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In this page: FDI in Figures | What to consider if you invest in Ukraine | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information

 

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 2023, FDI flows to Ukraine fell to USD 848 million in 2022, down from USD 7.3 billion one year earlier, due to the effects of the Russian invasion of the country. In the same year, the total stock of FDI stood at USD 51.1 billion. Multinational companies hold assets in steel, information and communication technology, pharmaceuticals and agricultural commodities. Arcelor Mittal is the largest investor, with assets of USD 6.5 billion (UNCTAD). In 2022, Russia’s invasion of Ukraine and the subsequent protracted war deeply deteriorated business climate. Insecurity, political and economic uncertainty, supply chain disruptions and infrastructure destruction lead to capital outflows. Most investments are made in manufacturing (23.3%), wholesale and retail trade; repair of vehicles and motorcycles (16.3%), mining and quarrying (11.5%), financial and insurance activities (7.6%), and real estate activities (7.3%). The main investors in Ukraine are Cyprus (33.1%), the Netherlands (19.5%), Switzerland (5.1%), Germany (5%), and the UK (4.8% - National Bank of Ukraine, 2022). The EU as a whole accounts for 74.4% of the total stock. In Q1 2023, Ukraine attracted USD 1.1 billion in FDI, comprising USD 128 million in capital, USD 1.1 billion in reinvested funds, and a debt component of USD -64 million. As of March 31, 2023, the cumulative direct investment in Ukraine reached a total of USD 53 billion, as reported by the Ukraine Invest agency.

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. Overall, the war significantly worsened the business climate: challenges such as Russia's deliberate destruction of Ukrainian civilian infrastructure, the occupation of a significant portion of the territory, disruption of the workforce resulting from the invasion, the presence of unexploded ordnance, and other ecological consequences of the war hinder both new and existing investors. It is worth noting that while these challenges exist, the majority of Ukraine's regions are not directly on the frontlines. Ukraine ranks 55th among the 132 economies on the Global Innovation Index 2023 and was not ranked in the 2023 Index of Economic Freedom due to Russia’s ongoing invasion.

 
Foreign Direct Investment 202020212022
FDI Inward Flow (million USD) -367,320848
FDI Stock (million USD) 52,09165,74651,118
Number of Greenfield Investments* 467831
Value of Greenfield Investments (million USD) 2,2542,333975

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 2020, in %
Cyprus 30.4
Netherlands 19.8
Switzerland 6.2
United Kingdom 6.0
Germany 4.7
Austria 3.3
Luxembourg 2.5
Main Invested Sectors 2020, in %
Manufacturing 22.9
Wholesale and retail trade, repair of vehicles 15.9
Mining and quarrying 9.7
Real estate 9.2
Financial and insurance activities 9.2
Energy 7.3

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

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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.

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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.

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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.

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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.

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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.

 
 

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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

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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.

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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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Latest Update: March 2024