servicesector indicate a lack of competition. This is consistent with evidence of high entry barriers and high margins inthe wholesale and large retail and transport sectors gathered from case studies.■ Export concentration is high compared internationally, and a large share of exports (metals and chemicals)remains exposed to price volatility.■ Ukraine had favorable export sophistication relative to its income level in 2000, but progress has been slowsince then. Key competitors have left Ukraine behind with faster progress in sophistication. The basket ofproducts exported to CIS countries is more sophisticated than that exported to non-CIS countries, but heavyindustries like machine building are losing market share to other competitors in Russia (its largest market),which in turn places further pressureto improve product sophistication.■ The number of newly exported products seems to be in line with other comparator countries, but with lowersuccess rates over time.■ Technology absorption is particularly critical to increase productivity and sophistication in a “within-the-frontier” country such as Ukraine. But technology absorption seems low. A weak intellectual property rightsregime, weak rule of law, and an unlevel playing field deters foreign investors from engaging in joint ventureswith local investors in technology-intensive sectors, particularly manufacturing. Licensing of technology andoff-the-shelf technology purchasing are underexploited. Moreover, adherence to globally-recognized standardsis low.

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■ More than two-thirds of existing (Soviet-era) standards are not harmonized with theEU—a market where Ukraine has largeupside potential. Infrastructure andmetrology equipment issues are part of theproblem in improving standards. But moreimportant are the reforms needed around theharmonization of standards and the controlbodies with redundant mandates and aculture of rent-seeking.■ Ukraine’s historically renownedinnovation system is under-performing andslowly fading out due to a weak alignment ofproperty rights and economic incentives,weak linkages with the private sector, and anaging cadre of scientists.■ Labor skills are becoming an important obstacle for firm growth, particularly for fast-growing firms. Thisproblem is more acute for technical positions in the manufacturing sector (mainly heavy manufacturing). Thereseems to be mismatch between the skills provided by the education system and labor demand. One-third ofrespondents in the Ukrainian Labor Market Survey claim that they are performing a job that either requires adifferent ffield of education or/and a different level of education.■ Ukraine ranks poorly on logistics and trade facilitation infrastructure and other behind-the- border issues.The top problems are outdated or insufficient infrastructure, expensive and nontransparent freight tariffs in thetransport sector, burdensome cross border procedures, and inadequate warehousing space and storage facilities(including cold storage).

The sector and micro analyses undertaken shows that Ukraine seems to be trapped in a self-perpetuating lowequilibrium of high entry barriers, low competition, limited incentives for technology adoption, low exportdiversification and sophistication, and high vulnerability to commodity prices. This vicious circle hampers thestructural transformation of the country’s economy while key comparator countries move ahead, and cripplesthe aspiration of achieving higher per capita income levels and living standards for Ukraine’s citizens.

These problems are compounded by patronage and capture in many of the interactions of the public sector withbusinesses and citizens. The public sector is large—the general government alone spends roughly 47 percent ofGDP. Ukraine scores low on public sector governance, despite some improvements. Regulatory bodies,inspection and control agencies, government procurement, line ministries, and state-owned enterprises (SOEs)are heavily intertwined with the activities and the non-tax costs incurred by the private sector. Significantuncertainties about contract enforcement and fairness in the rule of law hold back foreign direct investment(FDI) needed to modernize the economy. Reforming the public sector requires reducing its size and breakingthe power of entrenched interests, to provide better public services to citizens and foster genuine competition.Investment climate and fiscal reforms will not be effective without undertaking at the same time deep publicsector and administration reforms.

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MACROECONOMIC INDICATORS

Figure 17 Hryvnia, national currency, Banknote

GDP (purchasing power parity):$305.2 billion (2010 est.)country comparison to the world: 40$292.9 billion (2009 est.)$343.8 billion (2008 est.)note: data are in 2010 US dollars

GDP (official exchange rate):$136.4 billion (2010 est.)

GDP - real growth rate:4.2% (2010 est.)country comparison to the world: 88-14.8% (2009 est.)1.9% (2008 est.)

GDP - per capita (PPP):$6,700 (2010 est.)country comparison to the world: 133$6,400 (2009 est.)$7,500 (2008 est.)note: data are in 2010 US dollars

GDP - composition by sector:agriculture: 9.4%industry: 33.6%services: 57% (2010 est.)

Labor force:22.02 million (2010 est.)country comparison to the world: 29

Labor force - by occupation:agriculture: 15.8%industry: 18.5%services: 65.7% (2008)

Unemployment rate:8.1% (2010 est.)country comparison to the world: 938.8% (2009 est.)note: officially registered; large number ofunregistered or underemployed workers

Population below poverty line:35% (2009)

Household income or consumption bypercentage share:lowest 10%: 4.1%highest 10%: 22.6% (2008)

Distribution of family income - Gini index:27.5 (2008)country comparison to the world: 12829 (1999)Investment (gross fixed):19.1% of GDP (2010 est.)country comparison to the world: 129

Budget:revenues: $39.62 billionexpenditures: $49.89 billionnote: this is the planned, consolidated budget (2010est.)

Taxes and other revenues:29% of GDP (2010 est.)country comparison to the world: 96

Budget surplus (+) or deficit (-):-7.5% of GDP (2010 est.)country comparison to the world: 180

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Public debt:42.3% of GDP (2010 est.)country comparison to the world: 6834.7% of GDP (2009 est.)

Inflation rate (consumer prices):9.4% (2010 est.)country comparison to the world: 19715.9% (2009 est.)

Central bank discount rate:11.97% (31 December 2010 est.)country comparison to the world: 2810.25% (31 December 2009 est.)

Commercial bank prime lending rate:15.869% (31 December 2010 est.)country comparison to the world: 2020.863% (31 December 2009 est.)

Stock of narrow money:$36.41 billion (31 December 2010 est.)country comparison to the world: 50$29.27 billion (31 December 2009 est.)

Stock of broad money:$74.96 billion (31 December 2010 est.)country comparison to the world: 58$60.71 billion (31 December 2009 est.)

Stock of domestic credit:$108.1 billion (31 December 2010 est.)country comparison to the world: 47$101.3 billion (31 December 2009 est.)

Market value of publicly traded shares:$39.46 billion (31 December 2010)country comparison to the world: 63$16.79 billion (31 December 2009)$24.36 billion (31 December 2008)

Agriculture - products:grain, sugar beets, sunflower seeds, vegetables;beef, milk

Industries:coal, electric power, ferrous and nonferrous metals,machinery and transport equipment, chemicals,food processing

Industrial production growth rate:11.2% (2010 est.)country comparison to the world: 18

Electricity - production:172.9 billion kWh (2009 est.)country comparison to the world: 22

Electricity - consumption:134.6 billion kWh (2009 est.)country comparison to the world: 22

Electricity - exports:4 billion kWh (2009 est.)

Electricity - imports:6.73 billion kWh (2008 est.)

Oil - production:82,000 bbl/day (2010 est.)country comparison to the world: 54

Oil - consumption:296,000 bbl/day (2010 est.)country comparison to the world: 44

Oil - exports:114,000 bbl/day (2009 est.)country comparison to the world: 62

Oil - imports:301,900 bbl/day (2009 est.)country comparison to the world: 35

Oil - proved reserves:395 million bbl (1 January 2011 est.)country comparison to the world: 54

Natural gas - production:20.26 billion cu m (2009 est.)

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country comparison to the world: 30

Natural gas - consumption:44.16 billion cu m (2009 est.)country comparison to the world: 19

Natural gas - exports:2.8 billion cu m (2009 est.)country comparison to the world: 34

Natural gas - imports:26.7 billion cu m (2009 est.)country comparison to the world: 11

Natural gas - proved reserves:1.104 trillion cu m (1 January 2011 est.)country comparison to the world: 25

Current account balance:-$2.884 billion (2010 est.)country comparison to the world: 169-$1.732 billion (2009 est.)

Exports:$52.19 billion (2010 est.)country comparison to the world: 52$40.39 billion (2009 est.)

Exports - commodities:ferrous and nonferrous metals, fuel and petroleumproducts, chemicals, machinery and transportequipment, food products

Exports - partners:Russia 24.1%, Turkey 5.9%, Italy 4.7% (2010)

Imports:$60.9 billion (2010 est.)

country comparison to the world: 43$44.7 billion (2009 est.)

Imports - commodities:energy, machinery and equipment, chemicals

Imports - partners:Russia 33.9%, China 8.5%, Germany 8.1%, Poland5.4%, Belarus 4.1% (2010)

Reserves of foreign exchange and gold:$34.58 billion (31 December 2010 est.)country comparison to the world: 45$26.51 billion (31 December 2009 est.)

Debt - external:$99.51 billion (31 December 2010 est.)country comparison to the world: 38$93.15 billion (31 December 2009 est.)

Stock of direct foreign investment - at home:$53.3 billion (31 December 2010 est.)country comparison to the world: 52$46.81 billion (31 December 2009 est.)

Stock of direct foreign investment - abroad:$2.803 billion (31 December 2010 est.)country comparison to the world: 65$2.067 billion (31 December 2009 est.)

Exchange rates:hryvnia (UAH) per US dollar –8.0264 (2011)7.9111 (2010)7.7912 (2009)4.9523 (2008)5.05 (2007)5.05 (2006)

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2006 2007 2008 2009 2010 2011f 2012f

Real GDP Growth, % yoy 7.3 7.9 2.3 -14.8 4.2 4.0 4.0

Fiscal Balance, % GDP* -0.7 -1.7 -2.0 -8.8 -6.5 -4.0 -3.0

Consumer Inflation, %, eop 11.6 16.6 22.3 12.3 9.1 10-11 9.0

UAH/$ Exchange Rate, eop 5.1 5.1 7.7 8.0 8.0 8.0 8-8.5

Current Account, % GDP -1.5 -3.7 -7.0 -1.5 -1.9 -4.5 -4.5

Gross Int. Reserves, $ bn 22.4 32.5 31.5 26.5 34.6 35.0 31.0

Foreign Gov't Debt, % GDP 11.0 8.7 9.2 20.5 25.5 24.5 23.0

Foreign Private Debt, % GDP 39.6 47.4 47.1 68.1 63.8 56.4 50.0Figure 18 Main Macroeconomic indicators

* Includes implicit pension fund deficit (credits from unified Treasury account (state budget) to cover pensionfund expenditures) for 2007-2008 and Pension Fund and Naftogaz imbalances since 2009, excluding bankrecapitalization and VAT bonds

OVERVIEW

Real GDP grew by 4.4% yoy in 1H 2011 (3.5% yoy in 2H 2010).This growth was broad-based, driven by robust domesticconsumption, strong investments, and solid exports. But theoutlook for 2H 2011 has recently worsened due to:• deterioration of global economic growth prospects; and• weakening consumer demand.Therefore, our GDP growth forecast was revised slightlydownwards to 4.0% both in 2011 and 2012

Ukraine will be affected by the international slowdown throughthe following channels:I. Exports:a) Weaker growth in main trading partners may reduce their imports.b) This may put a downward pressure on commodity prices,including steel – Ukraine’s main export commodity;

II. Sector Inter-dependence:Figure 19 Real GDP Growth Percentage Points

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a) Metallurgy accounts for 25% of total industrial productionand production of many other industries and sectors are tied toit.b) But performance of other sectors may compensate.

III. Foreign Capital:a) The health of Ukrainian banks depends on European banks:due to higher global risk aversion, European banks may bemore reluctant to maintain past external debt rollover ratios;b) FDI and External Debt inflows may be below potential

I. Exports: (a) Growth in Main Trading PartnersDemand for Ukraine’s exports is likely to weaken in 2H2011. Exports to Russia and other CIS countries may slowdue to:• Weaker growth in Russia, economic downturn in Belarus;• Trade restrictions, imposed by Russia during June-July 2011, and which were automatically imposed by othermembers of the Customs Union.• There is continuing turbulences in MENA region. The second largest market for Ukraine’s exports, the EU,will also experience slow downs, even though exports to the periphery are small.• Turkey may also grow at a slower pace, due to its close ties with EU.• Slower growth in the CIS, EU and Turkey will affect Ukrainian exports.

Exports: (b) Commodity PricesSlower global GDP growth will reduce not only world demand for commodities, but also their prices, includingthe price of steel.In fact, from May to July 2011, steel prices already fell by 6%. Although during July steel prices were higherthan last year, the full-year increase in steel prices will be lower thanprojected at the beginning of the year. Ukraine’s exports and industrialproduction will be affected as they closely follow steel price trends. Theywill have lower growth rates than initially anticipated.

II. Sector Inter-dependence: (a) Metallurgy

Metallurgy accounts for 25% of total industrial production and drives theperformance of many other sectors (1st chart). • From Jan-July 2011Ukraine’s metallurgy grew by about 11% yoy, though output sufferedlarge fluctuations during the year. • Similar trends were observed for thecoke industry, non-energy mining etc., which are closely tied tometallurgy.Ukraine was a major world producer of such minerals as bromine,gallium, graphite, iron ore, manganese ore, pig iron, steel, titaniumconcentrates (ilmenite and rutile), and titanium. The country had large coal Figure 21 World Carbon Steel Prices

Figure 20 Ukraine's Goods Export

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reserves but was dependent on imports to satisfy most of its petroleum and natural gas demand. Ukraine wasalso an important transit country for natural gas and petroleum from Central Asia and Russia to Europe(apodaca, 2010; Corathers, 2010; Fenton, 2010; Gambogi, 2010; Jaskula, 2010; Jorgenson, 2010; Olson,2010).

Structure of the Mineral Industry

As in many of the countries that had made up the Soviet Union, ownership and control of mineral productionfacilities in Ukraine are not always completely transparent, but understanding the ownership issues is importantfor understanding the actions of industry participants. According to news reports, Ukrainian companies or theirowners often established holding companies outside of Ukraine in order to purchase mineral productionfacilities and control their activities through indirect ownership. Therefore, when discussing a particularcompany, news reports often referred to companies as being “controlled by” instead of “owned by” anotherentity to avoid an unnecessarily detailed explanation of the ownership structure. This report and table 2 use thismethod to show the companies that actually control various facilities without showing specific shareholders. Agood example of this indirect method used to control mineral production facilities was the PrivatBank Group’scontrol of Ukraine’s manganese production and of virtually all Ukraine’s ferroalloys production. ThePrivatBank Group’s control of Ukraine’s two manganese mining companies at Marganets and Ordzhonikidzeand three ferroalloys plants at Nikopol, Stakhanov, and Zaporozhye was widely reported, but the exact natureof ownership was difficult to determine. The shares of most of these facilities were owned by a number ofprivately held companies based in Cyprus that were widely reported to have been owned by the principleshareholders of PrivatBank, which gave the PrivatBank Group effective control over the facilities withouthaving direct ownership of them (table 2; Ignatenko, 2009). Another important aspect of the structure of theUkrainian mineral industry was that major production facilities were usually controlled by Ukrainianconglomerates with financial and industrial assets (know as financial-industrial groups) or by Russiancompanies. The leading Ukrainian financial-industrial group in terms of production of mineral commoditieswas System Capital Management, which controlled assets in finance, power generation and distribution,telecommunications, media, and real estate in Ukraine, and, through its holding company, Metinvest B.V. andthrough Donbass Fuel and energy Co. held important mining and metals production facilities.

In 2009, companies owned by System Capital Management and Metinvest accounted for about 42% of coalproduction in Ukraine, an estimated 40% of iron ore production, and about 24% of coke and crude steelproduction, JSC Makevskii iron and Steel Works was removed from the list of crude steel producers as itseemed to have stopped production of crude steel in 2008 but continued to produce rolled metal products. Theplant was obtained by Metinvest in 2007 when Smart Holdings of Ukraine sold its mining and metallurgicalassets to Metinvest (table 1; Metinvest B.V., 2007; 2010, p. 2, 42; Donbass Fuel and energy Co., 2010, p. 38;System Capital Management, 2011). In the beginning of January 2010, the shareholders of the industrial Unionof Donbass Corp. (iSD Corp.) completed the sale of 50% plus 2 shares in the company to a group of threeRussian investors. ISD was Ukraine’s second ranked steel producer after Metinvest, and, in addition to itsUkrainian steel plants in alchevsk and Dniprodzerzhinsk, iSD owned steel plants in Hungry and Poland. Oneof the russian investors was identified as the owner of the Carbofer Group, which was based in Switzerland, butthe other two investors were not officially named and news reports suggesting their identity could not beconfirmed. The Russian state-owned bank Vnesheconombank financed the deal (Asankin, Chernovalov, andKalnysh, 2010; Neverov, 2010).

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Figure 22 Ukraine: Production Of Mineral Commodities

e -estimated; estimated data are rounded to no more than three significant digits; may not add to totals shown.revised. do. Ditto. -- Zero.1- Table includes data available through January 18, 2011.2 – secondary in addition to the commodities listed, other minerals may be produced, but available informationwas inadequate to make reliable estimates of output.3- reported figure.4 - includes secondary5 - ilmenite production statistics include information from production at only the irshansk GOk andVolnogorsk State Mining-Metals Complex. Productiondata for OOO Valki-ilmenit were not available, but itmay produce an additional 50,000 metric tons per year of ilmenite concentrate.6Figures were converted to barrels from metric tons (t), which were reported as follows: 2005—4,414,000 t;2006—4,506,000 t; 2007—4,459,000 t; 2008—4,168,300 t; 2009—3,916,600 t.7Figures were converted to barrels from metric tons, which were reported as follows: 2005—17,189,000 t;2006—13,525,000 t;2007—13,283,000 t; 2008—10,717,000 t; 2009—10,959,000 t.

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Figure 22 Ukraine: Production Of Mineral Commodities

e -estimated; estimated data are rounded to no more than three significant digits; may not add to totals shown.revised. do. Ditto. -- Zero.1- Table includes data available through January 18, 2011.2 – secondary in addition to the commodities listed, other minerals may be produced, but available informationwas inadequate to make reliable estimates of output.3- reported figure.4 - includes secondary5 - ilmenite production statistics include information from production at only the irshansk GOk andVolnogorsk State Mining-Metals Complex. Productiondata for OOO Valki-ilmenit were not available, but itmay produce an additional 50,000 metric tons per year of ilmenite concentrate.6Figures were converted to barrels from metric tons (t), which were reported as follows: 2005—4,414,000 t;2006—4,506,000 t; 2007—4,459,000 t; 2008—4,168,300 t; 2009—3,916,600 t.7Figures were converted to barrels from metric tons, which were reported as follows: 2005—17,189,000 t;2006—13,525,000 t;2007—13,283,000 t; 2008—10,717,000 t; 2009—10,959,000 t.

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Figure 22 Ukraine: Production Of Mineral Commodities

e -estimated; estimated data are rounded to no more than three significant digits; may not add to totals shown.revised. do. Ditto. -- Zero.1- Table includes data available through January 18, 2011.2 – secondary in addition to the commodities listed, other minerals may be produced, but available informationwas inadequate to make reliable estimates of output.3- reported figure.4 - includes secondary5 - ilmenite production statistics include information from production at only the irshansk GOk andVolnogorsk State Mining-Metals Complex. Productiondata for OOO Valki-ilmenit were not available, but itmay produce an additional 50,000 metric tons per year of ilmenite concentrate.6Figures were converted to barrels from metric tons (t), which were reported as follows: 2005—4,414,000 t;2006—4,506,000 t; 2007—4,459,000 t; 2008—4,168,300 t; 2009—3,916,600 t.7Figures were converted to barrels from metric tons, which were reported as follows: 2005—17,189,000 t;2006—13,525,000 t;2007—13,283,000 t; 2008—10,717,000 t; 2009—10,959,000 t.

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Figure 23 Grain Harvest

II (b) Performance of Other Sectors could compensate

• Agriculture grew by 9% yoy amid a generous harvest: Ukraine collected 48-50 million tons, the third highestharvest in its history.• Other sectors were supported by robust investment and consumption.• Construction went up by 14% yoy in Jan-Jul 2011, mainly thanks to budget financing of large infrastructureprojects.• However, in June-July both private consumption and investments showed moderation, which may continueduring the year as noted in next slides.Ukraine has 42.9mn ha of arable land, of which 75% is used to harvest crops. Individuals own land, andcan use it to grow crops themselves or lease it to agro companies on a long-term basis (three-to-five years). Weconsider this type of relationship as transparent and price-driven, which has been reflected in increased leaseprices in recent years For land to become tradable, two primary legislative acts are required: Law on LandMarket and Law on Land Registry, both of which must be passed by the Rada. In the meantime, there isongoing activity to develop a single land registry and draft amendments to the other legislative acts. Lease rateinflation and the absence of a guaranteed right to buy leased land are the two biggest concerns for Ukraine’sagro companies. It is expected that lease rates will reach $110-120/ha/year by 2012. Land lease contracts areusually very simple and include only basic terms, like lease period, lease rate and the pre-emptive right to buyland when it becomes tradable. However, such contracts give no guarantee to the lessee to buy land, as theowner is free to sell its land to the highest bidder. Over the 2006/2007 season, Ukraine produced 33.5mnt ofgrain, of which 4.2mnt was accounted for by grain. This is a rather modest crop, given the country’s potentialto produce up to 60mn tpa. Ukrainian agro business lacks the financial resources to replace its 90%-depreciatedmachinery and spend the required working capital (on items such as quality seeds and fertilizers) to ensure highyields.

Consumption and Investment

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Real wage growth decelerated sharply from about 10% yoy in1Q 2011 to less than 2% yoy in June. Although the Governmentwants to increase public sector wages in 2H 2011, fiscalconstraints may not allow it. Also slower export and industrygrowth may affect employment and private sector wage growth.However, the recent revival of consumer credit (+18% yoy inJuly) will support private sector consumption. Privateinvestment activity remains rather weak (excluding investmentin inventories) mainly due to sluggish bank credit to privatecompanies. In fact, the 16% yoy increase in credit to legalentities as of June 2011 was achieved mainly due to a 180% yoyrise in loans to state-owned companies.

III Foreign Capital: (a) Health of Banking System

The external debt of the banking sector stood at $28 billion as ofApril 2011, with half of it is due within a year. There are 56

banks with foreign capital in Ukraine, of which 21 banks are100% foreign-owned. European banks hold about 30% ofUkrainian banking system capital. So far, foreign mother banks have provided substantial support to theirUkrainian subsidiaries. Nevertheless, the banking sector of Ukraine was a net exporter of capital (repaymentsexceeded new borrowings) during both 2010 and 1H 2011. High exposure of the European banking system tothe Euro zone sovereign debts and intensified global risk aversion may make it more difficult for Ukrainianbanks to maintain high debt rollover rates. This may affect the ability of local banks to provide credits.

Figure 25 Net FDI

Figure 24 Consumer Sentiment Index

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III Foreign Capital: (b) FDI and External Debt

FDI inflows remain low despite decent economic recovery. Uneven reform progress and increased investors’perceptions of more complicated business environment explain subpar FDI inflows to Ukraine. Sovereign andquasi-sovereign borrowings on foreign markets were the main source of BoP financial account surpluses in2010 and 1H 2011. Intensified global risk aversion may adversely affect foreign capital inflows

Ukraine’s BoP and Hryvnia Outlook

Due to weaker exports but still high imports, Ukraine’s CA deficit may widen to 4.5% of GDP in 2011. Thefinancial account may be under pressure due to high debt financing needs and strong population demand forforeign currency.In 2011, net population purchases of foreign currencyamounted to $7 bn. However, foreign creditors stillbelieve Ukraine is less risky than some countries in theEU periphery In addition, high level of NBU grossinternational reserves ($37.8 billion as of end-July2011) should provide some confidence. Hence, we donot expect massive capital outflows from the country.The Hryvnia exchange rate to US Dollar should remainstable in 2011.

Fiscal Policy

State budget revenues exceeded original estimates,rising by 47% yoy in 1H 2011 (in nominal terms). Therevenue increases resulted from: selected tax rateincreases (excises, rent payments, etc.); a generalimprovement in the economic situation in 1H 2011; a change in tax administration rules after Tax Codeenforcement. As expenditures grew by only 6% yoy, the state budget deficit amounted to about 1.7% of periodGDP. Despite announced increases in budget spending in 2H 2011, the state budget deficit target of 2.7% ofGDP looks realistic. However, due to the authorities’ reluctance to raise natural gas tariffs to the population andhigher energy prices, Naftogaz will face above-target deficit.

Reform Progress and Cooperation with the IMF

Ukraine’s progress in implementing IMF conditions is mixed:• The 2011 state budget law was amended in June to keep broad fiscal deficit target at 3.5% of GDP.• However, natural gas tariffs were not raised as planned. As a result, Naftogaz deficit may reach 1.3% of GDP,almost twice as high as the initial target.• The Pension reform bill was approved by the parliament on July 8th. However, it introduced increases inpension payments unacceptable to the IMF. The President still has not signed it into law.• During May-June, the domestic currency market was liberalized and NBU independence was ensured byeliminating a requirement to mandatorily purchase government bonds issued for recapitalization purposes.

Figure 26 Fiscal Deficit

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• Due to lack of full implementation of these conditions, the IMF program funding to Ukraine has beensuspended since March.• The next IMF mission is now expected in late October.• Though currently there is no fiscal need for IMF funds, the presence of the IMF would increase the country’sresilience to adverse external shocks.

Short Term Outlook

Despite weaker export prospects, real GDP should increase by 4% in 2011. Without additional compensatorymeasures to sustain Naftogaz, the broad fiscal deficit target of 3.5% of GDP will be missed in 2011. It istherefore unlikely that the IMF program will be revived this year. But the country seems firm to continue fiscalconsolidation, though at a slower pace than initially expected. If so, the country may be able to manage itsvulnerabilities without the IMF funds in the short-run, provided that: The EU debt crisis is contained andEuropean banks can roll-over debt; The world economy avoids another recession that would depress Ukrainianexports and reduce steel prices. Due to slower GDP growth, lower pressure from international energy pricesand good harvest, inflation will ease to 10-11% yoy in 2011. The Current account deficit will widen to 4.5% ofGDP in 2011, but external financing needs will be manageable, allowing the Hryvnia to remain stable.

Medium Term Outlook

In 2012, the Ukrainian economy is likely to grow below its potential at 4% yoy. This growth will be supportedby private consumption, fueled by election-driven budget spending, and export of services (due to the hostingof the Euro 2012 football championship). Depreciation pressures on the Hryvnia, stemming from high externalfinancing needs and gradual loss in competitiveness (as inflation in Ukraine remains much higher than in itsmain trading partner countries), should materialize with the exchange rate moving to 8.0 -8.5 UAH/$ by theend of 2012. After the 2012 Rada elections, there will be 3 years without elections that could allow for theimplementation of reforms toimprove the business environment.The signing of a FTA with the EUmay become a locomotive of futuregrowth and a strong driver ofstructural changes in the economy.However, there is a risk of increasingRussia’s pressure on Ukraine to jointhe Customs Union; but so far theUkrainian government has been clearthat it will only agree to a TFA withthe CU and pursue deeper traderelations with the EU.

PERFORMANCEAfter falling 16 places over the lasttwo years—one of the steepestdeclines of all countries, which

HIGHLIGHTS OF UKRAINIAN

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reflects the many economic and political challenges the country has faced in recent years—Ukraine reversesthe trend and moves up 7 positions this year. The country continues to demonstrate a number of competitivestrengths. A well-educated population, flexible and efficient labor markets, and a large market size continue toset a good base for the country’s future growth performance. On the other hand, despite its impressive reformagenda, no real improvements have been measured in the country’s weak institutional framework (131st) or inits highly inefficient markets for goods and services (129th), which stifle competition and prevententrepreneurship from flourishing. In this context, it is hoped that the country’s accession to the World TradeOrganization (WTO) will further contribute to intensifying competition in the country by reducing both tradebarriers and domestic obstacles. Priority should also be given to continuing the stabilization and developmentof its financial sector (116th), building on recent reforms.

Figure 27 The Global Competitiveness Index 2011-2012 rankings and 2010-2011 comparisons.

Figure 28 The Global Competitiveness Index 2011-2012

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Figure 29 The Global Competitiveness Index 2011-2012: Basic Requirements

World Bank and International Finance Corporation Rankings for Ukraine

The following is how Ukraine ranked out of 183 countries studied (The complete study is available)

Figure 30 Ukraine: World Back Rating

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EconomicGrowth

Between 2003 and 2007, real GDP grew at an impressive average annual rate of 7.8 percent, driven largely by strongexport earnings, high domestic consumption, and efficient use of capital and labor. In the longer term, Ukraine’sdemographic problems threaten growth prospects.

Poverty With rapid growth, the incidence of poverty fell from 31.7 percent in 2001 to 7.9 percent in 2005. In 2003, theincome share of the bottom 20 percent was among the highest in the world.

EconomicStructure

Agriculture’s share of GDP has declined while the share in services has risen to almost 57 percent of GDP in 2006.

Demography andEnvironment

Because of low fertility rates and emigration, Ukraine’s population is rapidly declining, and the ratio of elderly toworking-age population is rising steeply, straining the public purse.

Gender Gender parity is excellent in education and nearly as good in labor force participation. An unusual disparity of nearly12 years in life expectancy in favor of females reflects the high incidence of male alcohol abuse and health problems.

Fiscal andMonetary Policy

The budget deficit is within the EU ceiling, but the levels of taxes and government spending are extremely high.Spending strongly favors transfer payments that spur consumption, not investment. In addition, inflation is farabove the EU and benchmark norms.

BusinessEnvironment

Red tape is a serious impediment to private sector growth. In 2008, Ukraine ranked 139th of 178 countries in theWorld Bank’s composite Doing Business index. Governance improved in recent years but remains poor in absoluteterms. Corruption is also a major problem.

Financial Sector The banks and the stock market show remarkable growth, and the insurance sector is expanding. But there areproblems with credit risks, negative real interest rates on loans, thin trading in the stock market, a weak bond market,poorly developed private pension industry, and deficiencies in the underlying institutional framework.

External Sector Export volume declined in recent years, and remittance receipts remain low, while import demand has soared. As aresult, Ukraine’s current account switched from surplus to a deficit of 8.1 percent of GDP in 2007, funded mainly byprivate capital inflows. The de facto peg of the hryvnia to the U.S. dollar creates stability and competitiveness risks.

EconomicInfrastructure

Overall infrastructure quality is in line with benchmarks, particularly ports, roads, and railways. Internet andtelecommunications networks are expanding rapidly. But improvements are needed in air transport and electricitysupply.

Science andTechnology

A clear commitment to science and technology is seen in most science and technology indicators. The main problemis weak protection of intellectual property rights.

Health Ukrainians enjoy nearly universal access to improved water and sanitation, and low maternal mortality and childmalnutrition. Still, life expectancy of 68 years is low by benchmark standards, and Ukraine has the highest HIV rate(1.4 percent) in Europe and Central Asia.

Education Ukraine has a strong commitment to tertiary education, though net enrollment rates at the primary and secondaryschool levels lag well behind EU standards.

Employment andWorkforce

The workforce contracted by 0.4 percent per year from 2000 to 2007. But labor force participation is high,unemployment is low and falling, and real wages are rising rapidly.

Agriculture Labor productivity in agriculture is very low compared to labor productivity in industry and services, but it isimproving. Nonetheless, sustained efforts are needed to boost productivity and efficiency.

Figure 31 World Bank Breakdow

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UKRAINE: STRENGTHS AND WEAKNESSES—SELECTED INDICATORS

Selected Indicators, by Topic Strengths WeaknessesGrowth PerformanceReal GDP growth XGrowth of labor productivity XInvestment productivity, IncrementalCapital-Output Ratio (ICOR)

XPoverty and InequalityIncome share, poorest 20% XDemography and EnvironmentPopulation growth, annual percent change XElderly dependency rate XGenderLife expectancy at birth, gender differential XGross enrollment rate, all levels, genderdifferential

XLabor force participation rate, genderdifferential

XFiscal and Monetary PolicyGovernment expenditure, level andcomposition

XMoney supply growth XComposition of money supply growth(credit to the private sector)

XInflation rate XBusiness EnvironmentEase of Doing Business ranking XControl of Corruption Index XFinancial SectorDomestic credit to the private sector XInterest rate spread XReal interest rate XLegal rights of borrowers and lenders XStock market capitalization rate XExternal SectorExport growth, goods and services XForeign direct investment, percent GDP XConcentration of exports XCurrent account deficit, percent of GDP XGross private capital inflows, percent GDP XDebt service ratio, percent exports X

Figure 32 Ukraine - Strength and Weaknesses

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Selected Indicators, by Topic Strengths WeaknessesEconomic InfrastructureRoads, paved, percent of total X

Air transport infrastructure index X

Quality of electricity supply index X

Science and TechnologyExpenditures on Research and Development, percent GDP X

IPR protection X

HealthHIV prevalence X

Access to improved sanitation X

Access to improved water source X

Maternal mortality rate, per 100,000 live births X

Prevalence of child malnutrition, weight for age X

EducationNet secondary school enrollment rate X

Youth literacy rate X

Gross tertiary enrollment rate X

Employment and WorkforceGrowth of the labor force, annual percent change X

Unemployment rate X

AgricultureAgriculture value added per worker X

Agricultural Policy Costs Index X

Figure 33 Selected Indicators, by Topic

Note: The chart identifies selective indicators for which performance is particularly strong or weakrelative to benchmark standards.

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Page 47Figure 34 The Global competitiveness Report - World Economic Forum

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Page 48Figure 35 Global Competitiveness Index in Detail

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Acceleration the growth – recommendation of World Bank and IFC

The diagnostic of the economy undertaken points to 3 key reform areas needed to accelerate growth in the shortterm: fiscal stabilization, business entry (and exit), and banking sector rehabilitation. Over the medium term,reform also needs to focus on three areas: deeper fiscal and investment climate reforms complemented bypublic sector governance reform. In short, the objective is to turn Ukraine into an economy where the footprintof the state is smaller and more even handed, and where the private sector thrives and invests as a result of thepressures of competition rather than the perks of state connections.

In the short term

The objectives of fiscal reforms in the short term and their linkages to accelerating growth are to:• secure stability through a prudent fiscal stance to attract investors back to the country;• adequately pay VAT refund arrears to support the export sector; and• lay the foundations to generate fiscal space for public investments that would support employment and

growth. On the expenditure side this can be done by initiating structural pension reform and increasingenergy tariffs. This process should be mindful of adequately funding well-targeted social assistanceprograms to protect the poor from the downturn and future reforms by reallocating funds from poorly-targeted programs. On the revenue side, reforms can expand the tax base by eliminating tax exemptionsand curtailing loopholes in the enterprise profit tax (EPT), such as double taxation international treaties.Measures on the revenue side also bring about a more balanced adjustment between citizens and firms.These measures constitute the first step in a process of saving and reallocating fiscal resources towardmore productive and growth-enabling uses

The objectives of business entry/exit reforms in the short term and their linkages to accelerating growth are to:• enable a healthy reallocation of resources in the economy from declining sectors and firms to more

resilient sectors and new firms, which would help to generate employment and growth; and• remove key obstacles to business entry and exit to attract FDI and encourage domestic investors with

resources to start new ventures. In the short term, credible reforms need to be taken to generate enoughmomentum in licensing, permits, standards, and certification. Bold measures on business entry will notonly help employment but also help to build confidence in the economy and credibility in the reformprocess.

The objective of banking sector rehabilitation is to secure stability, enable intermediation, and prepare thesector for future shocks. Access to finance through the banking sector is not likely to be a constraint to growthover the medium term, but in the short term, the economy cannot afford another year of drastic deleveraging.Rehabilitating the sector is essential to secure stability and recovery. Reforms require a renewed effort to tacklethe legacies of the past and strengthen regulation and transparency to regain trust. While progress has beenachieved over the last year (e.g., setting up the process of recapitalization, providing the regulator withresolution tools), significant pressures and threats face the system today: unrecognized NPLs may rise, there isstill a large number of weak small banks that cannot intermediate effectively the declining amount of national

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savings, and supervision and regulation is not ready to prevent another crisis. Recapitalizing the system whilstincreasing its transparency is essential to the rehabilitation process. Beyond that, regulation and supervisionreforms should help to make the financial sector more resilient to shocks whilst being a reliable source offinancing for a growing domestic economy. But the authorities should move quickly as the window ofopportunity for reforms in the sector is closing.

These three reform challenges are inter-related. Without fiscal reform, macroeconomic stability and a sustainedrecovery will not be possible and investors will remain risk averse toward Ukraine. Without private investment(through new entry) to fuel the recovery, fiscal consolidation will be more difficult, and banks will struggle tofind viable lending opportunities in the real sector. Without a stable and properly capitalized banking sector andregained trust among depositors, banks will not have the resources and the strength to support privatebusinesses. Because of these interlinkages, all three reform areas must be tackled simultaneously, and withstrong up front measures.

In the medium term

To sustain growth, deeper investment climate, fiscal, and public sector reforms will be needed. With capitalmarkets likely to remain more selective and risk averse than in the past, Ukraine’s growth will have to rely onsignificant productivity gains. These gains can result from a more dynamic entry and exit of firms in theeconomy, more competition, and greater sophistication and diversification of Ukraine’s export basket. At thesame time, this requires dealing with the large backlog of public infrastructure investments and improvingefficiency of public services (to foster a highly skilled labor force) to support productivity and export growth.This will require deeper fiscal reforms and the continuation of the fiscal reallocation process described above.Finally, to achieve sustained growth, the public sector will need to be streamlined and reformed, eliminatingred tape, securing property rights, and strengthening the rule of law.

The objectives of deep investment climate reforms and their linkages to sustained growth are to:• lift barriers to entry and exit to improve competition and productivity growth;• increase and sustain FDI to foster technology adoption, modernization and productivity growth; and• foster product diversification and sophistication to enable Ukraine’s exports to become more resilient to

shocks and sustainably support stronger growth. Reliance on foreign savings to finance explosivedomestic consumption will not be an option in the current conditions of tight credit. But deep policyimprovements to strengthen the institutional framework for business and continuing the process ofmodernization in key sectors of the economy will help to accelerate and sustain productivity growthover the medium term.

The objectives of deeper fiscal reforms and their linkages to sustained growth are to:• create fiscal space for public investments so infrastructure can sustainably support private sector

growth;• gradually reduce the footprint of the public sector in the economy to crowd in the private sector;• improve efficiency and quality of service delivery for Ukraine’s citizens; and• secure the sustainability of public finances and social insurance.

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The objectives of public sector reforms and their linkages to sustained growth are to:• improve citizen and investor confidence in the country’s rule of law and economy;• sustainably attract FDI that can help modernize the economy as opposed to just short-term in flows in

search of high rents; and• reduce red tape, abuse and corruption in regulatory and control agencies that hamper private sector

investment and growth. Tackling public sector and institutional reforms is necessary to improvegovernance and gain the trust of investors and citizens. Red tape, burdensome regulation, allegations ofcorruption and abuse, insecure property rights, a perception of weak rule of law, poor governance ofSOEs and limited accountability are core problems hampering Ukraine’s prospects as a place to makelong-term investments. Tackling these problems will require radical reforms in the way the governmentinteracts with business and with citizens: a change in role from a controller to an enabler of markets andwelfare.

Public sector reforms are closely linked with investment climate and fiscal reforms. Public sector reforms willrequire a public administration reform program that rationalizes redundant state control agencies and redundantroles within the government itself, which should be done in parallel to investment climate and regulatoryreforms. Tackling the problem of oversized public sector employment should be done in parallel to fiscalreforms in social services, such as the optimization reforms in health and education. These reforms wouldrequire drastic improvements in transparency, governance, and incentives for SOEs, in parallel with fiscal andpublic financial management reforms. Significant reforms are also required in the judicial system to level theplaying field.

Sustained increases in FDI over the medium term from countries that can help to push Ukraine’s exportdiversification and sophistication will depend heavily on these reforms. Public sector reforms are complex.Sustained and high level of political leadership will be needed to carry them through.

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Communication

Telephones – main lines in use:13.026 million (2009)country comparison to the world: 20

Telephones - mobile cellular:55.333 million (2009)country comparison to the world: 20

Telephone system:general assessment: Ukraine's telecommunicationdevelopment plan emphasizes improving domestictrunk lines, international connections, and the mobile-cellular systemdomestic: at independence in December 1991,Ukraine inherited a telephone system that wasantiquated, inefficient, and in disrepair; more than 3.5million applications for telephones could not besatisfied; telephone density is rising and the domestictrunk system is being improved; about one-third ofUkraine's networks are digital and a majority ofregional centers now have digital switching stations;improvements in local networks and local exchanges

continue to lag; the mobile-cellular telephonesystem's expansion has slowed, largely due tosaturation of the market which has reached 120mobile phones per 100 peopleinternational: country code - 380; 2 new domestictrunk lines are a part of the fiber-optic Trans-Asia-Europe (TAE) system and 3 Ukrainian links havebeen installed in the fiber-optic Trans-European Lines(TEL) project that connects 18 countries; additionalinternational service is provided by the Italy-Turkey-Ukraine-Russia (ITUR) fiber-optic submarine cableand by an unknown number of earth stations in theIntelsat, Inmarsat, and Intersputnik satellite systems

Broadcast media:TV coverage is provided by Ukraine's state-controllednationwide broadcast channel (UT1) and a number ofprivately-owned television broadcast networks;Russian television broadcasts have a small audiencenationwide, but larger audiences in the eastern andsouthern regions; multi-channel cable and satellite TVservices are available; Ukraine's radio broadcastmarket, a mix of independent and state-ownednetworks, is comprised of some 300 stations (2007)

Internet country code: .ua

Internet hosts:1.098 million (2010)country comparison to the world: 42

Internet users:7.77 million (2009)country comparison to the world: 38

Overview

Ukraine’s possesses a significant telecoms market due to its large population. Competition is improving asalternative operators engage in infrastructure-based competition due to lack of an effective last mile networkaccess regime. Wireless local loop and fibre operators have been most active in this area.

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Communication

Telephones – main lines in use:13.026 million (2009)country comparison to the world: 20

Telephones - mobile cellular:55.333 million (2009)country comparison to the world: 20

Telephone system:general assessment: Ukraine's telecommunicationdevelopment plan emphasizes improving domestictrunk lines, international connections, and the mobile-cellular systemdomestic: at independence in December 1991,Ukraine inherited a telephone system that wasantiquated, inefficient, and in disrepair; more than 3.5million applications for telephones could not besatisfied; telephone density is rising and the domestictrunk system is being improved; about one-third ofUkraine's networks are digital and a majority ofregional centers now have digital switching stations;improvements in local networks and local exchanges

continue to lag; the mobile-cellular telephonesystem's expansion has slowed, largely due tosaturation of the market which has reached 120mobile phones per 100 peopleinternational: country code - 380; 2 new domestictrunk lines are a part of the fiber-optic Trans-Asia-Europe (TAE) system and 3 Ukrainian links havebeen installed in the fiber-optic Trans-European Lines(TEL) project that connects 18 countries; additionalinternational service is provided by the Italy-Turkey-Ukraine-Russia (ITUR) fiber-optic submarine cableand by an unknown number of earth stations in theIntelsat, Inmarsat, and Intersputnik satellite systems

Broadcast media:TV coverage is provided by Ukraine's state-controllednationwide broadcast channel (UT1) and a number ofprivately-owned television broadcast networks;Russian television broadcasts have a small audiencenationwide, but larger audiences in the eastern andsouthern regions; multi-channel cable and satellite TVservices are available; Ukraine's radio broadcastmarket, a mix of independent and state-ownednetworks, is comprised of some 300 stations (2007)

Internet country code: .ua

Internet hosts:1.098 million (2010)country comparison to the world: 42

Internet users:7.77 million (2009)country comparison to the world: 38

Overview

Ukraine’s possesses a significant telecoms market due to its large population. Competition is improving asalternative operators engage in infrastructure-based competition due to lack of an effective last mile networkaccess regime. Wireless local loop and fibre operators have been most active in this area.

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Communication

Telephones – main lines in use:13.026 million (2009)country comparison to the world: 20

Telephones - mobile cellular:55.333 million (2009)country comparison to the world: 20

Telephone system:general assessment: Ukraine's telecommunicationdevelopment plan emphasizes improving domestictrunk lines, international connections, and the mobile-cellular systemdomestic: at independence in December 1991,Ukraine inherited a telephone system that wasantiquated, inefficient, and in disrepair; more than 3.5million applications for telephones could not besatisfied; telephone density is rising and the domestictrunk system is being improved; about one-third ofUkraine's networks are digital and a majority ofregional centers now have digital switching stations;improvements in local networks and local exchanges

continue to lag; the mobile-cellular telephonesystem's expansion has slowed, largely due tosaturation of the market which has reached 120mobile phones per 100 peopleinternational: country code - 380; 2 new domestictrunk lines are a part of the fiber-optic Trans-Asia-Europe (TAE) system and 3 Ukrainian links havebeen installed in the fiber-optic Trans-European Lines(TEL) project that connects 18 countries; additionalinternational service is provided by the Italy-Turkey-Ukraine-Russia (ITUR) fiber-optic submarine cableand by an unknown number of earth stations in theIntelsat, Inmarsat, and Intersputnik satellite systems

Broadcast media:TV coverage is provided by Ukraine's state-controllednationwide broadcast channel (UT1) and a number ofprivately-owned television broadcast networks;Russian television broadcasts have a small audiencenationwide, but larger audiences in the eastern andsouthern regions; multi-channel cable and satellite TVservices are available; Ukraine's radio broadcastmarket, a mix of independent and state-ownednetworks, is comprised of some 300 stations (2007)

Internet country code: .ua

Internet hosts:1.098 million (2010)country comparison to the world: 42

Internet users:7.77 million (2009)country comparison to the world: 38

Overview

Ukraine’s possesses a significant telecoms market due to its large population. Competition is improving asalternative operators engage in infrastructure-based competition due to lack of an effective last mile networkaccess regime. Wireless local loop and fibre operators have been most active in this area.

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However the incumbent remains the dominant player,with the regulatory environment more likely toimprove once privatization of the incumbent iscompleted. Drawing upon numerous statistics, thisreport provides a concise overview of the Ukrainiantelecoms market, including brief profiles of majoroperators, telecom network infrastructure in thecountry and network developments which areunderway.

Telephone

Ukrainian telephone network stayed practicallyundeveloped till recently. The situation is beingchanged within last years and old equipment has beenupdated. The results are noticeable in big cities andtheir suburbia, where new digital telephone exchanges have appeared. At the same time, the part of oldequipment remains non-upgraded and quality of the connection can vary very much. In little towns andcountryside the connection can be very poor. Some villages might have only one telephone to serve the wholebuilt-up area. Phone usage charge at hotels is often 2-3 times higher than phone companies’ tariffs. WithUkrtelecom still a de facto state monopoly, the situation regarding interconnection is so heavily regulated thatthe cost of calls from fixed phones to mobile phones is decided by Government decree and the redistribution ofincomes from such calls is based on agreements between Ukrtelecom and the mobile operators. This rate iscurrently 0.6UAH per minute (or approximately 0.10 Euro). These agreements between Ukrtelecom andmobile operators are signed on a yearly basis. At the present time, it is difficult to obtain data oninterconnection between telephony operators because all sides have an interest in not revealing the actualconditions of their agreements. There is also no public information available regarding the existence ofcomplaints regarding interconnection regulation. Interconnection is governed by Chapter IX of the 2003 Lawon Communications and the subsequent draft NCCR Order on Interconnection and Calculation amongOperators. The Law on Communications requires operators to provide other operators willing to conclude aninterconnection agreement with the information required for negotiation and to offer interconnection terms thatare at least equivalent to those proposed to other operators (Art. 58). The NCCR is authorized to intervene incases of failure by parties to negotiate (paragraph 19, Art. 18). For fixed-to-mobile interconnection, thetermination fee is 0.25 UAH (0.04 Euro) per minute. The price of call termination in the mobile-to-fixedmarket is decided by commercial agreement between the parties, but the tariff cannot be more than 0.25 UAH(0.04 Euro). Mobile to mobile interconnection is purely a matter for commercial negotiation. Charges for callorigination and other telecommunication services are subject to the control of the Antimonopoly Committee(AMC) of Ukraine in cases where the charges are deemed to have a significant social impact. For instance, on28 October 2005 the AMC adopted a decision recommending mobile operators abolish sign-up charges forusers. The fact that the number of mobile subscribers exceeds the number of fixed subscribers in Ukraine wasthe basis for the argument that this intervention was needed. This issue of interconnection is being addressed bythe NCCR as a matter of priority, in order to deal with non-transparency in the interconnection regime.According to Article 59 of the Law on Communications, the incumbent operator is required to publish an RIOannually in the official journal of the NCCR. The offer should include the current list of interconnection points,technical requirements and economic terms. However, Ukrtelecom has not yet published an RIO, as the Law on

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Communications requires it to, since the Rules on Interconnection have not been adopted yet by the NCCR.The NCCR is drafting the Rules of Interconnection and these are currently available for public discussion onthe NCCR website (http://www.nkrz.gov.ua/ua/docs/pravila_v3.zip (Ukrainian language only)). UntilUkrtelecom’s monopolies are weakened (and a decision on this issue is expected in the near future), there islittle possibility of the introduction of carrier selection and carrier reselection. Running parallel to Ukrtelecom’smonopoly are the illegal international voice services. As early as 2001, some estimates put the percentage ofillegal international voice services in Ukraine as a percentage of total voice traffic as high as 10 percent. Suchproblems often indicate issues with regulation or competition in the marketplace. However, this situation ischanging and there are now several private operators, such as Optima, that are in the process of developingtheir own infrastructure. Ukrtelecom revenues from the different services on offer were as follows: Longdistance calls revenue – 2,633.9 billion UAH (427.39 million Euro) or 49.86 percent of total revenue; localfixed calls revenue – 1,317 million UAH (213.71 million Euro) or 24.3 percent of total revenue; internationalcall revenue – 950.7 million UAH (154.27 million Euro) or 18 percent of total revenue; IP – 156.417 millionUAH (25.38 million Euro), or 2.96 percent of total revenue.17 Other services such as paging made up theremainder. No attempt has been made to calculate losses from the illegal termination of voice calls in Ukraine.Ukrtelecom offers a termination rate for IP calls of 0.75/0.77 US$ (0.62/0.63 Euro). It is not known how many(if any) IP telephony companies avail of this offer. Ukrtelecom sold to Epic Services Ukraine for UAH10.57billion; telecom revenue expected to grow 5% for 2011; EU concerns of independent judiciary; regulatormarket data to August 2011; operator data to June 2011.Fixed telephony penetration has been steadily rising,and currently stands at 23.2 percent, with mobile at 84.9 percent. As these figures are significantly lower thanin developed countries, there appears to be significant growth potential. Ukrtelecom has been workingextensively with Cisco to upgrade IP services on its network, including for VoIP functionality, and isdeveloping a next generation network. Fixed line telephone density was 24.3 percent as of 1 January 2006.However, this figure conceals a large urban/rural digital divide. Tele densities range from 45 percent in Kyiv to9 percent in villages and small towns, and even less in more remote regions.

Numbering

The Department of Communications and Informatisation (part of the Ministry of Transport andCommunications) develops and manages technical policy for numbering allocation. The NCCR provides amanagement function for numbering policy through liaison with operators. Under the 2003 Law onCommunications, administration of numbering resources is divided between the “Central body of the executivegovernment in the communications sphere,” which is responsible for legislation and policy regardingnumbering, and the NCCR, which is responsible for assessing requests for numbering resources and ensuringthat the relevant rules on use of numbers are respected and has the power to withdraw numbers, if necessary.Planning work is currently underway to overhaul both the fixed and mobile numbering resources used inUkraine in order to take account of increased use of both networks. The number allocation procedure isregulated by the Law on Communications.

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According to Article 70, “numbering resourcesare provided to [a] telecommunicationsoperator for the period of validity of its licencewithout the right to sub-allocate these numbersto other operators.” The sub-allocation ofnumbers has been used in other countries tofacilitate the use of geographic numbers forVoIP, an option that is therefore not availablein Ukraine. Nevertheless, telecommunicationsproviders are able to exchange numberingresources amongst themselves, based oncontractual agreements. Before thedevelopment of independent privatetelecommunications operators, Ukrtelecom hadan exclusive right to telephone numberingresources. However, this situation is changing

and now there are several private operators, such as Optima, that are in the process of developing their owninfrastructure, and obtaining their own numbering resources directly through the NCCR.Neither fixed nor mobile number portability is currently available, although all of the main mobile operatorshave expressed support for mobile portability to be implemented. Non-geographic numbers, such as nationallocal call or premium rate services, have not yet been developed in Ukraine. In the near future the subscribersof mobile operators will be able port their number between operators if Bill N 2047 is successful. This bill aimsto amend the list of obligatory services provided in the context of the Law on Telecommunications. Whether ornot consumers will be charged a fee to port their numbers is not yet clear.

Rights of Way and Facilities Sharing/Collocation

Every three years, the Parliament of Ukraine approves the activities proposed under the National Program forInformatisation, which includes infrastructure development decisions taken at national and local levels. TheReport of the Parliament No. 3075-IV, adopted on 4 November 2005, concerning the approval of tasks of theNational Program for Informatisation for 2006-2008, obliged the Cabinet of Ministers to provide an economicanalysis of the financial resources needed for the planned projects, so that the costs to the state could beincluded in the State Budget. The 2003 Law on Communications offers the NCCR a variety of tools to ensurecompetitive neutrality with regard to building communications infrastructure. According to current legislation,all telecommunications operators have the right to build telecommunications networks in accordance with aPlan that has been approved by the Ministry of Transport and Communications (MTC).The procedure for approving the Plan is the following:• The telecommunications operator should develop a Plan for the building of the telecommunications network;• The Plan should be sent to the MTC for review and approval;• After the plan has been approved, the operator should ask the owner of the cable man-hole (Ukrtelecom or thelocal government) to approve the construction.The procedure applies equally to all communications companies regardless of size. However, as therequirements are somewhat complex, there is a risk that only larger companies, with the resources to tacklethese requirements, are in a position to build telecommunications networks cost effectively. Once the procedure

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for approving the Plan has been completed, the telecommunications operator needs to secure buildingpermission. The procedure for obtaining permission to build a network is set out in Article 10 of the Law onTelecommunications, and includes:• Having the relevant communications license;• Obtaining permission for land use;• Obtaining permission from the local authority to build the network (based on the decisions approved by thelocal communications, architecture, and health authorities).Often, rather than rolling out their own networks, telecommunications operators and providers use the networksbuilt by local community companies, particularly TV providers, which also provide low cost Internet services.

Tariff Policy

Article 67 of the 2003 Law on Communication sets clear rules regarding the cost orientation of services,meaning that the legal basis for bringing about a competitive market in the local call and international marketsis in place.The Law states that:“Tariff regulation on the telecommunication market of Ukraine shall be based on the following principles:• Tariffs shall be based on the cost of these services and considering the profit earned; Tariffs shall depend onthe quality of telecommunication[s] services;• Telecommunication[s] operators/providers shall not set dumping or discriminatory prices;• Cross funding of one telecommunication service [to the benefit] of another shall be avoided.”

NCCR has drafted extensive rebalancing measures, with a 70 percent reduction in the cost of international callsand an increase in local rates. Line rental is set to increase by between 200 and 300 percent (up to 18UAH/3Euro to 28UAH/4.5 Euro). International tariffs are being reduced by between 17 and 69 percent, while nationallong-distance calls are being reduced by between 13 and 17 percent. Despite these price adjustments, tariffrebalancing per se has not been implemented in Ukraine.

The incumbent telecommunicationsoperator (Ukrtelecom) fulfils itsuniversal service obligations throughits low fixed prices (prices for localand regional calls are below cost forUkrtelecom subscribers) and thedevelopment of its fixed network tocover the entire territory of thecountry. The profit from internationalcalls covers losses from local andregional calls and ensures thecompany’s viability. Mobile operators’prices are not regulated, as the marketis deemed to be competitive.

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Cost Accounting

In the absence of liberalization andrequirements for cost-based access to themonopoly provider’s network, there is littleneed for an efficient cost accounting system atpresent, as Ukrtelecom calculates all costs.However, as mentioned above, the 2003 Lawon Communications does require services to bebased on cost orientation in order to ensure thepossibility of fair competition in the market.Therefore, the NCCR will need to developsome form of consistent methodology to ensurethat this aspect of the law is respected.However, nothing has yet been published at thetime of writing.

Universal Service

By “universal” services the Law on Communications understands “a minimum set of services of standardizedquality determined by the Law, accessible by all the consumers on the whole territory of Ukraine” (Article 1).The exhaustive list of the universal services in Ukraine comprises: “landline telephone (local, long-distance andinternational) communication services, (except for services provided using wireless access facilities), includingemergency call services, information services, communications that use payphones and trunk-call offices,facsimile and telegraph communication” (Article 62).According to the Law on Communications, specific services should be available for all consumers living onUkrainian territory. These universal services include fixed telephone connection for local, long distance andinternational calls, emergency and directory services, payphone services, and facsimile and telegraph services.The approach with regard to universal service is based on the Concept for a Universal Services Fund, which isoutlined in the draft Report (No. 8448 of 14 November 2005) of the Parliament on the Approval of theRecommendations of the Parliament Hearings on Information Society Development in Ukraine held on 21September 2005 and the Concept on Telecommunications Development. According to the Law onTelecommunications (Article 64), the development of universal services should be outlined in the Concept onTelecommunications Development, subject to approval by the Cabinet of Ministers. The latest version of thedraft Concept on Telecommunications Development, dated 1 August 2005, was prepared by the UkrainianResearch and Scientific Institute of Communications and submitted to the Cabinet of Ministers. The approvalprocess was disrupted by preparations for Parliamentary elections in Spring 2006. Universal service is based ontariffs fixed by the Government. While the legal basis for universal service is clear, the implementation of thislegislation has not been prioritized to date. A universal service fund has not yet been established and themethodology for funding any such initiative has not yet been developed. It is worth noting that mobileoperators are already subject to a levy on their income to contribute to the national pension fund. The Ukrainianauthorities are addressing universal service in a pragmatic way, not dissimilar to the approach taken in Russianlegislation. They are taking measures to ensure at least communal access to communications networks,providing a basic level of access to citizens before building up to more comprehensive universal servicemeasures. Pilot projects have been launched, the experience from which should form the basis of future work in

Figure 36 Teledensity compared with population

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this area. In addition, plans were announced to provide low-cost access to the Internet in the major cities ofUkraine using WiMAX technology. Three national and two regional 5.74Ghz-5.67Ghz licenses are in theprocess of being auctioned. Directory services and access to emergency services (fire, police and ambulance)are only available for fixed network users. Mobile networks are not connected to emergency call centers.Universal services for disadvantaged users are not yet included in Ukrainian law. The right to receive aninvoice for telephony services was introduced by the 2003 Law on Communications. Tariffs for universalservices are to be regulated by means of introducing either maximum or fixed rates (according to Article66(2)(1) of the Law on Telecommunications). Under legislation in force since 1 January 2005, the NCCR hashad the right to impose the obligation on companies with nationwide monopoly status, and on companieslooking to develop services to consumers in regions needing universal service support, to develop and provideuniversal services to consumers. The mechanism for the compensation of losses incurred as a result of fulfillingthis obligation is to be determined by the Cabinet of Ministers of Ukraine (Article 64(5)).

Local Loop Unbundling

At present, there appears to be little likelihood that local loop unbundling will be mandated by the Ukrainiancentral government, as there are other priorities which are considered more urgent.

Leased Lines

Official statistics regarding the use and availability of leased lines in Ukraine are not currently available, asthese data are not collected from market players by state authorities. Alternative telecommunications providersare dependent on leased lines as Ukrtelecom owns the majority of the infrastructure and many alternativeproviders do not have sufficient resources to build their own networks and consequently have to rely onUkrtelecom’s network. This is particularly true for the lower-cost end of the market. Private operators usuallydevelop their own networks for business customers and they are not generally interested in the less lucrativeresidential market because of the high cost of building communications channels. According to data fromoperators in Kyiv, installation costs can range from 420 Euro in areas with above average (by Ukrainianstandards) infrastructure to 2,500 Euro in more underdeveloped regions. Individuals or smaller businessesobviously cannot pay for such services at these rates. At present, only cable television distributors provide theopportunity for smaller entities to have a comparatively fast, always-on connection to the Internet. Such aconnection costs approximately 25 US$ (20.6 Euro) per month. This comparatively low price is due to the factthat this service can be provided with relatively low levels of additional investment by the cable ISPs.

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Local experts report that, “99 percent of providers rent [leased lines] from Ukrtelecom, and only some carrytheir own lines. However, a customer will feel the difference, if he/she tries the channels of different providers.Carrying capacity, external channel quality, the “last mile” (meaning quality of a cable laid to the customer),as well as technology for signal transmission in the cable and the equipment used all have an impact on theInternet quality. The qualifications of the provider’s personnel also play a big role.One supplier of services to mobile phone operators in Ukraine told the study team that difficulties (cost, inparticular) of using leased lines in Ukraine have resulted in other options being sought, such as wirelessbackhaul services which, while expensive to install, are an attractive option when long-run costs are taken intoaccount. Interconnection with the public switched network is subject to state regulation governed by the Orderof the State Telecommunication Committee of 7 June 2002, No. 120. The price for the provision of aconnecting line is 333.33 UAH (54.09 Euro) per month. Prices for long distance and international calls of localoperators made via Ukrtelecom lines are regulated by the Order of the Ministry of Communications of 21November 1996, No. 234, on the basis of revenue sharing. This depends on the number of lines, equipmentused, and administrative costs.In Ukraine, DSL is used by Internet Service Providers as high speed leased lines. HDSL is the most widespreadtechnology used for this purpose, reaching 2Mbps data exchange speeds in both directions. A new company inthe Ukrainian market, Datagroup, is building out a 1,800km fibre optic network, which it will use as the basisto provide wholesale services to other communications operators and ISPs, taking advantage of Ukrtelecom’sproblems in dealing with current demand. Eurotranstelecomm has also recently joined the wholesale market.This new level of competition has lead to significant price reductions, by up to 90 percent in some cases (notreflected in the table above). Datagroup and Ukrtelecom deny suggestions that prices are now below cost.

Mobile Phone Networks

Ukraine’s mobile market has experienced exponential growth since 2002. Mobile subscribers increased from3.7 million in 2002 to over 57 million in 2007, growing at an average 70% per year. Penetration levels are oneof the highest in the region and mobile connections now outnumber fixed line connections by 5 to 1.

Figure 37 Regional levels of mobile penetration, Q3 2007

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Mobile services are the preferred method of communication in a country where fixed line penetration stood at23% of population in 2005. Mobile services have therefore contributed to overall telephony penetration andhave helped bridging the communication gap between rural and urban areas. In addition, by providing auniversal and reliable telephony services, mobile services have promoted economic development and directinvestment in the country. Mobile coverage is now effectively universal as 99% of the country’s territory isserved by at least one operator and Minutes of Use (MOU) peaked at 150 per month in 2007. There arecurrently five mobile operators in Ukraine, competing to deliver low tariffs and innovative services toconsumers. The average price of an outgoing call has dropped by nearly 80% in the last five years. Effectivemobile prices per minute are among the lowest in Eastern and Central Europe. However, in 2007 subscribergrowth declined significantly due to a saturated market: five million new connections are estimated for 2007,compared to over 18 millions in 2006.

Figure 38 Effective mobile price per minute in a sample of Eastern and Central European countries, 2007

Figure 39 Mobile penetration and Total Outgoing Minutes of Use in Ukraine

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The maturing voice market has caused voice average revenue per user (ARPU) to decrease by over 70% in thelast four years. In response, operators have shifted focus towards the mobile data market, with EDGE-technology services recently introduced and MMS services. 3G (third generation) has yet to be launched by theMNOs. Licenses were awarded to the fixed line operator UkrTelecom in 2005, which launched 3G services inNovember 2007 in five cities. Ukraine lags behind most of other countries in Eastern and Central Europe interms of the development of 3G networks and the take-up of services. However, this situation could be reversedfollowing the issuing of 3G licenses and a swift network build out. Issuing additional 3G licenses may alsospeed up the roll out of mobile broadband and could assist the Ukrainian government in achieving higherinternet penetration.The Ukrainian communication market has benefited from foreign investors taking a long term interest inUkraine. Their presence increases the likelihood of additional investment as:• Foreign mobile operators bought technical expertise and attracted business partners, for example networkequipment suppliers, to register businesses in Ukraine;• Mobile operators have contributed to raise the quality of services allowing investors to rely on optimalcoverage in a country with low fixed lines penetration. The presence of a reliable communication system isregarded as a factor in attracting foreign investment; and• Foreign investors have a “signaling effect” of generally increasing investors’ confidence about Ukraine.Mobile operators face a high level of direct and indirect taxation in Ukraine. Operators are subject to mobilespecific pension fund contributions of 7.5% of subscriber revenues. This contribution does not apply to fixedlines. In addition a similar type of pension fund tax applies to handset revenues (1.5%) and, along with therequired $2 per handset permit necessary to import handsets, is a tax ultimately paid by consumers.The economic impact of the mobile sector in Ukraine in 2007 is UAH 37bn, representing 5.9% of total GDP. In2003 the estimated impact represented 2.9% of the GDP.

Figure 40 Economic Impact of the mobile communications industry in Ukraine.

Figure 40 shows the three different effects of the mobile industry’s economic impact:• Supply-side effects: value-add and employment from direct and indirect firms in the value chain;• Demand side effects: productivity increases resulting from people using their phones for business purposes;and• Intangible benefits: the social benefits enjoyed by consumers.

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In addition, the contribution of the mobile sector has been significantly increasing over the last four years andthat the mobile industry employs almost 120,000 Ukrainian full time employees (FTEs). This compares with75,000 FTEs in 2003. Employment directly by MNOs is estimated to have increased by around 9000 FTEs in 4years. These workers receive work shadowing, apprenticeships and other formal training and receive theopportunity to work in a competitive environment. Kyivstar has been named the best employer in 2006 bybusiness magazine Dilavoi and by an international consultancy firm.

Supply side impact of mobile communications

The supply side impact of mobile communication is formed of three components:• Direct effects: the value added and employment created by the MNOs themselves;• Indirect effects: the value add and employment created by other parties in the value chain; and• Multiplier effects: the knock-on impact of the direct and indirect effects on the rest of the economy.

Figure 41 Mobile value chain in Ukraine in 2007(UAHs millions)

Government revenues under the form of direct taxation, regulatory fees and mobile-specific pension fundcontributions constitute 75% of the value add. This proportion is higher than for other countries due to themobile-specific taxes and pension fund contributions which apply to subscribers’ revenues and to importedhandsets, as well as to the high level of social contributions. Kyivstar is the biggest taxpayer within the Kievregion.

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Demand side impact

Labour productivity increases in both urban and rural areas as workers can communicate continuously withtrade partners. The mobile phones have had a strong impact on the following sectors:• Small trade and import/export businesses, for example in the Odessa seaport. Mobile communications proveda powerful tool to estimating demand, updating estimates and finding new customers;• Logistics for large companies, in particular for internal communications and transportation;• Transport sector in urban areas: a number of cab drivers companies have started coordinating actions throughmobile phones.

Consumer benefits

Figure 43 Increasing Intangible benefits enjoyed by consumers in Ukraine.

Figure 42 Productivity impact of mobile communication

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The intangible benefits of mobile communications enjoyed by consumers can be estimated using a ‘willingnessto pay’ analysis. By combining data on usage and data on prices, we find that usage increase and pricedecreases create growing net benefits for consumers over time.Social benefits generated by mobile communications in Ukraine include:• The contribution of mobile communications to the democracy development and to the openness of society;• The contribution to developing interpersonal and family communications;• The promotion of social cohesion through the use of Location Base Services (LBS) and child trackingdevices;• The extension of communications to users with low education and literacy, particularly elderly people livingin rural areas; and• The extension of communications to those on low incomes.

Other benefits

In addition to the benefits estimated above, MNOs in Ukraine contribute to various groups in society through anumber of Corporate Responsibility projects. Charity related programmes organized by MNOs includeschemes aimed at helping orphan children, particularly in the Chernobyl area, by providing administrative helpto orphanages and by funding IT courses. Other projects provide help to social centers for invalids, such as theKiev Polytechnical Institute, and to elderly people in retirement homes, particularly in rural areas, whoare provided with opportunities of communication.

Conclusions

The Ukrainian mobile sector has experienced exceptional subscriber growth since 2002 and creates asubstantial and increasing proportion of the country’s economic value. It estimated to have contributed 2.9% ofGDP in 2004, increasing to 5.9% in 2007. In 2007, approximately 119,000 FTEs were employed directly andindirectly by the industry. The impact of the communications is demonstrated through supply side andproductivity impacts. However, consumers have also benefited from an increased range of services and fallingprices. The average price per minute is estimated to have fallen 50% in 3 years. The fall in prices has beenaccompanied by an increase in coverage levels and this has contributed to the general accessibility of mobileservices. By continuing to grow its subscriber base and provide new services, the mobile sector may be able toincrease its GDP contribution. A regulatory and licensing regime that combines international best practice withlocal considerations would be supportive of this growth opportunity25. For example, the issuing of additional3G licenses would allow for further service innovation including the delivery of data connectivity to largerproportion of the Ukrainian population. In addition, the government could further support the sector’sdevelopment through fiscal policies consistent with the remainder of the economy, notably a review of thecurrent pension funding requirements.

Background to the mobile market

Ukraine’s mobile market has experienced exponential growth since 2002. Mobile subscribers increased from3.7 million in 2002 to over 57 million in 2007, representing an annual growth rate of over 70%. Penetrationrates are above the average in the region. There are several companies serving cellular connection in Ukraine:

• UMC(MTC) - National operator of cellular connection. Standard: GSM 900

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• Kyivstar GSM - National operator of cellular connection. Standard: GSM 900/GSM 1800• DCC - covers Kyiv, Odesa, Crimea, Donetsk, Kharkiv, Dnipropetrivsk, Zaporizhzhya and some other

regions of Ukraine. Standard: D-AMPS• Golden Telecom - covers Kyiv and Odesa. Standard: GSM 1800• WellCom - Kyiv only. Standard: GSM 900• Beeline - covers some Ukrainian regions. Standard: GSM• Life:) - covers some Ukrainian regions. Standard: GSM

Figure 44 Mobile operators' market shares over time.

Figure 45 Mobile connections and mobile penetration in Ukraine over time.

Mobile services are the preferred method of communication in a country where fixed line penetration hasalways been low. Fixed line penetration was 23% of population in 2005, when mobile penetration started toincrease, and today mobile connections outnumber fixed lines by 5 to 1. Mobile coverage is now effectivelyuniversal: 99% of country’s territory is served by at least one operator. Usage has increased to over 150

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minutes of use per user per month in 2007 and is generally higher than in other countries in the region.Aggressive competition in the mobile market has delivered low tariffs and increasing innovation to consumersin a very short time. Mobile prices dropped by around 80% in the last five years. However, the Ukrainianmobile market is maturing and penetration reached 100% in 2006. Mobile operators began offering prepaidservices in 2003 and by 2007 prepaid connections represented 93% of all subscribers. Prepaid SIM cards haveproved more popular than fixed line or postpaid subscriptions. They do not require a bank account to receiveaccess and customers can buy low value vouchers once to activate and use a prepaid SIM. This practice iscommon in Ukraine for most pre-paid customers.

Figure 46 Percentage of prepaid and postpaid customers for each operator (2007)

Figure 47 ARPU levels over time, UAHs.

Falling prices have caused voice average revenue per user to decrease. The figure below shows that ARPUlevels have decreased by over 70% in the last four years. The drop in ARPU levels and the mature voice markethas caused operators to shift focus towards the mobile data market, with EDGE-technology services recentlyintroduced and with MMS services launched.

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Figure 48 Earnings and Subscriber base

As was previously stated, Ukraine’s mobile market is highly competitive due to a number of mobile operatorsoffering services via GSM, CDMA and WCDMA/HSDPA networks. Mobile broadband services present thenext growth opportunity given the saturated mobile voice market although the major GSM operators arehampered by lack of licenses to offer 3G services. Into this market opportunity has stepped Ukraine’s CDMAoperators, which initially offered fixed-line services but have since moved into the mobile market, launchingmobile broadband services. Ukraine is also home to a nascent mobile content and applications market, withfuture growth largely dependent on mobile data uptake. Russia’s Vimpelcom announced on 11 November 2005that it had bought the mobile operator Ukrainian Radiosystems (URS) for 231.3 US$ million (191.16 millionEuro). The subscriber base of URS amounted to 51,200 people at the end of 2005, or less than 1 percent ofmobile users in Ukraine. URS has a GSM900 license that covers the entire territory of Ukraine, which has apopulation of approximately 47.8 million. URS also has a GSM 1800 license that covers 23 of Ukraine's 27administrative regions (excluding the city of Kyiv and the Kyiv, Dnipropetrovsk, and Odessa regions).Ukrainian radio systems (URS) provides services in GSM-900 under the brand names WellCom and Мoby.The NCCR has decided to limit the number of licenses available to new subscribers for the CDMA standard inthe 800 waveband. There are four companies in Ukraine operating in the CDMA standard: ITC, CST-invest,Velton Telecom and Intertelecom. All of these operators are working in CDMA-20001x and they offer, inaddition to telephone services, a full range of digital telephone communication services and fast datatransmission. According to the CDMA Association, the total subscriber base for CDMA rose by 43 percent inthe year to June 2005. Mobile users of Astelit’s network (marketed under the trademark “life:)”) will have theopportunity to be the first in Ukraine to experience 3G services. An EDGE service offering connection speedsof 236kbps is already on the market. Such offerings will also help life:) to better understand user expectationsfor high-end services. For life:), EDGE is a transitional migration step to 3G.46 According to life:)’s strategy,EDGE based services will be available in the largest cities, in areas of heavy data usage and in city centers.EDGE was made available in Kyiv, Odesa and Dnipropetrovs’k on 25 March 2005. life:) intends to continue itsexpansion of EDGE coverage in Ukraine. UMC recently awarded a tender to the Kyiv company Priocom todevelop its IP/MPLS infrastructure to boost its capacities for GPRS, EDGE, advanced IP services and inpreparation for the launch of 3G services. A range of 2.5G and 2G data services are also available on themarket. However, prices are somewhat prohibitive bearing in mind the income levels in the country (WAP perminute 0.30UAH or 0.04Euro; GPRS per megabyte 5UAH or 0.81Eur at peak times, and 1UAH (0.16 Euro)off peak).48 No statistics regarding the take-up of such services are available. As an indication of the extent ofmobile coverage, Kyivstar claims a territorial coverage of 97 percent, with a population coverage of 98 percent.

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Mobile phone penetration is growing at a precipitous rate in Ukraine, increasing from 42.48 percent (based onindustry figures) at the end of 2004, to 64 percent50 at the beginning of 2006, and rose to 84.9% by 30September 2006. The standard methodology for calculating subscriber numbers in Ukraine is to count contractcustomers together with prepaid customers who have had at least one piece of incoming or outgoing traffic ontheir phone in the preceding three or six months (depending on the operator).

Mobile-specific taxation

The mobile sector in Ukraine is subject to heavy sector-specific taxation. Mobile specific taxes in Ukraineinclude:• A pension fund contribution of 7.5% of an operator’s subscriber revenues. This contribution acts de facto as asecond VAT on mobile revenues. This tax applies across other goods in Ukraine, such as alcohol and tobacco,which have very different features to mobile services. However, a similar contribution does not apply to thefixed operator. As a result this tax distorts competition between fixed and mobile operators, potentiallyaffecting areas of the country where mobile network operators act as universal service providers.• Handset-specific taxes. These are a pension fund contribution of 1.5% of the value of the handsets imported,paid by handset importers and a $2 permit paid on each handset imported in the country. These taxes contributeto inflate the price of handsets and cause a large number of handsets to be imported through parallel andunofficial channels.

Satellite Services

There are a number of companies providing Internet access via satellite technologies in Ukraine. These includeUkrsat, Infocom-SK, Spacegate, Adamant, LuckyNet, Ukrnet, and Itelsat. Excluding Infocom-SK, these areall private operators (several of these companies areresellers). Ukrchastotnagliad, the Ukrainianfrequencies supervisory centre, reports that 86operators have licences to provide satellitecommunications services in Ukraine. Despite the largenumber of operators on the market, however, satellitetelecommunications in Ukraine may be limited due tolow income levels. The Government is neverthelessdeploying a digital satellite television and radiobroadcasting system, which will also be used forInternet services. Ukraine has joined the Inmarsat,Intelsat, Global Star, Thuraya and Orbcomm satellitenetworks. Currently, there are five licenses for directsatellite communications services. In Ukraine, accessto satellite communication is divided into reception andtransmission of information. The reception ofinformation by satellite is available to anyone, withoutthe requirement for a license or permission for use ofradio frequency. The necessary receiving equipment isavailable to anyone willing to invest in it. For thetransmission of information (for example, the use of an

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Internet access service), it is necessary to have permission to use the frequency, which acts as a brake on thedevelopment of this market sector. Furthermore, satellite communications equipment is subject to certification,which takes around half a year to process by the authorities. This market is not considered promising for thoseproviding services to the private or small business user, since data link bandwidth is limited and InternetService Providers that use this method cannot compete in terms of price or speed. The narrowness of themarket is explained by the fact that full uplink and downlink services via satellite communications arecomparatively expensive for the end user, because users have the option of purchasing Internet access servicesat significantly lower prices from cable operators. For this reason, satellite communications services aregenerally targeted at large corporate clients. The Ukrainian Research and Academic Network (URAN)connects 90 universities and research institutions. The main operators of the network are the EuropeanIntegration Centre Ltd and public enterprise, UARNet. The network includes access points in 16 oblast(regional) centers and uses Ukrtelecom leased lines with data rates of 64kbits/s to 8Мbits/s.

Status of the National Regulatory Authority (NRA)

The National Committee for Communications Regulation (NCCR) was set up in April 2005 as the independentnational communications regulatory authority of Ukraine. As it is not possible under the Ukrainian legal systemto have an executive body that operates completely outside Government, the NCCR functions under theauthority of the President of Ukraine, thereby, in principle, ensuring its independence from Government. Aftersome uncertainty regarding the sources of funding for the NCCR up until the end of 2005, a budget of 23.1million UAH was allocated for regulatory activities for 2006, with a further 2.6 million UAH allocatedspecifically for the management of the reorganization of spectrum (see the section on spectrum below). As theNCCR has not been in operation for very long, it is difficult to say with certainty whether it has, or will have,sufficient funds to carry out its assigned tasks.The key tasks of the NCCR are to:

• introduce proposals to governmental bodies regarding legislation, other normative legal acts andstandards in the sphere of telecommunications;

• develop and approve Regulations and other normative legal acts within the limits of its authority andoversee their implementation;

• supervise the telecommunications market;

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• issue licenses and registrations in the scope of telecommunications services;• distribute, assign and keep records of number resources, issue and cancel permits to use numbering

resources, and manage the use of number resources;• oversee the quality of telecommunications services and satisfy users’ demands;• regulate telecommunications tariffs and settle disputes among telecommunications operators, as

appropriate;• issue permits to telecommunications operators and providers to set specific tariffs for disabled and

socially disadvantaged persons for public telecommunications services;• support the legal provision of public telecommunications services;• obtain statistical reports from telecommunications providers and operators as established by legislation;• obtain documents, statistics and other data, as established by legislation, from central and local

executive Governments, the executive Government of the Autonomous Republic of Crimea, and localGovernments;

• adopt decisions within the limits of its authority, which must be adhered to by providers/users of thetelecommunications market;

• apply administrative penalties to providers/users of a telecommunications market in a manner describedby legislation;

• submit materials to the Anti-Monopoly Committee of Ukraine in cases of violation of the legislation onthe protection of competition;

• take legal action following complaints regarding violations of telecommunications legislation bybusiness entities who operate in the telecommunications sector;

• regulate the interaction of operators when telecommunications networks interconnect;• create favorable organizational and business conditions for attracting investment in

telecommunications;• ensure equal terms and conditions for all market players;• ensure dispute settlement among telecommunications operators and providers with interconnected

telecommunications networks;• keep a register of telecommunications operators and providers;• cooperate with corresponding regulatory bodies in other countries;• publish an official bulletin, which

includes normative legal acts, newsand other information; and

• fulfill other responsibilities,envisaged by the Law onCommunications, other laws, andnormative-legal acts.

There does not appear to be any overlapbetween the administration oftelecommunications by the Governmentand that of the NCCR. Again, it is difficultto tell at this early stage if there will be anypractical issues regarding the division oflabour between the Ministry and theNCCR, or the speed with which they will

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be addressed should they arise. The study team is not aware of any staff from the telecommunicationsincumbent being seconded to work for the NCCR, although (somewhat inevitably and not necessarily causing aproblem for the independence of the commission) there are former incumbent staff working at the top levels ofthe NCCR. Until the NCCR has been in operation for more time and has dealt with significant consultations ordisputes, it is difficult and possibly misleading to speculate on its likely effectiveness.

Cable Services

According to data provided by the Cable TV Union of Ukraine, there are approximately 300 cable operatorsproviding services to approximately 12 percent of Ukrainian households. Only 10 percent of these have accessto broadband services and only half of these actually avail of it. Annual growth is, according to this data, only 3percent. However, against this lackluster background, cable provider Volia is already offering advanced “tripleplay” services (television, Internet and telephony), with a subscriber base of over 735,000.

Cable Networks

Despite the fact that the regulatory environment (see licensing above) is somewhat difficult for cableoperators, there are cable networks available in most large cities in Ukraine. The Kyiv operator Volia, whichhas been offering advanced “triple play” services for some time now, being a significant example of thepotential for the sector. According to the State Statistics Committee, the revenue of the cable operatorsincreased by 5.6 percent from 42.099 million UAH (6.8 million Euro) to 44.448 million UAH (7.2 millionEuro) in 2005.

Cable Regulation

Despite the extensive powers of the NCCR, the regulation of cable communications has not been put squarelyand unequivocally into its remit. Ukraine has an extensive cable television network (when compared with otherCIS countries). However, the further development of cable television has been hampered by a lack of relevantlegislation, meaning licensing and overall management of the industry is very complex. Based on currentlegislation, the Ukrainian cable television industry is administered by several government entities. The divisionof authority and responsibilities is a nebulous issue not only for foreign investors but also for industryspecialists. There are at least four government agencies that exercise direct control over the industry:

• The Department for Communications of the Ministry of Transportation (the former State Committee forCommunications);

• The National Council for Television and Radio Broadcasting;• The Ukrainian Centre for Control of Radio Spectrum;• The National Commission for Communication Regulation;

Ambiguous and outdated legislation leads to confusion and conflict; for instance, cable television services arecurrently licensed by the National Council for Television and Radio Broadcasting, although the latestlegislation delegates this authority to the NCCR. However, because the NCCR has not yet taken over all of itsresponsibilities, its functions are supposed to be performed by the Department for Communications of theMinistry of Transportation. Numerous court hearings, decisions and counter decisions do not make thesituation better. Moreover, the Antimonopoly Committee of Ukraine views cable television operators as naturalmonopolists, and delegates regulatory authority over their industry tariffs to local administrations. Averagemonthly tariffs established by city authorities vary from 0.85 Euro to 5 Euro. Based on the above user fees,

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cable television companies say that they cannot afford to produce their own programming as well as paytelevision companies for the programmes they distribute. Operators can also offer individual packages thatcould include more channels or other value-added services (Internet, security, etc.). In these cases the fee is notlimited.

Licensing and Authorization

The procedure for the licensing of telecommunications services is regulated by the 2003 Law OnTelecommunications, as well as by additional guidelines issued by the NCCR. The Law specifies that local,inter-city and international telecommunications services, as well as mobile telephone communications andtelevision and radio broadcasting, must be licensed. Under the Law On Telecommunications, the basicprinciples for the licensing of telecommunications service provision are as follows: creating open marketconditions; acting in the best interests of society and service providers; equal access; efficient use of resources;promotion of new technologies; and the attraction of investment. The NCCR is responsible for establishing theterms and conditions of licenses and ensuring compliance.

• Licensing for fixed telephone communications costs as follows:• International (covering the whole territory) – 1,700,000US$ (1,404,958 Euro)• Intercity - 68,000US$ (56,200 Euro)• Domestic: With network capacity of up to one thousand telephone numbers – 320 US$ (264 Euro) With network capacity of up to ten thousand telephone numbers – 1,600 US$ (1,322 Euro) With network capacity above ten thousand telephone numbers – 9,600 US$ (7,934 Euro) With use of wireless access – 19,600 US$ (16,198 Euro) With use of wireless access based on DECT technology -1,000 US$ (826 Euro) In rural areas – 730 US$ (603 Euro) Audio-text – 700 US$ (579 Euro)

A license for mobile telephone service provision varies in accordance with the frequency involved and the sizeof the region in question. Prices range from 170,000 UAH (27,500 Euro) for the cheapest region in the 300-470MHz band to 340,000 UAH (55,171 Euro) for Kyiv in the 1.7-2.2GHz band. On 16 May 2001 the UkrainianGovernment introduced licensing of VoIP with 15-year operational licenses at a cost of up to 899,300 UAH(146,000 Euro). The term of the license (except for VoIP, which is as described above) is determined by theNCCR and cannot be less than five years. For each type of telecommunications service, the NCCR is obliged toissue special instructions on the technical and bureaucratic parameters the enterprise should respect and whatdocuments would be needed to confirm that the parameters have been met. The CDMA operators have askedthe NCCR to issue them with a license for national roaming. Victor Frolov, the director of the executivecommittee of the CDMA Association of Ukraine, says that CDMA is available in 11 regions of Ukraine and theoperators are ready to work together. When compared with the previous situation, the 2003 legislation onlicensing has greatly improved certainty for operators, as it is now impossible for the NCCR not to respond(actively or passively) within the time period specified in the law (one month) to license applications. Thisreplaces the system where businesses had to wait indefinite periods to get responses from official bodies.In April 2006, the NCCR decided not to grant further GSM-900 and GSM-1800 licenses, meaning that GoldenTelecom will not be able to operate in the Kharkov, Lvov and Dnipropetrovs’k regions, although Astelit,Kyivstar and UMC do have licenses to provide services there. A range of licenses were awarded to URS,Kyivstar, Astelit and UMC for GSM-1800 services in a number of regions. Market players in the telecomssectors are divided by the Law on Communications into “operators” and “providers”. Under Article 1 of the

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Law, “providers” do not have the right to maintain or operate networks. Operators are divided into mobileoperators, fixed operators and fixed wireless operators. Mobile operators need to obtain a license for theactivity of provision of phone services and for the frequencies they use, fixed operators must have a license forlocal, national and international services and fixed wireless providers need the same licenses as fixed operatorsas well as a frequency license. The legal status of VoIP providers has so far been neglected. Within the contextof the current definitions, they could be judged to be “operators” and therefore be liable to the same licensingprocedures as the categories of operators listed above. This obviously creates a degree of uncertainty in themarket.

Spectrum

Radio spectrum is managed in Ukraine by the Ukrainian State Centre for Radio Frequencies (also referred to as“Ukrchastotnaglyad”), under the authority of the State Committee on Communications and Information. Theoverall management of spectrum in Ukraine is in a state of flux, however. In due course, a body called the StateTelecommunications Inspection (STI) will be established, under the supervision of the NCCR, to overseespectrum management. Until this happens, the State Centre for Radio Frequencies will continue in its presentrole. Radio spectrum is managed in line with the Radio Regulation annexes to the Convention of theInternational Telecommunication Union, which was ratified by the Ukrainian Parliament in 1994, as well asthrough some national regulations such as the Radio Frequency Resource Act of 2000. Frequencies are licensedin compliance with the 7 February 2001 Cabinet of Ministers resolution number 112 on the Procedure forIssuing Licenses for the Use of Frequency Resources in Ukraine. According to Article 20 of the 2004 Law OnRadio Frequency Resources of Ukraine, the National Frequency Distribution Table (NFDT) governs thedistribution of radio frequency for general (regular) and special usage.The list of special subscribers of radio frequency resources in Ukraine consists of:

• Departments and organizations in the Ministry of Internal Affairs;• The Ministry for Emergency Situations and the Chernobyl disaster;• The State Administration for Border Control;• The Administration for State Security;• The State Department for Corrections; and• The Ministry of Transport of Ukraine, for the use of radio electronics by joint civilian and military

management systems for flight traffic and flight support.• Non-state subscribers of radio frequency resources in Ukraine are divided into the following groups:• Commercial entities that are using radio frequency resources in order to provide telecommunications

services, except for the purpose of television broadcasting;• Commercial entities which are broadcasting television programmes by using their own or rented radio

electronics means; and• Technology and amateur radio users (private individuals and registered businesses, which are using

Ukrainian radio frequency resources without providing telecommunications services).The NFDT currently in force, which was adopted by the Cabinet of Ministers on 12 October 1995 (order no.803), distributes frequency as follows:

• 0.4 percent - for civil usage;• 27 percent - for military usage;• 72.6 percent - for joint military and civil usage (in practice – for military usage).

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According to the Ministry of Transportation and Telecommunications’ press-release of 22 November 2005, theCabinet of Ministers approved the decision for the usage of 76 percent of previously military radio spectrumfor the provision of 3G services by civil operators. Additional 3G licenses will be sold by the NCCR to privateoperators on a competitive basis, although these may not be issued for some time. Currently there arecommercial Wi-Fi networks that provide services to the public. Technologies using standards IEEE 802.11aand IEEE802.11b are being used in Ukraine, according to the licenses issued by the State CommunicationsCommittee of Ukraine, and permissions are granted by the "Ukrchastotnagliad" (Ukrainian FrequenciesSupervisory Body). Equipment needs to be certified in compliance with Ukrainian legislation. Each piece ofequipment is subject to technical evaluation, in accordance with the 5 October 2000 Order 154 of the StateCommunications Committee. Ukraine is not planning allow use low-power devices for Wi-Fi technologieswithout licenses and corresponding permits.Ukraine has not allocated and is not planning to allocate radio frequencies for the unlicensed use of Wi-Fi orsimilar technologies. Today Wi-Fi networks, operating in the 2400-2483,5 MHz frequency, are used in Ukraineto provide the public with wireless access to the Internet. More than 200 Wi-Fi licenses have been issued inrecent years and all oblast regions have now exhausted their resources in the 2400-2483.5 range. The 3400-3700 MHz frequency range is used by Ukrtelecom and RRT Consortium for radio relay.

Internet

Overview

Internet is developing fast in big cities of Ukraine. Plenty of cyber cafes and clubs provide Internet connectionat 1-2 USD per hour. Some hotels offer Internet connection in the rooms, delivered to the room via Ethernetnetwork usually. It is recommended to keep a twisted-pair Ethernet cable with RJ-45 connectors with you ifyou plan to connect your laptop to the hotel network. Dial-up access is about 0.50 - 1.00 USD/hour. Usually,connection speed is a bit slow and depends much on the quality of telephone line. In some cases, Internetaccess is barely possible if using an old-fashion analogous phone line. Computer penetration is limited by thelow average wage, since a computer costing 420 Euro would cost approximately 19 percent of an averageannual gross salary, for example.

While the government has passed legislation regardingthe expansion of e-government services, little progresson practical implementation has been made. However,the development of e-government is part of the EU-Ukraine Action Plan, along with other informationsociety initiatives, such as e-health and e-education.The ITU also supports the development of e-health inUkraine, as part of its wider efforts on this issue.Ukraine’s score dropped from 3.79 (out of 10) to 3.51from 2004 to 2005 in the Economist e-readinessrankings, achieving its best mark for businessenvironment (5.49) and worst for consumer andbusiness adoption (1.8).In 2006, Ukraine improved slightly, up to 3.62, whiledropping a further four places, down to 61st (from

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57th in 2005 and 2004).The IT outsourcing market accounts for USD 544 million. There are 800 IT outsourcing companies employing14,000 IT specialists. Since 2000, the Ukraine has become an attractive outsourcing destination in EasternEurope providing software development services to clients in the US and Western Europe.

Ukraine is also an attractive location for offshore/near-shore companies, home to many subsidiaries ofinternational companies like IBM Ukraine, Comarch, Microsoft, SAP, Aricent, ISM eCompany, Magento andCiklum. Ukraine has several home-grown ICT companies. Whereas initial outsourcing investment focused onKyiv (40 percent of FDI projects) companies_ are now focusing on second tier cities such as Lviv and Kharkivas potential investment destinations. The Ukrainian Hi-Tech Initiative and IT Ukraine are the associationsrepresenting the IT-BPO industry in the country.

The proposed National “e-Ukraine” Programme went through its first reading in Parliament in February 2006.The previous draft Law on the Enforcement of the National “e-Ukraine” Programme for 2006-2015, developedby the Government of Mr Yanukovich, failed to receive the necessary majority in Parliament at the hearingsheld on 15 December 2004, possibly due to the political upheaval taking place at the time. While little concreteprogress on implementing the Programme has been made until recently, there is range of legislativeinstruments in place to support it once it is adopted.

These include:• The 1998 Law on the National Programme of Informatisation;• The Cabinet of Ministers Decision of January 2005, appointing the Minister of Transport andCommunications as the National Executive Manager of the National Programme on Informatisation;• The Cabinet of Ministers Decision of April 2005 on the National Strategy for Development of ElectronicCommunications, the Establishment of the Commission for Telecommunications Regulation and the Adoptionof the e-Ukraine Programme;• The Cabinet of Ministers Decision of May 2005 on the Fulfillment of the EU Ukraine Action Plan in theInformation Society field;• The Parliamentary Recommendations of September 2005 on Information Society Development;• The Presidential Decision of October 2005 on Urgent Tasks for the Implementation of Advanced InformationTechnologies;• The adoption in November 2005 by the Parliament of the National Programme of Informatisation Tasks(which lists the tasks but does not assign budgets);• The Government Decision of December 2005 on the National Programme on ICT in Education and Science2006-2010. The total budget for this programme is 1855 million UAH (30 million Euro).The new plan for 2006-2015 covers the development of the network, development of human potential and thepropagation of information technology. Key priorities of the new plan include the introduction of the most up-to-date technologies into all aspects of life in Ukraine, improvement of computer literacy levels and thecreation of a communications infrastructure to integrate the country more effectively into global networks. TheNational Informatisation Programme, agreed each year since 1998, serves more as a short-term planningexercise than a national development plan.

We can see that many sites that are a popular or have high traffic in Ukraine are in fact Russia originated.Russia websites have located themselves according to these developments to close the gap in Ukraine. Thereason is that Ukrainian people write and speak Russian as I have mentioned.In the years 2001-2008, the growth rate of internet in CIS countries was 400%, while internet growth in

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Ukraine is around 2500%. In 2008, the money spent for Online Advertising in Ukraine was $ 23 Million.Number of Skype users is 4 million. Every month, more than 200 thousand users are registered.

According to Bigmir.net’s October report;

• total internet users in Ukraine:: 13 Million 138 Thousand (In September: 12 Million 338 Thousand)• Internet population is mainly gathered in 8 regions. Kiev city has the highest rate with 58.8%.• the total time spent on the internet In October: 4 billion 538 million 358 thousand minutes• Search engine usage: 62% Google, 28% Yandex and 4% Mail.ru constitute the first 3. However, when

we look only at Ukrainian users Google’s use of rate is at around 75%.• The internet population mostly searches cars and related content that are in the top 30. In general, we

most searched words link to listing website. (Automobile, real estate, business Portals, etc.)

Social Network Penetration

Vkontakte.ru (vk.com)

Number of total users: 46 Million, Number of Ukrainian users: 5 Million (every second 1 user signs up)

Figure 49 Vkontakte.ru overview.

Odnoklassniki.ru

Number of total users: 40 Million, Number of Ukrainian users: 2,1 Million

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Figure 50 Odnoklassniki.ru overview.

Twitter

Number of total users: 50 Million, Number of Ukrainian users: 25 Thousand

Figure 51 Twitter overview.

Facebook

Number of total users: 288 Million, Number of Ukrainian users: 175 Thousand

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Figure 52 Facebook overview.

Ukr.net

Number of total users: 4 Million, Number of Ukrainian users: 3.5 Million

Figure 53 Ukr.net overview.

Livejournal

Number of total users: 23 Million, Number of Ukrainian users: 3.5 Million

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Figure 54 Livejournal overview.

Overview of E-Commerce

Number of Credit Cards

Date 1 transaction at least Active, not expired01.10.2008 – 31.12.2008 38.5 Million 45.3 Million01.01.2009 – 31.03.2009 30.6 Million 44 Million01.04.2009 – 31.06.2009 29.6 Million 44.3 Million

Source: National Bank of Ukraine (NBU)Figure 55 Number of Credit cards.

Web Money

Figure 56 Web money.

Graphic: UAH trading volume and turnover rate by years.

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• In 2008 700 million UAH trading volume was done by 1 million 370 thousand registered users via theWeb Money.

• Number of users who have made Minimum 100 and over processes, Kiev: 62,000 Ukraine: 255.000• Web Money access points, Kiev: 3681 Ukraine:15.756• Commission rate is 0.8% per transaction and money transfer to the account takes 1 business day.

Portmone

• Monthly number of transactions: 500,000• They are not working like PayPal. You do not have to pay to register and can pay with all credit cards.• Commission rates are between 4% and 5% and change according to products sold.• Money transfer to the account takes maximum 2-3 days.• If high trade volume is reached, commission rates are arranged again.• 3D Secure (optional) use is available. You can make your interface design for payment screen

Portmone User Penetration

• 81% Male, 19% Female• Age range; 24-32: 32%, 30-35: 30%, 36-40: 12%• 66% Married, 29% Single• 33% does not have any children. 20% has children between 1-5 ages.• 37 % Senior/Manager, 24% Professional/Specialist/Director, 15% Owns a workplace, 11% are

Engineer• 24% work in large companies in Ukraine and 23% work in international companies• 64% own their own apartment, 15% live in rental flats• 90% use the Internet every day

Mobile Penetration

• 2009 September the number of mobile users: 55.5 million (70.4% increase compared to August)• according to UKR Telecom (UMTS) reports, in September internet access via mobile phones has

increased by 50%.• The number of mobile phones sold in Ukraine in the 3. Quarter is 1.21 millionunits. (30% increase compared to 2008)

• The number of active mobile users in Ukraine is 30 million. 97% of individuals between the ages of 16-55 in Kiev use mobile phone. 19% of them use internet using mobile devices every day.

• Revenues of Internet providers in July are 1.8 billion UAH (44% increase compared to 2008) Totalearnings are 999.7 million UAH (80% increase compared to 2008)

• Mobile operators have begun to make investment as Internet Providers after September. Governmentopens 3G tender (15-year license, renewal) for 400 million UAH in order to give support. In addition, itgives 25 MHz Spectrum Radio Signal as incentive gift.

• Mobile operators’ income in July-August is 18.6 billion UAH (5% increase compared to 2008

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REGULATORY ENVIRONMENT FOR ONLINE SERVICES

Digital Signatures

Electronic signatures in Ukraine are governed by the Law on the Electronic Digital Signature and the Law onthe Electronic Document (both from 2003). However, up until mid-2005, these laws proved generallyineffective due, inter alia, to the fact that the certification of e-signature verification centers, which is requiredby these laws, was so complex that it was impossible for businesses to be accredited. In addition, thecertification of such centers was delegated to the Security Service of Ukraine (SBU). On 1 July 2005, thecentral National Electronic Digital Signature certification body was established. Ukraine is the first among thecountries of the CIS to introduce a central certification body. This carries out accreditation of key certificationcenters. Commercial and State certification centers can now provide electronic digital signature services forcitizens, the state, private establishments and enterprises. Within the first six months of the new body cominginto operation, ten centers had applied to be accredited, with the Ukrainian National Information Centre beingthe first body to be officially accredited. It is hoped that electronic digital signatures will allow citizens to savetime when dealing with state authorities, and allow the state authorities to provide services more efficiently. E-signatures from government bodies are offered as an option for signing official documents: citizens can choosewhether to receive a digital signature with the help of the Internet or to use traditional signatures. The roll-outof digital signatures by state authorities is still at a very early stage.

Payment Systems

Electronic commerce is still undeveloped in Ukraine, partly due to the lack of adequate electronic paymentsystems. However, the population does show signs of moving away from a cash-dominated society. At thebeginning of 2006, the number of credit cards issued totaled 12,196,527 Mastercard credit cards and18,243,259 Visa credit cards.78 The annual turnover on Visa cards was $10,8 bn (8.9 bn Euro), twice as muchas in 2005. Maestro card payments in Ukraine also show significant growth. The number of Maestro cards incirculation reached 8.15 million at the end of June 2005, representing a 53.2 percent growth over 2004. Debitcards using the Maestro payment system are now accepted in over 40 thousand shops. Despite this recentgrowth in electronic payment systems in Ukraine, innovative online payment systems, such as those whichhave been developed in Armenia, have not yet been developed or adopted in Ukraine. Nevertheless, accordingto the Cabinet of Ministers Report on the implementation of the National Programme for Informatisation, 18million dollars (14.9 million Euro) worth of goods were sold via the Internet in Ukraine in 2004. The purchaseof computers and computer parts/consumables accounted for over half this figure.

Internet Access

Internet usage is growing, albeit from a low base, and is hindered by the comparatively high cost of dial-upaccess and limited PC ownership. The Economist Intelligence Unit has suggested that, while Internet usage isnormally assessed at about 8% in Ukraine, the most recent research available suggests that this figure may besignificantly higher. Internetworldstats.com puts the figure at 11.4%. Official statistics for August 2006 put thenumber of Ukrainians who accessed the Internet in the course of the previous month at 10.9%. The most usedsearch engines are google.com (37,85 percent) and yandex.ru (32,0 percent). According to Bigmir.net researchin 2006, half of Ukrainian Internet users from Kyiv, with inhabitants of the other main cities counting for overhalf of the remainder. Users from other large Ukrainian cities with a population of one million or more

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(Dnepropetrovsk, Odessa, Kharkov, L'vov, Donetsk, Zaporozh'ye) represent 32.16 percent of UkrainianInternet usage (not including Kyiv). Users in the remaining regions of Ukraine equal 14.21 percent of Internetvisitors. The region with the lowest level of Internet use, at 0.21 percent, is the Rivnenskaya region. Users inKyiv also generate a significantly higher amount of traffic in terms of page views. Most of the top 10 websitesin Ukraine are search engines (Google, Yandex and Meta being the top three, the rest being trafficmeasurement sites). Top searches are focussed on academic and leisure activities. The number of hosts inUkraine is now more than 94,000. Regarding Internet usage, according to research conducted by Volia cablecompany, most Ukrainians use the Internet for business purposes. Volia’s research showed that:

• 87.6 percent of respondents consider Internet usage for business purposes as justified from acommercial point of view;

• 48.9 percent of enterprises have already been connected to the Internet for one or two years, 34.6percent for more than three years, and 15.4 percent for less than a year;

• 62.2 percent of enterprises are currently working online using dial-up and only 32.4 percent use always-on connections.

• 54.3 percent use their sole phone line for dial-up Internet access.Ukrtelecom has recently taken concrete steps to encourage the mass take-up of broadband services. In March2005, there were only 10,000 DSL lines in Ukraine. At that time, DSLAMs had been installed in 450 locationsin Ukraine, and work was underway with Cisco to provide capacity to permit a 1000 percent increase in DSLsubscribers by the second half of 2006.

Public Internet Access Points (PIAPs)

Various efforts have been made to boostInternet access via PIAPs. For example, theUS Embassy gave grants of over 1.4 millionUS$ (1.17 million Euro) to libraries for thispurpose in the period from 2001-2004. Also,the UN Development Programme and theGerman International Migration andDevelopment Centre have joined forces withlocal organizations to develop training andsupport for the creation of PIAPs inUkrainian schools, the intention being toboost both IT in education and improve thelevel of Internet access in schools. Pilot projects have also been launched in an effort to improve universalservice provision in remote areas. There are over 3,000 computer clubs and cafes in Ukraine (equating to onefor every 16,000 people in Ukraine)

Wireless Internet Access

Wireless Internet access is developing slowly in Ukraine, partly due to the fact that Wi-Fi is licensed spectrum.Ukrtelecom is planning to launch Wi-Fi services in the larger towns and cities in Ukraine, while other ISPs arebeginning to launch WiMAX services. Luckynet, provides a range of high-speed wireless broadband accessservices. A Wireless Internet Association was established in order to deal with a wide variety of perceivedproblems with launching wireless services in Ukraine including conflict resolution, legal framework, illegal

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content, and harmonization of standards and norms. According to feedback from the Ukrainian Mission to theEU, the Ukrainian Government is keen to support the roll-out of WiMAX services, in order to ensure low-costInternet access for as many citizens as possible.A new plan for the management of spectrum was adopted in April 2006, detailing the management of resourcesfor Wi-Fi, WiMAX, 3G and other relevant technologies. Services are being launched by a joint venture ofNetworks by Wireless (UK) and PAN Telecom (Ukraine)/PAN Wireless. On 9 October 2006, Kyivstar beganoffering Wi-Fi services to its customers via smartphone, laptop or pocket PC. UMC has also shown interest inproviding Wi-Fi services. The maximum data transfer rate is 54 kb/sec. The consumer sends a premium rateSMS, either for a “sample access”, allowing just one Mb of download capacity, or full access, which is sold inincrements of 5Mb. Ukraine is one of the few countries prohibiting or prohibitively taxing IP telephony, Wi-Fi,and WiMAX networks, both public and private. The restrictions on advanced communications technologies inUkraine are very unusual. The provision of advanced communications services in Ukraine is difficult.Providers of VoIP have to engage in a complex and costly process of obtaining a license, as do Wi-Fiproviders. Some analysts argue that these laws emanate from Ukrtelecom lobbying to curb or eliminatecompetition in the ISP and voice telephony markets. Wireless local loop (WLL) operator Telesystems ofUkraine is planning to invest around 180 US$ million (149 million Euro) to roll out CDMA2000 1xEV-DOtechnology in the next three years. Telesystems already offers WLL connections using EV-DO on a trial basisin Kiev, following a rollout in partnership with Chinese equipment provider Huawei Technologies. It hassigned contracts with LG, Pantech, ZTE for the construction of a nationwide network, with the aim oflaunching commercial services in Kiev, Odessa and Dnepropetrovsk in the near future.The NCCR is in the process of auctioning five licences for WiMAX broadband services, following interest bythirty operators. Technological Systems (a subsidiary of Comstar– United) has received a licence for theprovision of WiMAX-based services in the 5.4 –5.7 GHz range through a regional tender. It is believed thatthis licence cost $0.8m (0.66 million Euro). Ukrtelecom has chosen Nokia to provide network equipment for itsplanned 3G service. Nokia will also provide equipment for Utel’s W-CDMA network, which will initially belaunched in Kiev.

AVAILABILITY OF ONLINE SERVICES

The EU-Ukraine Action Plan for 2005 foresees the widespread use of electronic communications services bybusiness and administration, in particular in the health and education sectors (e-Commerce, e-Government, e-Health, e-Learning), via the provision of advanced infrastructures, the development of local content and theintroduction of pilot projects initiatives. Ukraine ranked second highest among the four countries in this studyincluded in The Economist E-readiness rankings 2005, with a total score of 3.51, scoring best in businessenvironment and worst in consumer and business adoption. In 2006, Ukraine improved its score and achieved3.62 points, albeit while dropping from 57th to 61st overall in the table of 68 countries.

E-Commerce

E-Commerce is developing very slowly in Ukraine. The low level of Internet penetration in the country is a keyproblem, with the most optimistic estimates suggesting that there are 6.5 million Internet users,115 whichequals approximately 13 percent of the population. Finally, the legal framework for e-commerce is also stilllacking, although improvements are being made. The leading Ukrainian online retailer city.com.ua receivesapproximately 8,000 hits daily.

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Domain name registrations

Apart from the 47 geographical (such as kiev.ua) domains, there are seven generic suffixes for organizationsregistered in the .ua domain, according to their type: com.ua - commercial organizations; gov.ua-governmentagencies; net.ua - suppliers of network services; edu.ua – educational organizations; org.ua - otherorganizations (not commercial), in.ua for individuals and dominic.ua for the community of Dominican friars.The .ua domain is managed by the UA NCG (Network Coordination Group). There has been a steady increasein the number of domains registered under .ua. For example, under .com.ua, the total number of domainsincreased from 31,153 in 2004 to 42,489 in 2005 and reached 54,187 by September 2006. The overall numberof domains under .ua increased from 133,907 in 2004 to 169,644 in 2005 and had already reached 211,478 bySeptember 2006

E-Government

One of the key aims of the National Informatisation Programme, which is prepared by the Ministry ofTransport and Communications each year, is to develop the use of ICT in central governmental bodies. Overallcoordination is exercised by the Ministry of Transport and Communications. The Cabinet of MinistersResolution of 24 February 2003 (N208) on the Development of Electronic Government and the Order of theState Telecommunications Committee of Ukraine of 15 August 2003 govern the development of access to e-government services by citizens and businesses. The list of e-Government legislation passed in Ukraine, albeitall under previous regimes, is very long. The Government portal lists a total of over forty different acts passedin the course of the past seven years, half of which were passed in 2003 and 2004. Since 1998, the UkrainianGovernment has produced a number of legal documents requiring state bodies to publish information abouttheir activity on the Internet. There is a functioning Government portal, which is a gateway to the existing sitesof state departments, but much work still needs to be done. For example, only 12 percent of city authoritieshave websites. Legally, all state departments are supposed to have websites on the Internet. These websites arenot currently interactive, focusing instead on information provision about the department, its leaders andoperational procedures. With recent developments in the use of electronic signatures in Ukraine, possibilitiesare increasing for more user-friendly interaction with government services. For the moment, however, mostgovernment websites are “one way”, with functionality improving. An example of the planned improvements isthat the Ukrainian tax authorities are planning a new improved web based service. The tax administration ofUkraine is undertaking a pilot project which allows company tax account reports to be accepted in electronicformat. These reports are provided on floppy diskettes, as there is still no online submission. One basicproblem is that in Ukraine there has been little or no practical implementation of the Law on Electronic DigitalSignatures, which makes the introduction of online e-government services more difficult. This situation iscurrently undergoing change (see above on digital signatures). The government of Ukraine does not havenationwide programs governing the use of software in public administration, including regarding the use ofopen source software. Microsoft has signed an agreement with the government of Ukraine, under which it willprovide software to government institutions at one-third of the market price. The agreement reflects a long-term preferential pricing scheme for government bodies.

E-Health

E-Health has a long history in Ukraine: there is a long tradition of e-health theory development in Ukraine,although it is still not very widespread in practice. The Ukrainian telemedicine website, maintained by the

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Donetsk Institute of Traumatology and Orthopedics lists fourteen telemedicine centers, twenty-threeinstitutions which carry out “teleconsultations”, and five online pharmacies. The Department of Informaticsand Telemedicine of Donetsk has also developed a distance-learning tool. The Centre for Telemedicine ofUkraine has provided half of the best practice models listed on the website of the International Society forTelemedicine and e-Health.

E-Learning

E-learning is somewhat limited in Ukraine, although this is one of the items that are being addressed by theEU-Ukraine Action plan, and EU funding is already being used to establish some resources. For example, anElectronic Media Resource Centre is being established with the help of the EU Tempus programme. The onlyUkrainian member of the European Distance and E-Learning Network is the Inter-regional Academy ofPersonnel Management. Approximately 52 percent of secondary schools have computer equipment, while only14 percent of them have Internet access. There are wide regional variations regarding access to IT in schoolsStatistics from official sources indicate that there are 30 million mobile users, which indicates an averagepenetration rate of approximately 64 percent.

Internet Access Networks

As mentioned above, Ukraine’s score in the Economist e-readiness rankings was 61st in the list of 68 countries.Within the Eastern European area, Ukraine was 12th out of the 14 countries covered, ahead of only Kazakhstanand Azerbaijan. Bytemobile, Inc., a global provider IP service provider for mobile networks, is working withAstelit to develop its EDGE+ and GPRS+ services. This will provide accelerated Internet access, which Astelithopes will provide it with the fastest available Internet access without using 3G technology. Opportunities forADSL have been very limited to date and, to the extent that they are available, this is usually through theincumbent. In 2005, Cisco and Ukrtelecom announced a major programme of upgrading IP links between thecapital and regional centres as well as of further extending the upgrading of Ukrtelecom’s capacity to provideADSL. A range of independent companies offer dial-up Internet access, in addition to Ukrtelecom.Furthermore, in June 2006, the NCCR launched a tender for use of WiMAX frequency. There is already oneWiMAX provider on the market – Ukrainian High Technologies – providing services in Kyiv and Kharkiv. Thecompany has plans to roll-out services nationwide.

Satellite Operators

Satellite providers such as Lucky Link provide Internet access services. Lucky Link offers connection speedsof 512kbps, and VSAT connections at a speed of 256kbps downstream and 64kbps upstream. In addition,Thuraya offers satellite telephony and GPS services.

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Production of IT Services

Ukraine’s information technology market is valued at between 800 million US$ (660 million Euro) to $1billion US$ (826.5 million Euro).There is a perceptible, ongoing increase in demand for the production of ITproducts for export. Exported Ukrainian IT services totaled 70 million US$ (57.85 million Euro) in 2003 and100 US$ (82.64 million Euro) in 2004. By the end of 2005, this figure was estimated to have reached 150million US$ (123.97 million Euro). Telecommunications market revenues constituted 6.8 percent of GDP inthe first nine months of 2005, according to the State Statistics Committee. The State Statistics Committee ofUkraine has also conducted an analysis of the operating systems used by almost 70,000 organizations inUkraine. Their findings are as follows: 71.9 percent use Microsoft Windows; 20.7 percent use DOS; 5.9percent use Linux; 1 percent use Unix/Fix; 0.1 percent use Os/2; 0.1 percent use OC EC/CBM EC; and theremaining 0.4 percent use other operating systems. Ukraine is slowly emerging as a low cost hub for highquality software development. The producers work mostly alone or in small groups on outsourced projectsordered from abroad. These activities are usually not reflected in official statistics. There is growing interestamong Ukrainian computer companies to establish software production centres that could participate ininternational software development projects.

Financial Development of the ICT Sector

Communications

Investment in fixed capital in the communications sector continues to grow. The Ukrainian State StatisticsCommittee reports a growth of 19.8 percent in fixed capital investment between the first nine months of 2005and 2006. Incomes from mobile services in the first ten months of 2006 were 49.5% up on the same period inthe previous year, while fixed services (urban, rural and long-distance) decreased by a little over one percent.This decrease was mainly due to a decline of 6 percent of the largest part of that market, long distance andinternational telephony.Revenue from the telecommunications market from January – September of 2006 can be broken down asfollows:

• Urban telephone network services – 2086,8 million UAH (338.6 million Euro);• Rural telephone services – 162,1 million UAH (26.3 million Euro);• Long distance & international – 4657,5 million UAH (755.8 million Euro);• Mobile services – 14279,4 million UAH (2317 million Euro).

Information Technology

No Ukrainian companies have made a significant impact on the international technology industry. Siemens,Ericsson and Nokia are leading suppliers of network equipment for the fixed and mobile markets. With anestimated total turnover of 450 million US$ (372 million Euro) in computer hardware sales and 125 millionUS$ (103 million Euro) in ICT services, the information technology industry is comparatively small. Theindustry provides ICT products and services through several distinct economic activities, including consultingservices, software development, data processing, database development, technical support and repair, and othercomputer-related services. The most common IT activities include: enterprise resource planning, customerrelationship management software, specialized management and accounting software, antivirus software, e-commerce applications, and industry-specific solutions. According to the Ukrainian Association of Software

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Developers (UASWD), over 1,300 legal entities are engaged in activities connected with softwaredevelopment, production, and distribution with another 900 companies involved in the import, assembly,distribution, and support of computer hardware. Multinational companies now reflect a much larger percentageof the industry, representing approximately 60 percent. Local registered firms make up about 30 percent of themarket, and the remaining 10 percent comprises small, shadow market groups working primarily on smalloffshore orders for software development. The IT industry in Ukraine complains about a range of structuralproblems that prevents it from developing further. These include competitiveness problems cause by low-costRussian imports, an alleged lack of government leadership to prioritize and support the sector, and inadequateinfrastructure. The leaders of the programming languages remain the same. C#, Java, PHP. JavaScript arebecoming important. Development on pure C becomes marginalized while Scala is showing a great future.Here are the complete results.

Figure 57 Programming languages in Ukraine.

Mail

Services of the Ukrainian State Mail are inexpensive but prove again the name of"snail". Delivery within Ukraine takes 3-7 days, mail to/from foreign countriesreach addressee in about 2 weeks. Therefore, it might be a good idea to use acourier delivery for faster and more effective services. The majority of Internationalcouriers have Ukrainian branches. The most popular here is DHL. When sending aparcel to Ukraine it is worthwhile considering that valuables, cassettes, floppies,compact disks, etc. are subject for Customs' clearance. Therefore, it is advisable toavoid sending the above objects.Customs clearance may cause lots of bureaucratictroubles and monetary expenses as a result of Custom's taxes. Food, plants andanimals are prohibited content for mailings to Ukraine, unless the recipient has aspecial permission from state authorities. Having been a part of the Soviet Union,Ukraine had a unified mail system.

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Transportation

Airports:425 (2010)country comparison to the world: 19

Airports - with paved runways:total: 189over 3,047 m: 122,438 to 3,047 m: 511,524 to 2,437 m: 24914 to 1,523 m: 5under 914 m: 97 (2010)

Airports - with unpaved runways:total: 2362,438 to 3,047 m: 31,524 to 2,437 m: 7914 to 1,523 m: 12under 914 m: 214 (2010)

Heliports:7 (2010)

Pipelines:gas 36,493 km; oil 4,514 km; refined products 4,211km (2010)

Railways:total: 21,684 kmcountry comparison to the world: 12broad gauge: 21,684 km 1.524-m gauge (9,854 kmelectrified) (2010)

Roadways:total: 169,496 kmcountry comparison to the world: 30paved: 165,844 km (includes 15 km of expressways)unpaved: 3,652 km (2010)

Waterways:2,185 km (most on Dnieper River) (2010)country comparison to the world: 41

Merchant marine:total: 160country comparison to the world: 40by type: bulk carrier 4, cargo 123, chemical tanker 1,passenger 5, passenger/cargo 5, petroleum tanker 9,refrigerated cargo 11, specialized tanker 2foreign-owned: 1 (Iran 1)registered in other countries: 197 (Belize 6,Cambodia 37, Comoros 10, Cyprus 2, Dominica 2,Georgia 15, Liberia 16, Malta 30, Marshall Islands 1,Moldova 12, Mongolia 1, Panama 11, Russia 12,Saint Kitts and Nevis 10, Saint Vincent and theGrenadines 12, Sierra Leone 5, Slovakia 7, Tuvalu 1,Vanuatu 3, unknown 4) (2010)

Ports and terminals:Feodosiya (Theodosia), Illichivsk, Mariupol',Mykolayiv, Odesa, Yuzhnyy

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Transportation

Airports:425 (2010)country comparison to the world: 19

Airports - with paved runways:total: 189over 3,047 m: 122,438 to 3,047 m: 511,524 to 2,437 m: 24914 to 1,523 m: 5under 914 m: 97 (2010)

Airports - with unpaved runways:total: 2362,438 to 3,047 m: 31,524 to 2,437 m: 7914 to 1,523 m: 12under 914 m: 214 (2010)

Heliports:7 (2010)

Pipelines:gas 36,493 km; oil 4,514 km; refined products 4,211km (2010)

Railways:total: 21,684 kmcountry comparison to the world: 12broad gauge: 21,684 km 1.524-m gauge (9,854 kmelectrified) (2010)

Roadways:total: 169,496 kmcountry comparison to the world: 30paved: 165,844 km (includes 15 km of expressways)unpaved: 3,652 km (2010)

Waterways:2,185 km (most on Dnieper River) (2010)country comparison to the world: 41

Merchant marine:total: 160country comparison to the world: 40by type: bulk carrier 4, cargo 123, chemical tanker 1,passenger 5, passenger/cargo 5, petroleum tanker 9,refrigerated cargo 11, specialized tanker 2foreign-owned: 1 (Iran 1)registered in other countries: 197 (Belize 6,Cambodia 37, Comoros 10, Cyprus 2, Dominica 2,Georgia 15, Liberia 16, Malta 30, Marshall Islands 1,Moldova 12, Mongolia 1, Panama 11, Russia 12,Saint Kitts and Nevis 10, Saint Vincent and theGrenadines 12, Sierra Leone 5, Slovakia 7, Tuvalu 1,Vanuatu 3, unknown 4) (2010)

Ports and terminals:Feodosiya (Theodosia), Illichivsk, Mariupol',Mykolayiv, Odesa, Yuzhnyy

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Transportation

Airports:425 (2010)country comparison to the world: 19

Airports - with paved runways:total: 189over 3,047 m: 122,438 to 3,047 m: 511,524 to 2,437 m: 24914 to 1,523 m: 5under 914 m: 97 (2010)

Airports - with unpaved runways:total: 2362,438 to 3,047 m: 31,524 to 2,437 m: 7914 to 1,523 m: 12under 914 m: 214 (2010)

Heliports:7 (2010)

Pipelines:gas 36,493 km; oil 4,514 km; refined products 4,211km (2010)

Railways:total: 21,684 kmcountry comparison to the world: 12broad gauge: 21,684 km 1.524-m gauge (9,854 kmelectrified) (2010)

Roadways:total: 169,496 kmcountry comparison to the world: 30paved: 165,844 km (includes 15 km of expressways)unpaved: 3,652 km (2010)

Waterways:2,185 km (most on Dnieper River) (2010)country comparison to the world: 41

Merchant marine:total: 160country comparison to the world: 40by type: bulk carrier 4, cargo 123, chemical tanker 1,passenger 5, passenger/cargo 5, petroleum tanker 9,refrigerated cargo 11, specialized tanker 2foreign-owned: 1 (Iran 1)registered in other countries: 197 (Belize 6,Cambodia 37, Comoros 10, Cyprus 2, Dominica 2,Georgia 15, Liberia 16, Malta 30, Marshall Islands 1,Moldova 12, Mongolia 1, Panama 11, Russia 12,Saint Kitts and Nevis 10, Saint Vincent and theGrenadines 12, Sierra Leone 5, Slovakia 7, Tuvalu 1,Vanuatu 3, unknown 4) (2010)

Ports and terminals:Feodosiya (Theodosia), Illichivsk, Mariupol',Mykolayiv, Odesa, Yuzhnyy

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Overview

All transportation in Ukraine except for automobile transportation is regulated by the Ministry of Infrastructure,formerly the united Ministry of Transportation and Communications. The automobile transportation isregulated by the State Automobile Inspection (DAI) of the Ministry of Internal Affairs. The Ministry ofInfrastructure includes several transportation and communication related administrations and inspections thatsupervise various specialized state companies.

The public transportation within cities are regulated by their local administrations which are appointed by thePresident of Ukraine, while submitting their reports to the related ministries of the Cabinet of Ministers ofUkraine. Some of the non-military transportation is also regulated by the special State Space Agency ofUkraine (DKAU). The energy-related transportation such as a pipeline gas is regulated by the Ministry of Fueland Energy.

The share of the transport sector in Ukraine'sgross domestic product (according toGoskomstat) as of 2009 was 11.3%. The numberof workers employed in the sector is almost 7%of total employment. The transportationinfrastructure of Ukraine is adequately developedoverall, however it is obsolete and in need ofmajor modernization. A remarkable boost in therecent development of the country's transportationinfrastructure was noticed after winning the rightto host a major continental sport event the UEFAEuro 2012. The approval and implementationof a national transport strategy is a pre-condition for a EUR 65 million EU budgetsupport program in the transport sector. Theadvantageous geographical position of Ukraineallows for the location of a number ofInternational Transport Corridors on its territory,in particular:

• Pan-European transport corridors № 3, 5, 7, 9;• Rail Co-Operation Corridors (ORC) № 3, 4, 5, 7, 8, 10 and• European Transport Corridors - Caucasus - Asia (TRACECA) and Europe - Asia.

In 2009, Ukrainian infrastructure provided for the transportation of 1.5 billion tons of cargo and 7.3 billionpassengers. As the global financial crisis took hold and demand for major export commodities in 2009 fell, thevolume of freight traffic decreased by 17,6% when compared with figures from 2008; passenger transport fellby 12,7%. Today the transport sector in Ukraine generally meets only the basic needs of the economy andpopulation. The level of safety, quality and efficiency of passenger and freight transport, as well as theinfrastructure's amount of energy usage, and the technological burden it places on the environment do not meetmodern-day requirements. Due to the low level of demand, the country's existing transit potential and

Figure 58 Railway map of Ukraine

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advantageous geographical position is not fully utilized. There is thus a lag in the development of transportinfrastructure, transport and logistics technologies and multimodal transport. All this has made Ukraineuncompetitive as the high costs of transport across the country make the cost of production in the countryuncommonly high. With an underdeveloped transport and communication infrastructure, Ukraine has notmanaged to capitalize on its unique geographic location as a transit country between various importersand exporters. As such Ukraine continues to underutilize its transit potential. Despite the high degree ofcoverage, the quality of the transportation infrastructure and equipment is not in line with internationalstandards. Since November 2009, a draft comprehensive transport sector development strategy up to 2020 isbeing developed. The draft strategy envisages that the Ministry will elaborate and submit to the Cabinet ofMinisters shorter-term strategy implementation program until 2015.

Railways

The railways are managed by a state railway company Ukrzaliznytsia which also is a state agency. Note thatindustrial railways and metros in cities are managed locally on a regional level. The length of the railwaynetwork Ukraine ranks third in Europe (21.7 thousand kilometers of railways). Ukrainian trains are usuallycapable of speeds up to 160 kilometers per hour, as the number of railway passengers and freight climbs, thecountry expects to see a significant improvement in the quality of railway transport. In addition to this thegovernment expects to make huge investments in the railways in preparation for Euro 2012. However, there iscurrently not enough line capacity provided on routes to the south and the Crimea.

Network length: (2010)

• 22,000 km (13,670 mi) broad gauge of 1,520 mm (4 ft 11 5⁄6 in), ~10,000 km (6,214 mi) electrified (3kV DC and 25 kV AC)

• 201 km (125 mi) of 1,435 mm (4 ft 8 1⁄2 in) standard gauge, electrified

There is also a network of suburban and regional train routes for type of local transportation connecting smallersettlements with big cities. A railway reform program for the period 2010-2015 was approved in December2009 and provides for a separation of the government's regulatory function from the operational functionof the national state-owned railway company.

Public Roads

The development of public roads in Ukraine is currently lagging behind the pace of motorization in thecountry. During 1990-2010 the length of the highways network hardly increased at all. The density ofhighways in Ukraine is 6.6 times lower than in France (respectively 0.28 and 1.84 kilometers of roads persquare kilometer area of the country). The length of express roads in Ukraine is 0.28 thousand km (in Germany- 12.5 thousand kilometers in France - 7.1 thousand kilometers), and the level of funding for each kilometer ofroad in Ukraine is around 5,5 - 6 times less than in those locations.

This is due to a number of objective reasons, including that the burden of maintaining the transport network percapita is significantly higher than in European countries because of Ukraine's relatively low population density(76 people per square kilometer), low purchasing power of citizens (1/5 of the Eurozone's purchasing capacity),relatively low car ownership and a the nation's large territory.

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The operational condition of roads is very poor; around 51.1% of roads do not meet minimum standards, and39.2% require major rebuilds. The average speed on roads in Ukraine 2 - 3 times is lower than in Westerncountries.

Waterways

Ukraine has 4,400 km (2,734 mi) of navigable waterways on 7 rivers,most of them are on Danube, Dnieper and Pripyat rivers. All Ukraine'srivers freeze over in winter (usually December through March)interrupting navigation. The river transportation is supervised by theUkrrichflot (http://www.ukrrichflot.com/) which combines four majorand one minor river ports along the Dnieper river and its estuaries.The major part of sea connection is made via the Black sea ports ofOdessa, Sevastopol and Yalta. The passenger vessels sailing betweenthe Crimea peninsula and Odessa do not have stable schedule and rates,currently. Therefore tickets for these cruises and ferries arehardly bookable. The major part of ferries serves Istanbul,Turkey destination. They provide with several categories ofaccommodation, meals, entertainment programs, etc. On the top of it, ferries make cargo transportationincluding cars, vans etc.

• Total: 193 ships (1,000 gross register tons (GRT) or over) totaling 862,690 GRT/963,550 metric tonsdeadweight (DWT)

• Ships by type: bulk carrier 6, cargo ship 145, container ship 3, passenger ship 6, passenger/cargo ship 4,petroleum tanker 9, refrigerated cargo ship 11, roll-on/roll-off 7, specialized tanker 2 (2007)

The Ministry of Transport and Communications is currently elaborating a national maritime safetyconcept. The subsequent development of a detailed implementation plan is expected to take until 2012.Regulatory alignment with international standards progresses slowly; the Ukrainian flag was still on the 2008black list of the Paris Memorandum of Understanding on Port State Control.

Aviation

The aviation section in Ukraine is developing very quickly,having recently established a visa-free program for EUnationals and citizens of a number of other 'Western'nations, the nation's aviation sector is handling asignificantly increased number of travelers. Additionally,the granting of the Euro 2012 football tournament to Polandand Ukraine as joint hosts has prompted the government toinvest huge amounts of money into transport infrastructure,and in particular airports.

Currently there are three major new airport terminals under

Figure 59 Odessa port

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construction in Donetsk, Lviv and Kiev, a new airport has already opened in Kharkiv and Kiev's BoryspilInternational Airport has recently begun operations at Terminal F, the first of its two new internationalterminals. Ukraine has a number of airlines, the largest of which are the nation's flag carriers, Aerosvit andUIA. Antonov Arilines, a subsidiary of the Antonov Aerospace Design Bureau, is the only operator of theworld's largest fixed wing aircraft, the An-225.

Major airports are: Boryspil Airport, Dnipropetrovsk Airport, Donetsk Airport, Odessa Airport and SimferopolAirport.Majority of big cities in Ukraine has air connection with Kiev. Tickets for domestic flights for non-Ukrainiansmight be more expensive than for Ukrainians. Best air connection with other countries goes via Kiev. Somedomestic flights are not very reliable in terms of schedule - it is a good idea to make sure that the flight youhave chosen is made on regular basis. Please, note most domestic air tickets can be obtained in Ukraine only.

Transport corridors and international integration

Ukraine plays a strategic role concerning integration into trans-European transport corridors in theregion. Ukraine has also shown interest in establishing a common aviation area between Ukraine andthe EU, the negotiations on which are ongoing. Transport sector development in Ukraine in the light ofmovement of goods and people is also closely linked with cross border and customs related issues asUkraine is an important transit country connecting the EU with Russia, the South Caucasus and Central Asia(TRACECA corridor). The transit cargo traffic between Europe and Russia through Belarus is fivetimes higher than that through Ukraine. Ukraine ranks 102nd among 155 countries as per logistic efficiencyindex of the World Bank, in this regard the main problem area is inefficiency of customs procedures (135thplace out of 155)As regards infrastructure investments, Ukraine signed a loan agreement with the World Bank, in April 2009,for a project on roads and safety improvements (EUR 370 million), and a railway modernizationproject (EUR 653 million) is still in the pipeline. EBRD has provided loans for financing public transportprojects in Kyiv and Odessa. Ukraineranks 79th among 155 countries asper transportation infrastructurequality, according to the World Bankrating. The surface/pavement ofroads requires constant repairing,there is no high speed railroadcommunication, the technological re-equipment in the sea ports isnecessary, in particular, thedevelopment of container terminals,the airports modernization is requiredas well as the air navigation service.

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Military

Supreme Commander-in-chief ViktorYanukovych

Minister of Defence Mykhailo Yezhel

Chief of the General Staff & Commander-in-Chief Colonel General Hryhorii Pedchenko

Military branches: Ground Forces, Naval Forces,Air and Air Defense Forces (Viyskovo-PovitryaniSyly, VPS) (2010)

Military service age and obligation:18-25 years of age for compulsory and voluntarymilitary service; conscript service obligation - 12months for Army and Air Force, 18 months forNavy (2010)

Manpower available for military service:males age 16-49: 10,984,394females age 16-49: 11.26 million (2010 est.)

Manpower fit for military service:males age 16-49: 6,893,551females age 16-49: 8,792,504 (2010 est.)

Manpower reaching militarily significant ageannually:male: 246,397female: 234,916 (2010 est.)

Military expenditures:1.4% of GDP (2005 est.)country comparison to the world: 109

Note 1.1. Principles of foreign policy… non-participation of Ukraine in military andpolitical alliances, priority of participation in theimprovement and development of the Europeancollective security system, continuation ofconstructive partnership with the North-AtlanticTreaty Organization and other military and politicalblocs concerning all matters of mutual interest.

Note 1.2. Main principles of national policy inthe sphere of national security and defense• strengthening national defense capability,

increasing responsibility of State Power Agenciesat all levels for the proper training andmaintenance of state security;

• reforming the Armed Forces to ensure theirmaximum effectiveness and the ability to respondimmediately to potential threats to Ukraine;

• gradual transition to the manning of contracted-personnel, primarily in specialties that defineunits’ combat effectiveness;

• equipping the Armed Forces with the newestitems of military equipment and weapons;

• providing social support for Service personnel andtheir dependents

Figure 60 Officers and MiG-29 fighter planes of the Ukrainian AirForces

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Military

Supreme Commander-in-chief ViktorYanukovych

Minister of Defence Mykhailo Yezhel

Chief of the General Staff & Commander-in-Chief Colonel General Hryhorii Pedchenko

Military branches: Ground Forces, Naval Forces,Air and Air Defense Forces (Viyskovo-PovitryaniSyly, VPS) (2010)

Military service age and obligation:18-25 years of age for compulsory and voluntarymilitary service; conscript service obligation - 12months for Army and Air Force, 18 months forNavy (2010)

Manpower available for military service:males age 16-49: 10,984,394females age 16-49: 11.26 million (2010 est.)

Manpower fit for military service:males age 16-49: 6,893,551females age 16-49: 8,792,504 (2010 est.)

Manpower reaching militarily significant ageannually:male: 246,397female: 234,916 (2010 est.)

Military expenditures:1.4% of GDP (2005 est.)country comparison to the world: 109

Note 1.1. Principles of foreign policy… non-participation of Ukraine in military andpolitical alliances, priority of participation in theimprovement and development of the Europeancollective security system, continuation ofconstructive partnership with the North-AtlanticTreaty Organization and other military and politicalblocs concerning all matters of mutual interest.

Note 1.2. Main principles of national policy inthe sphere of national security and defense• strengthening national defense capability,

increasing responsibility of State Power Agenciesat all levels for the proper training andmaintenance of state security;

• reforming the Armed Forces to ensure theirmaximum effectiveness and the ability to respondimmediately to potential threats to Ukraine;

• gradual transition to the manning of contracted-personnel, primarily in specialties that defineunits’ combat effectiveness;

• equipping the Armed Forces with the newestitems of military equipment and weapons;

• providing social support for Service personnel andtheir dependents

Figure 60 Officers and MiG-29 fighter planes of the Ukrainian AirForces

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Military

Supreme Commander-in-chief ViktorYanukovych

Minister of Defence Mykhailo Yezhel

Chief of the General Staff & Commander-in-Chief Colonel General Hryhorii Pedchenko

Military branches: Ground Forces, Naval Forces,Air and Air Defense Forces (Viyskovo-PovitryaniSyly, VPS) (2010)

Military service age and obligation:18-25 years of age for compulsory and voluntarymilitary service; conscript service obligation - 12months for Army and Air Force, 18 months forNavy (2010)

Manpower available for military service:males age 16-49: 10,984,394females age 16-49: 11.26 million (2010 est.)

Manpower fit for military service:males age 16-49: 6,893,551females age 16-49: 8,792,504 (2010 est.)

Manpower reaching militarily significant ageannually:male: 246,397female: 234,916 (2010 est.)

Military expenditures:1.4% of GDP (2005 est.)country comparison to the world: 109

Note 1.1. Principles of foreign policy… non-participation of Ukraine in military andpolitical alliances, priority of participation in theimprovement and development of the Europeancollective security system, continuation ofconstructive partnership with the North-AtlanticTreaty Organization and other military and politicalblocs concerning all matters of mutual interest.

Note 1.2. Main principles of national policy inthe sphere of national security and defense• strengthening national defense capability,

increasing responsibility of State Power Agenciesat all levels for the proper training andmaintenance of state security;

• reforming the Armed Forces to ensure theirmaximum effectiveness and the ability to respondimmediately to potential threats to Ukraine;

• gradual transition to the manning of contracted-personnel, primarily in specialties that defineunits’ combat effectiveness;

• equipping the Armed Forces with the newestitems of military equipment and weapons;

• providing social support for Service personnel andtheir dependents

Figure 60 Officers and MiG-29 fighter planes of the Ukrainian AirForces

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Overview

After the dissolution of the Soviet Union, Ukraine inherited a 780,000 man military force on its territory,equipped with the third-largest nuclear weapons arsenal in the world. In May 1992, Ukraine signed theStrategic Arms Reduction Treaty (START) in which the country agreed to give up all nuclear weapons toRussia for disposal and to join the Nuclear Non-Proliferation Treaty as a non-nuclear weapon state. Ukraineratified the treaty in 1994, and by 1996 the country became free of nuclear weapons.

Ukraine took consistent steps toward reduction of conventional weapons. It signed the Treaty on ConventionalArmed Forces in Europe, which called for reduction of tanks, artillery, and armored vehicles (army forces werereduced to 300,000). The country plans to convert the current conscript-based military into a professionalvolunteer military not later than in 2011.

Ukraine has been playing an increasingly larger role in peacekeeping operations. Ukrainian troops are deployedin Kosovo as part of the Ukrainian-Polish Battalion. A Ukrainian unit was deployed in Lebanon, as part of UNInterim Force enforcing the mandated ceasefire agreement. There was also a maintenance and training battaliondeployed in Sierra Leone. In 2003–05, a Ukrainian unit was deployed in Iraq, as part of the Multinational forcein Iraq under Polish command. The total Ukrainian military deployment around the world is 562 servicemen.Military units of other states participate in multinational military exercises with Ukrainian forces in Ukraineregularly, including U.S. military forces.

Following independence, Ukraine declared itself a neutral state. The country has had a limited militarypartnership with Russia, other CIS countries and a partnership with NATO since 1994. In the 2000s, thegovernment was leaning towards the North Atlantic Treaty Organization, and a deeper cooperation with thealliance was set by the NATO-Ukraine Action Plan signed in 2002. It was later agreed that the question ofjoining NATO should be answered by a national referendum at some point in the future. Current PresidentViktor Yanukovych considers the current level of co-operation between Ukraine and NATO sufficient.Yanukovich is against Ukraine joining NATO. During the 2008 Bucharest summit NATO declared thatUkraine will become a member of NATO, whenever it wants and when it would correspond to the criteria forthe accession.

The Ukrainian armed forces are largely made up of conscripts. The total personnel (including 41,000 civilianworkers) numbers at the end of 2010 will be 200,000.The branch structure is as follows:

• Ground Forces: 73,300 personnel• Air Force: 46,000 personnel• Navy: 15,000 personnel

Ukraine maintains a number of Guards units, tracing their traditions from Soviet Armed Forces service. A listcan be seen at List of guards units of Ukraine. Women make almost 13% of the armed forces (18.000 persons).There are few female high officers, 2,9% (1.202 women). Contractual military service counts for almost 44%of women. However, this is closely linked to the low salary of such positions: men refuse to serve in theseconditions when women accept them.

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Summary of development of the armed forces of Ukraine in 2010

The main event of 2010 that had a decisive impact on the security situation was the announcement of Non-Blocstatus by Ukraine1 that foresaw, in particular, full participation of Ukraine in common European and regionalcollective securitysystems, membership in the European Union while maintaining good neighborly relations and strategicpartnership with the Russian Federation, other CIS and world countries (Note 1.1).

The principles of national policy were defined in the sphere of national security and defense, onimplementation of which major efforts of the MOD and the GS were focused in 2010 (Note 1.2).

Challenges and threats to Ukraine’s national security in the military sphere2 were determined on the basis ofcomprehensive analysis of national and foreign situations conducted during the year.

The State Officials paid particular attention to issues concerning preventing the decrease in the Armed Forcescombat readiness level, provision of their daily activities and social protection of Service personnel, namely:

• for 2010 the task to stabilize the situation in the Armed Forces and to ensure financing of high priority• activities was defined for the MOD3; first stage of initiating administrative reform in MOD Head Office

and the• Command and Control Bodies of the Armed Forces was conducted;• legislation to increase the penalty to citizens who breach their active duty commitment The fine was

increased from three to five times for breaching military registration rules by persons subject to draft orconscript personnel, non-appearance in the military commissariat without reasonable excuse or latesubmission to the military registration authority of information concerning change of residence,education, place of work, position, and interruption of training classes in institutions of the DefenseAssistance Association of Ukraine and vocational schools.

• patronage over military units, military education institutions and organizations of the Armed Forces wasreconstituted in order to assist in resolving issues of enhancing the prestige of military service, socialand cultural needs of Service personnel6;

• pensions of persons retired from military service were increased at the expense of allowances forspecial conditions of service related to the maintenance of nuclear weapons;

• functions and tasks of the Inspection on Control over the Functioning of Military Formations of theMain Defense Policy Directorate and Law Enforcement Bodies of the Presidential Administration werespecified;

• “Ukroboronprom” State Economic Association was established to increase efficiency of theadministrative activity in the sphere of development, production, implementation, maintenance,modernization and disposal of weapons, military and special equipment and ammunition.

• The allowance was increased in order to encourage Service personnel to military service. In 2010 theamount of monthly allowance to contracted Non-Commissioned Officers (NCOs) was raised, thatincreased their allowance by 29% to 35% compared to 2009. An additional monthly allowance toaircraft and shipboard Service personnel was determined and the average size of the monthly allowancewas raised in December, that enabled an increase on average of 20% to 23% in the allowance of Servicepersonnel. Timely decisions and measures of State Officials in 2010 made everything possible to

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stabilize the situation in the Armed Forces and further reform. However, implementation of tasks toimprove the Armed Forces’ combat readiness requires significant resources and full consolidation ofState Power Agencies and society.

Internal and external challenges and threats, with high level of probability and impact on Ukraine to 2025 weredefined within the framework of the Strategic Defense Review and an analysis of the security environment.

Figure 61Threats and Challenges in the Sphere of National Security and Defense

Taking into consideration the comprehensive response of all state agencies to threats in the sphere of militarysecurity, it was proposed to transit from the irrelevant at this time definition “State Military Organization” tothe definition “Security and Defense Sector of Ukraine”. The latter’s functional components include: DefenseForces, Security Forces, non-governmental agencies that may be involved in the interests of security anddefense.

Transformation of the State Military Organization into the Security and Defense Sector and legislativeconsolidation of this term will enable the adjustment of the priorities of the State Security and Defense Policymore effectively and timely, optimally merging military and civil opportunities of all components of the systemof national security for preventing and neutralizing existing and potential military threats, and supporting thedefensive potential of the State at the level that ensures the military security of Ukraine.

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Figure 62 Functional Components of the Security and Defense Sector of Ukraine

Command and control system of the armed forces, organization, manpower and equipments

In 2010 due to decisive actions of the State leadership as a whole, Ukraine managed to create a background forstopping destructive processes in the Armed Forces, favorable conditions for renewal of Forces’ combatreadiness, gradually increases in both training level and equipping forces with materiel. The new StateComprehensive Program of Reforming and Developing the Armed Forces 2011-2015 is being developed basedon the results of defense policies and the Strategic Defense Review, according to the National security andDefense Council decision.

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Improving the Command and Control System of the Armed Forces was accomplished by developing its keyfeatures: Command and Control Elements; Command Posts, the Armed Forces Single Automated Commandand Control System (SAC2S) elements and replacing the communications systems with digitalcommunications.

The development of the single automated Command and Control System continued:• Strategic level – MOD, General Staff, Logistics, Armaments, Main Directorate of Operational Support;• Operational level – Services’ Commands, Joint Operational Command, Army Corps’ Commands, AirCommands, Naval Operations Centre and Coast Guard Troops Centre;• Tactical level – Brigades and Regiments’ Commands.

Figure 63 Armed Forces’ Command and Control Elements’, at the end of 2010

During 2010 effective mechanisms continued to be develop for the Armed Forces’ Command and ControlSystem and its integration in the renewed State Command and Control System. The MOD and the ArmedForces are implementing the government’s Administrative Reforms. The priority was given to optimizing themilitary Command and Control Elements’ organization and strength, removing overlapping functions andtasks, and reducing running costs.

The command and control system of the Armed Forces is capable of ensuring continual and robust control overunits, their routine activities as well as peacekeeping contingents. In 2010 the significant achievement inrenovating weapons and equipment serviceability enabled improvement in the materiel capability provided tounits. The establishment of effective mechanisms of military-technical cooperation in the defense sphereenables the modernizing and renovating of the whole Armed Forces inventory of arms and equipment.

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International cooperation, peacekeeping activity and arms control

International cooperation was implemented in terms of the State’s new political direction defined by the Law ofUkraine “On Principles of Internal and External Policy” and directed at implementing Non-Block status. TheMOD’s main efforts were concentrated on strengthening and deepening relations with leading internationalorganizations and leading countries, initiating with them constructive political-military, military-technicalcooperation on mutually favorable conditions as well as developing good-neighborly cooperation with theRussian Federation and other neighboring countries with the aim of creating an atmosphere of trust, stabilityand security around Ukraine.

In 2010 the MOD cooperated with defense institutions of 55 countries. In total 711 activities took place (Figure3). MOD, GS and Armed Forces leaders conducted about 150 meetings. As a result, 3 inter-governmental and15 inter-agency treaties with 12 countries were signed.Accordingly, international cooperation was directed at:• creating conditions to implement Ukraine’s EU membership course, widening its participation in regionalcooperation and promoting national interests regionally and globally;• increasing operational capabilities of the Ukrainian Armed Forces, enhancing the interoperability with leadingnations armed forces, widening participation in international exercises, peacekeeping and anti-terroristoperations;• improving the legal basis for international cooperation, implementing specific program and internationaltechnical support projects;• intensifying disposal of surplus rocket and ammunition depots as well as rocket fuel components, sustainingcooperation in disarmament, arms control, and proliferation of weapons of mass destruction.

Figure 64 International cooperation 2007-2010

Deepening bilateral cooperation with MODs of strategic partners, neighboring countries and leading nationsremains an important activity of the MOD. During the year 2010 the main attention was concentrated on

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fulfilling agreements within acting treaties and further improvement of mutually beneficial interaction at thebilateral level.

Priority directions of bilateral cooperation are:• interacting with EU- and NATO-countries;• developing relations with strategic partners: the US, theRussian Federation and Poland;• widening traditionally active cooperation with Germany,UK and France.

In 2010 the number of bilateral cooperation activitiesexceeded the previous year.The most activities were with US, UK, Canada, Russia,Lithuania, Germany, Belarus, Turkey, France and Italy.

Development of international cooperation, including defensecooperation, between Ukraine and the US remains one of themain directions of the State’s external policy.Establishing effective bilateral cooperation with Ukraine’sstrategic partners, neighboring countries and leading

countries remains one of the priority directions of the State’s external policy and is considered by Ukraine ancivet mechanism of developing mutually beneficial relations between countries and preventing militaryconflicts.Successful implementation of multi-lateral cooperation activities within international and regionalorganizations on security, stability and strengthening trust is one of the main components of internationaldefense cooperation. In total during the year 220 activities took place, representing 31 % of the total number ofactivities.

Cooperation with the European Union The State’sexternal policy main priority is providingUkraine’s integration to European political,economic, legal and security environment with theaim of European Union membership. That is whymilitary cooperation with the EU in 2010 waspractically oriented and is considered to be animportant direction of Ukraine’s new defensepolicy. International defenses cooperationprovides a stable pillar within Ukraine’s overallforeign policy and is aimed at the implementationof the country’s strategic course towards fullmembership in the European Union andintegration in the European security system.

Figure 65 Bilateral cooperation with countries defense institutions

Figure 66 Multi-lateral cooperation in 2010

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According to 2010 year’s results the Ukrainian Armed Forces, in general, are ready to accomplish designatedtasks. The necessary conditions for the situation to stabilize and maintain capabilities to renew combatreadiness were created.

During 2010 Ukraine-EU military cooperation was conducted in terms of:• widening the format of political-military dialogue between political- military leaders of Ukraine, EU MilitaryCommittee and EU Council Secretariat;• reforming and implementing Common Security and Defense Policy;• training experts in the Common Security and Defense Policy;• preparing Ukraine Armed Forces assets for EU Battle Groups (BG) and achieving interoperability ofdesignated units for participation in joint military exercises and peacekeeping operations under the aegis of EU;• establishing collaboration and participation in the work of EU structures and agencies (European DefenseAgency, European Security and Defense College, EU Security Research Institute);• using Ukraine’s capabilities in air transport during EU operations.

Successful implementation of EU cooperation plans in themilitary area gives a possibility for the Ukraine’s ArmedForces to reach a new quality and enhance commoncapabilities for participation in EU operations.

Ukraine continues a constructive partnership with NАТОaimed at solving priority tasks of Armed Forcesdevelopment, providing stability and security in the worldthrough peacekeeping operations, and ensuring Ukraine’sreadiness to participate in such activity by developingappropriate level of interoperability of the UkrainianArmed Forces with those of NATO member-states. Theformat of such cooperation was maintained and continuedthroughout 2010. By carrying out its internationalobligations Ukraine is proving itself a predictable countryand reliable partner. According to the ANP-2010 ActionPlan the MOD participated in 246 activities, in 215 as aresponsible executive body, in 31 as a co-responsibleexecutive body. Of these activities 126 were “completed”

(51 %), 69 “partially completed” (28 %), 11 “not completed” (4 %) and 7 activities “cancelled” (3 %).The NATO-Ukraine Individual Partnership Program is a practical mechanism for exchanging experiencebetween the armed forces of Ukraine and Alliance members and partners. It has enhanced the level ofcooperation in a number of directions: military education and training; command, communications andinformational systems; standardization; interoperability; and logistics. In 2010 Ukrainian Armed Forcesrepresentatives took part in a total of 55 program activities: 31 courses; 7 seminars and workshops; 6 exercises;3 working meetings and NATO expert visits; and 8 conferences and meetings.In 2010 Ukraine’s participation in the NATO Program on Air Situation Data Exchange was extended, with thesigning in May 2010 of a Memorandum of Understanding between the MOD and the General Staff of theTurkish Armed Forces and the Supreme Allied Command Operations. According to the Memorandum Air

Figure 67 The List of forces and means defined for participation in thePlanning and Review Process

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Situation Data Exchange will take place between the Ukrainian Air Force Command Post “South” and theControl and Notification Center of the Turkish Air Force in Erzurum.Another format of cooperation between Ukraine and NATO is participation of the Armed Forces in thePlanning and Review Process in the framework of the “Partnership for Peace” Program. The main efforts of theMOD and GS were concentrated on training designated forces and means for interaction with EU and NATOnations’ armed forces in peacekeeping, search and rescue and humanitarian operations.Thus, partnership with NATO remains one of the priority directions of Ukraine’s defense policy, and the MODand the Armed Forces are ensuring high level political-military dialogue between Ukraine and NATO andundertaking efforts to continue constructive partnership on issues of common interest.

Figure 68 Operation capabilities development of NBC unit

Cooperation in the framework of other international and regional organizations is an important direction ofUkraine’s defense policy and one of the State’s mechanisms for providing security in support of an atmosphereof stability and mutual trust in Europe and the world.In accordance with obligations undertaken by Ukraine the Armed Forces continued in 2010 to activelyparticipate in peacekeeping missions under the aegis of the United Nations (UN). The most significantcontribution in this area is being made by the 56th Detached Helicopter unit in Liberia and Cote d’Ivoire. At thetime Service personnel are serving as peacekeepers in UN missions in the Democratic Republic of Congo,Kosovo, Liberia and Sudan.

Ukraine is a permanent member of the Organization ofSecurity and Cooperation in Europe (OSCE) Forumfor Security Co-operation. One of the most importantand successful directions of OSCE-Ukrainecooperation in the politico-military sphere in 2010was the implementation of the OSCE-Ukraine projecton rocket fuel (mélange) disposal in the framework ofthe OSCE Document on Stockpiles of ConventionalAmmunition from 2003. Ukraine considerscooperation with the Commonwealth of IndependentStates as an important direction of external policy inthe post-Soviet space. During the year MODdelegations took place twice in work of the CIS

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Defense Ministers’ Council. Taking into account thestatus of Ukraine as an observer summary meetingdocuments were not signed.

The active participation of the MOD and ArmedForces in the activities of international securityorganizations helps to ensure international securityin Europe and the whole world and supports thecreation of a zone of stability and mutual trustaround Ukraine.Ukraine is conscious of its responsibility to preserveinternational peace and security and remains anactive participant in international peacekeepingactivity. In 2010 Ukraine maintained the format ofArmed Forces participation in internationalpeacekeeping operations and ensured the practicalrealization of the Strategy of International Peacekeeping Activity4. In the course of the year 858 Servicepersonnel participated in peacekeeping contingents and 133 served as peacekeeping personnel. AltogetherService personnel took part in 11 international peacekeeping operations in 8 countries.Ukraine’s participationin peacekeeping operations, including NATO operations in Kosovo, Afghanistan and the Mediterranean Sea,furthers the national interests of Ukraine and helps to support international peace and security. It also increasesthe level of combat training of Service personnel, enabling them to obtain combat experience, and helps theArmed Forces to achieve interoperability with the forces of other nations participating in internationalpeacekeeping operations.

Efforts in verification of Armed Forces activity werefocused on ensuring all parties’ adherence to armscontrol agreements, including the Open SkiesAgreement, the Treaty on Conventional Armed Forcesin Europe, the Vienna document of 1999 as well asbilateral inter-governmental agreements betweenUkraine and Slovakia, Hungary, Belarus and Polandaimed at additional confidence-building and securitymeasures.

The status of implementation of internationalagreements and conventions in the sphere of armscontrol in 2010 was the same as in previous years andwas characterized by the high level of attention paid toverification activities on the territory of Ukraine withoutthe right to refuse and an increase of the number ofneighboring counties’ representatives in multilateralinspection groups.

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Page 104Figure 69 Participation of Ukrainian Contingents and Personnel in Peacekeeping Operations 2010

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Fulfilling Ukrainian obligations under internationalarms control agreements furthers the development ofthe European security system and the integration ofUkraine within this system.

Conclusions

2011 is declared the “Year of Technical Readiness ofArms and Equipment and Training of theProfessional NCO Corps”.The main priorities of the Armed Forces developmentare as follows:• Implement effective system to support combatreadiness; improve arms and equipment technicalservicing; increase technical knowledge level of allService personnel; achieve readiness to accomplish thetasks of Joint Rapid Reaction Forces, SpecialOperations Forces and Air Defense Duty;create and develop professional NCO Corps, promoteits role in military staff management and furtheroptimize their multi-level training system;• Improve strategic planning of engagement of theArmed Forces; complete the Strategic Defense Review;and develop the State Program for the Armed ForcesDevelopment 2011-2015;• Optimize the Armed Forces and operationalformations command and control system with operatingsupport, material and technical support; develop unifiedautomated Command and Control System and transferto digital communication system;• Modernize and renovate armament and equipment,first of all of the Air Force to provide increasingeffectiveness of reconnaissance and control ofUkraine’s airspace;• Undertake Administrative Reform in the MOD andthe Armed Forces, improve management and eliminateoverlapping functions and duties;• Re-organize in full the military education system, re-organize and optimize its elements, and supply theArmed Forces with trained personnel;• Support social guarantees to Service personnel, their families, Armed Forces’ employees and other eligible tosocial protection from the MOD;• Fulfill Ukraine’s international military commitments, implement Non- Block status, strengthen military-political, military-technical and military cooperation with international organizations and nations.

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Transnational Issues

Disputes – International:

1997 boundary delimitation treaty with Belarus remains un-ratified due tounresolved financial claims, stalling demarcation and reducing bordersecurity; delimitation of land boundary with Russia is complete withpreparations for demarcation underway; the dispute over the boundarybetween Russia and Ukraine through the Kerch Strait and Sea of Azovremains unresolved despite a December 2003 framework agreement andongoing expert-level discussions; Moldova and Ukraine operate jointcustoms posts to monitor transit of people and commodities throughMoldova's break-away Transnistria Region, which remains under OSCEsupervision; the ICJ gave Ukraine until December 2006 to reply, andRomania until June 2007 to rejoin, in their dispute submitted in 2004 overUkrainian-administered Zmiyinyy/Serpilor (Snake) Island and Black Seamaritime boundary; Romania opposes Ukraine's reopening of a navigationcanal from the Danube border through Ukraine to the Black Sea

Illicit drugs:

limited cultivation of cannabis and opium poppy, mostly for CIS consumption; some synthetic drug productionfor export to the West; limited government eradication program; used as transshipment point for opiates andother illicit drugs from Africa, Latin America, and Turkey to Europe and Russia; Ukraine has improved anti-money-laundering controls, resulting in its removal from the Financial Action Task Force's (FATF's) Noncooperative Countries and Territories List in February 2004; Ukraine's anti-money-laundering regimecontinues to be monitored by FATF

Overview of Foreign Relations

Ukraine considers Euro-Atlantic integration its primary foreign policy objective, but in practice balances itsrelationship with Europe and the United States with strong ties to Russia. The European Union's Partnershipand Cooperation Agreement (PCA) with Ukraine went into force on March 1, 1998. The European Union (EU)has encouraged Ukraine to implement the PCA fully before discussions begin on an association agreement. TheEU Common Strategy toward Ukraine, issued at the EU Summit in December 1999 in Helsinki, recognizesUkraine's long-term aspirations but does not discuss association. On January 31, 1992, Ukraine joined the then-Conference on Security and Cooperation in Europe (now the Organization for Security and Cooperation inEurope--OSCE), and on March 10, 1992, it became a member of the North Atlantic Cooperation Council.Ukraine also has a close relationship with NATO and has declared interest in eventual membership. It is themost active member of the Partnership for Peace (PfP).

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Transnational Issues

Disputes – International:

1997 boundary delimitation treaty with Belarus remains un-ratified due tounresolved financial claims, stalling demarcation and reducing bordersecurity; delimitation of land boundary with Russia is complete withpreparations for demarcation underway; the dispute over the boundarybetween Russia and Ukraine through the Kerch Strait and Sea of Azovremains unresolved despite a December 2003 framework agreement andongoing expert-level discussions; Moldova and Ukraine operate jointcustoms posts to monitor transit of people and commodities throughMoldova's break-away Transnistria Region, which remains under OSCEsupervision; the ICJ gave Ukraine until December 2006 to reply, andRomania until June 2007 to rejoin, in their dispute submitted in 2004 overUkrainian-administered Zmiyinyy/Serpilor (Snake) Island and Black Seamaritime boundary; Romania opposes Ukraine's reopening of a navigationcanal from the Danube border through Ukraine to the Black Sea

Illicit drugs:

limited cultivation of cannabis and opium poppy, mostly for CIS consumption; some synthetic drug productionfor export to the West; limited government eradication program; used as transshipment point for opiates andother illicit drugs from Africa, Latin America, and Turkey to Europe and Russia; Ukraine has improved anti-money-laundering controls, resulting in its removal from the Financial Action Task Force's (FATF's) Noncooperative Countries and Territories List in February 2004; Ukraine's anti-money-laundering regimecontinues to be monitored by FATF

Overview of Foreign Relations

Ukraine considers Euro-Atlantic integration its primary foreign policy objective, but in practice balances itsrelationship with Europe and the United States with strong ties to Russia. The European Union's Partnershipand Cooperation Agreement (PCA) with Ukraine went into force on March 1, 1998. The European Union (EU)has encouraged Ukraine to implement the PCA fully before discussions begin on an association agreement. TheEU Common Strategy toward Ukraine, issued at the EU Summit in December 1999 in Helsinki, recognizesUkraine's long-term aspirations but does not discuss association. On January 31, 1992, Ukraine joined the then-Conference on Security and Cooperation in Europe (now the Organization for Security and Cooperation inEurope--OSCE), and on March 10, 1992, it became a member of the North Atlantic Cooperation Council.Ukraine also has a close relationship with NATO and has declared interest in eventual membership. It is themost active member of the Partnership for Peace (PfP).

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Transnational Issues

Disputes – International:

1997 boundary delimitation treaty with Belarus remains un-ratified due tounresolved financial claims, stalling demarcation and reducing bordersecurity; delimitation of land boundary with Russia is complete withpreparations for demarcation underway; the dispute over the boundarybetween Russia and Ukraine through the Kerch Strait and Sea of Azovremains unresolved despite a December 2003 framework agreement andongoing expert-level discussions; Moldova and Ukraine operate jointcustoms posts to monitor transit of people and commodities throughMoldova's break-away Transnistria Region, which remains under OSCEsupervision; the ICJ gave Ukraine until December 2006 to reply, andRomania until June 2007 to rejoin, in their dispute submitted in 2004 overUkrainian-administered Zmiyinyy/Serpilor (Snake) Island and Black Seamaritime boundary; Romania opposes Ukraine's reopening of a navigationcanal from the Danube border through Ukraine to the Black Sea

Illicit drugs:

limited cultivation of cannabis and opium poppy, mostly for CIS consumption; some synthetic drug productionfor export to the West; limited government eradication program; used as transshipment point for opiates andother illicit drugs from Africa, Latin America, and Turkey to Europe and Russia; Ukraine has improved anti-money-laundering controls, resulting in its removal from the Financial Action Task Force's (FATF's) Noncooperative Countries and Territories List in February 2004; Ukraine's anti-money-laundering regimecontinues to be monitored by FATF

Overview of Foreign Relations

Ukraine considers Euro-Atlantic integration its primary foreign policy objective, but in practice balances itsrelationship with Europe and the United States with strong ties to Russia. The European Union's Partnershipand Cooperation Agreement (PCA) with Ukraine went into force on March 1, 1998. The European Union (EU)has encouraged Ukraine to implement the PCA fully before discussions begin on an association agreement. TheEU Common Strategy toward Ukraine, issued at the EU Summit in December 1999 in Helsinki, recognizesUkraine's long-term aspirations but does not discuss association. On January 31, 1992, Ukraine joined the then-Conference on Security and Cooperation in Europe (now the Organization for Security and Cooperation inEurope--OSCE), and on March 10, 1992, it became a member of the North Atlantic Cooperation Council.Ukraine also has a close relationship with NATO and has declared interest in eventual membership. It is themost active member of the Partnership for Peace (PfP).

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Relation with CIS states

Ukraine maintains peaceful and constructive relations with all its neighbors; it has especially close ties withRussia and Poland. Relations with the former are complicated by energy dependence and by payment arrears.However, relations have improved with the 1998 ratification of the bilateral Treaty of Friendship andCooperation. Also, the two sides have signed a series of agreements on the final division and disposition of theformer Soviet Black Sea Fleet that have helped to reduce tensions. Ukraine became a member of theCommonwealth of Independent States (CIS) on December 8, 1991, but in January 1993 it refused to endorse adraft charter strengthening political, economic, and defense ties among CIS members. Ukraine was a foundingmember of GUAM (Georgia-Ukraine-Azerbaijan-Moldova).In 1999–2001, Ukraine served as a non-permanentmember of the UN Security Council. Historically, Soviet Ukraine joined the United Nations in 1945 as one ofthe original members following a Western compromise with the Soviet Union, which had asked for seats for all15 of its union republics. Ukraine has consistently supported peaceful, negotiated settlements to disputes. It hasparticipated in the quadripartite talks on the conflict in Moldova and promoted a peaceful resolution to conflictin the post-Soviet state of Georgia. Ukraine also has made a substantial contribution to UN peacekeepingoperations since 1992.

Figure 70 Diplomatic relations of Ukraine

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Ukraine’s Key Partners

Russia

Kyiv’s relations with Moscow have, since 2004,reached an unprecedented low. Restoring a goodrelationship with Russia must therefore top thenew President’s foreign policy agenda.Reestablishing a healthy relationship withUkraine’s northern neighbor is an end in itself, butalso a means: Brussels and Washington have tiredof the political and economic instability caused byUkraine-Russia spats, and both are looking toimprove their own relationships with Moscow. Atthe same time, Russia itself has grown weary of what it sees as western interference in its sphere of influence,and it fears that other countries may emulate Ukraine’s decision to follow a different developmental model thanits own. It will be up to Kyiv to avoid both unnecessary belligerence and the “unilateral loyalty” it has tendedto display since independence.

The European Union

Ukrainians—both Ukraine’s main political forces and its population as a whole—favor EU accession, which isseen as a means of enhancing the country’s independence, territorial integrity, and economic and energysecurity. But Ukraine’s politicians seem unable to grasp what European integration demands of them,especially when it comes to crucial reforms. Years of unkept promises, political and economic instability, and adeteriorating relationship with Russia have seriously damaged Kyiv’s standing in the EU. Hence overcoming“Ukraine fatigue” in both Brussels and other European capitals will have to top the new President’s agenda.This will mean both pushing through internal reforms and developing more mature relationships withUkraine’s foreign partners.

The United States

After years of being seen as a key counterweight to Russia in the former Soviet Union, Kyiv’s importance tothe United States has shrunk considerably. With Washington falling prey to Ukraine fatigue and the Obamaadministration seeking to reset relations with Moscow, Ukraine has been reduced to a simple card to be playedin resolving more important issues in US-Russian relations. The US is moving from an ideological, democracy-promoting foreign policy to a more pragmatic, interest-driven one. If Ukraine is to maintain a healthyrelationship with the US, it will have to grow out of its status as a mere beneficiary of American support intothat of a true partner—one capable of bringing real assets to the table.

Poland

For Ukraine, the importance of maintaining close relations with Poland is based on four main concerns. First, itis essential that Ukraine enjoy healthy relationships with its neighbors. Second, Poland’s experience of EU andNATO integration holds important lessons for Ukraine. Third, economic cooperation between Ukraine and

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Poland holds great potential. And fourth, of all Ukraine’s neighbors, Poland is in the best position to enhanceUkraine’s security.

Romania

Ukraine’s relations with Romania have historically been difficult. Bucharest routinely uses the Romanianminority in Ukraine as political leverage. Romania is trying to raise its profile in the Brussels, while at the sametime competing for the attention and resources of EU and NATO members. Controlled tensions with Kyiv arepart of Bucharest’s bid for regional leadership, which only Ukraine is in a position to challenge. In addition,Ukraine and Romania have competing environmental and economic interests in the Danube basin, whichBucharest has been more skilled at pursuing.

Moldova

The Republic of Moldova is the smallestof Ukraine’s neighbors, but also the mosttroublesome. An undemarcated border, thefrozen conflict in Transnistria, a Ukrainiancommunity on both sides of the Dnisterwhose interests are not always defended,common challenges linked to neighboringRomania—all these prevent Kyiv fromdropping Chisinau from its sights. Thecornerstone of Ukraine’s policy towardsMoldova is preserving the sovereignty andterritorial integrity of this importantneighbor. It is through this prism that theTransnistrian problem is seen in Kyiv.

Belarus

Belarus may be one of Ukraine’s main trading partners, but Kyiv’s relations with Minsk are prickly. “Europe’slast dictatorship” is intent on trying to play East against West while consolidating its position as a key transitcorridor between the Black and Baltic Seas—not to mention using border issues with Ukraine as leverage onother matters. It is in Ukraine’s interest to improve relations with Minsk but any progress will have to becarefully thought out and coordinated with Ukraine’s western partners.

Turkey

Ukraine and Turkey are neither close allies nor rivals. Still, they are bound by significant trade and a soundpolitical relationship. Turkey is one of the most important political players around the Black Sea, with one ofthe leading economies in the region and the second-largest military in NATO. Given their similar sizes,geographical proximity, and common interests, Ukraine and Turkey are ideally placed to develop “model”relations, based on equality rather than on dependence. But Ukraine’s leadership has yet to grasp the politicaland economic potential of this relationship.

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Georgia

In the aftermath of the Rose and Orange Revolutions, ties between Ukraine and Georgia grew very close. Bothcountries are trying to withstand Russian intrusions, both intend to join NATO and the European Union, andboth are active within GUAM. But today, both are also at low points in relations with their most importantpartners, and both are facing major political and economic challenges.

Ukraine’s Priority Areas

1. Security

Since the country’s failure to be granted a NATO Membership Action Plan (MAP) in 2008, Ukraine’s politicalelites have been in increasing disarray over what to do next. The country must better define the nature andsubstance of its relations with major security partners, namely the United States, the European Union, andRussia, before it can find its place in the European security system. Restoring relationships with its principalpartners will be crucial not only to protecting Ukraine’s independence, but also to fostering the domesticpolitical stability necessary for a constructive foreign and security policy.

2 Energy Security

Energy has been Ukraine’s Achilles’ heel ever since the Soviet Union collapsed. To this day, not one of Kyiv’sstrategic goals in this area has been reached, whether reducing the energy-intensity of GDP, increasing theextraction of domestic resources, diversifying supplies, or establishing a closed nuclear fuel cycle. Ukraineremains heavily dependent on Russian natural gas, and flawed contracts with Gazprom will leave it vulnerablefor years to come. Kyiv will have much to do if it is to restore its credibility as both an honest customer anda reliable transit state for Russian gas. This will namely mean reforming its energy sector and adhering to itscommitments under the Energy Community Treaty, which it has just joined.

3. Environmental Challenges

Ukraine’s environmental record is checkered at best. Both its energy efficiency and its greenhouse gasreduction targets are among the worst in the world. But with its educated population and highly-developedindustrial sector, the country also has great environmental potential—one that it could, with the necessaryeffort and the right strategy, turn into regional leadership. The mood in Ukrainian-Russian relations has oftenbeen affected by both subjective

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World Health Organization Profile

Figure 71 Ukraine: WHO health profile (part 1)

Life expectancy

WHO estimates that a person born in Ukraine in 2003 can expect to live 68 years on average: 74 years iffemale and 63 years if male. Life expectancy for males in 2003 was five years shorter than in 1986. Lifeexpectancy for females in 2003 was two years shorter than in 1989. Compared with the Eur-A averages formales and females, male life expectancy in Ukraine is 14 years lower and female life expectancy is 8 yearslower. Life expectancy for Ukrainian males remains two years less than Eur-B+C average life expectancy,while for females it is practically equal to the average. WHO also estimates that Ukrainians spend about 12%

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World Health Organization Profile

Figure 71 Ukraine: WHO health profile (part 1)

Life expectancy

WHO estimates that a person born in Ukraine in 2003 can expect to live 68 years on average: 74 years iffemale and 63 years if male. Life expectancy for males in 2003 was five years shorter than in 1986. Lifeexpectancy for females in 2003 was two years shorter than in 1989. Compared with the Eur-A averages formales and females, male life expectancy in Ukraine is 14 years lower and female life expectancy is 8 yearslower. Life expectancy for Ukrainian males remains two years less than Eur-B+C average life expectancy,while for females it is practically equal to the average. WHO also estimates that Ukrainians spend about 12%

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World Health Organization Profile

Figure 71 Ukraine: WHO health profile (part 1)

Life expectancy

WHO estimates that a person born in Ukraine in 2003 can expect to live 68 years on average: 74 years iffemale and 63 years if male. Life expectancy for males in 2003 was five years shorter than in 1986. Lifeexpectancy for females in 2003 was two years shorter than in 1989. Compared with the Eur-A averages formales and females, male life expectancy in Ukraine is 14 years lower and female life expectancy is 8 yearslower. Life expectancy for Ukrainian males remains two years less than Eur-B+C average life expectancy,while for females it is practically equal to the average. WHO also estimates that Ukrainians spend about 12%

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Figure 72 Ukraine: WHO health profile (part 2)

(eight years) of their average life span with illness and disability. As the length of life increases, older peoplecan respond with lifestyle changes that can increase healthy years of life. Correspondingly, health care systemsneed to shift towards more geriatric care, the prevention and management of chronic diseases and more formallong-term care. Since people are living longer, measures to improve health and prevent disease need to focuson people of working age.

Population profile

In mid-2003, Ukraine had about 48 million people. About 67% of them lived in urban areas, which is slightlyabove the Eur-B+C average rate. The percentage of the population 0–14 years old was relatively steady duringthe 1980s, but fell from about 21% in 1990 to 16% by 2003. The percentage is below the Eur-B+C average. At

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the other end of the age spectrum, the percentage of Ukraine's population more than 65 years old is above theEur-B+C average. By 2030, an estimated 22% of Ukraine's population will be 65 years old and older. The birthrate in Ukraine was the lowest in Eur-B+C in 2003. For that year, the natural population increase in Ukrainewas negative and the lowest of the Eur-B+C countries. Net migration for 2003 was slightly negative and belowthe corresponding Eur-B+C average

Socioeconomic indicators

Health outcomes are influenced by various factors that operate at individual, household and community levels.Obvious factors are, for example, diet, health behaviour, access to clean water, sanitation and health services.However, underlying health determinants of a socioeconomic nature also play a role in causing vulnerability tohealth risks. Here, the key factors are income, education and employment. Though moderately correlated andinterdependent, each of these three determinants captures distinctive aspects of the socioeconomic backgroundof a population and they are not interchangeable. Various indicators represent the key socioeconomicdeterminants of health.

Income: absolute poverty, relative poverty and income distribution

There is an income gradient affecting health: the poor generally suffer worse health and die younger thanpeople with higher incomes. For instance, the latter are better able to afford the goods and services thatcontribute to health, for example, better food and living conditions. People are considered to be in absolutepoverty if their incomes are not sufficient to purchase very minimal goods and services. The World Bankcurrently uses an absolute poverty line of US$ 2.15 and US$ 4.30 income per person per day to measurepoverty in low- and middle-income countries of the WHO European Region (using 1993 international pricesadjusted for purchasing power parity). While there is no certainty that the poverty lines measure the samedegree of need across countries, the World Bank uses them as a constant to permit comparison. Many countriesin the Region calculate their national poverty lines on the basis of a minimum consumption basket selected andpriced according to the specific circumstances of the country. Relative poverty is an indicator of income levelbelow a given proportion (typically 50%) of the average national income. In high-income countries, there arefar more pockets of relative poverty than of absolute poverty. In Ukraine, in 2003, per person gross nationalincome, adjusted for purchasing power parity (PPP) was US$ 5430, below the corresponding Eur-B+C average(US$ 6842). Household surveys conducted in Ukraine over 12 years, from 1988 to 1999, found that since 1988,when the absolute poverty rate was 1.6% (using the US$ 4.30 per person per day benchmark), the rates havebeen increasing. In 1999, the latest year for which data are available, 81.7% of the population lived on US$4.30 or less per day. That same year, 31.3% of the population lived on US$ 2.15 or less per day (World Bank,2005).Another measure of relative poverty in terms of income is the Gini index. This presents the extent to which thedistribution of income (or, in some cases, consumption expenditure) among individuals or households withinan economy deviates from a perfectly equal distribution. A Gini index of 0 represents perfect equality, while anindex of 100 implies perfect inequality.

The Gini index for Ukraine was 29.0 in 1999, the latest year for which data are available. The Gini indices for15 Eur-B+C countries for 2000–2002 range from 26.2 for Bosnia and Herzegovina (2001) to 37.2 in Estonia(2000) (World Bank, 2005).

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Education

Education tends to enhance an individual’s job opportunities. In so doing, it can improve income, which in turnaffects health positively. Education can also give more access to knowledge about healthy behavior andincrease the tendency to seek treatment when needed. A lower level of education – independent of individualincome – is correlated with the inability to cope with stress, with depression and hostility and with adverseeffects on health. School enrolment is an indicator of access to education. The secondary school net enrolmentrepresents the percentage of the total population of official school age (defined nationally) that is enrolled insecondary school. In Ukraine, net secondary school enrolment in 2001 was 89%, compared to an 81.2% Eur-B+C average in 2000. The average net enrolment in Eur-A countries that year was 88.5% (UNESCO, 2005).

Employment

Being employed tends to be better for health than being unemployed, except for circumstances whereemployment exposes the individual to physical injury or psychological stress. National unemployment ratesand rates for particular sub-populations are monitored to assess the extent to which people have or lack accessto opportunities that would enable them to earn an income and feel secure. Vulnerability to health risk isincreased by long-term unemployment, that is, continuous periods without work, usually for a year or longer;the socioeconomic status of an individual and of his/her dependents can slide as the period of unemploymentincreases.The total unemployment rate in Ukraine in 2001 was 11.1%, close to the Eur-B+C country average of 12.9%for that year, keeping in mind that national rates are based on estimates of people available and seekingemployment and that countries have different definitions of labour force and unemployment. The percentage ofyoung Ukrainians, 15–24 years of age, without work but available for (and seeking) employment was 24% in2000 – the latest year for which data were available. In 2001, the Eur-B+C average youth unemployment ratewas 25.2% (ILO, 2005).

Life expectancy (LE) and healthy life expectancy(HALE)

According to figures compiled by WHO (WHO, 2003c), aperson born in Ukraine in 2003 can expect to live 67.8 yearson average: 73.6 years if female and 62.3 years if male. InUkraine, life expectancy (LE) for males is about 13.6 yearslower than the corresponding Eur-A average, and 8.4 yearslower for females. The Ukrainian male LE remains lowerthan the corresponding Eur-B+C average by 1.9 years, whilefor females it is practically equal to the average. In males,LE decreased during the period 1986– 1995 by 5.6 years,then increased for 3 years, and subsequently started a slowdecline again. In 2003, it was less than in 1986, by 4.7 years,showing some departure from the Eur-B+C average LE.During the period 1998–2003, it stabilized. For Ukrainianfemales, LE declined by 2.7 years between 1989 and 1995,

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to reach the Eur-B+C average LE; it then increased for 3 years and stabilized. Its value in 2003 was 1.7 yearslower than in 1989 In addition to LE, it is increasingly important to know the expected length of life spent ingood health. WHO uses a relatively new indicator for this purpose – healthy life expectancy (HALE),subtracting estimated years of life spent with illness and disability from estimated LE. For Ukraine, WHO(WHO, 2003c) estimates that people can expect to be healthy for about 88% of their lives. They lose anaverage of 8.0 years to illness and injuries – the difference between LE and HALE. This loss is a little morethan the Eur-A average (7.3 years) and the Eur-B+C average (7.6 years)Since females generally live longer and since the possibility of deteriorating health increases with age, femaleslose more healthy years of life (9.3 years) than males (6.8 years). Nevertheless, the longer LE for females inUkraine gives them 8.7 more years of healthy life than males. At age 60 years, this difference reduces to 3.4years: woman can expect 13.7 years of healthy life and men 10.3 years.

Infant mortality

Both infant and neonatal mortality rates in Ukraine are well below the corresponding Eur-B+C average rates;however, the latest infant mortality rate is twice as high as the corresponding Eur-A average rate.The United Nations Children’s Fund estimates that the infant mortality rate in Ukraine in 1995 was 20 deathsper 1000 live births (the official national rate was 15 deaths per 1000 live births), and in 2003 it was 15 deathsper 1000 live births (the official national rate was about 10 deaths per 1000 live births). Antenatal care is one ofthe most important services in health care. Nevertheless, it can be expensive, and interventions may beexcessive, unneeded and unproven. A simplified model of antenatal care, based on evidence of benefit, isavailable.

Maternal mortality

The maternal mortality rate shows a clear decline, at a rate about four times higher than the Eur-A average rate,but well below the Eur-B+C average rate. The rate may be underestimated, though. According to WHO/UnitedNations Children’s Fund/United Nations Population Fund estimates for the year 2000, the maternal mortalityrate in Ukraine was 35 maternal deaths per 100 000 live births, while the official national rate was close to 25maternal deaths per 100 000 live births. Between 1990 and 2002, the maternal mortality rate in Ukraine fell by32%, despite a peak rate in 1994 (about 33 maternal deaths per 100 000 live births). The maternal mortality ratewould have to fall another 63% to reach the Millennium Development Goal target. More important thanreaching the exact Millennium Development Goal for maternal mortality rates is that countries take concreteaction to provide women with access to adequate care during pregnancy and childbirth. There are evidence-based initiatives proven to bring down the rates.

Main causes of death

The latest mortality rate for males in Ukraine is 6% higher than the corresponding Eur-B+C average rate, andthe rate for females is about 3% higher. When compared with Eur-A average mortality rates, excess mortalityin Ukraine is present in all age groups, the largest being in men 30–44 years old – who have mortality ratesabout five times higher then their peers in Eur-A. In females, the mortality rate differences are smaller than inmales.In 2003, the main non communicable diseases accounted for about 80% of all deaths in Ukraine; externalcauses for about 11%; and communicable diseases for about 2%. In total 60% of all deaths were caused by

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diseases of the circulatory system and 12% by cancer. The mortality rate among males attributed tocardiovascular diseases is the third highest in European countries, and for elderly males and females (65 yearsold and older) the rates are the fourth highest. Ischaemic heart disease is the single biggest killer in Ukraine,being responsible for almost 40% of all male deaths in 2003 – more than double the Eur-A average rate (15%)and more than the Eur-B+C average rate (28%).Preventive care, delivered through a country’s primary care system, can reduce all-cause mortality andpremature mortality, particularly from cardiovascular diseases.

Burden of disease

The burden of disease in a population can be viewed as the gap between current health status and an idealsituation in which everyone lives into old age, free of disease and disability. Causing the gap are prematuremortality, disability and certain risk factors that contribute to illness. The analysis that follows elaborates on theburden of disease in the population. The isability-adjusted life-year (DALY) is a summary measure thatcombines the impact of illness, disability and mortality on population health.Cardiovascular diseases (CVD) and unintentional injuries account for the highest burden of disease amongmales, and CVD and neuropsychiatric conditions account for the highest burden of disease among females.Because mortality from neuropsychiatric conditions is minor, disability in daily living comprises the bulk oftheir burden on the population’s healthAccording to the DALYs, tobacco and alcohol use place the greatest burden of disease on the Ukrainianmale population, and high blood pressure and high cholesterol level place the greatest burden of disease on thefemale

Excess mortality

To some extent, the mortality pattern in Ukraine follows the alcohol policy in the former Soviet Union.As withthe other former Soviet republics, Ukraine in 1986 showed a fall in the mortality rate from all causes, reflectinga reduction in deaths from CVD and external causes. This followed the introduction in June 1985 of a vigorouscampaign to restrict, and thereby reduce, alcohol consumption (the so-called Gorbachov anti-alcoholcampaign). Mortality rates reached a low point in males in 1986 and in females in 1989. Following economicliberalization in 1991, alcohol became more widely available and relatively cheaper than before 1985, and itsconsumption may have played a significant role in the further increase in mortality. It is estimated that, in theRussian Federation, alcohol was responsible for 19% of the premature mortality increase during the period1992–1994; however there are no such estimates for Ukraine. These trends, and the evidence that supports thecausal role of alcohol, are covered in more detail in Health in Europe 1997 (WHO Regional Office for Europe,1998). Mortality trends in Ukraine show the same pattern as the Commonwealth of Independent States andEur-B+C averages, with one noticeable distinction, which is the peak in mortality rate in 1995 rather than in1994. After 1998, mortality again increased: in males the death rate rose 8.3% until 2003, and in females it rose4.6%. The Health status 13 excess mortality in Ukraine in comparison with the Eur-B+C average has beenalmost stable since 1995, and in 2003 it was 5.6% in males and 3.4% in females.

According to the latest figures, the mortality rate for males in Ukraine is 5.9% higher than the Eur-B+Caverage rate, and the rate for females is 3.4% higher. Across age groups, the variation in the relative differencein mortality is rather small; however, in Ukraine, children below 15 years of age have a lower risk of death (bymore than 20%) than the Eur-B+C average risk for that age group. When compared with the Eur-A average

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death rates, excess mortality in Ukraine is present in all age groups, with the largest percentage in young men30–44 years old, who have mortality rates about five times higher then their peers in Eur-A countries.

Cancer

Cancer accounted for about 12% of the deaths in Ukraine, which is similar to the Eur-B+C average rate (13%)and less than half of the average Eur-A cancer rate (28%). In Ukraine, mortality from cancer decreased inrecent years in all age groups below 75 years old. There is a male–female difference in total cancer mortality:in males, total cancer mortality in Ukraine is at the average Eur-B+C level, and in females it has been lower foryears. However, there is excess mortality in younger age groups that gradually disappears in older age groups(the mortality rate for females aged 15–29 years is the highest in European countries and the rate for malesbelow 65 years is the fifth highest in Europe).

Respiratory diseases

In 2003, respiratory diseases accounted for 3.9% of all deaths in Ukraine. Male mortality rates for thesediseases declined rapidly until 1990, then again during the period 1995–2003 (by 32%), and approached theEur-B+C average rate; however, these rates are almost double the Eur-A average rates. Although this patternappears in older men (65 years and more) and although the rate in 2003 for this group is at the Eur-A and Eur-B+C average rates in males below 65 years old, the mortality rate has declined so clearly, and in 2003 it wasabout five times higher than the average Eur-A rate.

Digestive diseases

Mortality from diseases of the digestive system has increased in males and females in Ukraine. From thebeginning of 1990s, the male mortality rates have been above Eur-A average rates, and from 2000 on they havebeen at the level of the Eur-B+C average rates. The rates for females, however, have always been lower thanEur-B+C average rates, though they have been above Eur-A average rates since 2000. This pattern prevails inthe population below 65 years of age, where the rates and changes are quite similar to those of the Eur-B+Caverage rates. In the population aged 65 years and older, the mortalityrates show some decline and have always been below Eur-A and Eur-B+C average rates, being among thelowest in Europe: the rate for women is the fourth lowest. The increase in mortality rates in the population 25–64 years can be attributed to increasing mortality due to chronic liver diseases and cirrhosis

Ill-defined causes

Only 4.5% of deaths in Ukraine have a code from this group of ill-defined causes. In Ukraine, the mortality ratefor this group is close to the Eur-B+C average rate of 4.9%. Mortality rates for these causes soared dramaticallybetween 1988 and 1992 (in 1992 they were responsible for 11% of all deaths) – similar to the pattern inBelarus; between 1992 and 2000, however, the rates for Ukraine declined by 62% and have shown a ratherslow increase since then.

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External causes

Mortality from external causesdoubled between 1986 and 1995;then it declined some, followed byan increase, though below the 1995peak. The changes followed thoseof the Eur-B+C average rates, withthe rates at a higher than averagelevel in Ukrainian males and at theaverage level in Ukrainian females.In 2002, there was a striking drop(by half) in the mortality rate formales 75 years and older, and in2003 the rate was at the same level.Premature mortality is a particularproblem: for men 25–64 years old itis the third highest in Europe, andfor women it is the fifth highest.In Ukraine, the main subgroup of external causes of death, in both males and females, is accidental poisoning.In males, accidental poisoning did not surpass suicide until 2001. The mortality rate for accidental poisoningfor both sexes is the fourth highest in Europe, about 20% higher than the Eur-B+C average rate for males andabout 5% higher for females. Mortality from suicides grew between 1986 and 1996, its value almost doublingduring this period. The rate then levelled off, after which it showed some decline. About two thirds of thismortality can be attributed to alcohol poisoning, which is the second highest mortality rate due to alcohol inEuropean countries, with Belarus having the highest.

The second major subgroup of external causes of death, by sex, is suicides in males and events of undeterminedintent in females. Deaths from suicides increased in males, by about 75% between 1986 and 1996, and havedeclined since then; the corresponding mortality rate is less than 10% higher than the Eur-B+C average rate.For females, the mortality rate for events of undetermined intent soared (more than doubling) during 1991–1995; after a short decline, it again rose, in starts and stops and is now the third highest in Europe, about twiceas high as the Eur-B+C average rate. Also, in males, the mortalityrate for events of undetermined intent shows changes over time (almost tripling during 1991–1995) similar tothose for suicide; the mortality rate for males for events of undetermined intent is the third highest in Europe,twice as high as the Eur-B+C average rate. Such a high rate for events of undetermined intent indicatesinadequate coding of external causes of death and underreporting of some specific causes.

For Ukrainian females, in 2003, suicides and road traffic accidents are relevant external causes. Suicides infemales have declined since 1998 and are close to Eur-B+C average rate. Road traffic deaths, which have beenincreasing since 1999, have reached Eur-B+C average rates. Only the mortality rate for homicides is lower thanthe Eur-B+C average rate, and it has been declining since 1995. In females, other considerable subgroups ofexternal causes of death are homicides, which recently showed slowly declining rates, and accidental falls,which have a quite stable rate, below Eur-B+C and Eur-A average rates.

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Amnesty International

Resident Coordinator Office:Mr. Olivier Adam, Resident Coordinator of the United NationsMs. Olena Ovchynnikova, Executive Associate to UN ResidentCoordinator

Mr. Olivier Adam, UN Resident Coordinator in Ukraine since 1 August2009 Appointed by the UN Secretary General Ban Ki-moon, Mr. Adamacts as designated representative of the Secretary General. He leads theUN Country Team of thirteen UN agencies and programs.In his letter to President of Ukraine, the UN Secretary General expressedhis confidence that Mr. Adam’s appointment would further enhance theassistance that the organizations of the UN system are providing to theGovernment and civil society in Ukraine.The RC is the designated representatives of the United Nations Secretary-General for development operations in Ukraine. He chairs the UnitedNations Country Team (UNCT), a common board of all heads of UN

agencies working in the country.The RC leads and coordinates the United Nations' efforts to support the Government in creating and sustainingan enabling environment for the promotion of human rights, good governance and the improvement of thequality of life and the well-being of the people of Ukraine by reducing poverty, with a particular focus on themost vulnerable groups and regions.The UN Resident Coordinator Office has been established in line with the UN reform package unveiled by theSecretary - General at a special General Assembly session in September 1997. The reform packagehighlighted the need of establishment a new leadership culture and management structure at the UnitedNations, and strengthening of the UN Resident Coordinator System was defined as an important priority foraction.

With the increasing demands and complexity of Resident Coordinator’s functions and expectations of greatereffectiveness, the UN Resident Coordinator has been provided with the support staff that comprised aResident Coordinator Office (RCO). The purpose of the RCO in Ukraine is to coordinate the efforts of the UNCountry Team operating in Ukraine to ensure provision of efficient and effective assistance to accelerate thecountry’s steady progress towards social and economic development, observance of the world’s democraticstandards and facilitation of Ukraine’s-world integration process.The UN RCO in Ukraine consists of 4 units:

The Coordination Support Unit is aimed at strengthening the support of the planning, development,management, monitoring and evaluation of UN programs emanating from the United Nations DevelopmentAssistance Framework, as well as providing support, policy advice and expertise to the UN ResidentCoordinator and UN Country Team on the issues of human rights, civil society, aid coordination and resource

Figure 73 Mr. Oliver Adam, UN ResidentCoordinator in Ukraine

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Amnesty International

Resident Coordinator Office:Mr. Olivier Adam, Resident Coordinator of the United NationsMs. Olena Ovchynnikova, Executive Associate to UN ResidentCoordinator

Mr. Olivier Adam, UN Resident Coordinator in Ukraine since 1 August2009 Appointed by the UN Secretary General Ban Ki-moon, Mr. Adamacts as designated representative of the Secretary General. He leads theUN Country Team of thirteen UN agencies and programs.In his letter to President of Ukraine, the UN Secretary General expressedhis confidence that Mr. Adam’s appointment would further enhance theassistance that the organizations of the UN system are providing to theGovernment and civil society in Ukraine.The RC is the designated representatives of the United Nations Secretary-General for development operations in Ukraine. He chairs the UnitedNations Country Team (UNCT), a common board of all heads of UN

agencies working in the country.The RC leads and coordinates the United Nations' efforts to support the Government in creating and sustainingan enabling environment for the promotion of human rights, good governance and the improvement of thequality of life and the well-being of the people of Ukraine by reducing poverty, with a particular focus on themost vulnerable groups and regions.The UN Resident Coordinator Office has been established in line with the UN reform package unveiled by theSecretary - General at a special General Assembly session in September 1997. The reform packagehighlighted the need of establishment a new leadership culture and management structure at the UnitedNations, and strengthening of the UN Resident Coordinator System was defined as an important priority foraction.

With the increasing demands and complexity of Resident Coordinator’s functions and expectations of greatereffectiveness, the UN Resident Coordinator has been provided with the support staff that comprised aResident Coordinator Office (RCO). The purpose of the RCO in Ukraine is to coordinate the efforts of the UNCountry Team operating in Ukraine to ensure provision of efficient and effective assistance to accelerate thecountry’s steady progress towards social and economic development, observance of the world’s democraticstandards and facilitation of Ukraine’s-world integration process.The UN RCO in Ukraine consists of 4 units:

The Coordination Support Unit is aimed at strengthening the support of the planning, development,management, monitoring and evaluation of UN programs emanating from the United Nations DevelopmentAssistance Framework, as well as providing support, policy advice and expertise to the UN ResidentCoordinator and UN Country Team on the issues of human rights, civil society, aid coordination and resource

Figure 73 Mr. Oliver Adam, UN ResidentCoordinator in Ukraine

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Amnesty International

Resident Coordinator Office:Mr. Olivier Adam, Resident Coordinator of the United NationsMs. Olena Ovchynnikova, Executive Associate to UN ResidentCoordinator

Mr. Olivier Adam, UN Resident Coordinator in Ukraine since 1 August2009 Appointed by the UN Secretary General Ban Ki-moon, Mr. Adamacts as designated representative of the Secretary General. He leads theUN Country Team of thirteen UN agencies and programs.In his letter to President of Ukraine, the UN Secretary General expressedhis confidence that Mr. Adam’s appointment would further enhance theassistance that the organizations of the UN system are providing to theGovernment and civil society in Ukraine.The RC is the designated representatives of the United Nations Secretary-General for development operations in Ukraine. He chairs the UnitedNations Country Team (UNCT), a common board of all heads of UN

agencies working in the country.The RC leads and coordinates the United Nations' efforts to support the Government in creating and sustainingan enabling environment for the promotion of human rights, good governance and the improvement of thequality of life and the well-being of the people of Ukraine by reducing poverty, with a particular focus on themost vulnerable groups and regions.The UN Resident Coordinator Office has been established in line with the UN reform package unveiled by theSecretary - General at a special General Assembly session in September 1997. The reform packagehighlighted the need of establishment a new leadership culture and management structure at the UnitedNations, and strengthening of the UN Resident Coordinator System was defined as an important priority foraction.

With the increasing demands and complexity of Resident Coordinator’s functions and expectations of greatereffectiveness, the UN Resident Coordinator has been provided with the support staff that comprised aResident Coordinator Office (RCO). The purpose of the RCO in Ukraine is to coordinate the efforts of the UNCountry Team operating in Ukraine to ensure provision of efficient and effective assistance to accelerate thecountry’s steady progress towards social and economic development, observance of the world’s democraticstandards and facilitation of Ukraine’s-world integration process.The UN RCO in Ukraine consists of 4 units:

The Coordination Support Unit is aimed at strengthening the support of the planning, development,management, monitoring and evaluation of UN programs emanating from the United Nations DevelopmentAssistance Framework, as well as providing support, policy advice and expertise to the UN ResidentCoordinator and UN Country Team on the issues of human rights, civil society, aid coordination and resource

Figure 73 Mr. Oliver Adam, UN ResidentCoordinator in Ukraine

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mobilization. The Unit is responsible for ensuring coordination among the UN agencies in Ukraine throughorganization and technical support to regular UN Country Team meetings, organization and follow up to jointand collaborative activities, coordination of preparation and revision of the UN Country Team Annual Workplan and preparation of annual RC/UNCT Reports, support to joint programming processes and activities of theUN Theme Groups, etc.

Communication and Public Information Unit’s mission is to communicate effectively UN global and nationalpriority issues and to improve public outreach of the UN Country Team in Ukraine. The objectives of the unitinclude improving inter-agency cooperation in the field of communications and promoting "UN as one voice"in Ukraine as well as enhancement of e-outreach and strengthening of media relations, improvement of internalUNCT communications. Unit also assists in organization of public events on specific themes and observationof special UN and International Days’

The Private Public Partnership Unit aims at promoting corporate social responsibility of the private sector inUkraine in the framework of the UN Global Compact, and at fostering the development of partnerships withthe private sector for achieving the country`s specific Millennium Development Goals. The unit is alsoresponsible for strengthening the capacity of the Ukrainian Global Compact network, improvement of theregulatory policy environment for corporate social responsibility and private-public partnership, and brokeringpartnerships between the UN County Team and private sector.

The mission of the Security Unit is to ensure the safety and security of staff members of the United Nationssystem, their spouses and eligible dependants, and the property of the organizations.

Amnesty International in Ukraine is a global movement of more than 3 million supporters, members andactivists in more than 150 countries and territories who campaign to end grave abuses of human rights. Theorganization's vision is for every person to enjoy all the rights enshrined in the Universal Declaration of HumanRights and other international human rights standards.Amnesty International is independent of any government, political ideology, economic interest or religion.

Amnesty International Reports

Death penalty abolitionist for all crimesLife expectancy 68.6 yearsUnder-5 mortality (m/f) 18/13 per 1,000Adult literacy 99.7 per cent

The human rights situation in Ukraine can be described as uneven at best. A relatively new country,independent only since 1991, Ukraine has struggled socially, economically, and politically in its transformationto a democratic and free-market system. Torn between the East and the West, Ukraine's geographic locationfurther complicates its transformation. However, November of 2004 marked a potentially historictransformation in the human rights situation in Ukraine. In what is now commonly known as the "OrangeRevolution" Ukrainians took to the streets after refusing to accept a fraudulent election, which lead to anunprecedented revote and the democratic election of Viktor Yushchenko. Additionally, in recent years the rightof freedom of expression has also come under increased pressure from Ukrainian authorities. The abductionand possible killing of the investigative journalist, Georgiy Gongadze, is the most well-known of this abuse of

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press freedom. Finally Anti-Semitic and racist attacks have been reported throughout the country and thetrafficking of women for sexual exploitation remains a serious concern.There were reports of torture and otherill-treatment in prisons and police custody. Prisoners and criminal suspects received inadequate medical care.Human rights defenders were physically attacked and faced harassment from law enforcement officers.Refugees and asylum-seekers were threatened with forcible return and other human rights violations. Policediscriminated against ethnic minorities and peaceful demonstrators were detained and subjected to violence.

Torture and other ill-treatment

Allegations continued of torture and other ill-treatment in police custody. In March, the Human RightsDepartment within the Ministry of Internal Affairs, which had monitored police detention, was closed. It wasreplaced with a smaller division without a monitoring remit. Amnesty International is further concerned thatindividuals who have lodged complaints of torture or other ill-treatment have been subjected to reprisalsincluding ill-treatment and intimidation by police in efforts to dissuade them from pursuing their complaints.

On 1 July 2011, the European Court of Human Rights ruled that a group of prisoners had been subjected totorture and other ill-treatment when they were beaten in Zamkova Prison in Khmelnitskiy region in twoseparate incidents in 2001 and 2002. The beatings took place during a training programme for the RapidReaction Unit, a special group of prison guards called in to deal with unrest in prisons.

Access to legal defense

Amnesty International is concerned that persons suspected of crimes are frequently not permitted access to alawyer during questioning. The right to legal defense is set out in Ukrainian legislation, but AmnestyInternational is concerned that the law is not clear enough about when a person should be granted access to alawyer. Article 21 of the Criminal Procedural Code of Ukraine states that detainees have the right to legaldefense; it requires investigators,prosecutors and judges to make suspectsaware of this right before the firstinterrogation. The Law on the Policestates that detainees are entitled to alawyer from the moment of arrest.However, there is wide disagreement asto when Until May 2006 the Departmentfor the Enforcement of Punishments wasa separate and independent body notsubordinated to any ministry. It has nowbeen put under the authority of theMinistry of Justice. Criminal ProceduralCode, Article 21. Ensuring suspects,accused and those on trial the right todefense Suspects, the accused and thoseon trial have the right to legal defense.Those carrying out the investigation, the

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investigator, procurator, judges and court are obliged to explain to the suspect, accused and person on trial thathe has the right to legal defense and to write a report to this effect The Criminal Procedural Code listsexceptional circumstances when the presence of a lawyer is required such as for children, and disabled personsdeprived of their liberty, but otherwise access to a lawyer is expressly required only when specificallyrequested by the detainee.Also, Amnesty International is concerned about the lack of availability of legal aid throughout the country forpersons who cannot afford to hire their own counsel. Ukrainian legislation only provides for lawyers’associations to arrange legal services including legal aid and does not envisage the involvement of private legalpractices in the provision of legal services for detainees. Yet in the majority of regions in Ukraine there are nolawyers’ associations. This means that investigators arethemselves responsible for ensuring that detainees have the right to legal counsel, and there are no mechanismsfor safeguarding this right. In its recently adopted resolution the Parliamentary Assembly of the Council ofEurope (PACE) has also called on Ukraine to guarantee prompt access to lawyers and to ensure legal aid.

Overcrowding

In the letter to Amnesty International of 17 November 2005, the Ministry of Internal Affairs admitted thatovercrowding in facilities where people are held prior to trial is a problem and stated that it was takingmeasures to increase the use of alternative measures. It has prepared recommendations for investigatorsconcerning the use of Article 154 of the Criminal Procedural Code which refers to the use of bail deposits. TheHead of the Department of International Legal Cooperation of the Supreme Court informed AmnestyInternational that legal mechanisms for the use of alternative measures were beingdeveloped. In addition, some changes to the criminal procedure code of Ukraine concerning the use of non-custodial sentences were reportedly being submitted to the Ukrainian parliament.Amnesty International is concerned that until these measures are implemented, many people will continue tobe detained rather than being released on bail; and thus many will continue to be exposed to the risk of tortureand ill-treatment in ITTs and police stations. In some facilities they are also at risk of contractingcommunicable diseases.

Conditions in Detention

In the letter to Amnesty International of 17 November 2005, the Deputy Minister of Internal Affairs admittedthat conditions in ITTs were not in line with international standards: 13 per cent of pre-trial detention centerswere not equipped with water and sewage facilities, one in four had insufficient natural lighting and lackedindividual sleeping places, only one in five had an exercise yard and each detainee has only 2.5 square metersliving space. A program of reconstruction has begun and the government has allocated 30 million Hryvnya(4,840 million Euros) to refurbish and build new pre-trial detention centers. However the Ministry of Interiorinformed Amnesty International in their letter that this amount is inadequate. Amnesty International isconcerned that many detainees continue to be held in very poor conditions, which amounted to cruel andinhuman treatment.

Prosecutions of police officers

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Acts of torture or ill-treatment by police officers, when prosecuted, are prosecuted under two articles of theCriminal Code. Article 127 which criminalizes torture was added to the Ukrainian Criminal Code in 2001. InJanuary 2005 the law was amended so that it expressly criminalized such conduct when committed by stateofficials. Until these amendments were adopted, this provision of the law only criminalized torture by privateindividuals. The definition of torture in the article is now in line with the definition of torture in Article 1 of theConvention against Torture. Police officers can also beprosecuted for exceeding authority or official powers under Article 365 of the Criminal Code. However,despite these legal provisions there are problems within the criminal justice system which make it difficult forvictims to lodge complaints.

Deaths in custody

In January, the Deputy Head of the Department for the execution of sentences stated that health facilities inprisons were underfunded. Prisoners were not allowed out of prison for medical treatment outside the prisonsystem.

• Tamaz Kardava died in hospital on 7 April having been denied vital medical care. A Georgian citizenand a refugee from the conflict in Abkhazia, Tamaz Kardava was already suffering from Hepatitis Cwhen he was detained in Ukraine in August 2008. He was allegedly tortured in Shevchenkovskiydistrict police station in Kyiv to force him to confess to a burglary. Medical reports confirmed that hehad been badly beaten and raped with a police baton. For the last two months of his pre-trial detentionhe had been denied any specialized medical treatment for his condition, and his health worseneddramatically. On 30 March he spent six hours lying on the floor in the courtroom on a stretcher inShevchenkovskiy Court in Kyiv. The judge refused his lawyer’s request to transfer him immediately tohospital.

Human rights defenders

The work of human rights defenders and human rights NGOs was made more difficult as they facedobstruction in the courts and physical attacks. At least three human rights defenders were targeted in relation totheir legitimate human rights work.

• In May 2011, Andrei Fedosov, the chair of a mental disability rights organization, Uzer, was assaultedby unidentified men following threatening phone calls. Police refused to register his complaint and tookno action. In July, he was detained for a day in relation to a crime allegedly committed 10 years before,when he was 15 years old. On 20 September the charges against him were dropped as it was proved thathe was in a closed children’s hospital at the time and could not have committed the crime.

Refugees, asylum-seekers and migrants

Asylum-seekers in Ukraine continued to be at risk of arbitrary detention, racism and extortion at the hands ofthe police and return to countries where they would be at risk of serious human rights violations. An inadequateasylum system left them unprotected.

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Despite some positive measures which have been taken in the past two years aimed at preventing torture andother ill-treatment, Amnesty International considers that many of the concerns expressed by the Committeefollowing its examination of Ukraine’s fourth report in 2001 are still pressing and some of the Committee’srecommendations are yet to be implemented. In particular, there have been further deportations to Uzbekistanof members of the Uzbek opposition, who were at risk of torture; there continue to be allegations that police ill-treat and torture detainees with the aim of extracting confessions; the authorities fail to carry out prompt,impartial, independent and thorough investigations into allegations of torture and other ill-treatment; there is alack of clarity about when a detained person can exercise his right to access to a lawyer, and as a resultdetainees are deprived of their right to legal counsel; overcrowding and a high incidence of tuberculosis in pre-trial detention centers continues to be a problem. In January 2011, the EU-Ukraine Readmission Agreementcame into force for third country nationals. According to the agreement, EU states can return irregular migrantsto Ukraine providing they entered the EU via Ukraine. According to the International Organization forMigration, between January and July, 590 people were returned according to the terms of the ReadmissionAgreement. There were reports of migrants being beaten or otherwise ill-treated while in detention.Furthermore, although the Readmission Agreement is intended to apply to “illegal aliens”, asylum-seekerswere reportedly among those returned.

• At the end of the year four asylum-seekers from Uzbekistan – Umid Khamroev, Kosim Dadakhanov,Utkir Akramov and Zikrillo Kholikov – were in detention awaiting extradition to Uzbekistan. All fourwere wanted in Uzbekistan on charges including membership of an illegal religious or extremistorganization, dissemination of materials containing a threat to public security and order, and attempts tooverthrow the constitutional order. They would risk torture and other ill-treatment if returned. In July,the European Court of Human Rights made a formal request to the government not to return theasylum-seekers to Uzbekistan until their case had been considered, but withdrew this request uponassurances that the men would not be returned until they had exhausted all stages of the asylum process.

Racism

Police continued to apprehend and detain people because of the colour of their skin.

• On 29 January 2011, three plain-clothes police officers approached two Somali men, Ismail AbdiAhmed and Ibrahim Muhammad Abdi, outside their apartment building, and asked them to producetheir documents. The police officers then reportedly forced their way into the apartment, searched itwithout a search warrant, and punched one of the occupants. The police officers removed US$250 fromthe pocket of a pair of jeans belonging to Ibrahim Muhammad Abdi. Throughout the search, the policeofficers called the Somali men “pirates”. On 13 February, two of the same police officers returned tothe apartment. They told the Somali men living there that they wanted to film them retracting the publicstatements they had made about the search. The Somalis refused to open the door and, after severalhours, the officers left.

Refugees, asylum-seekers and migrants

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Asylum-seekers in Ukraine continued to be at risk of arbitrary detention, racism and extortion at the hands ofthe police and return to countries where they would be at risk of serious human rights violations. An inadequateasylum system left them unprotected. In January, the EU-Ukraine Readmission Agreement came into force forthird country nationals. According to the agreement, EU states can return irregular migrants to Ukraineproviding they entered the EU via Ukraine. According to the International Organization for Migration, betweenJanuary and July, 590 people were returned according to the terms of the Readmission Agreement. There werereports of migrants being beaten or otherwise ill-treated while indetention. Furthermore, although the Readmission Agreement isintended to apply to “illegal aliens”, asylum-seekers were reportedlyamong those returned.

• At the end of the year four asylum-seekers from Uzbekistan– Umid Khamroev, Kosim Dadakhanov, Utkir Akramov andZikrillo Kholikov – were in detention awaiting extradition toUzbekistan. All four were wanted in Uzbekistan on chargesincluding membership of an illegal religious or extremistorganization, dissemination of materials containing a threatto public security and order, and attempts to overthrow theconstitutional order. They would risk torture and other ill-treatment if returned. In July, the European Court of HumanRights made a formal request to the government not to return the asylum-seekers to Uzbekistan untiltheir case had been considered, but withdrew this request upon assurances that the men would not bereturned until they had exhausted all stages of the asylum process.

Freedom of assembly

• In May and June, 2011 peaceful demonstrators protesting the illegal felling of trees in Kharkiv werebeaten by members of the “Municipal Guard” (commercial security guards employed by the CityCouncil. Some were later refused medical treatment, including Liubov Melnik who was hospitalizedafter being beaten by “Municipal Guards”. She was reportedly asked by Municipal Guard personnel todeny that she had been beaten by the guards, but had injured herself by falling. The hospital theninformed her that there were no more beds and discharged her and, subsequently, three Kharkivhospitals refused to treat her. On 2 June, demonstrators positioned in the trees were injured whenloggers started to cut them down.

Demonstrators described how the police stood by while the guards beat protesters and journalists withoutintervening. On 28 May, between 10 and 12 people were detained for approximately eight hours by the policebefore being brought before a judge. Andrei Yevarnitsky and Denis Chernega were sentenced to 15 days’detention on 9 June for “malicious refusal to obey a law enforcement officer”, although video footage of theevents shows the demonstrators leaving with police officers peaceful.

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United Nation Development ProgramUNDP is the UN's global development network, advocating for change andconnecting countries to knowledge, experience and resources to helppeople build a better life. We are on the ground in 166 countries, workingwith them on their own solutions to global and national developmentchallenges. As they develop local capacity, they draw on the people ofUNDP and our wide range of partners. UNDP helps developing countriesattract and use aid effectively. In all our activities, we encourage theprotection of human rights and the empowerment of women.

In Ukraine, four development focus areas define the structure of UNDP’sassistance activities. These include democratic governance; prosperity,poverty reduction and MDGs; local development and human security; andenergy and environment. In each of these thematic areas, UNDP tries toensure balance between policy and advocacy work, capacity buildingactivities and pilot projects. UNDP established its presence in Ukraine in1993.

Joint efforts of UNDP and the Ukrainian Government and people weredirected to introduce and promote the main principles of democraticgovernance at all levels, through support of administrative reform andencouraging civil society to participate in the decision making process.

Programmes on small and medium enterprises and development of social assistance projects contributed to thecountry's economic development. UNDP also advocates the concept of sustainable development as an essentialpolicy, and emphasizes the importance of developing a network of NGOs in environmental areas.

After initially experiencing great difficulties in transition, 2001 was a turning point in Ukraine's history as anindependent nation, after positive economic change in Ukraine in recent years. The Second CountryCooperation Framework, signed cooperatively by UNDP and the Government of Ukraine at the beginning of2002, is focusing special attention on the issue of human development in Ukraine.

UNDP in Ukraine continues making the difference by supporting the Government to achieve Europeanstandards in policies, institutional capacity and practices through transformation of the relationship between thestate and citizens, effective decentralization, vibrant private sector in a market economy, empowerment ofcitizens to enjoy equal access to quality services, fulfillment of their human rights and prosperity.

UNDP pursues this goal in a common framework and programmatic synergy with UN agencies, donors andstakeholders, using flexible and modular deployment of world class international and national expertise andknowledge to harness global best practice, promote gender equality, build capacities and establish networks fora sustainable knowledge-based society fully integrated into the global economy.

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United Nation Development ProgramUNDP is the UN's global development network, advocating for change andconnecting countries to knowledge, experience and resources to helppeople build a better life. We are on the ground in 166 countries, workingwith them on their own solutions to global and national developmentchallenges. As they develop local capacity, they draw on the people ofUNDP and our wide range of partners. UNDP helps developing countriesattract and use aid effectively. In all our activities, we encourage theprotection of human rights and the empowerment of women.

In Ukraine, four development focus areas define the structure of UNDP’sassistance activities. These include democratic governance; prosperity,poverty reduction and MDGs; local development and human security; andenergy and environment. In each of these thematic areas, UNDP tries toensure balance between policy and advocacy work, capacity buildingactivities and pilot projects. UNDP established its presence in Ukraine in1993.

Joint efforts of UNDP and the Ukrainian Government and people weredirected to introduce and promote the main principles of democraticgovernance at all levels, through support of administrative reform andencouraging civil society to participate in the decision making process.

Programmes on small and medium enterprises and development of social assistance projects contributed to thecountry's economic development. UNDP also advocates the concept of sustainable development as an essentialpolicy, and emphasizes the importance of developing a network of NGOs in environmental areas.

After initially experiencing great difficulties in transition, 2001 was a turning point in Ukraine's history as anindependent nation, after positive economic change in Ukraine in recent years. The Second CountryCooperation Framework, signed cooperatively by UNDP and the Government of Ukraine at the beginning of2002, is focusing special attention on the issue of human development in Ukraine.

UNDP in Ukraine continues making the difference by supporting the Government to achieve Europeanstandards in policies, institutional capacity and practices through transformation of the relationship between thestate and citizens, effective decentralization, vibrant private sector in a market economy, empowerment ofcitizens to enjoy equal access to quality services, fulfillment of their human rights and prosperity.

UNDP pursues this goal in a common framework and programmatic synergy with UN agencies, donors andstakeholders, using flexible and modular deployment of world class international and national expertise andknowledge to harness global best practice, promote gender equality, build capacities and establish networks fora sustainable knowledge-based society fully integrated into the global economy.

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United Nation Development ProgramUNDP is the UN's global development network, advocating for change andconnecting countries to knowledge, experience and resources to helppeople build a better life. We are on the ground in 166 countries, workingwith them on their own solutions to global and national developmentchallenges. As they develop local capacity, they draw on the people ofUNDP and our wide range of partners. UNDP helps developing countriesattract and use aid effectively. In all our activities, we encourage theprotection of human rights and the empowerment of women.

In Ukraine, four development focus areas define the structure of UNDP’sassistance activities. These include democratic governance; prosperity,poverty reduction and MDGs; local development and human security; andenergy and environment. In each of these thematic areas, UNDP tries toensure balance between policy and advocacy work, capacity buildingactivities and pilot projects. UNDP established its presence in Ukraine in1993.

Joint efforts of UNDP and the Ukrainian Government and people weredirected to introduce and promote the main principles of democraticgovernance at all levels, through support of administrative reform andencouraging civil society to participate in the decision making process.

Programmes on small and medium enterprises and development of social assistance projects contributed to thecountry's economic development. UNDP also advocates the concept of sustainable development as an essentialpolicy, and emphasizes the importance of developing a network of NGOs in environmental areas.

After initially experiencing great difficulties in transition, 2001 was a turning point in Ukraine's history as anindependent nation, after positive economic change in Ukraine in recent years. The Second CountryCooperation Framework, signed cooperatively by UNDP and the Government of Ukraine at the beginning of2002, is focusing special attention on the issue of human development in Ukraine.

UNDP in Ukraine continues making the difference by supporting the Government to achieve Europeanstandards in policies, institutional capacity and practices through transformation of the relationship between thestate and citizens, effective decentralization, vibrant private sector in a market economy, empowerment ofcitizens to enjoy equal access to quality services, fulfillment of their human rights and prosperity.

UNDP pursues this goal in a common framework and programmatic synergy with UN agencies, donors andstakeholders, using flexible and modular deployment of world class international and national expertise andknowledge to harness global best practice, promote gender equality, build capacities and establish networks fora sustainable knowledge-based society fully integrated into the global economy.

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In June 2005 the United Nations system in Ukraine andthe Government of Ukraine signed the United NationsDevelopment Assistance Framework (UNDAF)elaborated on the basis of a recent Common CountryAssessment. Following this common strategicframework, UN agencies have agreed to coordinatetheir programmes/projects and elaborate joint initiativesand plans with the Government of Ukraine for theperiod of 2006-2010. As a result, UNDP along withother UN agencies operating in Ukraine focuses itsprogramming on four major areas for future action: (1)institutional reforms that enhance outreach to enable allpeople to fulfil their human rights; (2) civil societyempowerment to enable all people to access servicesand enjoy their rights; (3) health care and healthservices with a special focus on raising quality andaccessibility; (4) prosperity through balanceddevelopment and entrepreneurship.

In August 2006 Ukrainian Government and UNDPsigned the Country Programme Action Plan 2006-10.This Plan is a collective, coherent and integratedresponse to the national development priorities. Thedocument also furthers our mutual agreement andcooperation, taking into account the realization of theMillennium Declaration, Millennium DevelopmentGoals and other UN conventions to which theGovernment of Ukraine and UNDP are committed. Itsets up a number of development actions to improveliving conditions at the country level.Having celebratedthe seventeenth anniversary of independence in 2008,Ukraine appeared as a country with a greater sense offreedom and a stronger feeling of national identity.Among the countries of the former Soviet Union,Ukraine firmly stands out in its commitment toEuropean values, pluralism, freedom of speech andvigour of various non-governmental actors. However,this progress remains delicate and needs to beconsolidated. In August 1996 the Government ofUkraine and the UN Development Programme signed anew Country Programme Action Plan for 2006-2010.According to this Plan, UNDP works closely with theleadership of Ukraine at the central, regional and locallevel to advance democracy, promote economic growthand improve the living standards of Ukrainians. Guided

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by the Millennium Declaration and human rights-based approach to programming UNDP undertakes efforts toempower people to address current challenges, starting with village communities, schools and localgovernment offices, all the way up to the central level institutions of the state. Since 2005 UNDP's activities inUkraine have grown both in the scope of activities as well as in financial terms. Several new initiatives werelaunched alongside a number of ongoing projects that started before 2005. Currently, UNDP has 19 ongoingprojects in Ukraine. From about USD 9 million portfolio in 2005 it grew to over USD 23 million delivered in2006 and got to over USD 26 million in 2007.

Four development focus areas defining the structure of UNDP-led actions include:

• Democratic governance and access to justice: Corruption, unclear division of constitutional powersand responsibilities, the lack of transparency, accountability as well as poor quality of public services -all these challenges were brought into focus during the "Orange Revolution". Addressing these issuesremains among the top priorities of Ukraine's political leadership. Responding to this challenge, UNDPsupported public administration reforms, anti-corruption and accountability initiatives; justice andhuman rights protection; decentralization and development of local governance as well as genderequality. A large part of our management resources was devoted to implementation of EU-fundedprojects in the area of border management.

• Prosperity, poverty reduction and MDGs: UNDP provided Ukraine's leaders with continuous policysupport in designing and implementing economic reforms. It offers its assistance in the area ofpromoting economic growth, furthering market reforms and advancing WTO accession processes. TheUNDP country office in Ukraine helped to build national capacities and delivered expert advice ineconomic and social policy reforms. With UNDP leading global MDG advocacy efforts, the UNDPcountry office in Ukraine actively works to help Ukrainian partners anchor their national developmentstrategies in MDGs and to strengthen capacity to ensure their policies and budgets match the demandsof achieving the goals. Moreover, UNDP experts apply area-based development approaches andstrengthen HIV/AIDS prevention efforts.

• Local development and human security: With strong support from the donor community, UNDPmanaged to significantly expand the activities of the existing area-based development programmes,namely Chornobyl Recovery and Development Programme, Crimea Integration and DevelopmentProgramme and Municipal Governance and Sustainable Development Programme. While each of theprogrammes addresses the specific needs within a certain area, all the programmes rely on communitymobilization as a primary method to promote local development. This approach puts a strong emphasison: community empowerment and regeneration, building the spirit of activism and social inclusion. Asa result, it contributes to the improvement of self-governance by encouraging a dialogue between localauthorities and communities, thus enabling joint prioritization and response to common developmentneeds. The ABD methodology proved to be equally effective in both urban and rural areas formobilizing the communities to improve local infrastructure, generating self-employment and promotingentrepreneurship, and developing social services (particularly educational and medical).In total, over2005-2006 alone 538 communities were assisted, 419 community-based projects were implemented,and 11 municipalities joined partnership with UNDP.

• Energy and environment: UNDP cooperates with the national and local levels of government,private sector and civil society to promote sustainable development policies and ensure their practicalapplication. Moreover, UNDP supports the Government of Ukraine in meeting its internationalenvironmental commitments, particularly on fighting climate change and preserving biodiversity across

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Ukraine. We promote participatory approaches in environmental governance at the municipal level andassist the Government in addressing one of its key challenges - energy efficiency.

In each of these thematic areas, UNDP tries to ensure balance between policy and advocacy work, capacitybuilding activities and pilot projects. UNDP's flagship initiatives and achievements in the last two years includethe creation of the Blue Ribbon Commission for Ukraine which has to date released three reports with policyrecommendations; our Gender Programme; assistance to Chornobyl-affected regions and significant expansionof our programme in Crimea; and the very successful Municipal Governance Project the results of which, andthe interest of local partners, have exceeded our expectations. At present, UNDP-led local developmentprogrammes are implemented in 11 regions (oblasts), 39 districts (rayons), including all 14 districts of theAutonomous Republic of Crimea and 17 districts in Chornobyl affected areas, as well as 22 municipalitiesacross Ukraine. A major expansion of community-based assistance was launched in the beginning of 2008 withthe financial assistance from the EU within the "Community-based Approach to Local Development" Project.Moreover, UNDP in Ukraine conducts activities on youth, drug policy and HIV/AIDS, coordinates theMillennium Development Goals team within the Ministry of Economy of Ukraine, supports donorcoordination, and offers grants to human rights organizations. Last but not least, we are very pleased to havecontributed to establishing many partnerships in the sphere of energy efficiency, with the Esco-Rivne projectbeing a well known success story and a model for replication in other municipalities. The success of UNDPprogrammes is a result of the commitment and excellent cooperation of Ukrainian counterparts andbeneficiaries of UNDP-led projects. In delivering development assistance in Ukraine, we draw on the globalexperience and knowledge of our global network of experts and country offices. We also rely on partnershipswith bilateral and multilateral donors to implement UNDP projects.

UN Country Team

UNICEF United Nations Children’s FundUNHCR United Nations High Commisioner ForRefugeesUNFPA United Nations Population FundUNAIDS Joint United Nations Programme onHIV/AIDSWHO World Health Organization

UNODC United Nations Office on Drugs andCrimeIAEA International Atomic Energy AgencyILO International Labour OrganisationIOM International Organization for MigrationIFC International Finance CorporationIMF International Monetary FundWB World Ban

Operations

Headed by the Deputy Country Director for Operations, the Operations section of Ukraine Country Officeconsists of five units:

• The Finance Unit is responsible for planning, management, effective delivery of financial services,oversight, financial recording/reporting, and implementation of effective internal control on financialmatters. The Human Resources Unit handles tasks related to management of contracts, performance andtalent management, benefits and entitlements and succession planning. The Procurement Unit isresponsible for procuring goods and services, managing bids and tenders, and maintaining an up-to-datedatabase of suppliers. The General Services Unit supports the overall smooth running of the Countryoffice and includes registry, protocol and transport.

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• Procurement of goods and services This functions entails sourcing suppliers using UNDP'sprocedures, i.e. EOI (Expression of Interest), ITB (Interest to Bid), RFP (Request for Proposal), RFQ(Request for Quotation). This is followed by creating supplier profile in the system and loading them asapproved vendors. The vendor database is also managed continuously by the procurement unit.

• Registry and Information Management Handles all received mail and packages mail fordispatch/sending through a pouch system, as this function services not only UNDP but all UNAgencies, updates electronic documentation site, and manages physical filing in accordance with theGlobal Filing list. Identifies files ready for archiving and move them appropriately.

• Protocol The Protocol unit deals with accreditation of internationally recruited staff members by theNational Department of Foreign Affairs, in accordance with the bestowed to them by the department.This includes: Application for the diplomatic identity card Application for the temporary residencepermit (including accompanying family members and domestic helpers). Permission topurchase/import/export motor vehicles. Permission to register diplomatic vehicles. Application for Taxrefunds and rebates. The function also processes the deregistration of all accredited officials and theirproperty when they leave the country, assigned to another country.

• ICT The Information Communications and Technology team provides support to managementinformation systems within the UNDP country office and sister agencies.

• Transport Official vehicle services with dedicated drivers

UNDP Ukraine Programs

Prosperity, Poverty Reduction and MDGs

1Governance of HIV/AIDS in Ukraine Ongoing

2Millennium Development Goals Project Ongoing

3Social Inclusion of People with Disabilities through Access to Employment Ongoing

4Agricultural Policy for Human Development Closed

5Belarus, Ukraine, Moldova action against drugs Closed

6Blue Ribbon Commission Analytical and Advisory Centre Closed

7HIV/STI Prevention among Uniformed Services in Ukraine Closed

8Strengthening Educational Capacity of Kyiv National Taras Shevchenko University Closed

9Transfer of IT Technology to Ukraine Closed

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Democratic Governance

10Civil Society Development Programme Ongoing

11Equal Opportunities and Women’s Rights in Ukraine Ongoing

12Legal Empowerment Project: Fostering Full Enjoyment of Land and Property Rights Ongoing

13The European Union Border Assistance Mission (EUBAM) Ongoing

14Consumer Society and Citizen Networks Closed

15Establishment of JI Secretariat in Ukraine Closed

16Integrity in Action: Governance Programme Closed

17Marketing Democracy Project Closed

18Support to Civil Service Reform in Ukraine Closed

Local Development and Human Security

19Community Based Approach to Local Development Ongoing

20Crimean Regional Development Agency Support Project Ongoing

21Human Security Monitoring and Public Dialogue for Socio-Economic Development and ConflictPrevention in Crimea

Ongoing

22Municipal Governance and Sustainable Development Programme Ongoing

23UNDP Crimea Integration and Development Programme Ongoing

24Chornobyl Recovery and Development Programme Closed

25Human Security for Ukrainian Youth Closed

26Youth Social Inclusion for Civic Engagement in Ukraine Closed

Energy and Environment

27GEF Small Grants Programme in Ukraine Ongoing

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28Removing Barriers to Greenhouse Gas Emissions Mitigation through Energy Efficiency in theDistrict Heating System, Phase 2

Ongoing

29Sustainable Development Programme of Lugansk Region Ongoing

30Transforming the Market for Efficient Lighting Ongoing

31UNDP - GEF Dnipro Basin Environment Programme 2nd Stage: 'Implementation of the DniproBasin Strategic Action Programme for the reduction of persistent toxics pollution'

Ongoing

32UNDP/GEF Strengthening governance and financial sustainability of the national protected areasystem in Ukraine

Ongoing

33Conserving globally significant biodiversity and mitigation/reducing environmental risk inUkraine’s Carpathian region

Closed

34Energy Efficiency in Ukraine’s Educational Sector Closed

35National Capacity Self-Assessment for Global Environment Management in Ukraine Closed

36UNDP-GEF Dnipro Basin Environment Programme - PDF B Stage Closed

Figure 39 UNDP Ukraine

About MDGs

In September 2000, the largest-ever gathering of world leaders ushered in the new millennium by adopting theMillennium Declaration. Ukraine also took the responsibility of reaching the Millennium Development Goalstill 2015. The global MDGs were adapted to the Ukrainian context taking into consideration the particularitiesof the country`s development.

The global MDGs were adapted to the Ukrainian context taking into consideration the particularities of thecountry`s development. They were translated into 7 priority areas and 15 specific long-term targets.

Goal 1: Reduce poverty

Target 1.A: Eradicate poverty according to the criterion of US $ 5 (PPP) per day by 2015

Target 1.B: Decrease share of poor population (according to the national criterion of poverty 4) to 25% byreducing the number of poor among children and employed people

Target 1.C: Decrease by 10 times by 2015 the number of people whose daily consumption is below the actualsubsistence minimum

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Goal 2: Increase access to quality life-long education

Target 2.A: Increase enrolment rates in education

Target 2.B: Raise the quality of education

Goal 6: Ensure gender equality

Target 3.A: Ensure gender representativeness at the level of no less than 30–70% in representative bodies andhigh-level executive authorities

Target 3.B: Halve the gap in incomes between women and men

Goal 4: Reduce child mortality

Target 4. A: Decrease the mortality rate among children up to 5 years of age by one-fourth

Goal 5: Improve maternal health

Target 8: Reduce maternal mortality by at least 17%Target 9: Reduce the mortality rate of children under 5 years by at least 17%

Goal 6: Reduce and slow down the spread of HIV/AIDS and TB

Target 10: Reduce the rate of the spread of HIV/AIDS by 13%Target 11: Reduce the number of TB cases by 42%

Goal 7: Ensure sustainable environmental development

Target 7.A: Increase by 2015 share of the population with access to centralized water supply, inter alia 90% ofthe urban population and 30% of the rural populationTarget 7.B: Stabilize by 2020 greenhouse gas emissions at 20% below 1990 levels

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Target 7.C: Stabilize pollution of water reservoirs by 2015. Stabilize at the level of 8,500 million tonnes peryear the volume of sewage disposal to surface water reservoirs, million cubic meters per yearTarget 7.D: Increase forest cover of the territory of Ukraine to 16.1% and area of nature reserve territory by2015 Enhance the network of nature reserves, biosphere reserves and national natural parks to 3.5% of theoverall territory of Ukraine and to 9.0% of the overall area of territories and objects of the natural reserve fund

In Ukraine, following the advocacy and capacity-building efforts of the UNDP team, the MillenniumDevelopment Goals (MDGs) were nationalized in 2003 and are now used to track progress in governmentpolicies and programmes.

This year marks a decade of progress towards the MDGs. The results have been uneven across all Goals andwithin regions and nations. Ukraine has reduced absolute poverty and has made progress in achieving thetargets set for education, maternal health and child mortality. At the same time, the relative poverty rateremains unchanged and reducing gender inequality continues to be an area where progress needs to beachieved. While meeting the environmental Goal is proving to be a challenge, the rapid growth of HIVinfections, the increase in AIDS-related mortality and the spread of tuberculosis also remain critical areas inreaching the MDGs.

While it is clear that these are challenging times for all countries, and in particular for Ukraine, achieving theMDGs is possible, given an adequate level of commitment, efforts and resources. Creating effective nationalpolicies and developing capacities and ownership are essential to further empowering the people in Ukraineand improving their standards of living.

There is a range of tried and tested policies that can help Ukraine reach its commitments. These policiesinclude fostering inclusive economic growth, ensuring equal access to quality health and education andscaling up HIV/AIDS and tuberculosis interventions. Improving social protection targeting, increasingemployment opportunities, fostering climate change mitigation and focusing on biodiversity conservationmust continue to be regarded as absolute priorities.

MDGs progress in Ukraine

Goal 1: Reduce povertyOut of 8 Global Millennium Development Goals, Poverty Reduction is by far the number one goal and priorityfor Ukraine. The share of population whose daily consumption is below 5,0 USD, measured as average PPP,decreased to 3,8% in 2008 (9% in 2005). The official data indicates that in 2010 26,4% (in 2005 – 27,1%, in2009 27.0%) of Ukrainian population was below the poverty line (using the official definition of poverty lineas 75% of median daily expenditures per adult). Based on the national criterion, from year to year, the povertylevel among households with children traditionally exceeds that among the households without children by 1.7-2.0: 33.1% against 19.7% in 2008. The direst situation among families without children is traditionallyobserved in households where all members are older than 75. The highest poverty level for the period from2000 is registered within these groups in 2008, at 29 percent. This shows a direct decrease in the purchasingpower of the minimum pension payment, since people from the older age groups cannot earn an income

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additional to their pension income. Rural poverty increases from year to year – by now, a huge gap existsbetween urban and rural areas. Under stable conditions, some decrease in poverty indicators at the nationallevel based on the relative criterion is observed in cities compared with in rural areas. The poverty level in ruralareas was almost twice that of urban areas (38.2 percent against 21.5 percent) according to 2008 data. The highpoverty level among the employed population is caused by problems in the labour market, such as its inabilityto ensure decent work conditions and acceptable wages, and also by maintenance of a large number of low-productivity and marginal working posts. The high share of expenditure on foodstuffs within the structure ofhousehold expenditures is one of the basic features of the low level of living standards and the significantincidence of poverty among the Ukrainian population. One-third of the country’s population (according to 2008data) spends around 60 percent of their budget on foodstuffs. In addition to the monetary dimension of poverty,Ukraine is characterized by a significant degree of deprivation, or poverty of living conditions. According tothe survey conducted by the State Statistics Committee of Ukraine in October 2007, 28.6 percent of thepopulation suffer deprivations simultaneously in four or more dimensions, including: improper livingconditions; limited availability of social services; lack of property; shortcomings in health care; impossibility tohave a proper rest; etc. Rural inhabitants experience deprivations related to poor infrastructural developmentmore strongly than urban inhabitants. Every second rural household suffers from inadequate access toemergency medical assistance and other public services, and every third from the lack of a health careinstitution close to their place of residence and regular transport.

Goal 2: Increase access to quality life-long educationProviding life-long education in Ukraine requires coordinated actions to improve the educational system bothqualitatively and quantitatively to correspond to today’s needs. The main problems in adapting the educationalsystem to the current situation are: (1) decrease in access to and lack of quality of education to meet currentneeds; (2) non-compliance of the education system with the needs of the labour market and discrepancybetween the training of specialists and employers’ demands; (3) inefficient state financing mechanisms, whilebudget expenditures on education are constantly growing; and (4) overly centralized administration. It isnecessary to improve the efficiency of funds, which are currently spent mostly on the maintenance ofeducational institutions and not on improving educational outcomes. Education is a fundamental sector for thetransition to an innovative model of economic development so educational system should be reformed toensure a new quality of education, especially of higher education.

Goal 3: Ensure gender equalityOn 8th September the Verhovna Rada adopted the law on “Equal Rights for Women and Men and Realizationof Equal Opportunities”. The number of unemployed women is higher then of that of men; the ratio of averagewages of women as a percentage of that of men in 2009 was at the level of 77,2%. Problems of genderinequality in Ukrainian society are: high levels of employment and educational and professional training ofwomen are accompanied by insignificant representation of women in decision making. Women are

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underrepresented in political life, higher levels of public administration and management of economicorganizations. There are high levels of professional gender segregation, i.e. concentration of women and men inpositions of different levels and in different spheres of economic activity. And there is a significant gender gapin the population’s income level, as well as feminization of poverty. Ukraine’s unfavourable position on thisindicator is determined by representation of women in the Parliament: during the entire period sinceindependence, their share among Members has not exceeded 8 percent and, during 2002–2006, it evendecreased to 5 percent. At the same time, women occupy on average around 30 percent of parliamentary seatsin the EU. Since wages are the major source of income for the population, the gender gap in this field leads toan excessive risk of the feminization of poverty, since women dominate in the vulnerable categories of theUkrainian population (one-parent families with children and the elderly living alone). Although data on theintra-family distribution of incomes disaggregated by gender are almost inaccessible, since the household is thefocus of research in the national statistics system, analysis of family incomes depending on gender of thehousehold head identifies some gender differences, which grow in single-person households. In particular,from a gender point of view, women of retirement age living alone experience the highest risk of poverty inUkraine. Problems of unequal opportunities for women and men in Ukraine are not limited to socio-politicallife, the labour market and income levels. Numerous gender inconsistencies are present within the socio-demographic sphere and are related to the health and life expectancy of the population, family legalrelationships and issues of family violence, labour migration, including illegal migration, and also humantrafficking. There is a large gender gap of 12 years in terms of average life expectancy of the population(average life expectancy at birth is 74 years for women against 62 years for men), which remains a significantindication of inequality. The major component of this gap is made up of losses of men at the most productiveage, that is, the extremely high mortality rate among men of working age. In particular, according todemographic calculations, as of 2008, the probability of not living until 60 years of age was 39 percent for boysof 16 years of age against 14.5 percent for girls of the same age. External reasons play a significant role in this‘male’ mortality, which may be eliminated with an improvement in lifestyle.

Goal 4: Reduce child mortalityA decrease in infant mortality was observed in 1995–2009 (except for in 2005 and 2007): from 14.7 per 1,000live births in 1995 to 9.4 per 1,000 live births in 2009. Ukraine started to apply new standards for assessing thecriteria for the perinatal period and live and stillbirths on 1 January 2007. The infant mortality indicatordecreased in 2008, and in 2009 it amounted to 9.4 percent. Today, more than half of infant deaths are caused byspecific conditions emerging during perinatal life. When adding these causes of death to overall congenitaldevelopment defects, the share becomes three-fourths of the overall number of deaths of children of up to oneyear of age. Infant mortality is a determining factor in Ukraine in the death rate of children of up to five yearsof age. The probability of dying decreases sharply when a child reaches one year of age. The major reason fordifferences between Ukraine and developed European countries with respect to mortality of children of up tofive years of age owes to external reasons, i.e. those that can be prevented.

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Goal 5: Improve maternal health

A decrease in the maternal mortality level has been observed in Ukraine, from 24.7 per 100,000 live births in2000 to 15.5 per 100,000 live births in 2008. However, a comparison of values on the indicator throughout2000–2008 is impossible, since from 2005 Ukraine has been coding mortality data according to theInternational Statistical Classification of Diseases, Tenth Revision. Indicators calculated before and after thisare not comparable. In general, by assessing monitoring data, conclusions can be made on progress towards thisGoal. Trends on global indicators in relation to achieving this Goal in Ukraine are fully satisfactory. Almost alldeliveries in the country (99 percent) occur in health care institutions with qualified staff. Contraception hasalso spread: according to data from the Medical and Demographic Survey of the Ukrainian Population of 2007,two thirds (67 percent) of married women use contraception. Compared with the same survey in 1999, the levelof coverage of contraception has remained almost unchanged, but a positive trend has occurred – there isincreased usage of contemporary methods rather than traditional ones. A relatively low birth rate amongteenagers is observed, at around two cases per 10,000 girls of up to 14 years of age inclusively, and slightlymore than 13 cases per 1,000 of girls of 15–17 years of age inclusively. Almost all mothers are provided withpre-delivery care by qualified medical workers, with an insignificant difference observed between urban andrural areas.

Goal 6: Reduce and slow down the spread of HIV/AIDS and TBHIV /AIDS and tuberculosis are among the most complex socio-political and medical problems globally. Thescale of the HIV epidemic continues to grow in Ukraine. From 1987 to 1 January 2010, 161,000 cases of HIVinfection were registered. The highest number of new HIV infection cases for the entire period was recorded in2009 – 19,840; 31,241 people have been diagnosed with AIDS since the beginning of the epidemic and 17,791individuals have died. According to the State Statistics Committee, 22,824 people died in 2005–2009 fromdiseases caused by HIV. The estimated prevalence of HIV infection among the adult population of Ukraine isone of the highest in Europe, at 1.33 percent in 2010, or 360,000 adults aged 15–49. According to UNAIDSand WHO criteria, Ukraine’s HIV epidemic is classified as a concentrated epidemic. The use of injection drugsremains one of the main transmissions channels.Scaling up antiretroviral therapy will lead to an increase in the survival rate resulting from a decrease in AIDSmorbidity and mortality levels in the future and, accordingly, to an increase in the number of people living withHIV/AIDS. HIV prevalence among adults of 15 years of age and older will continue to grow, with a forecastdecrease in the number of new HIV infections and a stabilization in the number of people dying as a result ofAIDS.

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2010 2013 2015Total number of people living with HIV (adults from 15 yearsof age)

360,000 376 ,000 377,000

HIV infection prevalence (adults aged 15–49, %) 1.33 1.41 1.43

Estimated number of new HIV infections 32,000 27,000 23 ,000

Estimated number of deaths owing to AIDS 21 ,000 22,000 22,000

Figure 74 Evaluation of the HIV/AIDS Situation in Ukraine as of the End of 2008 and Forecast Indicators for 2015

Source: Developed with the participation of the Ukrainian Centre for AIDS Prevention of the Ministry ofHealth of Ukraine, WHO in Ukraine, International HIV/AIDS Alliance in Ukraine and UNAIDS in Ukraine,2009.

TuberculosisA deterioration of the tuberculosis epidemiological situation began in 1990; 1995 was considered the beginningof the full-fledged tuberculosis epidemic. Tuberculosis incidence grew continuously from 1995–2005 andincreased from 41.8 to 84.4 cases per 100,000 population. At the same time, significant political support for thecontrol of tuberculosis, and improved efficiency of resource use, including a significant increase in financing,led to some positive results. In recent years, a decreasing trend has been observed in relation to indicators ofmorbidity and mortality from tuberculosis. Today, however, the tuberculosis situation remains critical inUkraine: more than 30,000 new cases are recorded each year. A significant portion of the impact is on poor andsocially marginalized populations, whose numbers increased in Ukraine during the economic crisis.Unemployed individuals of working age represented 53.1 percent of those who became ill with tuberculosis forthe first time. The tuberculosis incidence rate increases in penitentiary institutions, which is facilitated by thehigh concentration of prisoners in cells and by unsatisfactory nutrition.

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Goal 7: Ensure sustainable environmental developmentIntensive development of production causes disturbances in the equilibrium of the environment, whichintensify socio-economic problems. Increased consumption of non-renewable energy resources contributes tothe pollution of the environment, especially of water resources and the atmosphere, the shrinking of forestedareas and fertile soils and the disappearance of individual species of plants and animals. This has negativeimpacts on the state’s natural resource potential and the population’s health. Problems with the collection, use,disposal and removal of waste of all types of hazard have increased. Furthermore, the network of naturalreserve territories and objects is expanding at a slow pace. Low-waste resources and energy-savingtechnologies have not been introduced sufficiently in Ukraine. The quality of drinking water is decreasing as aresult of the gradual pollution of fresh water sources, the deterioration of water outflows and water supply andthe use of outdated water treatment technologies and other unsatisfactory technical conditions.

A country’s progressive and dynamic development relies on inclusive economic growth, giving greatestconsideration to the population’s needs and interests. It should also fully consider the population’sincentives to engage in productive labour activities, to help people realize their own potential as well asobtaining decent remuneration for their labour. Reforms are only successful when the Goals and the targetsare aligned with the population’s interests and expectations.

The UNDP Ukraine-MDGs Project has been successfully implemented and aims at helping the Governmentaccelerate the achievement of the MDGs in Ukraine. The Project mainly focuses on the development andadaptation of new methods and approaches that will translate the MDGs into operational targets of governmentpolicy. The important country stakeholders for the MDGs are the Ministry of Economy (Project's key partnerand MDG focal point at the national level), line ministries, regional authorities, non-governmentalorganizations, business communities, academia, and the media. UNDP offers support in building localgovernment capacity to foster regional development. Besides assisting decentralization and poverty reduction,capacity must be built at the local level to develop strategies and plans for regional development, sustainability,and good governance. Achieving national MDGs is possible but only through further economic policydevelopment in line with the MDGs, bringing some policy changes and joint efforts at the country's bothcentral and local levels. These should be based on the further formation of sound market liberalizationmechanisms, strengthening political democracy, human potential development, national and cultural pluralismand other self-regulation mechanisms existing in well-developed civil society.

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