The Donetsk region is a big industrial, cultural and scientific center.

The industry of the region is based on coal extracting, metallurgical
and machine building industries. The region specialization is stipulated
by its favourable geographical position, rich mineral and raw material
base, sufficiently developed infrastructure and high urbanisation
degree.

The Donetsk region can also boast of its industrious and talented
people. The names of our compatriots who are famous scientists,
sportsmen, culture workers are well known far away from Ukraine.

10 reasons to invest in Donetsk region

1. Favourable geographic location of the region

2. Access to vast markets of Eastern Europe and other regions

3. International relations

4. Highly skilled workforce

5. Developed infrastructure

6. Natural resources and fertile land

7. Special Mode of Investment Activity, SEZ and TPD

8. Leading position of the region of the economy of Ukraine

9. Developed industry on local mineral and raw materials base

10. Experience of investment activity

FAVOURABLE GEOGRAPHIC LOCATION OF THE REGION

Donetsk region is located in the south-east of Ukraine, covering the
area of 26,5 thousand square km with the population of about 5 million
people.

Average population density –187 persons/sq.km

Distance to the capital of Ukraine, Kiev – 871 km by rail, 693 km by
highway

The administrative-territorial division of the region includes 28 towns
and 17 districts subordinated to the regional administration.

The largest towns Donetsk  1 075,33 thsd.

Mariupol 516,5 thsd.

Makeevka  435,9 thsd.

Gorlovka  328,6 thsd.вік

Has a seaport in Mariupol with an access to the Black and Mediterranean
seas.

Borders on the most densely populated and economically developed regions
of Ukraine – Dnepropetrovsk, Kharkov, Zaporozhye, Lugansk, and Rostov
region of the Russian Federation.

Special mode of investment activity operates in the territory of 26
towns and 7 agricultural districts. There were created 2 special
economic zones «Donetsk» and «Azov» within the region. These towns and
agricultural districts share 40% of the territory of the region where
84% of the population lives and 85% of industrial potential is
concentrated

ACCESS TO VAST MARKETS OF EASTERN EUROPE AND OTHER REGIONS

Investors have direct access to the consumers markets of Ukraine (about
50 million consumers) and Russia (about 150 million consumers).

Due to the developed system of automobile, railway and air transport,
the investor has all the opportunites to service effectively the markets
of Eastern and Central Europe, and also the countries of CIS.

Access to the Black and Mediterranean Sea basins enables to develop
successfully the trade relations with the countries of Balkan Peninsula,
Middle East, Africa, Central and Southeast Asia.

INTERNATIONAL RELATIONS

Donetsk region has longstanding and strong international trade relations
with partners from more than 100 countries of the world which play the
important role in the economy of the region.

The basic factors indicating a high international trade development
level are following:

The economy of the region includes more than 150 industries. Among them
there are metallurgy, machine-building, chemical and coal industries,
agriculture and food-processing industry, other profitable industries
with high resource potential.

Developed infrastructure with two main trade gates:

the international airport; the international transportation makes 70% of
freight turnover.

Mariupol trading port with capacity up to 12 mln. tones of cargo
annually. Deep waterways sof the port (average depth 12 m) allow to
accept ships with carrying capacity up to 16 thsd. tons .

53 vessels with total displacement of 462,4 thsd.tones belong to
Mariupol port.

SEZ «Azov» provides transhipment and transit cargoes handling, renders
services in sea-going vessels repair and restoration.

70% of manufactured products in the region are sold on foreign markets.
Donetsk region trades with more than 100 countries of the world. The
major trade partners of the region are Russia, China, the countries of
the European Union, USA, and Turkey.

The share of the region in total Ukraine export comes to more 20%.

HIGHLY SKILLED WORKFORCE

Companies investing in Donetsk region, enjoy advantages of having acces
to the largest in Ukraine labour market (2 million people). All over the
world Donetsk region is known for the developed labour market with
qualified broad specialists which are well-trained and easy adaptable to
changing labour conditions.

Donetsk region is the most urbanised in Ukraine – 90% of its population
lives in the big and small towns; the density of population is uneven.

Higher education

The education system in Donetsk region is one of the most effective and
prestigious in Ukraine.

It includes 112 higher educational institutions which annually prepare
about 40 thousand specialists. By number of educational institutions
Donetsk region takes the third place in Ukraine after such educational
centres as Kiev and Kharkov. The education system of the region is
adapted to varied economic conditions. There have been introduced new
programs on training of specialists with the aim to meet the
requirements of developing Donbass economy in managers, experts in the
field of international business, computer science, etc.

There have already been established relations with many universities and
educational institutions of foreign countries. Graduates of Donetsk
universities are considered to be of a high qualification and
successfully work in the countries of Western Europe and America.

Scientific and research potential

Donetsk region is one of the major scientific and research centres of
Ukraine. Scientific researches and analysis are carried out by 101
organisations.

Research activity is undertaken by 8 institutes of the National Academy
of Science of Ukraine, 18 higher education institutes, and more than 100
scientific-research and project institutions, bureaux, research stations
and branches.

DEVELOPED INFRASTRUCTURE

Commercial and industrial accommodation

In Donetsk region there is a wide range of various premises suitable for
dwelling, production, and offices and which meet all investors’
requirements.

Office premises

Donetsk offers premises for organisation of modern business centres,
including with already created complex of services and with restaurants
and polyclinics in one building. The rental fee depends on quality of
premises and their location.

Industrial premises

The bulk of the industrial space currently available is located within
existing industrial complexes. Industrial units tend to be large.
However,there is a wide range of multifunctional industrial space
available at competitive price. Actual rates vary depending upon lease
duration, nature of business etc.

By road

Donetsk is well connected by road to other regions of Ukraine and to
southern Russia. The highways are among the best in Ukraine in terms of
quality. All roads are well-equipped with networks of modern and high
quality petrol stations which render full range of services up to the
best international standards. All major vehicle manufactures have in
Donetsk region sales, repair, and maintenance service centres.

By air

There are three airports within the region: Donetsk, Mariupol and
Kramatorsk. Donetsk airport has international status and offers a
full-range of customs services.

By railway

Donetsk region’s railway system is among the most dynamic in Ukraine and
carries 40% of the total of Ukraine’s railway transportation, servicing
the industries and population of Donetsk and Lugansk regions and
partially – Dnepropetrovsk, Zaporozhie and Kharkov regions.

Donetsk region is directly connected by rail to other major railway
terminals in Ukraine and Russia – Kiev, Lvov, Odessa, Kharkov,
Simferopol, Moscow, St.Petersburg, and many others. Besides, many of the
available industrial spaces within the region benefit from one-side
access to the railway network through their own branch lines.

By sea

The port of Mariupol is one of the largest ports in Ukraine. Due to
extensive railway network, all major companies of the region has a
direct access to the port. . Railway connection, full customs
facilities, and high quality communication systems make the port an
important import-export centre of the region. More than 7 mil. tons of
goods are handled by Mariupol sea port every year where 50% of goods are
export finished products. Deep sheltered approaches (12,0 m in average)
allow ships of up to 116 000 tons deadweight capacity to berth. Mariupol
is a home port for 53 ships, with the total deadweight of 462,4 thsd.
tons. There are vessels of different types (multifunctional and
special): for vehicles transportation, timber cargo and etc. The ships
offer freight services to customers from all over the world, including
the South And Middle East, East Africa, Persian Gulf, South and North
America. The average ship draught is 8 metres.

Telecommunications

Telecommunications infrastructure in Donetsk region is developing
rapidly. There is an opportunity to expand the usage of mobile phones,
cell communication of GSM standard and paging communication. Costs of
mobile communication are comparable to European level. Donetsk region
has high quality access to the Internet services which are provided by a
number of companies.

Utilities

Electricity is supplied mainly by the local power stations. Their
capacity not only covers the region’s needs, but has a good export
potential. Gas is purchased from Russia and Turkmenistan and supplied to
Donetsk region through the well-developed pipe-line system. Donetsk
region’s water resources are not enough to cover the whole region’s
population and industry needs. Alternative sources of water supply are
being studied.

NATURAL RESOURCES AND FERTILE LAND

Donetsk region is the richest region of Ukraine in terms of natural
resources deposits. 12% of all natural resources of the country is
concentrated in Donetsk region it’s more than in any other region of the
country.

The structure of Donetsk region’s natural recourses potential

Donetsk region meets the requirements of own needs and delivers to other
regions of Ukraine the following minerals:

? coal;

? rock salt;

? limestone and dolomites;

? fire-resistant and ceramic clays;

? kaolin;

? mercury;

? asbestos;

? gypsum;

? chalk;

? building and facing stone.

There were developed perspective programs on extraction of the following
deposits:

? iron ore;

? rare-earth metals;

? feldspar;

? phosphorite;

? potash salt;

? bentonite clays;

? nepheline;

? graphite;

? semiprecious stones, etc.

The region is currently exploring the deposits of hydrocarbons, iron
ores, fluorite, brown coal, ochre, alkaline kaolin, semiprecious stones,
basalt, copper, lead.

Kimberlite pipes with fractions of fine diamond crystals have been
discovered in the north of Priazovsky crystal field.

Deposits of gold in Donetsk region are considered to have good
potential.

In the northern part of Donetsk region, there was discovered gas deposit
with a daily output of 70 000 m3 and total deposit of 1400 million cubic
meters. At present, the other 15 potential gas fields with total
deposits of around 30 bln. cubic meters are being explored.

Donetsk region boasts 2 million hectares of fertile land suitable for
agricultural holding. 1,6 million hectares of land is currently in
agricultural production. Fertile soil is mainlyblack earth with the
humus concentration up to 6%.

DEVELOPED INDUSTRY ON LOCAL MINERAL AND RAW MATERIALS BASE

Metallurgical industry

There are 3 large groups of metallurgical enterprises, 4 metallurgical
plants, 2 companies specialising in steel pipes production, a number of
tube-rolling mills and steel plants operating in non-ferrous and steel
industry.

The capacity on pig-iron production equals 18,2 mln. tons, steel – 22,9
mln. tons, rolled metal – 15,8 mln. tons.

The share of
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There are metallurgical plants located in the region that are well-known
all over the world:

? OSC «Donetsk metallurgical works», which managed to attract more than
50 mln. USD foreign investments

? OSC «Metallurgical works «Azovstal», OSC «Mariupol metallurgical works
«Illicha» which enlarge export of their products using Mariupol sea port
as an access to foreign markets

In the region there are big enterprises of non-ferrous metallurgy
important for the industry of Ukraine. This field of industry includes 7
companies that work on secondaryraw materials; the share of export
equals 20% of goods produced.

Machine-building

The Machine-building sector of Donetsk region includes nearly 220
companies covering the most part of demand of Ukraine for different
types of machinery and equipment.

All companies have well-developed infrastructure, which serves to
provide them with raw materials and through which their finished
products are sold. Among the biggest manufactures of machine-building
products are: Closed Stock Company «Novokramatorsk machine-building
plant», concern «Azovmash», «Starokramatorsk machine-building plant»,
Yasinovatskiy machine-building plant.

Chemical industry

The chemical industry is represented by 15 companies of different
specialisation, producing a wide range of products, including mineral
fertilisers, acids, soda, plastics.

The leading company is Open Stock Company «Concern «Stirol». The greater
part of its production is exported to CIS countries, Europe, Asia.

Coal industry

Coal industry is represented by 101 coal mines, 12 coal mines
construction enterprises, 33 processingmills. The coal deposits equal to
14,3 bln. tons, including cocking coal –7,5 bln. tons . Within the
framework of the program of coal industry re-structuring the closure of
unpromising mines is carried out.

Power industry

Power industry is represented by a complex of generating, network,
technical repair manufactures. The capacity of 7 heat power
stations(about 10 thousand. МWh.)covers needs of the region and allows
to export the electric power beyond the borders of Donetsk region.

Agriculture

Donetsk Region’s fertile soil provides ideal conditions forproducing a
wide range of agricultural products. Agriculture has 2 mln. hectares of
fertile lands at its disposal.

The region is a major producer of winter wheat, sunflower seeds, grain,
vegetables, eggs, milk, , beef, pork and poultry. As a result of
transforming of 414 collective agricultural companies there were formed
567 private agricultural companies in agricultural sector. There are
2132 farms operating in Donetsk region.

Food processing industry

Donetsk region has free niche in the market of food products. As
experience shows, the food-processing industry has proved to be one of
the most attractive sectors for investments. At the present time this
branch is the most popular sphere among foreign investors. There have
been already made significant investments in food processing industry of
Donetsk region; among foreign investors is the world famous company –
Cargill.

Donetsk region is the large centre of beverage industry , specialising
in quality beer, champagne and vodka production. One of the largest
factories on manufacture of champagne and winesis located in Artemovsk.
Itproduces champagne «Artemovskoye» which is the world-famous brand.

Light industry, consumer goods

The production of goods for population is implemented by 400 companies
which produce furniture, refrigerators, gas ovens, washing machines,
clothes, footwear, knitted goods, etc.

Other sectors offering investment potential include:

? Alternative power sources;

? Exploration of gas deposits;

? Infrastructure: transport and communications;

? Service sector: hotel, banking, insurance;

? Municipal sector development.

EXPERIENCE OF INVESTMENT ACTIVITY

Historical reference

Beginning from XVIII century Donetsk region (Donbass) has wide
experience in the sphere of attracting foreign investments.

The construction of coal mines in XVIII century made a good start for
industrial development of Donbass. Great demand for high quality coal
was an excellent incentive to invest in Donetsk region’s coal industry.
Thanks to direct foreign investments, in XIX century Donbass was
extracting 74% of total coal production in the country and nearly 100%
of the volume of cocking coal.

Intensive railway construction stimulated the industrial growth in the
region, while the development of mining industry created favourable
conditions for ferrous metallurgy development. By the middle of 1870s
Novorossiiskaya company located in Donbass and owned by the British
manufacturer John Hughes, became one of the largest metallurgical works
in the country. 12 out of 17 Russian metallurgical works were located in
Donbass. The construction of plants was mainly financed by American,
English, French, Belgian, and German investors. At the same time a great
number of rail ways were being built all over Donbass region.

Thus, at the beginning of ХХ century there were operating more than 300
industrial companies: coal-mines, metallurgical works, plants,
factories, shops, chemical plants, textile mills, food processing
companies. At the same time the share of foreign capital in industrial
complex of the region was quite significant.

Present-day experience

From the moment of adoption and implementation of the law of Ukraine
«About special economic zones and special mode of investment activity in
Donetsk region» there has been accumulated significant experience in
co-operation with foreign investors.

With the aim to coordinate the co-operation between local authorities
and investors acting on territories of priority development there was
established the Board on special economic zones and special mode of
investment activity in Donetsk region. In the towns and districts, which
have status of the territory of priority development (TPD), there were
established structural governing bodies on managing the special regime
of investment activity. There was launched an appropriate advertising
campaign aimed at attracting foreign investment capital in the Donetsk
region’s economy.

Since the implementation of the law of Ukraine «About special economic
zones and special mode of investment activity in Donetsk region » the
average annual volume of foreign investments in the region’s economy 4
times exceeded the volumes of previous years.

The approved projects provide for creation of 10,6 thsd. new and
retention of 26,4 thsd. existing jobs. Branch structure of projects is
represented on the diagram.

On the share of basic branches of industry fall 60 projects (total cost
2,7 bln.UAH), including in metallurgy – 12, coal industry – 11, chemical
– 21, machine-building – 13, construction – 3 projects. In light and
food industries there were approved 31 projects (total cost – 1,0 bln.
USD), agriculture – 10 (total cost – 122 mln.USD), transport and
communication – 12 (total cost – 343 mln.USD), municipal economy – 4
(total cost – 157 mln.USD,), health service – 1 project (6,6 mln. USD).

The realisation process of investment projects on the territories of
priority development and special economic zone «Donetsk».

The works have already started on 78 projects. Actually for their
implementation there were invested 1,8 bln.UAH (325 mln. USD), or 67% of
the total cost of projects.

The share of foreign investments from 22
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beginning of projects implementation) amounted to 2,2 bln. UAH (these
are bakery, confectionery and sausages, vegetable oil, modern furniture,
clothes, drugs, high quality soap and goods of technical use).The forth
part of goods produced is being exported.

In fact there have already been created more than 4 thsd. new and
retained 7,8 thsd. existingjobs, the salary level is approximately twice
the height ofthe rate of average salary in the region.

The cost of creation of onejob depends on the branch of industry in view
of their great variety and on average equals to 421 thsd. UAH (76,6
thsd.USD). At the same time, when investing in high technologies
(metallurgy) the cost of one job reaches the sum of 4 mln. UAH (691
thsd.USD).

The activity as for successful functioning of special economic zones is
taking place too.

The construction of a new meatprocessing plant in SEZ»Donetsk» has been
completed (the investor of the project – LLC «Vozrogdeniye»). The
planned production capacity – up to 2000 tons of ready products monthly.
80 new jobs are to be created according to the project.

A new plant on electrical household appliances manufacture is under
construction. The investor of the project – OSC «NORD».

The launch of special customs regime in SEZ «Azov» during the period
between March-May is planned, the infrustructure of which has already
been created.

The implementation works of investment project on development of the
main activity of Azov vessels repairing plant, which is located in the
territory of SEZ «Azov», are under way.

It is necessary to mention that the law of Ukraine «About special
economic zones and special regime of investment activity in Donetsk
region «has a stabilising influence on other regions of Ukraine –
positively promotes the economy of regions, their companies, budget
financing and solve the social problems.

It total as suppliers and subcontractors in realisation of projects take
place 2,5 thsd. companies of Ukraine.

The recipient investment capacity of the region equals to 100 bln. USD.

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