Opportunity for investors and entrepreneurs to rebuild Ukraine
Russia’s invasion has become an unprecedented challenge for Ukraine – to put it mildly. However, despite a difficult economic situation, the private sector is still resilient and capable of functioning.
That was the message Sergiy Tsivkach, executive director of UkraineInvest, delivered to attendees at the CEE Summit in June.
UkraineInvest is the Ukraine government’s investment promotion office, created in 2016 to attract foreign direct investment and assist existing investors in expanding their businesses in the country. Being an EU membership candidate and the need for reconstruction makes Ukraine attractive for foreign investors, according to Tsivkach.
“Ukraine obtained the status of an EU candidate in June last year and we are confident in terms of movement on the way to the European integration,” he said.
Attracting FDI
Ukraine has used various incentives to attract FDI, the most prominent among which is the programme for industrial parks, where projects of more than €20 million of investment can receive state support of up to 30%.
“Private investors planning to develop an industrial park in Ukraine are entitled to receive full or partial compensation of interest rates on loans, non-refundable financing, compensation for connecting to energy grids, as well as tax and customs incentives,” Tsivkach added.
“Many companies are currently interested in participating in Ukraine’s reconstruction, which will become one of the largest construction projects of this generation.”
Sergiy Tsivkach, UkraineInvest
The real estate and infrastructure sectors in Ukraine offer significant opportunities for both investors and entrepreneurs thanks to a robust legal framework, ongoing reforms and strategic location, he argued.
“Ukraine is well positioned to become a regional centre for real estate development and infrastructure investment. By capitalising on these opportunities we can contribute to Ukraine’s economic growth, connectivity, and quality of life of our citizens,” he said.
“Many companies are currently interested in participating in Ukraine’s reconstruction, which will become one of the largest construction projects of this generation. In the post-war future, expected access to new markets and rebuilding of infrastructure will increase demand from new international players and significantly improve Ukraine’s logistics and supply chain sectors.”
Warehouses are a promising sector
The warehouse market in Ukraine is considered to be a particularly promising sector, as it offers strong potential for growth and attractive returns once post-war recovery begins. The opportunity exists to develop innovative financing structures to mitigate risks and enable more private investment. A public-private partnership (PPP) route is planned as a way to restore damaged and destroyed social, transport and other infrastructure.
“Infrastructure requires significant investments as well as improving the quality of services and bringing them closer to European standards, this creates many opportunities for private investment and PPPs,” Tsivkach said.
The war has understandably had a detrimental impact on FDI inflows to Ukraine. After reaching a record $7.3 billion in 2021, inflows plummeted to -$321 million the following year (the invasion having taken place in February 2022), according to UkraineInvest. However, 2023’s early figures indicate a bit of a recovery, with $1.1 billion of inflows in the first quarter. Much of this is accounted for by reinvestment, but $128 million of it is new direct capital.
Among the inbound investments, Kingspan, a global producer of building materials based in Ireland, announced it will build a facility in the Lviv region worth about $300 million. Brewer Carlsberg also plans to invest $40 million, while bio-pharma giant Bayer company announced than $60 million of investment.
Meanwhile, in the development finance realm, the German Credit Institution for Reconstruction announced in mid-August that it is implementing five joint investment projects with the Government of Ukraine worth €247 million and is preparing an additional three projects valued at over €73 million.
Read more FDI articles in the October edition of REAL FDI
