Battles are won by armies, but wars are won by a strong economy. This is clearly understood in Kyiv, and Ukraine is working to woo investors who can help it rebuild and flourish.
There’s no question that the risks caused by Russia’s aggression are substantial, including the possible destruction of assets, challenges with logistics, supply chain disruption, and constant threats to critical infrastructure.
So why should investors consider Ukraine?
Among the country’s obvious advantages are its strategic position and European Union (EU) candidacy, the most battle-hardened and capable army on the continent, a large consumer market, and abundant natural resources. Other assets include its agricultural sector, which is growing despite attacks, a thriving IT sector, well-educated and skilled human capital, and a relatively inexpensive workforce.
If these pitches sound familiar to experienced investors, there’s more. It seems that however, and whenever, the war ends, there will be very substantial Western aid and possibly seized Russian assets to help rebuild. The sums are unknowable, but given the horrendous damage wrought by Russian aggression, something in the hundreds of billions of dollars will be required. In other words, there will be contracts galore.
The government in Kyiv is seeking to create a much better investment climate. Since 2014 a series of agencies and commissions have been established to smooth the process. These include a National Investment Council under the control of the President, UkraineInvest, a promotion agency that works as a one-stop-shop to attract and support foreign direct investment (FDI), the Business Ombudsman Council, which deals with complaints about unfair treatment, and a parliamentary commission on the Protection of Investors’ Rights.
The Ukrainian parliament is working on a law on public-private partnership (PPP). The adoption of this draft law will allow the introduction of a new PPP model based on a readiness fee, which will allow the use of different sources of funding for restoration work, as well as the simplification and standardization of procedures for the preparation of PPP projects, and the introduction of an e-procurement system for such projects in accordance with EU standards.
There have been amendments on transparency, tax reductions, import duty exemptions, and preferential land ownership, as well as measures to improve the rule of law, simplify regulatory procedures, offer tax credits, and cancel more than 500 permits of various types.
A National Strategy to increase FDI by 2030 and an “investment nanny” law have been adopted, while the “de-oligarchization” law is opening new opportunities. The cleansing of the judicial system is also ongoing and progress is being made in the fight against corruption.
Ukraine is offering favorable tax conditions for IT, and research and development, and President Volodymyr Zelenskyy has referred to the possibilities in sectors like metallurgy, energy, agriculture, natural resources, technology, and military manufacturing as “the greatest opportunity in Europe since World War II”.
Kyiv has negotiated political risk insurance (PRI) with governments and leading insurance agencies in the US, UK, Germany, and Poland. Some agencies, like the US International Development Finance Corporation (DFC) and the Multilateral Investment Guarantee Agency (MIGA), also cover military-related risks for foreign investors in Ukraine.