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inclusive and sustainable growth.” Among sectors with the highest potential cited by Renaud-Basso are: agriculture, energy, transport, information technology.
“There is a huge potential in Ukraine, especially in its people and its youth. Pursuing the reform agenda is key for the economic development. Structural weaknesses remain and weigh on the pace of economic growth, while labour productivity remains below other countries in the region. Progress in key areas of governance would provide a level playing field for investors
and entrepreneurs, which is crucial for unleashing the growth potential of the Ukrainian economy,” said Renaud-Basso.
With a large population, an educated and skilled work force, and situated in the heart of Europe, potentially Ukraine has a lot going for it. But it remains a hard sell. The political instability, the slow progress on reforms and a war in the eastern part of the country all put investors off. The government is trying to do something about that.
In February the government launched a New Economic Strategy 2030 (NES2030) that introduces a number of investment incentives – including the much touted “investment nannies” – with which the government hopes to increase FDI from the zero FDI it received in 2020 to $15bn a year by 2030.
Changing the investment climate
Ukrainian President Volodymyr Zelenskiy was elected on a wave of optimism in April 2019, but the reality of making changes that have been ignored for some three decades is much tougher.
Scandal and war dominate the international headlines, but the country has already made significant progress in some areas. The banking sector has been cleaned up and ended 2020 with its best month-on-month profits in four years, the coronacrisis notwithstanding. The lingering problem of high non- performing loans (NLPs) have now be provisioned for and don't represent a danger to the system anymore.
A crucial new law on the sale of land has also been passed, albeit watered down and delayed from the more radical draft version. And most recently the Cabinet of Ministers has put in place a set of laws to define the conditions and perks for inbound investors.
“For the first time since independence the president signed off on a law to support significant investment for sums over $20mn over five years that will receive significant state support,” says Tsivkach. The support comes in form of things like tax breaks, low rents on land, reduced duties, connection to grids and construction of necessary infrastructure that in total will be equivalent up to 30% of the total amount invested. The law just came into effect in February and now the government is working on the all-important instructions that lay out the details of how the law should be applied.
The support comes in the form of things like tax breaks, low rents on land, reduced duties and attractive leasing rates on property that in total will be equivalent to 30% of the total amount invested. The law just came into effect and now the government is working on the all-important instructions that lay out the details of how the law should
be applied.
The new investment law is designed to attract international investors but the same law applies to domestic investors, as the government wants to encourage investment across the board and believes
bank, Dragon Capital, already said in the middle of March that he was looking at the new rules and considering investing into two industrial parks, making use of the benefits on offer.
Privatisation redux
Another big plank of the Zelenskiy shake-up is to re-launch the privatisation programme, which has already seen some old disused prison buildings sold off and an iconic hotel in the heart of Kyiv. Bigger assets are in the pipeline to go under the gavel later this year, which will also be supported by the new investment law.
There are several big companies that have been on the list for years that were temporarily removed from the list while the coronavirus (COVID-19) ravished the country in 2020, but these restrictions are expected to be removed soon and those companies put back under the gavel.
On February 4, the Verkhovna Rada supported the draft law 4543 on unlocking transparent large-scale privatisation auctions in the first reading. The adoption of this bill in the second reading eliminates the last barrier to attracting sustainable investment through large-scale privatisation in Ukraine’s economy.
And the state has a lot of sell. The former president of Georgia and
now a Ukrainian politician, Mikheil Saakashvili, said in a Kyiv Post opinion piece recently that the state-owned enterprises (SOEs) cost the Treasury
“The support comes in the form of things
like tax breaks, low rents on land, reduced duties and attractive leasing rates on property that in total will be equivalent to 30% of the total amount invested”
creating strong local players, who can become partners with international inves- tors, will pull in more FDI in the long run.
Indeed, Tomas Fiala, the CEO and founder of Ukraine’s biggest investment
$6.1bn a year and that Ukraine has 63 times more state companies than Poland and 76 times more than Sweden.
In 2021, the State Property Fund plans transparent tenders for the sale of the
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