Investing in Ukraine

Investing in Ukraine

Blog Article

Why Invest in Ukraine

Ukraine continues to undergo a democratic and economic transformation that is integrating it deeper into the Euro-Atlantic and global economic architecture. This makes it a key market for global companies, particularly in information technology and agriculture. Visit Investing in Ukraine to read more.

Ukraine also offers several benefits to investors, including a large consumer market, a highly educated and cost-competitive work force, and abundant natural resources. The government has made attracting FDI a priority.

1. High-quality human capital

Investing in human capital is an effective way to boost economic growth and competitiveness. Specifically, it can strengthen an employer’s ability to create high-quality jobs and increase the productivity of its workforce.

The most important reason to invest in human capital is that it can help an employer avoid disruptions caused by technological change and other market forces. Moreover, the investment can also improve an employee’s skills and raise their wages.

Ukraine is a good investment destination because it has a highly educated and cost-competitive workforce and abundant natural resources. Additionally, it is a member of the EU, which gives it preferential market access and accelerates its economic integration with the EU.

2. Strong infrastructure

Modern economies rely on reliable infrastructure to facilitate trade, power businesses, connect workers to jobs, improve living conditions and protect the environment. This includes roads, rail systems, broadband networks, water and energy systems and more.

Moreover, investments in infrastructure can be made through public-private partnerships, which involve the private sector in a range of aspects from design to construction, financing and operations. These partnerships can provide greater budgetary accountability and savings in the long run.

While these benefits do depend on Ukraine surviving the current war and winning an acceptable peace settlement, they also rely on the United States and its allies providing continuing aid. If the United States ceased to do so, they could quickly reverse these benefits and undermine any progress Ukraine has made towards economic recovery.

3. Competitive labor costs

In addition to the competitive labor costs that are associated with Ukraine’s high-quality human capital, its infrastructure, and a stable business environment, a growing number of foreign investors also recognize the many benefits that Ukraine can provide them.

For example, a recently approved law provides preferential land use rights and supports foreign investment projects that exceed the equivalent of 20 million euros ($23.8 millions** or DKK149 millions). In addition to these incentives, Ukraine’s ICAL is a near-direct translation of the UNCITRAL model law on international commercial arbitration, which means that local courts must recognize and enforce foreign court decisions.

As for the human capital that is being generated by refugees from Ukraine, Giovanni Peri suggests that this may be a windfall for Poland, Romania, Moldova, and Hungary – if the war ends soon enough, of course. The migration of brains, professionals and skilled workers – which is the most important thing to understand about this phenomenon – could have a multiplier effect in terms of helping countries like these rebuild their economies.

4. Good business environment

Ukraine's business environment has improved in recent years and is now ranked among the most free and open economies in Europe. However, corruption remains a problem and continues to be a major obstacle to foreign investment.

The government actively seeks FDI and has established an investment promotion office, UkraineInvest, and a Business Ombudsman. It also offers a wide range of incentives to attract foreign investors.

Ukraine's regulatory regime is characterized by outdated, contradictory, and heavy regulations, as well as arbitrariness and favoritism in government decisions. It also lacks effective protection of property rights, and there are often irregular payments and bribes made by government officials.

5. Access to markets

Ukraine is a large market with a highly educated and cost-competitive workforce. It also has an abundance of natural resources.

The government continues to advance legislation geared towards developing these strengths and creating new opportunities for investors. For example, in March 2020, parliament passed a law lifting the decades-old moratorium on the sale of agricultural land.

Despite Ukraine's reputation for corruption and weak governance, its government has continued to improve its transparency and rule of law. However, vested interests and oligarchs still control public policy for personal gain. These factors have jeopardized a new IMF assistance program and have raised concerns about the future of reforms.