Foreign Direct Investment in Ukraine
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.
Country Comparison For the Protection of Investors
|Ukraine||Eastern Europe & Central Asia||United States||Germany|
|Index of Transaction Transparency*||5.0||6.3||7.0||5.0|
|Index of Manager’s Responsibility**||2.0||4.0||9.0||5.0|
|Index of Shareholders’ Power***||7.0||6.2||9.0||5.0|
|Index of Investor Protection****||4.7||5.5||8.3||5.0|
Source: Doing Business
Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action. **** The Greater the Index, the Higher the Level of Investor Protection.
|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|
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.
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.
- Bilateral Investment Conventions Signed By Ukraine
- The Ukraine has signed 64 investment protection bilateral agreements, namely with the United States and most of the OECD and the CIS countries.
Procedures Relative to Foreign Investment
- Freedom of Establishment
- The administrative formalities depend on the form of company to be created. The Ukrainian agency for the promotion of foreign investment allows you to get information about the authorizations necessary for setting up business.
- Acquisition of Holdings
- The legislation provides for the possibility of creating a Ukrainian company with foreign investment in a Private Limited Company, in a joint-stock company, or in a 100% subsidiary form, and regulates their constitution and running. Acquisition of holdings in an existing company, especially within the ongoing privatization programme, is subject to the same legal procedures but requires approval from the State Assets Funds.
- Obligation to Declare
- The agency for the promotion of foreign investment in the country allows you to get information about the authorizations necessary for setting up business.
- Competent Organization For the Declaration
Ukrainian Ministry of Finance
- Requests For Specific Authorizations
- All companies active in the sectors of banking, insurance, security, pharmacy, and the production of alcohol must obtain a State license.
- Investment Aid Agency
Ukrainian investment promotion agency
The State Agency of Ukraine for Investments and Innovations
- Tenders, Projects and Public Procurement
Tenders Info, Tenders in Ukraine
DgMarket, Tenders Worldwide
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