After the end of the war in Ukraine, the basic condition for rebuilding the infrastructure and economy of this country will be the development of absolutely all branches of production, because some of them have been completely destroyed, and others will require huge investments to enable their full operation.
This means that investing in the Ukrainian economy may bring significant profits to potential investors in the near future.
Until 2019, the most attractive investment sectors in Ukraine were considered to be agriculture, information technology, and traditional and renewable energy. After the end of the war, there will undoubtedly be huge investments in construction. All other areas of production will become at least promising.
Proper investment requires, first of all, a correct assessment of the risk and the prospects for the return of invested funds – so that instead of a loss, you can enjoy the profit you have made. Below we present a brief discussion on the specifics of investing in the Ukrainian economy.
At the outset, it should be noted that the concept of "investment climate" is used to determine the investment attractiveness of a country. In order to verify it correctly, it is necessary to take into account general indicators, the detailed assessment of which was carried out by our colleagues from Ukraine:
– political and financial stability (unfortunately low for Ukraine);
– level of overall economic development of the country (average);
– level of development of market and investment infrastructure (currently assessed as average, but its assessment changes with the increasing attacks on infrastructure facilities);
– domestic market capacity (high);
– labor cost (low);
– purchasing power of the population (high);
– level of criminogenic, environmental and other threats (medium).
When assessing investment potential, one cannot lose sight of the fact that Ukraine is one of the largest and richest countries in Europe in terms of mineral resources. In addition, it ranks first in Europe in terms of agricultural land area, and third in the world in terms of chernozem area. As a result, it can meet the food needs of over a billion people. Ukraine is also a highly industrialized country, ranking second in Europe in terms of gas transmission capacity; second in the world in iron ore exports; third in Europe in terms of nuclear power plant capacity and fourth in terms of the length of railway lines. It should also be taken into account that Ukraine has an extensive transport system.
Today, Ukraine as a potentially attractive country for investment is determined by the following positive factors :
– significant natural resources;
– potentially large capacity of the domestic market;
– favorable geographical location;
– low labor costs;
– high innovation capacity.
Low tax rates, accessibility and ease of business registration, and quick investment discounts also have a positive impact on doing business in Ukraine.
However, it should also be taken into account that currently additional threats related to investing and doing business in Ukraine are: the instability and specificity of national legislation, a large number of documents regulating some industries and a relatively high level of corruption. Such obstacles should be assessed individually, however, because they differ significantly depending on the given branch of the economy.
Ukraine is taking a number of actions to improve the situation in this area. It is worth noting that, for this purpose, Law No. 1059 of September 20, 2019, “On Amending Certain Legislative Acts of Ukraine on Stimulating Investment Activity in Ukraine” was adopted. This law aims to improve the conditions for: obtaining loans, obtaining building permits, ensuring the execution of contracts, resolving insolvency issues, registering real estate, protecting minority investors, and registering businesses. Specific steps are also being taken to combat corruption, such as the recent establishment of the Higher Anti-Corruption Court, competent for crimes in this area, which is to streamline and speed up adjudication in these cases.
Most problems can be avoided, or at least the risk of their occurrence can be reduced, thanks to professional handling of investment projects.
This entry contains general information on the legal issue discussed. It does not constitute legal advice or a solution to a specific case or legal problem. Due to the unique nature of each factual situation and the variability of the legal status, we recommend that you seek the assistance of a law firm for legal advice.