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Ukraine To Become Main Investment Recipient In Eastern Europe

December 13, 2007

In 2008-2012, the annual inflow of direct foreign investments (DFI) in Ukraine will, on average, exceed USD 7.5 billion, which will make the country one of the largest DFI recipients in Eastern Europe.

At that, in 2007, the volume of DFI in Ukraine will top the record of 2005 and amount to USD 8.5 billion (without taking into account the deal on acquisition of Ukrsotsbank by the UniCredit group).

In the nearest years, main spheres of DFI will be the financial sector, industry (first of all, food processing and engineering), and real estate. The main factors of DFI inflow will become improvement of investment climate and renewal of large-scale privatization with participation of foreign investors.

In addition, the long-overdue land reform, in particular, lift of the moratorium on farmland sales, will become a decisive argument for arrival of foreign investments in agriculture.

Large potential for DFI also lies in the energy sector, reforming of which is impossible without attracting private capital.

At present, Ukraine is still lingering behind the most of the Eastern European states in terms of correlation between general volumes of attracted DFI and GDP (around 22% of GDP in Ukraine, compared to more than 30% in Poland and 70% in Hungary), and in terms of DFI per capita indicator, which currently makes up around USD 650 (compared to over USD 7,000 in Hungary, USD 3,300 in Poland, and USD 2,700 in Bulgaria).

However, the current level of DFI inflow in relation to GDP is already comparable with the indicators of most Eastern European countries.

Thus, during the first nine months of 2007, USD 6.8 billion worth of DFI arrived in Ukraine, which makes around 7% of the country’s GDP for this period.

It should be reminded that according to the Control Risks report, around 57% of countries with emerging markets have the average and higher levels of political risks. Control Risks has characterized Ukraine as a country with the average level of political risks. The states where foreign business may face certain undermining of positions, and where safety of long-term investments cannot be guaranteed are referred to this category by Control Risks.

Tags: investment