Trade and economic cooperation

Bilateral trade and economic, as well as investment cooperation has been showing steady positive dynamics over the last three years. In 2019, the total volume of bilateral trade in goods and services reached $1,235.3 mln. The total turnover consists of exports of Ukrainian goods and services - $259.87 mln., as well as imports of goods and services from Japan - $975.43 mln.

(mln. USD)

	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019
Turnover	906,6	1166,6	1 519,1	1 443,4	839,2	630,3	764,0	941,5	969,3	1 235,30
Export	104,8	152,5	320,5	458,4	220,5	243,0	192,0	218,0	231,9	259,87
Import	801,8	1014,1	1 198,6	985,0	618,7	387,3	572,0	723,5	737,4	975,43
Balance	-697,0	-861,6	-878,1	-536,4	-398,2	-144,3	-380,0	-505,5	-505,5	-715,56

The turnover of goods in 2019 amounted to $1,212.68 mln. Exports of Ukrainian goods to Japan reached to $249.95 mln. and increased compared to the previous 2018 by 7.8%, and imports of Japanese goods to Ukraine increased by 30.6% and reached $962.73 mln.

The structure of Ukrainian merchandise exports is traditionally dominated by goods with a low level of value added: iron ores and concentrates - $140 mln. (55.8%) and tobacco products - $72.5 mln. (29% of exports). The structure of Japanese merchandise imports is characterised by stability and consists primarily of engineering products. Thus, car imports compared to 2018 increased by 50% and reached $627 mln. (which is 65% of Japanese imports to Ukraine). Imports of heavy machinery and electrical equipment amounted to $82.15 mln. and $44.7 mln. and optical and photographic devices worth $57.2 mln.

Over the last three years, there has been a focused effort to certify Ukrainian agricultural products to ensure their access to the Japanese market, which defines the increased quality requirements for food products. In 2017, the permits for the import of dairy products of Ukraine to Japan were agreed. In 2019, after a long period, health certificates for the export of poultry meat and fresh eggs for human consumption were agreed also. These results will help expand the nomenclature of Ukrainian exports and reduce imbalances in bilateral trade in goods.

Bilateral trade turnover of services in 2019 amounted to $ 22.6 mil. at the expense of Ukrainian export of $10 mil. and import from Japan $ 12.70 million.

Japan's foreign direct investment (FDI) in Ukraine, as of January 1, 2020, amounted to $139.86 mil. and during 2019 increased by $560 thousands.

Japanese investments in the amount of $92.53 mil. (66%) are concentrated in the sale and maintenance of cars, as well as in the amount of $35 mil. (25%) in the production of components for vehicles. The production facilities of the Japanese companies Yazaki (Uzhhorod district, Zakarpattia region) and Fujikura (Yavoriv district, Lviv region) for the production of electrical and electronic equipment for vehicles are focused on EU car plants.

Japan Tobacco Inc., which has been operating in Ukraine since 1993, has invested approximately $320 mil. in the development of a tobacco factory in Kremenchug. However, this investment was registered as Swiss in origin, as the financial assets came to Ukraine through a European subsidiary, Japan Tobacco Swiss Inc., located in Switzerland.

The Agreement on Promotion and Mutual Protection of Investments between Ukraine and Japan entered into force in 2015. This agreement created favourable conditions for attracting Japanese investment in Ukraine. In their business plans, Japanese companies take into account the advantages of the common market of Ukraine with the EU. It is therefore important to emphasise the interest of Japanese companies in investing in the production of goods intended to be exported to the European market as components in European finished products.

The Japanese investment in Ukraine in 2017-2019 became a new direction in the agricultural sector. The Sumitomo Corp. has become a main stakeholder of the Ukrainian JSC "Spectrum-Agro", which has a wide network of offices and enterprises in all regions of Ukraine and specialises in the supply of agricultural machinery, plant chemical protection, fertilizers, etc. The Japanese company SDG Corp has invested approximately $30 million in the Ukrainian agricultural sector over the last three years. These investments were directed to agricultural production and construction of grain storage for 16 thousand tons (Ukrainian company "Kivshovata Agro" in Tarashcha district of Kyiv region).

Based on discussions with Japanese companies during 2019-2020, Japanese companies are actively interested in participating in privatization in Ukraine and investing in the following economic sectors of Ukraine:

- participation in the privatization and construction of new infrastructure (ports, bridges, railways, etc.);

- introduction of energy-saving and "environmentally friendly" technologies in different sectors of the economy of Ukraine with the purpose of strengthening energy and environmental security - energy sector, industry, municipal sphere;

- modernization of hot power plants operating on natural gas and coal by new technologies in order to increase their capacity and significantly reduce greenhouse gas emissions;

- reconstruction of existing and introduction of new units at hydro-storage and hydroelectric power plants;

- development of alternative energy sources;

- сooperation with the municipal sector on solid waste incineration and electricity generation;

- investing in Ukrainian agrocultural complex.

On December 16, 2019, was held the Eighth Joint Meeting of the Economic Cooperation Coordination Council with Japan and the Economic Cooperation Committee with Ukraine of the Japanese Federation of Business "Keidanren", co-chaired by the Deputy Minister for Economic Development, Trade and Agriculture of Ukraine - Trade Representative of Ukraine T.Kachka and Keidanren Committee Chairman T. Asada.

The results of the discussions and the exchange of views were reflected in the final Memorandum (https://www.keidanren.or.jp/en/policy/2019/113.pdf ). The document identified the intentions of both parties to develop business relationships in agriculture, infrastructure, energy modernization and the digital economy, including the implementation of projects aimed at the development of Society 5.0.

The financial and credit cooperation between Ukraine and Japan is implemented mainly within the framework of the Official Development Assistance (ODA) program of the Government of Japan through cooperation with the Japan International Cooperation Agency JICA. Since the establishment of diplomatic relations in 1992, Japan has provided assistance totaling over $3.2 billion under ODA. More than $1.86 billion received during 2014-2019.

During 2018 - 2020, the following projects are being implemented in Ukraine under the ODA program:

- “The reconstruction of sewage treatment plants and construction of a processing line for the treatment and disposal of sediments of the Bortnychi Aeration Station (BSA)” on the basis of a $ 1 billion loan.

- “The construction of bridge over the Southern Bug River in Mykolaiv city”. In December 2019, JICA experts submitted to the Ministry of Infrastructure of Ukraine the feasibility study of the project.

- “The Financial Advisor from the Government of Japan on Reforming the Financial System of Ukraine for the Ministry of Finance of Ukraine”.

- A project aimed at developing the potential of the public service broadcaster in Ukraine.

- The project “Improvement of radiation control of the environment and legislative base in Ukraine for ecological rehabilitation of radioactively contaminated territories”.

- “The Municipal Solid Waste (MSW) Management studies”. JICA experts are preparing studies on MSW management in three Ukrainian cities - Kharkiv, Kiev and Dnipro. The project is scheduled to begin in March 2020.

- Launching a new project for the development and support of small and medium-sized enterprises in Ukraine, based on a two-step loan in collaboration JICA with the German-Ukrainian Foundation.