Ukraine: Investing

FDI in Figures

On February 24th 2022, Russia initiated a military conflict on the Ukrainian territory, which profoundly upsets the current political and economic context in both countries and will have substantial ramifications on the investment climate. For the ongoing updates on the developments of Russia-Ukraine conflict please consult the dedicated pages on BBC News.

According to UNCTAD's World Investment Report 2024, FDI flows to Ukraine bounced to USD 4.2 billion in 2023, from 557 million one year earlier. At the end of the same period, the total stock of FDI stood at USD 54.2 billion. Russia’s invasion of Ukraine and the subsequent protracted war deeply deteriorated the business climate. Insecurity, political and economic uncertainty, supply chain disruptions and infrastructure destruction lead to capital outflows. Most of the investment stock is made in manufacturing (19.6%), wholesale and retail trade (15.5%), financial and insurance activities (11.8%), mining and quarrying (10.9%), and information and communication (8.5%). The main investors in Ukraine are Cyprus (26.1%), the Netherlands (22.6%), Switzerland (6.2%), the U.S. (5.1%), Germany (3.7%), and Austria (3.5% - National Bank of Ukraine, data as of Q3 2024). According to the latest governmental figures, FDI in Ukraine declined 14% y/y during the first 11 months of 2024. Data from the National Bank of Ukraine (NBU) shows that reinvested profits made up the majority of FDI—75% in 2023 and 64% by November 2024.

Despite the war, the government has launched a drive to attract foreign investment of up to USD 400 billion in various sectors including technology, the agro-industry, clean energy, defence, metallurgy and natural resources. Furthermore, the reconstruction efforts in Ukraine are expected to draw investments totalling hundreds of billions of dollars from governments, international financial institutions, and the private sector. In addition to political instability, investors pointed out before the war that the underlying inefficiency and corruption in the justice system were among the main obstacles to investment. Other serious impediments are the complexity of laws and regulations, poor compliance with contracts and poor governance. However, the country has a large internal market, proven agricultural potential, energy and mineral resources and a strategic geographic location, making it a transit hub and a gateway to Europe and Eurasia. Before the war, progress had been made in terms of obtaining building permits, connection to electricity, protection of minority investors and cross-border trade. Ukraine has also simplified and reduced the costs of the registration procedure for representative offices of foreign business entities. In recent years, the war significantly worsened the business climate: Russia’s occupation of large parts of Ukrainian territory, ongoing frontline battles, missile and drone attacks on civilians and infrastructure, workforce disruption, unexploded ordnance, and other environmental impacts pose challenges to investors. However, most of Ukraine remains unaffected by the frontlines. The country ranks 60th among the 133 economies on the Global Innovation Index 2024 and 105th out of 180 on the 2024 Corruption Perception Index.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	-36	7,320	848
FDI Stock (million USD)	52,091	65,746	51,118
Number of Greenfield Investments*	46	78	31
Value of Greenfield Investments (million USD)	2,254	2,333	975

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

FDI STOCKS BY COUNTRY AND INDUSTRY

Main Investing Countries	2022, in %
Cyprus	44.4
Netherlands	26.2
Switzerland	6.9
Germany	6.7
United Kingdom	6.5
Austria	4.4
Luxembourg	3.3
USA	3.3

Main Invested Sectors	2022, in %
Manufacturing	23.3
Wholesale and retail trade, repair of vehicles	16.3
Mining and quarrying	11.5
Financial and insurance activities	7.6
Real estate	7.3
Electricity, gas, steam and air-conditioning supply	6.9
Agriculture, forestry and fishing	5.5
Information and communication	5.4

Source: National Bank of Ukraine, Latest data available.

Form of Company Preferred By Foreign Investors: Limited liability companies and joint stock companies.
Form of Establishment Preferred By Foreign Investors: A subsidiary is preferred by foreign investors as it is very advantageous.
Main Foreign Companies: For a list of foreign companies established in the Ukraine, consult the "Success Stories" section on the portal UkraineInvest.
Sources of Statistics: National Bank of Ukraine

What to consider if you invest in Ukraine

Strong Points

The key assets of the Ukrainian economy in terms of FDI include:

Strategic geographical position, the country being located at the gates of Europe, Russia and Asia
Abundant natural resources (iron ore and manganese reserves) and a large agricultural industry (55% of arable land)
Strong international financial support from global institutions (IMF, World Bank, EU) and through bilateral agreements
Association and Free Trade Agreement with the European Union (2016) which gives Ukraine preferential market access
One of the largest markets in Europe with 43.5 million consumers and the emerging middle class
Skilled and inexpensive workforce
Good education system (large number of qualified specialists in the high-tech sector)
Low level of private debt

Weak Points

The weak points of the Ukrainian economy in terms of FDI include:

High geopolitical risk and political instability severly aggravated by the escalation of the confict with Russia (large scale military invasion of Ukraine launched by Russia at the end of February 2022)
A weakly diversified economy which is highly dependent on Russia (its main trading partner and natural gas supplier) with which it has been in conflict since the 2014 crisis in Crimea and Donbass regions)
Unstable economy, characterised by a high rate of inflation and exchange rate vulnerability
Weak legal framework and business environment (endemic corruption, monopolies, weak property rights, inefficient public services)
High public debt level (especially external debt)
Declining demographics, regional inequalities, high level of poverty and of the informal sector

Government Measures to Motivate or Restrict FDI

In recent years, Ukraine has been trying to improve its business climate and attract foreign investors, as confirmed by the dozen laws passed by the government of President Zelenskyy in this regards, including several incentive programs (including a 5-year tax exemption for investments over USD 10 million in large-scale privatization projects, loans with reduced interest rates for SMEs, the collaboration of a government manager for investments over USD 100 million, higher depreciation rates for fixed assets, etc.).
UkraineInvest is the national investment promotion agency that works as a one-stop-shop for investors.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Ukraine: To see the list of investment treaties signed by Ukraine, consult UNCTAD's International Investment Agreements Navigator.
International Controversies Registered By UNCTAD: Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement: ICCWBO , International Court of Arbitration, International Chamber of Commerce
ICSID , International Center for Settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency: Ukraine is a signatory of the MIGA convention.

Country Comparison For the Protection of Investors	Ukraine	Eastern Europe & Central Asia	United States	Germany
Index of Transaction Transparency*	9.0	7.5	7.0	5.0
Index of Manager’s Responsibility**	2.0	5.0	9.0	5.0
Index of Shareholders’ Power***	6.0	6.8	9.0	5.0

Source: The World Bank - Doing Business, Latest data available.

Procedures Relative to Foreign Investment

Freedom of Establishment: In general, foreign nationals can enjoy the same rights as Ukrainian citizens in terms of freemod of investing in the country.
Acquisition of Holdings: Foreign companies are restricted from owning agricultural land, producing bio-ethanol, and some publishing activities. In addition, Ukrainian law authorizes the government to set limits on foreign participation in state-owned companies. Furthermore, the gas transmission system, electricity grids, and various plants and factories are precluded by law from private ownership.
Obligation to Declare: Before registering their business, non-Ukrainian investors must register with the Office of Immigration in the Ministry of Foreign Affairs and obtain a taxpayer identification number through the State Fiscal Service.
Competent Organisation For the Declaration: Ukrainian Ministry of Foreign Affairs
State Fiscal Service
Requests For Specific Authorisations: Ukraine is considering a mechanism for foreign investment review for security matters. According to UkraineInvest, foreign direct investments are reviewed on a case-by-case basis by the Cabinet of Ministers if concerns arise, but there is no formal screening process in place at the moment.

Office Real Estate and Land Ownership

Possible Temporary Solutions: Consult InstantOffice, CoWorker, Kiev International Realty.
The Possibility of Buying Land and Industrial and Commercial Buildings: Ukrainian laws impose almost no restrictions on the acquisition of real estate in the country by foreigners, nevertheless there is a moratorium on the sale of agricultural land that prevents them from acquiring it.
Risk of Expropriation: The risk of expropriation is still very present in the Ukraine. Ukrainian law provides for total compensation in case of expropriation, except for extreme emergency cases. On November 17, 2009 the Parliament adopted the law on transfer of land plots and property for public needs. The law gives clear definition of public need, defines procedures for such an expropriation, and provides a list of possible reasons. Furthermore, expropriation of property is permitted in certain criminal proceedings or in cases of failure to fulfil investment obligations during privatization procedures.

Investment Aid

Forms of Aid: Investment incentives take the form of a 5-year tax exemption for investments over USD 10 million in large-scale privatization projects, loans with reduced interest rates for SMEs, the collaboration of a government manager for investments over USD 100 million, higher depreciation rates for fixed assets (property, plant, and equipment), exemptions from customs duties for any in-kind contribution imported into Ukraine for the company’s charter fund, etc.
For further information, refer to the official portal UkraineInvest.
Privileged Domains: Incentives are generally available for larger projects (USD 10 million in case of privatization projects, or for investments above USD 100 million).
Privileged Geographical Zones: Consult UkraineInvest's guide, including analytical data from various industries.
Free-trade zones: Ukraine does not maintain special or free economic zones. Consult the dedicated pages on UkraineInvest for a business overview of the country's regions.
Public aid and funding organisations: Invest in Ukraine
However, the Ukrainian government does not usually financing foreign direct investment projects, and the issuance of government guarantees are rare.

Investment Opportunities

The Key Sectors of the National Economy: Energy sector, agriculture and agro-chemistry, consumer goods, technology.
High Potential Sectors: High technology, agro-chemistry, aerospace industry, alternative energy, tourism and hospitality, transport and logistics, IT service and software R&D.
For an overview of the most attractive sectors, consult the "Industries" section of UkraineInvest's portal.
Privatization Programmes: Although the government has launched a privatization program in 2019, listing 21 major public companies to be privatized (plus many smaller companies), so far the results have been inadequate, with no major privatization being concluded in the last three years.
In 2020, the government started the legislative process to permit partial privatization of some previously excluded public companies, including Naftogaz, MainGasPipelines of Ukraine, UkrTransGaz, UkrNafta, Ukrgasvydobuvannya, Ukrzaliznytsia (UZ) and UkrPoshta. In March 2021, Parliament passed the bill in its final reading.
In principle, nationals and foreign investors should enjoy equal rights when bidding in privatization programs; however, there have been complaints to this extent.
Tenders, Projects and Public Procurement: ProZorro , Official governmental procurement portal
Tenders Info , Tenders in Ukraine
DgMarket , Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: The Government of Ukraine operates 1,600 state-owned companies (with around 1,700 more being inactive), of which more than half are small and inefficient and rely on government subsidies to function as they wouldn’t be able to be in direct competition with private firms. These companies are not restricted to network industries with natural-monopoly segments (e.g., electricity, gas, water supply, and railways), and they operate in a wide range of manufacturing, agricultural, and financial services markets. Ukrainian law defines certain segments of the electricity, gas, and transportation sectors as natural monopolies, while the postal services, railways, alcohol production, and water distribution markets are all legal monopolies.

The Antimonopoly Committee of Ukraine (AMCU) is the Ukrainian state authority for protection of economic competition.

Finding Assistance For Further Information

Other Useful Resources: UkraineInvest's Guide
Ministry for Development of Economy, Trade and Agriculture
Investments in Ukraine - InVenture
Doing Business Guides: World Bank - Doing Business Ukraine
Baker McKenzie - Ukraine Business Guide

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