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Business Commentary IT sectors of Canada and Ukraine poised to benefit from free-trade deal

Nataliya Mykolska is Deputy Minister of Economic Development and Trade and Trade Representative of Ukraine.

Canada may be the most Ukrainian country outside of Ukraine itself. With 1.3 million Canadians claiming Ukrainian descent, we have deep personal and cultural bonds that span generations. Last year marked the 125th anniversary of the first Ukrainian immigration to Canada.

Canada and Ukraine recently strengthened our relations in a very 21st-century way – negotiating a free-trade agreement. Once it takes effect on Aug. 1, the Canada-Ukraine free-trade agreement (CUFTA) will provide immediate duty-free access for 98 per cent of goods traded. Like Canada, Ukraine also has a free-trade agreement with the European Union, giving firms opportunities to trade largely tariff-free across a large economic bloc.

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The Ukrainian government that emerged from the 2014 Euromaidan Revolution of Dignity has undertaken much-needed structural reforms and has a robust program to deregulate the economy, improve the business climate and privatize state-owned enterprises. Following two years of recession in 2014 and 2015, Ukraine's GDP grew by 2.3 per cent in 2016 and growth of 2.5 per cent is forecast in 2017 (a two-year growth rate comparable to Canada).

Ukraine offers Canadian companies the fourth-most educated population in the world, with a strong emphasis on information technology, engineering, aerospace and, of course, agriculture technology (agritech).

Information technology (IT) is one of the sectors that benefits greatly from this highly educated population, making it one of the most promising sectors for closer economic ties with Canada. Ukrainian IT exporters are ready to step up to become a part of the global digital revolution. Creative industries, including information technologies in all their diversity, are among the crucial building blocks of the emerging Ukrainian export strategy. Ukraine can provide companies with high-level technology services combined with fresh ideas, helping Canadian firms become globally competitive and keep up with the pace of digital transformation.

Ukraine's software development and IT services industry recorded exports of about $3-billion (U.S.) in 2016 and has enjoyed double-digit growth for several years. There are more than 100,000 certified IT specialists, third-most in the world after the United States and India. By 2020, this number is expected to reach 200,000. In a world in which all talents need to be harnessed, the number of women in Ukrainian IT companies has doubled in the past five years.

More than 100 global players have located R&D facilities in Ukraine and 12 Ukrainian IT companies are in the Top 100 outsourcing companies in the world. Proximity to the European Union has brought a number of major European firms to Ukraine.

The development of an IT ecosystem is top of mind for the Government of Ukraine. The IT ecosystem includes three areas of focus: firms that service large IT companies; more than 1,000 startups; and serving as an international R&D centre.

Five major cities and regions in Ukraine – Kiev, Lviv, Kharkiv, Odessa and Dnipropetrovsk region – boast IT clusters. Most notably, the hubs emerging are supported by industry and by local and national governments.

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The Government of Ukraine has committed to eliminating the barriers to export of services. For instance, since new laws were adopted, services exporters can conclude contracts and sign invoices electronically and they do not need the Ukrainian translation of documents.

The first Ukraine IT mission to Canada took place at the 2017 Branham300 launch event in May, 2017, where Ukraine was the featured country-sponsor. The launch was accompanied by more than 50 business-to-business meetings with the leading Canadian IT companies. A total of 17 Ukrainian IT businesses were meeting their Canadian counterparts to start networking and building long-term partnerships.

Support for building these relationships comes from our governmental Export Promotion Office (EPO), which works in close сo-operation with the Canada Ukraine Trade and Investment Support (CUTIS) project, a five-year development-assistance project funded by the Government of Canada through Global Affairs Canada and implemented by the Conference Board of Canada and the Canada-Ukraine Chamber of Commerce. Both EPO and CUTIS have set out IT as a priority sector for Ukraine-Canada business relationships. Generating more exports from Ukrainian technology companies can contribute to the project goals of reducing poverty and increasing sustainable economic growth in Ukraine.

Canadian businesses are uniquely positioned to benefit from the opportunities offered by the CUFTA and the vibrant Ukraine IT sector. Building on the existing ties, Canada and Ukraine can greatly strengthen their relationship for mutual benefit.

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