- FIRST INSURANCE AGAINST WAR RISKS FOR PRIVATE INVESTORS IN UKRAINE
In 2023 (September) the World Bank’s MIGA (International Investment Guarantee Agency of the World Bank) provided the first investment guarantee for private investors of Ukraine against war risks. Insurance in the amount of up to $9.1 million was provided for the M10 Industrial Park project in Lviv. The guarantee is provided for financing the construction and operation of the warehouse complex and related infrastructure in the M10 industrial park. The insurance covers military risks for 10 years.
The MIGA guarantee gives an important signal to international investors regarding the activation of war risk insurance in Ukraine. “Many Ukrainian and foreign companies will be able to apply and receive new guarantees” commented Economy Minister Yulia Svyridenko.
So, the first insurance for private sector and for an Industrial Park. Why?
2. INDUSTRIAL PARK IN UKRAINE. WHAT IS IT? INCENTIVES
Industrial Park (IP) in Ukraine is the registered in the State IP Register special industrial zone (from 10 till 1000 hectares) with state and local authorities’ incentives, provided by the law, such as:
- Exemption from import VAT and customs duties when importing new equipment into Ukraine;
- Exemption from income tax for 10 years in case of activity within the IP;
- Exemption from property tax and minimum land charges from local authorities;
- Compensation for connecting to engineering facilities;
- Compensation of interests for the loans, obtained for arranging the IP*
*Some of the aforementioned incentives have their implementing peculiarities, which must be discussed in each certain case and are not the subject of the present Article.
Economists have calculated that due to these incentives, if you build the plant in Ukraine, about 25% of the investment can be saved on the construction on the territory of the industrial park. That is, a quarter of the investment compared to building the plant in Ukraine on a normal land plot not in an industrial park. Not to mention the neighbouring EU countries, where the amount of investment will be 30-40% higher due to the cost of works and materials.
Besides the economic incentives, the IP can serve for:
- Investment subsidies. Investors in IP might be eligible for various investment subsidies or grants to support their capital expenditure.
- Transportation Infrastructure. Improved transportation infrastructure, including roads and logistics, may be a focus to enhance connectivity.
- Educational and Research Collaboration. R&D Collaborations. IPs may be encouraged to collaborate with educational and research institutions, fostering innovation and technology transfer.
- Customized Support Programs. Industry-Specific Support. Some IPs may receive additional support tailored to the specific industries they host.
It is obvious that the location of production in industrial parks near the borders with the European Union countries will give advantages both to the owners and at the state level – export-oriented enterprises will appear competitive in our country.
Shared infrastructure and industrial networking are what help businesses grow if they are located in an industrial park.
3.“BOOM” OF SETTING UP INDUSTRIAL PARKS IN UKRAINE?
Yes, comparing to the other years the answer is affirmative. And this trend has been continuing. Formally, the main thing is how many plants will be eventually constructed and what amount of investment is involved. Nevertheless, there is a belief that in the future, a critical number of industrial parks will lead to increased competition between communities for investments. The most progressive community leaders are already returning from abroad with prior agreements with investors who have experience in developing private equity in their countries.
Here are just several examples of recent developments on Industrial parks:
- The Mykolaiv City Council has begun developing the concept of a new industrial park. On a plot of 190 hectares between the Kherson and Bashtan highways, it is planned to attract investments in a dry port and a logistics center, production in the field of shipbuilding, electronics and light industry, premises for the processing and storage of fruits and vegetables, a customs terminal and a waste processing plant. It is planned to place solar panels with a total capacity of 100 megawatts on the roofs of all premises.
- Bucha Mayor’s Office of the Kyiv region announced plans to create the Bucha Techno Garden industrial park together with the Korean state company K-water. This company has experience in building industrial parks in South Korea.
- The Nedoboiv community of Chernivtsi region has started developing the concept of an industrial park. It is planned to create 500 jobs. The industrial park will be built on the territory of the former sugar factory in the village of Zarozhany on the territory of 25 hectares. Processing industry and the creation of a digital town for the IT sector were chosen as the main direction.
- The Municipality of Brovary allocated a plot of land with an area of 15.4 hectares for a new industrial park. The profile commission of the city council approved the technical documentation on land management.
- Mayor of Lviv Andriy Sadovy announced his intention to build a powerful industrial park in the city for South Korean investments in industrial production.
- In the Lviv region, Novorozdilskyi Industrial Park announced that the Center for Investment and Industrial Development consortium had acquired the status of a management company. The park is located on a plot of 46.4 hectares on the border with Poland. 200 m from the border there are 2 transformer substations of 20 and 6.3 MW.
- Construction of the road to the future industrial park has started in Khmelnytskyi.
- Work has begun on the preparation of the site for the industrial park “Vugletsevo neutral eco-agro-hub “Podillia-Horodok”. In the industrial park, it is planned to create a plant for the production of unrefined and purified medical alcohol from corn, a plant for the production of oils, as well as a waste processing plant.
- Building materials group Kingspan says it is moving ahead with plans to build a new €280 million manufacturing facility in Ukraine. It is the biggest manufacturing investment yet promised to Ukraine.
4. THINK OF SETTING UP AN INDUSTRIAL PARK IN UKRAINE?
The period of time, required for the preparatory works (from the idea and via feasibility study, searching of the location and proper land plot, negotiations with state and local authorities, financial and insurance institutions, etc. to the working out of IP concept and registration of IP) can take from 6 months to 1,5 years. So, in case of having interest to IP, the certain actions have to be started beforehand and taking into consideration increasing competition, in the nearest future. As far as a lot of procedures and incentives depend on local authorities, they could hardly bear a lot of supportive investment obligations to many Industrial parks within their territories.
Having our wide and deep experience in legal support to different businesses in Ukraine, cooperation with international and local institutions assisting foreign investors in Ukraine, network of partners in different places in Ukraine and our reliable reputation; the Law Firm “Interlegal” is always ready to help you with your fair business in Ukraine and, in particular, to give you all the required legal assistance in preparatory works and final registration of your Industrial Park in Ukraine.
Stadnichenko Denys
Business Development Manager at Interlegal Law Firm
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