More boom for your investment buck!

For over the past six months, Ukraine has experiencing an investment boom thanks to an increased flow of capital from countries of the EU

Europeans nave discovered a new thriving economy for investing their capital into-it's called Ukraine.  Though this discovery came not immediately following the Orange Revolution, this event certainly opened the floodgates for European capital. 

Despite the recent talks about deterioration of the investment climate in Ukraine, western businesses saw more good than bad in the new climate in the country.  The threat of re-privatization affected mainly the companies acquired by Ukraine's major financial industrial groups.  Meanwhile, the tender for the promises of ensuring transparent privatization were more than just words.

At the moment, western investors are looking into companies like Ukrtelecom, Oshchadny Bank and other large and medium-sized assets, which are slated to be put up for sale over the next couple of years.  The offensives that certain politicians launched against the operation of free economic zones and priority development territories in Ukraine disappointed those investors that worked in them, but was positively perceived by those who are used to playing taxes on across-the-board conditions.

Largest investors in Ukraine by country, US $.  As of January 1, 2006-06-09 Increase in 2005

Finally, while some Russian investors can't seem to stop talking about pressure on the part of the Ukrainian government, it seems as though western companies have hopes that the conditions for fair competition in Ukraine will actually be created. 

It is still too early to speak of certain trends, because the flow of investments into Ukraine from western countries, particularly from the G-7, is not uniform.  Moreover, not all investments registered as coming from western countries or companies are actually from there.  Often, these are Ukrainian re-investments or Russian capital investments made through companies registered in the west.  This makes it more interesting to follow which western countries and companies show the greatest interest in Ukraine and what industries are the most attractive.

The State Statistics Committee reports that the volume of foreign direct investments (FDI) into Ukraine grew 12.5% or by US $2.039 bn in January-March 2006, totalling US $18.4 bn as of April 1.  The net increase in foreign capital reached US $875.604 mn.  In particular, US $989.628 mn has been invested in the country, while US $114.024 mn has been repatriated.  Kyiv is the leader among regions in terms of the volume of foreign capital at US $4.224 bn (as of April 1, 2006 and rising) followed by the Dnipropetrovsk (US $1.819 bn) and Donetsk (US $647 mn) oblasts. 

According to the Forecast of Economic and Social Development of Ukraine for 2007 drawn up by the Economy Ministry, the volumes of FDI into the economy of Ukraine will amount to US $24.175 bn in 2007, which is 16% more than the forecast for this year (US $20.875 bn).  The ministry points out that based on the results of 2005, the increase of FDI exceeded the level of 2004 by 3.3 times (mainly thanks to the privatization of Kryvorizhstal).  In 2006, the ministry predicts a 27.5% increase in the level of investments.

By Yevhen Pivnev

June 14, 2006