Western Ukraine, particularly its border regions (oblasts), is emerging as a promising area for business and foreign investment. These include Lviv, Volyn, Zakarpattia and Chernivtsi, which all share borders with EU member states Poland, Slovakia, Hungary and Romania. This strategic location offers unique advantages for businesses looking to tap into both Ukrainian and European markets and to take advantage of the favorable trade rules between Ukraine and the EU.
Strategic advantages
Proximity to EU markets: The western oblasts’ proximity to EU countries facilitates easier access to European markets, reducing transportation costs and time. This is particularly beneficial for sectors like manufacturing, logistics, agriculture and food processing.
Skilled workforce: Western Ukraine boasts a well-educated and skilled workforce, particularly in IT, engineering and manufacturing. Cities like Lviv, home to a renowned polytechnic, have become IT hubs, attracting tech companies and startups.
Infrastructure development: Significant investments have been made in improving infrastructure, including roads, railways and border checkpoints, enhancing connectivity and trade efficiency.
Government incentives
Tax benefits: The Ukrainian government offers various tax incentives to attract foreign investors. These include reduced corporate tax rates, exemptions on import duties and VAT for equipment and tax holidays (See: Ukraine strengthens state support for investment) as well as a special regime for the IT industry through the Diia.City regime (See: Diia.City Special Tax Regime).
Special Economic Zones (SEZs): SEZs in regions like Zakarpattia provide additional benefits, such as simplified customs procedures, reduced land lease rates and government support in obtaining permits and licenses. The Zakarpattia SEZ was established to leverage the region’s strategic location bordering Poland, Slovakia, Hungary and Romania.
Investment promotion agencies: Agencies like UkraineInvest actively promote investment opportunities and provide support to foreign investors, including assistance with legal and regulatory issues. Advantage Ukraine promotes investment by showcasing over 500 projects and opportunities across various sectors, including agriculture, technology and natural resources. (See: Interview with Oleksandr Gryban, Advantage Ukraine)
Economic opportunities
IT and software development: Known as Ukraine’s Silicon Valley, Lviv is a major IT hub with numerous tech companies and startups. The IT sector has seen significant growth, with exports reaching over US$5 billion in 2023. (See: Interview with Anna Ryzhova, Ciklum)
Agriculture and food processing: The fertile lands of Western Ukraine are ideal for agriculture. Investment opportunities exist in organic farming, food processing, and agriTech. The region’s agricultural exports to the EU have been steadily increasing.
Renewable Energy: With a focus on sustainability, there are opportunities in renewable energy projects, including solar and wind farms. The Ukrainian government has set ambitious targets for renewable energy, making it a favorable environment for investment.
Manufacturing: Since the start of the war, approximately 13.4 percent of Ukrainian firms have relocated, either partially or completely, to Western Ukraine. This includes a significant number of companies in light manufacturing industries such as apparel, textiles, and beverages. Having seen much less disruption since the war’s onset, thanks to its distance from the front lines, Western Ukraine is perceived to be safer and has benefited from programs to assist with relocation costs and logistics. For example, Kingspan Global plans to invest €200 million in a construction technology hub in Lviv to produce low-carbon insulation and building envelope products. This hub will support both EU exports and reconstruction efforts in Ukraine.
Tourism and Hospitality: Rich in cultural heritage and natural beauty, the tourism sector shows potential for growth. Opportunities exist in hotel development, travel services and cultural experiences.
Economic growth and statistics
GDP growth: The western oblasts have shown resilience and growth despite the challenges posed by the ongoing conflict. For instance, Lviv’s GDP grew by 4.5 percent in 2023.
Foreign Direct Investment (FDI): Western Ukraine has attracted significant FDI, particularly in the IT, manufacturing and renewable energy sectors. In 2023, the region received over US$1 billion in FDI.
Export growth: Exports from the western oblasts to the EU have been on the rise, with agricultural products, machinery and IT services leading the way.
Western Ukraine’s border regions offer a wealth of opportunities for businesses and foreign investors. With strategic advantages, government incentives and a growing economy, these regions are well-positioned to become key economic hubs. Whether in IT, agriculture, renewable energy or tourism, the potential for growth and success is substantial.
In May 2024, the State Property Fund of Ukraine (the SPFU) introduced the “Land Bank” project, which opens the state land lease market for farmers and agrarians. The project will be implemented within the framework of Law № 3272-IX dated 27 July 2023, which aims to ensure the efficient use of state-owned agricultural land. The formation of the Land Bank is anticipated to be implemented in several stages:
The Cabinet of Ministers of Ukraine (the CMU) will issue a resolution transferring agricultural lands to state operators of the Land Bank — several state enterprises under the SPFU that are free of debt and corruption cases. These enterprises will subsequently be transformed into Limited Liability Companies (LLCs) or Joint Stock Companies (JSCs), with 100% of their shares owned by the state.
The state operators will lease the land for 50 years and organise open competitive sublease auctions through the Prozorro.Sale platform.
The initial rental rate will be no less than 12% of the land’s normative monetary valuation, with sublease agreements being concluded for 14 years for annual crops and 25 years for perennial crops.
In accordance with Order of the CMU № 541-r dated 13 June 2024, 104,000 hectares of agricultural land have already been transferred to the State Enterprise “Agrarian Investment Fund” which, after corporatisation, will serve as a land auction operator. The first land auctions on the Prozorro.Sale online platform are anticipated to take place in 2024.
State Registration of Property Rights for Land Improvement and their Components
The possibility of state registration of property rights to land improvement networks and their components (for irrigation, drainage, collector-drainage and other related purposes) was introduced via amendments to the final and transitional provisions of the Law of Ukraine “On Water User Organisations and Stimulation of Hydrotechnical Land Improvement“. From now on, to register an irrigation and drainage network or its components (including changes to information about them), the applicant (any interested person, government, or local authority) may submit the following to the State Cadastral Registrar:
An application for the state registration of a land improvement network or its components (including changes to information about them), in the form prescribed by the Procedure for Administration of the State Land Cadastre;
Documents establishing the details of a land improvement network or its components;
An electronic document containing information about a land improvement network or its components.
State registration or a reasoned refusal to register is granted within 14 days from the date of registration of the application.
Compensation for the Restoration and Construction of Land Improvement Systems
According to amendments to Resolution of the CMU No. 1070 dated 11 October 2021, agricultural producers who use improved land may receive up to 50% compensation for the costs incurred for the reconstruction and modernisation of existing or the construction of new land improvement systems. Water user organisations may also receive up to 50% compensation for the restoration of pumping stations. These subsidies will be provided for land improvement systems that have been commissioned between 1 November 2023 and 31 October 2024.
Compensation for Humanitarian Demining Costs
The CMU has updated the Procedure for using the state budget funds allocated to compensate agricultural producers for the costs of humanitarian demining of agricultural land. According to the amendments, the updated Procedure now also applies to demining activities carried out between 24 February 2022 and 15 April 2024, provided that such activities are conducted by certified demining operators. Compensation will cover up to 80% of the costs.
ІІ. LEASE OF STATE-OWNED PROPERTY
The CMU has amended the legislation governing the preparation of documents required for the lease of state-owned real estate by social service providers
The CMU has amended the legislation governing the preparation of documents required for the lease of state-owned real estate by social service providers included in the Register of Social Service Providers and Recipients. As a reminder, since August 2023 social service providers have been included in the list of entities eligible to lease state and municipal property without the need for an auction.
By Resolution № 381 dated 2 April 2024, the Government of Ukraine approved the list of documents that must be submitted by such applicants, specifically a document confirming the inclusion of the social service provider in the Register of Social Service Providers and Recipients, as well as a lease application. Additionally, a uniform preferential rental rate of 1% per year of the market value of the leased property has been established for all social service providers.
ІІІ. STATE INCENTIVES FOR ATTRACTING INVESTMENT
New Regulations on State Support for Projects with Significant Investment (so-called “Investment Nannies”)
The Government has approved a series of resolutions that regulate the conditions for providing state support to projects with significant investment.
In particular, to implement the provisions of Article 3 of the Law “On State Support for Investment Projects with Significant Investment in Ukraine” (“the Law“), the Government approved in March 2024 the Procedure for Compensation for Construction Costs of Engineering and Transport Infrastructure Objects by Applicant or Investor with Significant Investment (“Resolution № 292”).
Resolution № 292 outlines the requirements for the submission of documents and the procedure for obtaining full or partial compensation from budgetary funds for:
The costs of engineering and transport infrastructure facilities constructed by the applicant or investor with significant investment, required for the implementation of the investment project;
The cost of connection to engineering and transport networks required for the implementation of an investment project with significant investment.
To recap, the Law introduces the aforementioned state incentives for investors planning to implement investment projects in Ukraine with a value of at least €12 million and a duration of up to five years in sectors such as manufacturing, extraction and processing of minerals, transportation, logistics, and other specified industrial areas. The total amount of state support can reach up to 30% of the investment project’s value.
Additionally, on 26 April 2024, the Government approved the Procedure for Use of Funds to Support Projects with Significant Investment, including budgetary funds allocated as full or partial compensation to applicants or investors for the costs of constructing engineering and transport infrastructure facilities and/or the costs of connecting and joining engineering and transport networks.
The allocation of budgetary funds for these purposes will be carried out in accordance with the Procedure set forth in Resolution № 292, within the framework of the special fund of the state budget under the program “State support for the implementation of investment projects with significant investment.”
Among other things, the Procedure mandates that the applicant must return the received compensation if it is determined that the amount of investment is less than the threshold of €12 million or if such funds were obtained unlawfully.
On 14 May 2024, the Strategic Investment Council was established and its composition approved. The Council will approve the medium-term plan of priority public investment and the unified portfolio of public investment projects, as well as oversee their high-level implementation.
Certain Issues of State Incentives for Creation and Operation of Industrial Parks
Resolution No. 1208 dated 28 October 2022 “On Approval of Procedure for Providing Full or Partial Compensation of the Interest Rate on Loans (Credits) for the Development and/or Conduct of Business Activities within Industrial Parks” is suspended for the period of martial law,
сancellation of Resolutions No. 1207 “On Approval of the Procedure for Providing Funds on a Non-Refundable Basis for the Development of Industrial Parks and/or Ensuring the Construction of Related Infrastructure Facilities Necessary for the Creation and Operation of Industrial Parks” and No. 10 “On Approval of the Procedure for Providing Compensation for Expenses to Initiators of the Creation of Industrial Parks — Business Entities, Management Companies and Participants of Industrial Parks for Connection to Engineering and Technical Facilities”.
Instead, state support for industrial parks will now be regulated by the updated Procedure for Providing Funds for the Development of Industrial Parks and/or the Construction of Engineering and Transport Infrastructure Required for the Creation and Operation of Industrial Parks, as well as Compensation for Costs of Connecting and Joining Engineering and Transport Networks (the “Procedure“). State incentives will be provided to initiators and managing companies for two main purposes:
(i) the development of infrastructure for industrial parks, and (ii) compensation for the costs of connecting to engineering networks.
However, the amount of state support should not exceed UAH 150 million per applicant (one industrial park) and will cover no more than 50% of the project’s cost (80% for de-occupied territories).
Furthermore, the Procedure outlines the required documentation for obtaining state funds and sets a number of requirements that applicants must meet, including the inclusion of the industrial park in the Register of Industrial Parks, timely submission of reports on the operation of the industrial park, absence of debt and open bankruptcy proceedings, absence of asset confiscation, and no records of the applicant in the Unified State Register of Persons who Committed Corruption or Related Offenses.
Catalogue of Industrial Parks
The Ministry of Economy has published a Catalogue of Industrial Parks, which contains data on the specialisation, location, area, infrastructure, and available services of industrial parks. The catalogue is intended to help businesses find partners to develop their operations within industrial parks, attract new investment, or select locations with developed infrastructure to house their production facilities.
Newly registered industrial parks
Since the beginning of 2024, 16 new industrial parks have been registered in Ukraine, primarily located in the western and central regions, with a diverse range of activities planned by future residents (production of building materials, woodworking, paper, and food industries). As of July, 84 parks have been included in the Register of Industrial Parks.
Are you an entrepreneur or a representative of a civil society organisation? Do you want to work with a Ukrainian organisation on reconstruction activities in Ukraine and sustainable recovery of the Ukrainian economy? If so, apply for a subsidy from the Ukraine Partnership Facility (UPF).
Budget
Start date: Wednesday 30 October 2024 00:01 (CET)
End date: Friday 31 January 2025 23:59 (CET)
Total budget: € 32,500,000
For whom?
The UPF subsidy scheme (UPF2) supports Dutch and international companies and civil society organisations that want to work on recovery and sustainable reconstruction activities of the Ukrainian economy and society. These companies and organisations partner with at least one Dutch and one local organisation in Ukraine to establish and implement the project. The main applicant must represent a Dutch company or civil society organisation.
Budget
For this opening round, a total of €32.5 million is available. You can apply for a minimum grant of €500,000 and a maximum of €4 million for your project.
UPF2 reimburses up to 95 per cent of the total eligible costs for each project. You must demonstrate how you provide for the own contribution and deal with unforeseen costs. Projects must not be commercially fundable or for-profit.
Aim
Since the Russian invasion of Ukraine, the need for support has been immense. Financing projects with money from the commercial sector is not possible. Thus, UPF supports concrete projects of the (Dutch) business community that contribute to the reconstruction and sustainable recovery of the Ukrainian economy and society. The subsidy is for the following sectors:
agriculture
water
healthcare
sustainable energy, and
circular construction.
The expertise of Dutch companies and organisations is particularly valuable in these areas. For example, expertise in providing access to drinking water, essential healthcare or improving food quality.
UPF does not cover emergency aid.
Where possible, these projects contribute to a better position of vulnerable groups, including women and youth.
Conditions
Conditions for applicants
As an applicant, keep the following in mind:
A Dutch company or civil society organisation submits the subsidy application on behalf of a partnership.
The partnership must consist of at least 2 companies or organisations.
The partnership must have been formed before the applicant applies for a subsidy.
The applicant (lead partner) sends the partnership agreement and the subsidy application.
All partners in the partnership are private legal entities established before 15 August 2023. They must also have experience and expertise in the project’s field. Partners must also be necessary for achieving the project goals. All partners are able – also financially – to make their own contributions and deal with risks.
Projects are concrete and have tangible results. They will lead to broader local economic and social development. Projects should also have a lasting long-term impact on the local community or chain of businesses and civil society organisations. For example, projects that contribute to local employment and labour employability, such as the knowledge, skills, and mental and physical health of Ukrainian citizens. Projects that contribute to reconstructing facilities damaged or destroyed by war are also eligible for a subsidy.
Feasibility studies, pilots and projects based on technologies that are in an experimental phase are not eligible.
Assessment criteria
We will use the general conditions and 3 extra criteria to assess applications:
alignment with local needs and priorities;
results and impact;
action plan and effectiveness.
Certain criteria are more important than others, so each is assigned a ‘weighting factor’. Look at all criteria carefully. Project proposals must score sufficiently on all three criteria.
For a list of the criteria and their respective weighting factors, see the publication in the Dutch Government Gazette.
Project duration
Project activities must last at least 6 months and a maximum of 4 years. They must start within 2 months of being awarded the UPF subsidy, but they can also begin before we award the subsidy.
Responsible Business Conduct (RBC)
What International Responsible Business Conduct requirements must my project meet?
Dutch companies set an example for others in International Responsible Business Conduct (RBC). If you do business internationally with financial or other support from the government, we expect you to act responsibly.
International RBC risks and due diligence
Using an RBC risk assessment approach, you ensure that projects you undertake or participate in reduce or prevent potential harmful effects on people and the environment. This process is also called due diligence. It examines
the social and environmental risks of your international activities and supply chain,
how you prevent or reduce them, and
how you report on them.
International RBC guidelines and UPF
If we approve your project proposal, you must follow these international RBC guidelines:
Activities on the FMO Exclusion List are not eligible for funding under the UPF subsidy programme.
Responsible Business Conduct (RBC) in your application
Specify your project’s international RBC risks for people, the environment and society. Describe what you do to manage these risks. Use the RiskCheck for a quick and easy overview of potential risks.
Establish a joint integrity policy and implementation plan for the project.
If we approve your subsidy application, our advisor will discuss your specified international RBC risks during the initial meeting.
We may include specific measures to prevent or reduce identified international RBC risks in confirming the subsidy approval.
During the project, you report the measures you have taken to prevent, reduce, or end RBC risks. We expect you and your partners to share this information openly and proactively with us.
Preparing your application
There is no mandatory quick scan for this subsidy round. On the Dutch Q&A page, you will find the most frequently asked questions and answers. Is your question not listed? Mail your question to upf@rvo.nl.
Our advisors are available to answer your questions. To schedule an appointment with an advisor, visit the b2match platform website.
Has your partnership been formed, and do you have all the necessary documents? Then, you can apply for funding via the eLoket during the opening on our English apply page. You will also find the forms to send with your application on this page.
You can apply for a subsidy from 30 October 2024, 00:01 CET, until 30 January 2025, 23:59 CET. You will need at least eHerkenning level 2+ for this. If you still need to get eHerkenning, apply for it first. The process may take a few days.
Once we have received your subsidy application, we will send you a written acknowledgement. We only process complete applications in the order of receipt: first-come, first-served. If your application is not complete, we will notify you. You can add documents to complete your application until the closing date.
Is your application complete? You will receive a message about this and the date you will receive the decision (within 13 weeks).
You can add documents to complete your application until the closing date.
After your application
We aim to inform you whether we have approved your application within 13 weeks of receiving your complete application. We will also send you our assessment of your application.
Do you have questions about your approved project? Send an email to upf@rvo.nl.
Approved projects UPF1
The first application round for UPF closed on 31 December 2023. We received more than 60 project proposals varying in size and complexity, requesting a total of €200 million. The total subsidy amount of €25 million has now been allocated. Our advisors, the Netherlands embassy in Kyiv, specialists and an advisory committee assessed complete project proposals on a first-come, first-served basis. 7 projects from companies and NGOs were approved:
Agriculture
Resilient energy-efficient agriculture and food supply for Ukraine;
Rebuilding potato Ukraine;
Building of a multifunctional transhipment terminal for agricultural products.
Water
Water-immediate damage reconstruction and sustainable solutions.
Healthcare
Expanding access to diagnostics for improved treatment and rehabilitation;
Trauma: Scaling up community mental health care for children and youth at risk in Ukraine’s conflict-affected communities and beyond;
Building a prosthetics and rehabilitation centre and setting up a Netherlands-Ukrainian educational programme for medical specialists.
The State Property Fund of Ukraine (SPFU) has unveiled the Large Privatisation-2024 project, an ambitious initiative to attract strategic investors and stimulate economic growth through the privatisation of state-owned assets.
Following the success of small-scale privatisation efforts, this initiative is a key element of Ukraine’s broader economic reform strategy. It aims to enhance transparency, improve efficiency, and drive foreign investment into the country. The key highlights of the privatisation effort are as follows:
Top assets for privatisation. The programme has identified several high-value assets that will be offered to investors. These assets represent some of the most valuable and strategically important properties available for privatisation (more information can be found here):
the Ukraine Hotel in Kyiv (auction scheduled for 18 September 2024 with a starting price of UAH 1.05bn/EUR 23.30m);
the United Mining and Chemical Company, the biggest producer of titanium ore in Ukraine (auction scheduled for 9 October 2024 with a starting price of UAH 3.9bn/EUR 86.5m);
LLC “AEROC”, a leading producer of aerated concrete products with its facilities located in the Kyiv and Lviv regions;
LLC “Demurinskiy Mining and Processing Plant”, which is developing the Vovchansk deposit of titanium and zirconium; and
LLC “Investment Union “Lybid”, owner of Ocean Plaza, one of the biggest malls in Kyiv.
Strategic goals. The SPFU aims to use the proceeds from privatisation to bolster the national budget, reduce the state’s economic footprint, and improve corporate governance across various sectors. Key goals also include improving enterprise performance, enhancing property utilisation, and modernising production.
Prozorro.Sale platform. For the first time in Ukrainian history, large-scale privatisation will be conducted via the Prozorro.Sale platform, ensuring a transparent and competitive bidding process. This platform has proven effective in promoting fair competition and preventing corruption in smaller privatisation auctions.
Investor confidence. The initiative comes at a crucial time when Ukraine is seeking to rebuild and stabilise its economy amid ongoing challenges. The government hopes that this privatisation drive will signal Ukraine’s commitment to economic reforms and attract substantial foreign direct investment.
The use of PPP mechanisms in Ukraine is not common and has been only recently gaining momentum. Even though the Law on Concessions was adopted back in 1999 and the Law on Public-Private Partnership in 2010, these instruments have long been underestimated.
The main reasons were imperfect legislation and the public sector’s low institutional capacity, traditionally more oriented toward leases or privatization. The state was not ready to undertake long-term budgetary obligations and participate in lengthy feasibility study procedures. In all fairness, it should be noted that there were no legislative mechanisms for this.
Real infrastructure projects, structured with the technical support of the IFC, appeared only in 2019 when the preparation of two concession projects in the ports of Olvia and Kherson started. The financial closing of both projects took place at the end of 2021. In addition to the successful completion of these transactions, the team of consultants identified weak points in the legislation, which required the fastest possible response from the government and parliament.
During the implementation of the first concession projects in ports, changes were made to the Law on Concessions aimed at implementing Directive 2014/23/EU on concessions. The changes considered the existing international experience and significantly improved the rules for granting concessions and procedures for developing feasibility studies and conducting tenders.
The improvement of the legal framework and the successful completion of the two port concessions became the impetus for the preparation of several new projects in the field of transport infrastructure. Not only the public sector but also private companies contributed to these activities.
Thanks to a private initiative, the preparation of feasibility studies of several more projects in the port sector was started. The implementation of the projects was planned for 2020-2023. Examples include the concession of the Odesa port passenger terminal and the concession of the Berdyansk and Izmail ports.
Between 2019 and 2021, the Ministry of Infrastructure launched a few infrastructure projects with the support of the WBG. In particular, a pre-feasibility study was prepared for five airports, eight railway stations, and six highways. Advisers were involved in preparing a feasibility study of two concession projects in the port of Chornomorsk. Further implementation of these projects was stopped by the full-scale military invasion.
Significant damage or a complete destruction of critical infrastructure became the reason for an intensive search for financing the reconstruction of the country. In this context, PPP appears to be one of the most promising tools.
In this regard, during the two years of the war, the government worked out appropriate changes to the legislation on PPP. A massive draft law on amendments to the laws on PPP and concessions was adopted in October 2022 in the first reading. Currently, the draft law is being prepared for the second reading. Key legal advancements include: (i) the definition of a new type of project – restoration projects, for which a simplified preparation procedure is provided that allows reducing the time for implementation (critical in the current context of Ukraine); (ii) the regulation of a new type of project – restoration projects; (iii) the expansion of sources of funding for PPP projects and sources for state support, in particular, the possibility of financing PPP projects through grants; and (iv) the initiation of the opportunity to implement PPP projects in the field of housing construction.
Furthermore, this draft law introduces systemic changes in legislation in the fields of highways, railway transport, waste management, water supply, education, and healthcare. As previous experience has shown, the imperfection of industry legislation is a key factor restraining PPP development.
Despite the martial law, the prospects of PPP projects in Ukraine are also indicated by the fact that the WBG has renewed the preparation of projects in the port of Chornomorsk (concession of ferry crossing and container terminal) and launched the pre-feasibility study of PPP projects in the field of healthcare.
Consequently, in April, the World Bank updated its Benchmarking Infrastructure Development 2023 rating, which demonstrates the quality of legal regulation in the countries of the world in terms of the possibility of implementing large infrastructure projects with the involvement of the private sector. Ukraine demonstrated one of the best results in the world, increasing its indicators by 41 points. This shows the existence of a favorable legislative environment for attracting private investments to Ukraine under PPP conditions. Hopefully, it will become the basis for financing future infrastructure projects.
At its meeting on 6 August, the Cabinet of Ministers of Ukraine allowed foreign companies to obtain construction permits in Ukraine without obtaining licences. This was reported by the government’s representative in the Verkhovna Rada, Taras Melnychuk, Komersant ukrainskyi.
The government has decided to allow foreign companies and organisations operating in Ukraine through separate divisions and permanent establishments to acquire the right to carry out economic activities in the construction of facilities.
The amendments are made to CMU Resolution No. 314 of 13 March 2022. They relate to the construction of facilities that are classified as objects with medium (CC2) and significant (CC3) classes of consequences.
The resolution was supplemented with provisions stipulating that a declaration on the conduct of economic activity may be submitted by non-residents through the Diia portal or through an administrative service centre.
The Ministry of Digital Transformation will formulate a request for information about representative offices of foreign business entities (if such a representative office wishes to file a declaration) and then send such a request to the State Statistics Service and the State Tax Service, which will provide the Ministry of Digital Transformation with the necessary information.
As explained by the Ministry of Reintegration of the Temporarily Occupied Territories of Ukraine, the right to conduct construction activities will be granted by submitting a free of charge declaration of economic activity to the licensing authority without the need to obtain a construction licence.
The adoption of this act will improve the regulatory framework for foreign companies in Ukraine. In particular, it will allow representative offices of Polish companies in Ukraine to carry out works on the arrangement of checkpoints on the Ukrainian-Polish border.
Such works are planned as part of the implementation of the Agreement between the Government of Ukraine and the Government of the Republic of Poland on the provision of a loan on the terms of related assistance dated 9 September 2015.
The relevant provision will be in force for the duration of martial law.
What are objects with medium (CC2) and significant (CC3) consequence classes?
The consequence class (liability) of buildings and structures is a characteristic of the level of possible danger to the health and life of people who will be permanently or periodically on the site or outside the site, material damage or social losses associated with the termination of operation or loss of the integrity of the site.
All facilities are divided into the following classes of consequences (liability):
minor consequences – CC1;
medium consequences – CC2;
major consequences – CC3.
As a rule, buildings and structures of class CC3 include
facilities of oil and gas production, gas processing, metallurgical, chemical and other industries equipped with fire and explosion hazardous tanks and storage facilities for liquid fuels, gas and gas products, especially when stored under pressure (process pipelines, apparatus, boilers, gas holders, isothermal tanks with a capacity of more than 10 thousand cubic metres). cubic metres, oil and oil product storage tanks with a capacity of 30 thousand cubic metres and more, high pressure vessels, etc;)
facilities of chemical, petrochemical, biotechnological, defence and other industries related to the use, processing, manufacture and storage of chemically toxic, explosive and fire hazardous substances and industrial explosives, biologically hazardous substances, etc;
coal and mining facilities that are hazardous in terms of fire, explosion and gas in accordance with the classification of the State Committee of Ukraine for Industrial Safety, Labor Protection and Mining;
buildings of the main ventilation systems at mines and quarries;
nuclear power facilities (NPPs, AETCs, ACTs), including storage facilities and plants for the processing of nuclear fuel and radioactive waste, as well as other radiation hazardous facilities according to the SNRIU classification;
hydro and thermal power facilities (HPPs, SDPPs, TPPs, CHPs, PSPs) with a capacity of more than 1.0 million kW
bridges and tunnels on roads of the highest category, or with a length of more than 1000 m or a span of more than 300 m;
stationary structures of navigation aids to navigation;
gateways and main port facilities on waterways of the 1st and 2nd classes of DSTU B B.2.3-1;
buildings and structures of major railway stations and airports;
main pipelines with a diameter of more than 1000 mm or with a working pressure of more than 2.5 MPa, as well as sections of main pipelines of smaller diameter and with lower working pressure at crossings over water obstacles, railways and motorways;
hydraulic structures of reclamation systems with an irrigation and drainage area of more than 300 thousand hectares and reservoirs with a volume of more than 1 cubic kilometre;
large elevators and granaries, milling plants;
residential, public or multifunctional buildings over 100 metres in height;
buildings of major museums, state archives, and repositories of national historical and cultural values;
spectacular facilities with a massive presence of people (stadiums, theatres, cinemas, circuses, exhibition spaces, etc;)
buildings of universities, institutes, schools, preschools, etc;
large hospitals and other healthcare facilities;
department stores and other large retailers;
life support facilities for large urban areas and industrial areas;
large protective and safety facilities (mudflow, landslide, avalanche protection structures, protective dams, etc.).
Class CC2 buildings and structures include those that do not belong to class CC3:
main facilities of the metallurgical industry, heavy engineering, petrochemicals, shipbuilding, defence industry (blast furnace and open-hearth shops, assembly buildings, tall chimneys, etc.)
boreholes, engine rooms of mining machines;
hydro and thermal power facilities with a capacity of less than 1.0 million kW, distribution systems of main high-voltage power grids (including power line towers and open switchgear);
tanks for oil and oil products;
roadways of main roads, runways, bridges and tunnels with a length of less than 1000 m, cable cars, railway stations, airports, helicopter stations;
main pipelines;
large hotels, hostels;
water supply and sewerage facilities (including water towers, treatment plants, water intakes) of industrial enterprises and settlements;
buildings of entertainment and sports enterprises, trade, catering, consumer services, healthcare facilities;
buildings and structures of central warehouses to meet the vital needs of the population, warehouses of particularly valuable equipment and materials, military warehouses;
residential, public or multifunctional buildings up to 100 metres in height.
Buildings and structures of class CC1 usually include:
all industrial, energy, transport and communication, agricultural and agricultural product processing facilities not included in classes CC3 and CC2;
public buildings, physical culture and sports facilities not included in classes CC3 and CC2, as well as all temporary facilities, mobile homes;
facilities of intra-production roads, communications and product pipelines;
greenhouses, greenhouses;
low voltage distribution network poles, lighting poles.
It is clear to all that a major global financial effort will be required to rebuild Ukraine. It is also now widely recognised that the investment needed to rebuild Ukraine cannot wait until the conclusion of the war. In recent times there has been a developing focus on financing and support for Ukraine’s reconstruction in the short to medium term. In this article, the fourth part of our “Rebuilding Ukraine” series, we look at the current private and public sector investment opportunities announced at the Ukrainian Recovery Conference in Berlin (“URC2024”) in June 2024.
Agrifood: From complex fertilizers to fruit, vegetable, poultry, and meat products. Ukraine’s agrifood sector, crucial to global food security, accounted for 62% of total exports in 2023 notwithstanding the impact of the war. The Ukrainian government is implementing reforms to ensure food safety, security, and improved investment facilitation including plans to construct a US$62m feed soy protein concentrate plant to produce toasted meal, soybean oil and pelletised hulls within the next 2 years.
Transportation and Logistics: Construction of new terminals, development of export logistics, restoration of roads, bridges, tunnels, and improvements in sea, river and rail transportation. Ukraine’s central location in Eastern Europe makes it important for trade and travel. Significant investment is needed to repair and modernise infrastructure.
Energy: Advancing renewable energy goals, increasing efficiency in traditional generation, investing in energy storage and transportation. Ukraine’s energy sector has substantial potential for renewable energy development.
Hydrogen: At-scale production of carbon-neutral hydrogen. Ukraine’s abundant renewable energy resources position it as a key hydrogen supplier to Central Europe, supported by competitive production and transportation costs.
Green Steel: The manufacturing of green steel and production of hot briquetted iron (HBI)/direct reduced iron (DRI) for green metallurgy. Ukraine’s ferrous metallurgy sector is significant. The countries of Eastern and Central Europe have become the new strategic partners for Ukraine’s mining and metallurgical complex during the war and have accepted the major share of Ukrainian exports investments in green steel initiatives such as Green steel products; DR-pellets; DRI; HBI; Mining and processing; Ferroalloys, Limestone; Recycling of waste ore processing is being sought to drive economic recovery and sustainability.
Critical Raw Materials: Lithium, titanium, uranium, graphite, cobalt, nickel, tantalum, and other rare-earth elements. Ukraine holds substantial potential for CRM extraction, essential for green energy transition and technological innovation.
Housing,Reconstruction, and Building Materials: Construction of building materials factories, reconstruction of damaged housing, social and affordable housing, water and sanitation facilities. Significant damage to the housing sector has necessitated investment in reconstruction, with a focus on sustainability and modernisation.
Pharmaceutical and Medical Sectors: Production of vaccines, modernisation, and construction of medical facilities. Ukraine’s pharmaceutical sector has seen growth, supported by increasing public healthcare spending and significant sectoral transformation.
Information and Communication Technology & Digital: Infrastructure projects, human capital developments, and technology investments. The ICT sector is a major contributor to Ukraine’s economy, with exponential growth in IT service exports and technological proficiency.
In Ukraine, a list of the most active funds investing in Ukrainian startups has been compiled. Some of the most active ones were launched after the start of the full-scale Russian invasion.
The list, compiled by Forbes Ukraine, is led by the fund u.ventures. In the first half of the year, the u.ventures portfolio expanded with eight Ukrainian startups. The average investment by the fund was $500,000— the same amount it invested in the first two years of the full-scale war.
‘Since July 2023, the top five most active venture players in Ukraine have completely changed. Three of them—ZAS Ventures, Angel One, and the angel club United Angels Network (UAN)—were launched during the full-scale Russian invasion,’ notes Forbes.
The top ten funds are as follows:
u.ventures — 8 Ukrainian startups in the portfolio.
ZAS Ventures — 7 Ukrainian startups.
Angel One — 6 Ukrainian startups.
United Angels Network — 5 Ukrainian startups in the portfolio.
ICLUB — 3 Ukrainian startups in the portfolio.
TA Ventures — 3 Ukrainian startups in the portfolio.
Inovo VC — 3 Ukrainian startups in the portfolio.
SID VP — 2 Ukrainian startups in the portfolio.
Vesna Capital 3 — 2 Ukrainian startups in the portfolio.
SMRK — 2 Ukrainian startups in the portfolio.
On average, most participants in the study plan to close 5–10 deals by the end of the year.
‘As worldwide, AI startups are currently attracting the most attention from venture funds in the Ukrainian venture capital market,’ says Bogdan Svyrydov, Investment Director at Horizon Capital and u.ventures.
According to Vadym Rohovskyi, partner at GEEK Ventures, the market fell significantly in 2023 and is expected to decline further in 2024.
“New funds, if they appear, will need to adjust their trajectory, expand their geographical focus, invest more broadly, or at later stages,” he says.
Under the Ukraine Facility, a financial support program from the European Union, Ukraine is implementing a series of strategic economic reforms and sectoral development measures. These measures are expected to boost export volumes and strengthen the country’s position in the international market as a leading supplier of critical materials and high-quality products. We have decided to analyze the current state of Ukraine’s foreign trade, its export potential, and the possible risks that could threaten economic recovery.
To ensure stable financial support from the EU, Ukraine must implement a specific set of measures and reforms, achieve certain benchmarks, and undergo evaluation by its partners. Fulfilling these commitments is expected to help build a strong and resilient economy, bringing the country closer to the socio-economic development level of EU countries. One of the outcomes of the plan’s implementation should be an increase in exports, which will contribute to economic growth and post-war recovery.
Progress should be achieved through the development of relevant institutions, attainment of comprehensive digital transformation goals, inclusive development, and the implementation of the “green transition,” as well as the support of key economic sectors:
Sectoral development: Ukraine will focus on developing specific economic sectors with high export potential, such as agriculture, energy, transportation, critical raw materials (including processing), and information technology. By investing in these sectors and enhancing their competitiveness, the government aims to increase exports.
Infrastructure development: Developing transport, logistics, and trade infrastructure is crucial for facilitating exports, especially given Russia’s blockade of the Black Sea. Investments in increasing port transshipment capacities, building railway lines, and cooperating with partner countries to develop border crossing points can simplify the export process and reduce transportation costs, making Ukrainian products more competitive in international markets.
Trade support: The Ukrainian government, in cooperation with international partners, will implement trade facilitation programs. These include providing financial support to small and medium-sized enterprises, compensating agricultural producers for demining costs, implementing mechanisms for war risk insurance, and more.
Basic institutional reforms: Implementing structural reforms and improving the business environment are crucial for stimulating exports. These measures include reducing bureaucracy, increasing transparency in the regulatory environment, protecting intellectual property rights, and strengthening the rule of law. By creating a more favorable business climate, Ukraine can attract foreign investment and stimulate export-oriented industries.
What is Ukraine’s export potential?
Ukraine’s export potential can be considered in two main dimensions. First, there is an increase in export volumes (restoring the supply of goods to pre-invasion levels and further increasing volumes). For some goods, such as grain, export volumes have almost reached pre-war levels thanks to the operation of the “temporary transport corridor,” despite parts of Ukraine being mined and occupied. Second, there is a shift in the commodity structure toward a higher share of manufacturing and high-value-added goods. According to the aforementioned plan, the main focus is on developing five sectors, including agriculture and mining (considering the potential for mineral processing).
According to the International Trade Centre, Ukraine has an export potential of tens of billions of dollars. In absolute terms, we could demonstrate the largest volumes in the supply of ferrous metals, vegetable oils, grains, mineral resources, machinery and equipment, electricity, and more (see Figure 1). However, an important caveat is that these calculations were made considering data mostly before the full-scale war and, therefore, do not fully take its consequences into account.
For instance, the export potential in the segment of ferrous metals is estimated at $10 billion, with only 51% of this potential actually realized (meaning the actual export volume). Thus, there was significant potential for increasing exports of this product. However, Russia occupied and destroyed over a third of Ukraine’s steel production capacity. Therefore, in the foreseeable future of the next decade, the country is unlikely to restore pre-war levels of metallurgical production, let alone exceed them and realize this potential.
A more realistic scenario seems to be increasing the export of mineral resources, particularly iron ore products. On the one hand, there is demand for this product both in Europe and in distant countries like China, while domestic demand in Ukraine has significantly decreased due to the loss of production capacities. On the other hand, Ukraine has the capability to produce high-quality iron ore products that align with “green” transition plans. Implementing these plans is already on the agenda.
Additionally, the International Trade Centre calculations and the Ukraine Facility Plan highlight titanium ores and their processed products as having significant export potential.
Figure 1.Top 25 product categories with the highest export potential in Ukraine and the degree of export potential realization
The top sub-sectors with significant export potential also include agri-food sector products, which are considered promising within the Ukraine Facility framework. Specifically, these are sunflower oil, corn, wheat and meslin, and rapeseed. With proper support for the sector—investments in productivity growth, logistics development, reduction of trade barriers, and demining of territories—this potential can be realized.
Another segment with significant potential is machinery and equipment. Today, Ukraine is a manufacturer and supplier of automotive wiring harnesses with corresponding factories in the western regions. The volume of such product exports to European countries can be significantly increased.
Under equal conditions and before full-scale war, Ukraine had the potential to export a wide range of goods and services, from raw agricultural and mining products to high-tech products. However, the key items of foreign supply were and still remain raw materials and semi-finished products.
Trade results for 2023
Ukraine’s foreign trade results in 2023 continued to be influenced by factors directly related to the war on its territory, as well as the war’s indirect impacts. On the one hand, the Ukrainian economy suffered from attacks on energy and transport infrastructure and power outages at the beginning of 2023. The significant implications also came from Russia’s withdrawal from the “grain deal” until Ukraine, under the protection of its defense forces, organized its own “temporary maritime corridor.” This allowed for the revitalization of foreign economic activity.
On the other hand, the global economic slowdown observed even in Europe resulted in reduced demand for Ukrainian products. Given Ukraine’s limited ability to choose export markets, transporters’ blockade of western borders and European countries’ restrictions on the supply of agricultural products further undermined the footing of Ukrainian exporters.
Figure 2.Volumes of Ukraine’s foreign trade in 2014-2023, $ billion
Last year, Ukraine’s negative balance of foreign trade increased by 2.5 times, reaching its highest level since the beginning of Russia’s invasion in 2014. This result was driven by simultaneous growth in the value of imports and further contraction of exports. Specifically, imports almost returned to the level of 2021 when countries were recovering from the COVID-19 pandemic crisis and showing rapid restoration. It is likely that its value would have been higher if not for Polish carriers’ blockade of the western border. According to the NBU’s estimates, direct losses from imports alone in November 2023 amounted to $500 million. To illustrate, this is almost equivalent to the total value of drones imported into Ukraine last year.
Import of goods
In physical terms, imports in 2023 amounted to 26.8 million tons, which is 29% less than in 2022. However, in value terms, imports grew by 7% due to the importation of more expensive goods such as transport and electrical goods, pharmaceuticals and blood products, and food products, as well as increased purchases of drones, generators, and pipe products. This was made possible only with the financial support of our international partners, who provided grants and loans. Additionally, hidden imports, meaning goods for which neither the State Statistics Service nor the State Customs Service of Ukraine provide detailed statistics, increased manifold.
Figure 3.Commodity structure of Ukraine’s imports in 2019-2023, $ million
Source: State Customs Service of Ukraine
Traditionally, mineral fuels – oil and oil products and gas – occupied the largest share in Ukraine’s import structure. The leading suppliers of these products were Poland, Greece, India, Lithuania, and Slovakia. Ukraine halted imports of these goods from Russia and Belarus, while European countries and India had previously supplied them. Compared to 2022, the import of these products decreased by 39% in value terms due to cheaper oil and the refusal to purchase from the aggressor country.
Imports of other key commodity groups increased. Specifically, the growth in purchases of cars, mobile equipment, generators, batteries, transformers, trucks, tractors, and drones from abroad is directly related to military actions. On the one hand, this increase reflects Ukraine’s defense needs, and on the other hand, it reflects the consequences of mass rocket attacks on energy facilities, forcing the population to make emergency equipment purchases.
The increase in purchases of ferrous metals and fertilizers is linked to the decline in domestic production of these goods in Ukraine. Specifically, the occupation of metallurgical plants in Mariupol has led to a deficit of certain types of steel products, forcing Ukraine to procure them from Turkey and European countries (previously, we exported them). Although Ukraine increased its own fertilizer production by 81% last year, its volume remained almost half of what it was before the full-scale war, generating demand for imported fertilizers.
Export of goods
At the end of last year, Ukraine maintained the physical volume of exports almost unchanged, but export revenues fell by 18%. This can be explained by both a decrease in prices for a range of goods, primarily in the agricultural sector, and a change in the commodity structure of exports (see Figure 4).
Grain crops held the largest share of exports, at 23% (18% of the total export value in 2021). The decrease in revenue from grain exports is mostly due to the decline in world prices for corn, Ukraine’s main export item. Although Ukraine increased its wheat exports, this was insufficient to compensate for the decreased revenue from corn exports.
There was also a decrease in the volume of exports of oilseed crops (soybeans, rapeseed, and sunflower seeds). At the same time, a positive trend was the growth in the export of oil, i.e., processed seed products.
Revenue from the export of ferrous metals and ores decreased by over 40% last year. First, in 2022, the first two months accounted for nearly full-capacity operation of metallurgical enterprises. Second, last year, companies were forced to reduce production due to power outages, the explosion of the Kakhovka HPP, and unfavorable economic conditions in external markets. Third, companies began to utilize the opportunity for sea shipments within the framework of the “temporary corridor” closer to the end of the year.
Ukraine also reduced its exports of higher-value-added products such as electrical wiring, cables, and small kitchen appliances like electric kettles. This reduction is associated with decreased electronics imports by Hungary.
In 2023, Ukraine obtained 61% of its export revenue from selling agricultural products and foodstuffs, marking a significant portion of its exports. Following closely behind were ores, metals, and products thereof, contributing 16% of export income. Machinery, equipment, vehicles, and transportation means held the third position, accounting for 8% of exports. This marked a notable change from the pre-war year of 2021, when agriculture and metallurgy shared comparable shares at 41% and 34%, respectively. However, the export structure shifted dramatically, with the share of foodstuffs in revenue nearly quadrupling compared to that of metals.
The reasons for this situation are understandable. The territories where industrial enterprises are mostly located are either occupied or near the front line. Russia’s attacks on critical infrastructure objects have led to a reduction in production volumes, and even with a stable electricity supply, logistical difficulties such as the blockade of the Black Sea and western border prevent export growth. A shortage of human resources also limits production recovery opportunities.
Foreign trade in services
Last year, Ukraine reduced external trade volumes in services due to simultaneous decreases in imports and exports. However, since the beginning of the full-scale invasion, we have observed an atypical imbalance in favor of importing services for Ukraine.
The prevalence of service imports over exports emerged in 2022 due to a sharp increase in spending by Ukrainians abroad, associated with the outflow of refugees during the first year of full-scale war. It is precisely the expenses of Ukrainians on purchasing goods and services in recipient countries that constitute the volumes of service imports under the “Travel” category. Although this segment decreased last year, it still accounts for the lion’s share of Ukrainian spending on imported services, at 69%.
Prior to the start of the full-scale war, the Ukrainian IT industry was experiencing rapid growth, with its share in the structure of service exports increasing from 2% in 2010 to 44% in 2022. In 2023, the export of IT services decreased for the first time, which is attributed to power outages and cautiousness among foreign clients regarding ordering services from Ukrainian IT specialists (due to risks of mobilization and rocket attacks).
Figure 4.Structure of foreign trade in services in 2019-2023, $ million
The increasing share of the agricultural and food sector in exports requires attention and effective solutions. Perhaps, by implementing the Ukraine Facility Plan, we can return to increasing exports in processing industries and restore growth in the IT industry. Defense industry manufacturers also have significant export potential. The war has catalyzed the active development of the defense industry with a rapid increase in the number of arms manufacturers. However, currently, there is insufficient state funding to utilize existing capacities. A solution could be to export excess production abroad so that arms manufacturers receive working capital and investment funds, but currently, such exports are prohibited.
Limited optimism for 2024
The beginning of 2024 brings cautious optimism in terms of foreign trade (see Figure 6). After a decline in quarterly export volumes last year, Ukraine demonstrates a sharp recovery in indicators based on the results of the first three months of the current year. Moreover, according to the operational data of the Ministry of Economy, Ukraine reached pre-war levels of monthly exports in April, amounting to $3.3 billion (13 million tons).
Traditionally, key export drivers include grain (such as corn and wheat) suppliers and exporters of iron ore and ferrous metals. These companies have resumed sea exports crucial for re-entering markets in the Middle East, America, and Asia. Meanwhile, machinery exports dropped out of the top 10 commodity groups.
In the metallurgical products segment (iron ore and steel products), an increase in export volumes can be expected this year thanks to the operation of the “sea corridor” under the protection of Ukrainian defense forces. However, limiting factors to consider include weakened demand in Europe and China, reduced economic efficiency of sales due to expensive logistics, and the risk of production volume restrictions.
Expectations in the agricultural segment are less optimistic. According to experts’ estimates, the volume of the harvest may decrease in 2024 due to a reduction in the sown areas of certain crops against the backdrop of an unfavorable price situation in the international market and lower yields. According to preliminary estimates for the 2024-2025 marketing year, this will affect export volumes, which may decrease to 43.7 million tons compared to the expected 53.1 million tons in the 2023-2024 marketing year.
Even in the short term, the record volume of grain exports achieved in April 2024 (which even exceeded pre-war levels) will not be repeated in May, as the available volumes of wheat for export have already been sold, and those of corn have been contracted.
Key risks for 2024
The importance of restoring export activity is undeniable. On the one hand, exports are a source of foreign currency inflows necessary to support the exchange rate, finance defense, and reconstruction efforts. On the other hand, access to foreign markets allows producers to increase capacity utilization, expand production volumes, and enhance their influence in international markets. From this perspective, stimulating export activity reflects not only an economic but also a geopolitical aspect, providing additional means to strengthen Ukraine’s position in the world.
However, in the context of geopolitical tensions and uncertainty associated with the war with Russia, Ukraine’s export opportunities face serious challenges. The expansion of the conflict zone threatens not only physical infrastructure but also the functioning of export channels and the security of transportation routes. These circumstances, along with potential economic constraints from Western partners (such as restrictions on imports or transit of agricultural products from Ukraine), create uncertainty about the future export potential and require careful risk analysis and strategic decision-making.
Among the risks for export growth this year are:
Escalation of hostilities and occupation of new territories. Although the Ukraine Facility Plan was developed with the assumption of the end of hostilities by the end of 2024, as of May 2024, the aggressor country continues to build up its military potential and forces for further advancement, as indicated by both Ukrainian and international sources. The occupation of new territories by Russia, including the complete seizure of the Donetsk region, could lead to further degradation of the industrial sector. Other consequences of the intensification of hostilities and occupation include the destruction of infrastructure and further population migration.
Shelling of energy and transportation infrastructure. Mass rocket attacks on critical infrastructure objects and damage to power grids can lead to both restrictions on electricity consumption by industrial consumers and complete production shutdowns. Attacks on transportation infrastructure can lead to disruptions in raw material supplies and increased costs for recovery. Consequently, export volumes will decrease.
Further mobilization; population migration abroad. Increasing the volumes and pace of mobilization can deepen the deficit of human capital, reduce productivity, and increase labor costs, which in turn can lead to a decrease in enterprises’ export activity. Large industrial enterprises are already facing limitations in expanding production due to a labor shortage and, in an attempt to adapt to the existing conditions, are employing more women.
Blockade of the western border. The blockade of the border with EU countries has led to both a reduction in exports by road transport and a decrease in customs revenues to Ukraine’s state budget. Consequently, the resumption of the blockade may result in delays in deliveries of products to foreign customers, actual reduction in supply volumes, and increased transportation costs.
Implementation of trade restrictions or cancellation of preferential trade terms. The suspension of all import duties and trade defense measures by the EU for Ukraine in the spring of 2022 proved to be a lifeline for Ukrainian exporters, who, in the conditions of the maritime blockade, could only supply goods to Europe or through European countries. The EU has already extended preferential trade terms twice, most recently in March 2024, but with conditions to protect its agricultural market. Abandoning preferential trade terms or introducing trade restrictions could lead to a reduction in export volumes due to restricted access to markets.
Suspension of the “temporary corridor.” Closing the “temporary corridor” in the Black Sea would return Ukrainian exporters to the situation of summer 2023 when Russia withdrew from the “grain deal,” and an alternative maritime route was not yet secured. Although Ukraine has since continued to develop alternative transportation routes via the Danube or through ports in Romania and Poland, this could lead to a significant increase in delivery times and costs, as well as a restructuring of logistic chains that would be less efficient. The export of agricultural products, ores, and black metals critically depends on the ability to export by sea.
Further weakening of the global economy, particularly in Europe. Decreased demand for goods from Ukraine due to economic hardships in Europe could lead to a reduction in export volumes and a decrease in production levels. With the ability to transport goods by sea, this risk could be mitigated by redirecting exports to markets in the Middle East, America, and Asia.
The Ukraine Recovery Conference (URC) 2024, held in Berlin on June 11-12, marked a significant step forward in the international community’s support for Ukraine amid the ongoing war with Russia.
The conference brought together over 3,400 participants from various sectors, including national and local governments, businesses, and civil society organizations. The event aimed to consolidate sustainable international support for Ukraine’s recovery, reconstruction, reform, and modernization efforts.
Events later in the week, including the G7 summit and the Ukraine peace summit, further confirmed the international community’s commitment to assisting Ukraine in overcoming the ongoing crisis.
This year’s conference was a continuation of the 2017 Ukraine Reform Conference in London, and bilateral and multilateral events in Lugano (2022 and 2023), Toronto and Paris (2022), Rome, Berlin and Warsaw (2023) as well as last year’s Ukraine Recovery Conference in London. Lawyers from Dentons participated in most of these events.
Below is a brief summary of key announcements and agreements to aid Ukraine’s recovery based on publicly available information and insights of our lawyers who participated in the event.
Key announcements and agreements
European Bank for Reconstruction and Development (EBRD) commitments
One of the major highlights of the conference was the EBRD’s announcement of €600 million in new funding commitments and de-risking tools. This brings the total EBRD financing deployed in wartime Ukraine to €4.5 billion. Notably, the EBRD signed multiple financing agreements, including:
€300 million in emergency support for the energy sector to address the immediate energy crisis exacerbated by Russian attacks on Ukraine’s energy infrastructure.
€517 million from the European Union to support Ukraine’s economy and recovery through EBRD programs.
€60 million loan for a greenfield biofuels project and equity investment in renewable energy. These projects underscore the focus on sustainable and renewable energy solutions.
€70 million in local-currency loans and risk-sharing facilities with Ukrainian banks to boost access to finance for small and medium-sized enterprises (SMEs).
The EBRD also announced a joint venture with GOLDBECK SOLAR Investment to construct up to 500 MW of solar power plants in Ukraine over the next three to five years.
International aid and investments
The conference saw the announcement of over €16 billion in more than 110 international agreements and assistance. Significant contributions included:
€1.4 billion in guarantee and grant agreements under the Ukraine Facility program.
€7 billion SME Resilience Alliance to support the resilience and growth of Ukrainian SMEs.
€700 million Skills Alliance retraining program to address structural unemployment and support workforce development in Ukraine.
€350 million in guarantees and €17.5 million in technical assistanсe from EU via IFC to accelerate and scale-up investments in renewable energy such as wind power projects, battery energy storage systems, transport, digital sector, and industrial investments.
€430 million program of EIB group to restore the housing sector. The first program will focus on repairing war-damaged residential buildings, and the second will be a credit program and extensive grant resources from the European Commission.
$350 million war risk insurance program to facilitate foreign investment in Ukraine during the war. The program, in partnership with the US International Development Finance Corporation (DFC), includes US$50 million to reinsure policies issued by Ukrainian companies and US$300 million to insure military risks in the healthcare and agriculture sectors.
Focus areas of the conference
The URC 2024 extended the dimensions of Ukraine’s recovery to four key areas:
Business development: The conference launched several initiatives to stimulate economic growth and private sector involvement by offering mechanisms to derisk investments and provide access to financing. This includes investments in renewable energy, biofuels, and significant support for SMEs.
European integration: With Ukraine’s EU candidate status, substantial support was directed towards meeting EU accession requirements and facilitating integration processes. On June 14, 2024, the EU approved in principle the negotiating framework for the accession of Ukraine and Moldova to the EU. Huge emphasis was given to sustainable recovery of a competitive economy as well as funds to achieve these targets in various sectors.
Municipal and regional development: Agreements were signed to improve infrastructure and essential services in cities like Mykolaiv, Lutsk, Kharkiv, Kyiv, Kryvyi Rih, and Zhytomyr. These included projects for water infrastructure, housing, district heating systems, public transport and export logistics.
Human capital development: Initiatives such as the Human Capital Resilience Charter and the Skills Alliance for Ukraine were launched to support returnee workers and veterans and promote inclusive recovery.
High-profile support and future prospects
German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen emphasized the importance of Ukraine’s reconstruction for both Ukraine and the EU. Von der Leyen announced that Ukraine would receive €1.9 billion through the Ukraine Facility by the end of June, with a significant portion directed towards urgent power system repairs and defense.
Ukrainian President Volodymyr Zelenskyy highlighted the immediate need for energy infrastructure repairs and long-term investment. He stressed that foreign investments in Ukraine’s energy sector could yield high returns and create substantial economic opportunities.
A few days later at the Ukraine peace summit in Switzerland, US Vice President Kamala Harris announced a new energy aid package, consisting of $500M in new funding for energy assistance and redirecting $324M of previously announced funds to Ukraine’s emergency energy needs.
The news from the US comes a few days after the G7 leaders adopted a declaration outlining the use of proceeds from frozen Russian assets to give Ukraine $50 billion in loans. This plan aims to ensure Ukraine can continue its defense against Russia and signals Western resolve. The funds will come from loans by G7 members and the EU, backed by interest from the frozen assets, with repayment expected from either interest or future reparations by Russia. The disbursement of funds, intended for various purposes including military and humanitarian support, is planned to start by the end of the year, although there are still unresolved details and potential risks related to the ongoing status of the frozen assets.
The weekend brought additional support for Ukraine at the Ukraine Peace Summit in Switzerland, at which representatives from 78 countries agreed that Ukraine’s territorial integrity must be the basis for any peace agreement with Russia. The conference marked a preliminary step towards diplomacy but faced challenges due to the absence of key developing nations from the final document. Despite varied participation, the summit underscored the necessity for international cooperation to resolve the conflict.
Conclusion
The main events of last week – the Ukraine Recovery Conference 2024 in Germany, the G7 summit in Italy and the Ukraine peace summit in Switzerland – demonstrated a robust international commitment to supporting Ukraine’s recovery and long-term development. The agreements and initiatives announced at the URC reflect a comprehensive approach, addressing immediate needs while laying the groundwork for sustainable growth and integration into the European Union. As Ukraine continues to navigate the challenges posed by the ongoing conflict, the support and collaboration fostered at URC 2024 – and confirmed by the participants of the G7 and the peace summit – will be crucial in building a resilient and prosperous future.
