FDI in Ukraine

Overview by Globlatrade.net:

FDI in Figures

Increasing in the recent years, the FDI flux into Ukraine have slowed down due to the global recession and the severe economic crisis affecting the country. Apart from the economic downturn, the inefficient and corrupted legal system, complexity of legislation and regulation, poor contract and enforcement and poor governance constitute serious impediments to investment. This is so despite the fact that the country has its strengths: a large domestic market, proven agricultural potential, energy and mineral resources and a strategic geographic location which makes it a transit hub and a gate to Europe.

The main investors in Ukraine are Cyprus, Germany, The Netherlands, UK, Austria, the United States and Russia. Apart form the energy sector, direct foreign investment is concentrated mainly in the banking and food processing sectors. You can refer to the Invest in Ukraine website for more information.

Foreign Direct Investment 2007 2008 2009
FDI Inward Flow (million USD) 9,891 10,913 4,816
FDI Stock (million USD) 38,059 46,997 52,021
Performance Index*, Ranking on 141 Economies 48 47 45
Potential Index**, Ranking on 141 Economies 41 48 -
Number of Greenfield Investments*** 108 125 92
FDI Inwards (in % of GFCF****) 25.2 23.0 25.9
FDI Stock (in % of GDP) 26.7 26.1 44.3

Source: UNCTAD

Note: * The UNCTAD Inward FDI Performance Index is Based on a Ratio of the Country's Share in Global FDI Inflows and its Share in Global GDP. ** The UNCTAD Inward FDI Potential Index is Based on 12 Economic and Structural Variables Such as GDP, Foreign Trade, FDI, Infrastructures, Energy Use, R&D, Education, Country Risk. *** Green Field Investments Are a Form of Foreign Direct Investment Where a Parent Company Starts a New Venture in a Foreign Country By Constructing New Operational Facilities From the Ground Up. **** Gross Fixed Capital Formation (GFCF) Measures the Value of Additions to Fixed Assets Purchased By Business, Government and Households Less Disposals of Fixed Assets Sold Off or Scrapped.


FDI Inflows By Countries and Industry

Main Investing Countries 2010, in %
Cyprus 22.5
Germany 16.5
The Netherlands 9.6
Russia 7.0
Austria 6.3
UK 5.4
France 4.1
Sweden 4.1
Main Invested Sectors 2010, in %
Financial sector 24.0
Industry 20.7
Real Estate 8.0
Wholesale and retail 10.0

Source: State Statistics of Ukraine

Form of Company Preferred By Foreign Investors
Limited liability companies and joint stock companies.
Form of Establishment Preferred By Foreign Investors
A subsidiary is preferred by foreign investors as it is very advantageous.
Main Foreign Companies
You can see the list of the main foreign companies established in the Ukraine.

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Why You Should Choose to Invest in Ukraine

Strong Points
The country's main strong points are:
- One of the biggest markets in Europe with 47 million consumers;
- The most dynamic GDP growth in Europe;
- A very good education system. The Ukraine is placed fourth in the world, in terms of specialists with diplomas in the high-tech sector;
- A strategic geographical positioning, the country being situated at the entry of Europe, Russia and Asia;
- The emerging middle class estimated at 20% of the population;
- The presence of investors such as Kraft Foods, Coca-Cola, Hewlett Packard, Cargill, Knauf, Raiffeisen Bank, Credit Agricole and many others; and
- The strengthening and reforms of the banking sector's.
Weak Points
The country's weak points are:
- The small amount of support given to foreign investors by the law;
- The weakness of the national oil company, Naftogaz's, financial situation and the country's permanent risk of being unable to pay its gas bill;
- The drop in industrial production in 2009;
- A high rate of inflation;
- Political instability;
- Endemic corruption.
Government Measures to Motivate or Restrict FDI
Following the orange revolution, investment friendly reforms have allowed for the considerable increase of FDI. In effect, the government wishes to strongly attract foreign investors. Except for certain key sectors like banking and telecommunications, most sectors are entirely open to FDI.

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