German business is ready to invest in the Ukrainian economy despite the war.
Ukraine joined the top 3 attractive countries for investment despite the war lasting for almost three years.
Eastern Europe is becoming increasingly attractive for German business. More and more German companies already investing or planning to invest in the region in the near future. Not least of all, this concerns Ukraine, as reported by Deutsche Welle.
The article highlights, “They [German entrepreneurs – ed.] treat Poland, Romania, and Ukraine as the most attractive countries for investment, followed by Hungary and the Czech Republic. A significant part of the projects planned for the Ukrainian market will be launched this year, despite the ongoing Russian aggression”.
Relocating production to Eastern Europe
The trend of relocating production to Eastern Europe is confirmed by a survey conducted by the international consulting company KPMG and the Eastern Committee of the German Economy, in which 133 companies operating in this region participated.
More than half of them (55%) believe that by the end of the decade, the importance of Eastern European countries for their business will increase. However, only 7% are skeptical.
Regarding investments in Eastern Europe, 42% of respondents reported that they have already budgeted for costs of establishment, expansion, or relocation of production to Eastern Europe in the 2025 budget, while 56% are planning to do so in the next 5 years.
Andreas Glunz, the KPMG representative, explained, “Well-known problems concerning investment climate in Germany are forcing local companies to move their production abroad. In such a case, the best direction is Central and Eastern Europe. German business has already made large-scale investments there, has studied very well local conditions, and at the same time remains close to its home country”.
In the respondents’ opinion, this region is attractive due to high domestic demand and qualified personnel. Meantime, low labor costs turned out to be only the third most important reason.
What attracts investors to Ukraine
The most unexpected result of the survey is the high interest in investing in Ukraine, despite the ongoing war.
Michael Harms, Executive Director of the Eastern Committee of the German Economy, emphasized, “It is especially noteworthy that Ukraine ranked third among the most attractive countries for investment. It shows the great economic potential of this country”.
Among 133 surveyed companies, one in five (21%) is already an investor in the Ukrainian economy, and slightly more than a third (35%) are planning to invest by the end of this year.
However, 41% of companies are planning to invest in the Ukrainian economy for the next five years, as they expect its accelerated joining the EU. This is almost the same number of companies as those planning to invest in Romania, and significantly more than in Hungary (35%), the Czech Republic (31%), and Bulgaria (22%).
Nicolai Kiskalt, Head of the Central and Eastern Europe Desk at KPMG Germany, noted, “Despite the war, more and more international and German companies are investing in Ukraine – a country with the potential to become an energy hub for the European Union, to turn into alternative production site and to play a vital role for European companies in IT and outsourcing”.
Meantime, two-thirds of German businessmen (67%) named political risks and lack of security as the main obstacles to investment in the region as a whole, while corruption and bureaucracy are much less of a concern for entrepreneurs; respectively, 38% and 31% of respondents treat them as a problem.
We remind that America and Europe are interested in Ukraine’s victory and its achievement of long-term economic success. Mike Pompeo, former US Secretary of State, now a member of the Board of Directors of the global telecom operator VEON and its Ukrainian asset – Kyivstar, believes that Ukraine’s Western allies should help it win the war and support its economic recovery and growth with strong investments.