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Analyzing briefly the trade relations between Ukraine and the Netherlands it looks like we recall our cooperation only on the eve of 8th March (International Women’s Day) when hundreds thousands of Dutch tulips are coming across the customs towards happy women. Usually, Ukrainians buy a lot of flowers for celebration of this holiday and Dutch tulips are the most popular.
In broader meaning trade cooperation between Ukraine and the Netherland is not restricted only by trade of flowers. Since Ukraine became an independent state in 1991, volumes of trade, investments and business connections with the Netherlands were developing rapidly reflecting growing Dutch business interest into Ukrainian markets and vice versa. Implementation of the Association Agreement between the EU and Ukraine is expected to unveil new possibilities for trade and investments between the Netherlands and Ukraine. That’s why we have conducted a brief analysis that provide an overview of recent developments and outline the benefits that emerge for Dutch business for trading and doing business in Ukraine. Our analysis will answer the questions what is the current status-quo of economic cooperation, structure of trade, investments and business presence between two countries as well as applied benefits come from recently launched free trade area between our countries
First, what importance has Ukraine for the Netherlands and vice versa in terms of trade of goods?
Looking at the structure of aggregate exports and imports of the Netherlands in 2015 one might notice that Ukraine was graded only 54th among all export destinations for Dutch goods and was only 52nd importer in the Netherlands. The share of Ukrainian market was tiny 0.1% in total Dutch exports and the imports from Ukraine was counted for another small share of 0.2%. It is of course significantly lower if we compare with the largest trade partners of the Netherlands – Germany, Belgium, the United Kingdom and China – which hold the top positions in the ranking.
In contrast with, the Netherlands is more valuable trade partner for Ukraine holding the 11th rank in the list of exports destinations of Ukraine with a share of 2.4% from total and being the 16th largest importer to Ukraine with a modest share of 1.2%.
Thinking about the EU dimension, the Netherlands were the 8th largest importer in Ukraine; the exports from Dutch shores to Ukraine were around USD 450 m in 2015.
Therefore, either Ukraine or the Netherlands are not top trade partners for each other today, especially from Dutch prospective. But that also creates enormous space for trade growth in trade between our two countries, especially if to take into account the size and economic potential of Ukraine in Europe, and it cannot be neglected
Second, how trade between our countries has been developing during recent decades?
Starting from the 90s the Dutch exports to Ukraine increased from minor EUR 14 m in 1992 to EUR 200 m in 1997, after the crisis in 1998-99 it had been growing rapidly by 12% annually in average. In 2007 the volumes of Dutch exports reached its historical maximum at EUR 1.4 bn.
World economic crisis of 2008-09 hit the Dutch exports severely that shrank by a half as of the end of 2009. Until 2012 it bounced back to EUR 1.2 bn and entered a new phase of contraction. 2015 resulted in a new bottom for Dutch exports to Ukraine after it reached EUR 670 m against the background of war actions in the East and consequent shortfall of industrial production and domestic demand supplemented by political instability and worsening of business climate.
Ukraine’s imports to the Netherlands has been developed under very similar pattern as the Dutch ones with the only difference that total value of Ukrainian goods exported to Dutch direction was as twice as less that for Dutch goods. Looking at the chart depicting the Ukrainian exports to the Netherlands one can see that after it had revived from 2008-09 crisis, in 2012 it continued growth and in 2015 exceeded an absolute terms (EUR 892 m) than the Dutch exports to Ukraine (EUR 670 m).
Such unexpected trend can be explained by the fact the majority of Ukrainian goods to the Netherlands are raw materials, food and semi-finished goods (see therein under) that favored from rapid devaluation of Ukrainian national currency (hryvnya) and became more competitive (cheaper in EUR). Also a proactive position of large Ukrainian agriculture holdings that undertook successful efforts in entering its products onto the EU market also contributed significantly to Ukraine exports growth.
Recent development of trade relations between Ukraine and the Netherlands demonstrates rapid decline of Dutch exports to Ukraine due to adverse conditions for demand for Dutch goods. Ukraine, to contrary, managed to boost its exports to Dutch destination enjoying its specific exports structure and devaluation effect. Therefore, the structural reforms in Ukraine that improve business climate and trade conditions are vital for revival of Dutch exports to Ukraine.
Third, what the Netherlands are selling to and buy from Ukraine?
The Dutch exports to Ukraine are quite well diversified and comprise mainly from plastics (13.2% from total), different specialized machinery (9.7%), pharmaceutical products (8.7%), and vehicles (8.7%) that comprise around 40% of total value of Dutch goods exported to Ukraine in 2015.
Ukraine exports to the Netherlands mainly cereals (32.6% from total), metals (21.7%), oil and oil seeds (20% in total), meat and subproducts (4.3%) and residuals from food industry (3.8%). Totally these trade categories are responsible for 82% of all goods shipped to the Netherlands from Ukraine in 2015.
From the point of view of major single goods that are traded between the Netherlands and Ukraine we can see that the most valuable goods for the Netherlands sold to Ukraine were agriculture tractors (USD 28.8 m worth), ethylene (USD 28m), medicaments (USD 26.7 m), gold, oil products, polyacetals and polycarbonates, as well as traditional Dutch goods worldwide as cocoa and chocolate (USD 24.7 m) and flowers – live and in bulbs (USD 10.5 m).
Ukraine has been selling to Dutch harbors mainly corn (by USD 278 m in 2015), ferroalloys (USD 171 m), sunflower oil (USD 134 m), oil seeds (USD 45.2 m), poultry meat (USD 38 m) and oilcake (USD 34 m). Surprisingly for us was to discover that Ukraine also sells to the Netherlands quite a lot of machines for printing (by USD 18 m) and cables (USD 15 m).
The Dutch goods exported to Ukraine are mainly finished goods with high value added like machines, medicaments and chemical industry products, but also strongly supplemented with cacao and chocolate and flowers for which the Netherlands is a worldwide trading market. Ukraine’s export to Dutch destination mainly comes from agriculture and food industry, as well as steel products where it has strong positions. Nevertheless, Ukraine may enter some niches markets for machinery and electrical equipment as few of such goods like printing machinery, cables and networks equipment are already demanded in the Netherlands.
Services supplied from the Netherlands to Ukraine and back.
By volume of trade of services the Netherlands has been ranked the 18th as an export destination for Ukraine with USD 107 m in 2015, while the Dutch imports of services accounted for the 7th largest volume of services sold in Ukraine with USD 139 m.
Decline of trade volumes in 2008-09 was not as sharp as for goods, in 2013 trade in services almost reached pre-crisis level but during 2014-15 the volumes of trade hit the new bottom: in 2014 the export of Dutch services fell by 36%, Ukrainian exports followed by enormous 62% in 2015 due to general deterioration of economic cooperation between two countries and lowering of demand for services due to stagnating economy.
The Dutch companies have strong positions in providing financial services to Ukrainian clients (their share was 36% from total services supplied), Ukraine provides mainly transport services (44% from total) that logically flows the large volumes of agricultural goods crossing the Ukrainian border towards the Netherlands (Dutch share of transport services to Ukrainian was only 14% in 2015).
The countries also provides each other relatively relevant volumes of business services (21% from total each) and Ukraine provided large amount of IT-services (28% from total) where it has strong positions as well. IT-services also have been provided by Dutch companies and its share was 12% in 2015.
In terms of services Ukraine is important for the Netherlands as the market for financial services, business services and transport; IT-services may also play an important role in the future. Given the Ukraine’s role as transport corridor between Western Europe and Asia it provides mainly transport services but IT-services is already occupied 1/3 from total value of services provided and its importance will be growing further.
Fourth, how much the Netherlands invest into Ukraine?
At the beginning of 2016 the Netherlands were the 2nd largest investor in Ukrainian economy upholding its top position in terms of foreign direct investments (FDI) provided (in the three top investing countries from 2012) together with Cyprus and Germany. As of 01.01.2016 the FDIs from the Netherlands in Ukraine were USD 5.6 bn or 12.9% from total amount of FDI brought into country from all destinations.
The economic turbulence has negatively influenced the willingness of new investors to put the money into Ukrainian economy. Meanwhile 2015 demonstrated the moderate growth in FDIs even despite a coming out of Shell from large shale gas project in Eastern Ukraine.
The FDIs from Ukraine to the Netherlands over the last 10 years were almost zero or information about them was not available officially.
In terms of FDIs sectors the ICT sector and industry (mainly food and chemical industry) were the main attractions for Dutch investors in 2015 holding by 1/3 from total amount of foreign investments in the country. Two other important destinations for Dutch FDIs were wholesale trade and real estate. The largest traditional investors are «Royal Dutch Shell», «ING Ukraine», «Radobank», «Philips», «Akzo Nobel», «Damen Shipyards», «Unilever Export» and others.
Fifth, what DCFTA with Ukraine will give for Dutch business?
Dutch companies have already strong business presence in Ukraine. As of the end of 2015 around 315 Dutch companies with almost even distribution in agriculture and food (155 companies) and other industries (160) while others have been working in the sectors providing financial, logistics, business and IT-services, as well as energy, constriction and wood industry.
Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Ukraine that is being active from 01-Jan-2016 is expected to facilitate trade and business presence for Dutch companies in Ukraine. The trade deal will improve market access and make it easier for companies from the Netherlands to do business with Ukraine in terms of both exporting to, and importing from, Ukraine. According to modeling results of the Institute for Economic Research and Policy Consulting (2011) as a result of DCFTA implementation in Ukraine imports from Ukraine to the EU will increase by 6.3% and EU exports to Ukraine would increase by 5.8%.1
Facilitation to trade will come in the short run from gradual elimination (over a period of 10 years) of majority of tariffs on trade between the EU and Ukraine that will further reduce the cost of trading and this will lead to greater trade.
For Dutch exporters it will mean the following changes: after the DCFTA entered into force from the beginning of 2016, 80% of current Dutch exports entered duty free and the average import duty is only 2.9%. After 10 years 98% of current Dutch exports to Ukraine will be traded freely. It is worth to note that the Netherlands will keep higher level of tariff protection for Ukrainian goods as its market will be opened by 78% only including some tariffs quotas for separate sensitive goods like cocoa and chocolate.
In terms of major single important goods of Dutch origin that are exported to Ukraine we can also see that for the majority positions import duties have already been set to zero after the DCFTA has entered into force after 01 Jan 2016. The only goods for that Ukraine will use the protective duties in 2016 will be used tractors and bulbs, tulips and other flowers. For used tractors the tariff protection will be finally eliminated starting from 2019.
But DCFTA is more than a simple a tariff liberalization agreement. It also offers a comprehensive reform programme for Ukraine to align its business laws and procedures with those of the European Union. After Ukraine will be aligning its business laws, regulations and procedures, trading with Ukraine will be similar to trading with any other EU member state, thus reducing the costs of trade. Businesses that want to trade with Ukraine will no longer need to consider what rules they have to comply with, how they differ from those of the EU and how they can obtain certification as compliance and certification from either EU or Ukrainian authorities will confer compliance in the other’s territory. All the DCFTA-related reforms will therefore have tremendous impact on operating environment for Dutch companies working in Ukraine and contribute significantly to their success. The same comes for those Dutch companies which are just planning to increase their prosperity by entering into Ukrainian market – the biggest one in Europe with 43 m of consumers and promising in terms of investment opportunities
Dmytro Naumenko, Senior analyst, NGO “Ukrainian Centre for European Policy”
In broader meaning trade cooperation between Ukraine and the Netherland is not restricted only by trade of flowers. Since Ukraine became an independent state in 1991, volumes of trade, investments and business connections with the Netherlands were developing rapidly reflecting growing Dutch business interest into Ukrainian markets and vice versa. Implementation of the Association Agreement between the EU and Ukraine is expected to unveil new possibilities for trade and investments between the Netherlands and Ukraine. That’s why we have conducted a brief analysis that provide an overview of recent developments and outline the benefits that emerge for Dutch business for trading and doing business in Ukraine. Our analysis will answer the questions what is the current status-quo of economic cooperation, structure of trade, investments and business presence between two countries as well as applied benefits come from recently launched free trade area between our countries
First, what importance has Ukraine for the Netherlands and vice versa in terms of trade of goods?
Looking at the structure of aggregate exports and imports of the Netherlands in 2015 one might notice that Ukraine was graded only 54th among all export destinations for Dutch goods and was only 52nd importer in the Netherlands. The share of Ukrainian market was tiny 0.1% in total Dutch exports and the imports from Ukraine was counted for another small share of 0.2%. It is of course significantly lower if we compare with the largest trade partners of the Netherlands – Germany, Belgium, the United Kingdom and China – which hold the top positions in the ranking.
In contrast with, the Netherlands is more valuable trade partner for Ukraine holding the 11th rank in the list of exports destinations of Ukraine with a share of 2.4% from total and being the 16th largest importer to Ukraine with a modest share of 1.2%.
Thinking about the EU dimension, the Netherlands were the 8th largest importer in Ukraine; the exports from Dutch shores to Ukraine were around USD 450 m in 2015.
Therefore, either Ukraine or the Netherlands are not top trade partners for each other today, especially from Dutch prospective. But that also creates enormous space for trade growth in trade between our two countries, especially if to take into account the size and economic potential of Ukraine in Europe, and it cannot be neglected
Second, how trade between our countries has been developing during recent decades?
Starting from the 90s the Dutch exports to Ukraine increased from minor EUR 14 m in 1992 to EUR 200 m in 1997, after the crisis in 1998-99 it had been growing rapidly by 12% annually in average. In 2007 the volumes of Dutch exports reached its historical maximum at EUR 1.4 bn.
World economic crisis of 2008-09 hit the Dutch exports severely that shrank by a half as of the end of 2009. Until 2012 it bounced back to EUR 1.2 bn and entered a new phase of contraction. 2015 resulted in a new bottom for Dutch exports to Ukraine after it reached EUR 670 m against the background of war actions in the East and consequent shortfall of industrial production and domestic demand supplemented by political instability and worsening of business climate.
Ukraine’s imports to the Netherlands has been developed under very similar pattern as the Dutch ones with the only difference that total value of Ukrainian goods exported to Dutch direction was as twice as less that for Dutch goods. Looking at the chart depicting the Ukrainian exports to the Netherlands one can see that after it had revived from 2008-09 crisis, in 2012 it continued growth and in 2015 exceeded an absolute terms (EUR 892 m) than the Dutch exports to Ukraine (EUR 670 m).
Such unexpected trend can be explained by the fact the majority of Ukrainian goods to the Netherlands are raw materials, food and semi-finished goods (see therein under) that favored from rapid devaluation of Ukrainian national currency (hryvnya) and became more competitive (cheaper in EUR). Also a proactive position of large Ukrainian agriculture holdings that undertook successful efforts in entering its products onto the EU market also contributed significantly to Ukraine exports growth.
Recent development of trade relations between Ukraine and the Netherlands demonstrates rapid decline of Dutch exports to Ukraine due to adverse conditions for demand for Dutch goods. Ukraine, to contrary, managed to boost its exports to Dutch destination enjoying its specific exports structure and devaluation effect. Therefore, the structural reforms in Ukraine that improve business climate and trade conditions are vital for revival of Dutch exports to Ukraine.
Third, what the Netherlands are selling to and buy from Ukraine?
The Dutch exports to Ukraine are quite well diversified and comprise mainly from plastics (13.2% from total), different specialized machinery (9.7%), pharmaceutical products (8.7%), and vehicles (8.7%) that comprise around 40% of total value of Dutch goods exported to Ukraine in 2015.
Ukraine exports to the Netherlands mainly cereals (32.6% from total), metals (21.7%), oil and oil seeds (20% in total), meat and subproducts (4.3%) and residuals from food industry (3.8%). Totally these trade categories are responsible for 82% of all goods shipped to the Netherlands from Ukraine in 2015.
From the point of view of major single goods that are traded between the Netherlands and Ukraine we can see that the most valuable goods for the Netherlands sold to Ukraine were agriculture tractors (USD 28.8 m worth), ethylene (USD 28m), medicaments (USD 26.7 m), gold, oil products, polyacetals and polycarbonates, as well as traditional Dutch goods worldwide as cocoa and chocolate (USD 24.7 m) and flowers – live and in bulbs (USD 10.5 m).
Ukraine has been selling to Dutch harbors mainly corn (by USD 278 m in 2015), ferroalloys (USD 171 m), sunflower oil (USD 134 m), oil seeds (USD 45.2 m), poultry meat (USD 38 m) and oilcake (USD 34 m). Surprisingly for us was to discover that Ukraine also sells to the Netherlands quite a lot of machines for printing (by USD 18 m) and cables (USD 15 m).
The Dutch goods exported to Ukraine are mainly finished goods with high value added like machines, medicaments and chemical industry products, but also strongly supplemented with cacao and chocolate and flowers for which the Netherlands is a worldwide trading market. Ukraine’s export to Dutch destination mainly comes from agriculture and food industry, as well as steel products where it has strong positions. Nevertheless, Ukraine may enter some niches markets for machinery and electrical equipment as few of such goods like printing machinery, cables and networks equipment are already demanded in the Netherlands.
Services supplied from the Netherlands to Ukraine and back.
By volume of trade of services the Netherlands has been ranked the 18th as an export destination for Ukraine with USD 107 m in 2015, while the Dutch imports of services accounted for the 7th largest volume of services sold in Ukraine with USD 139 m.
Decline of trade volumes in 2008-09 was not as sharp as for goods, in 2013 trade in services almost reached pre-crisis level but during 2014-15 the volumes of trade hit the new bottom: in 2014 the export of Dutch services fell by 36%, Ukrainian exports followed by enormous 62% in 2015 due to general deterioration of economic cooperation between two countries and lowering of demand for services due to stagnating economy.
The Dutch companies have strong positions in providing financial services to Ukrainian clients (their share was 36% from total services supplied), Ukraine provides mainly transport services (44% from total) that logically flows the large volumes of agricultural goods crossing the Ukrainian border towards the Netherlands (Dutch share of transport services to Ukrainian was only 14% in 2015).
The countries also provides each other relatively relevant volumes of business services (21% from total each) and Ukraine provided large amount of IT-services (28% from total) where it has strong positions as well. IT-services also have been provided by Dutch companies and its share was 12% in 2015.
In terms of services Ukraine is important for the Netherlands as the market for financial services, business services and transport; IT-services may also play an important role in the future. Given the Ukraine’s role as transport corridor between Western Europe and Asia it provides mainly transport services but IT-services is already occupied 1/3 from total value of services provided and its importance will be growing further.
Fourth, how much the Netherlands invest into Ukraine?
At the beginning of 2016 the Netherlands were the 2nd largest investor in Ukrainian economy upholding its top position in terms of foreign direct investments (FDI) provided (in the three top investing countries from 2012) together with Cyprus and Germany. As of 01.01.2016 the FDIs from the Netherlands in Ukraine were USD 5.6 bn or 12.9% from total amount of FDI brought into country from all destinations.
The economic turbulence has negatively influenced the willingness of new investors to put the money into Ukrainian economy. Meanwhile 2015 demonstrated the moderate growth in FDIs even despite a coming out of Shell from large shale gas project in Eastern Ukraine.
The FDIs from Ukraine to the Netherlands over the last 10 years were almost zero or information about them was not available officially.
In terms of FDIs sectors the ICT sector and industry (mainly food and chemical industry) were the main attractions for Dutch investors in 2015 holding by 1/3 from total amount of foreign investments in the country. Two other important destinations for Dutch FDIs were wholesale trade and real estate. The largest traditional investors are «Royal Dutch Shell», «ING Ukraine», «Radobank», «Philips», «Akzo Nobel», «Damen Shipyards», «Unilever Export» and others.
Fifth, what DCFTA with Ukraine will give for Dutch business?
Dutch companies have already strong business presence in Ukraine. As of the end of 2015 around 315 Dutch companies with almost even distribution in agriculture and food (155 companies) and other industries (160) while others have been working in the sectors providing financial, logistics, business and IT-services, as well as energy, constriction and wood industry.
Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Ukraine that is being active from 01-Jan-2016 is expected to facilitate trade and business presence for Dutch companies in Ukraine. The trade deal will improve market access and make it easier for companies from the Netherlands to do business with Ukraine in terms of both exporting to, and importing from, Ukraine. According to modeling results of the Institute for Economic Research and Policy Consulting (2011) as a result of DCFTA implementation in Ukraine imports from Ukraine to the EU will increase by 6.3% and EU exports to Ukraine would increase by 5.8%.1
Facilitation to trade will come in the short run from gradual elimination (over a period of 10 years) of majority of tariffs on trade between the EU and Ukraine that will further reduce the cost of trading and this will lead to greater trade.
For Dutch exporters it will mean the following changes: after the DCFTA entered into force from the beginning of 2016, 80% of current Dutch exports entered duty free and the average import duty is only 2.9%. After 10 years 98% of current Dutch exports to Ukraine will be traded freely. It is worth to note that the Netherlands will keep higher level of tariff protection for Ukrainian goods as its market will be opened by 78% only including some tariffs quotas for separate sensitive goods like cocoa and chocolate.
In terms of major single important goods of Dutch origin that are exported to Ukraine we can also see that for the majority positions import duties have already been set to zero after the DCFTA has entered into force after 01 Jan 2016. The only goods for that Ukraine will use the protective duties in 2016 will be used tractors and bulbs, tulips and other flowers. For used tractors the tariff protection will be finally eliminated starting from 2019.
But DCFTA is more than a simple a tariff liberalization agreement. It also offers a comprehensive reform programme for Ukraine to align its business laws and procedures with those of the European Union. After Ukraine will be aligning its business laws, regulations and procedures, trading with Ukraine will be similar to trading with any other EU member state, thus reducing the costs of trade. Businesses that want to trade with Ukraine will no longer need to consider what rules they have to comply with, how they differ from those of the EU and how they can obtain certification as compliance and certification from either EU or Ukrainian authorities will confer compliance in the other’s territory. All the DCFTA-related reforms will therefore have tremendous impact on operating environment for Dutch companies working in Ukraine and contribute significantly to their success. The same comes for those Dutch companies which are just planning to increase their prosperity by entering into Ukrainian market – the biggest one in Europe with 43 m of consumers and promising in terms of investment opportunities
Dmytro Naumenko, Senior analyst, NGO “Ukrainian Centre for European Policy”
Everyone could post a copypaste and see it as a topic. Put some labor in the OP.
beside the dutch word for OP, it can also be seen as 'original post'; the first post in a topic
Google is your friend, abuse your friends
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