The Ukrainian economy opens new prospects for international investors

Despite the ongoing full-scale Russian military invasion, Ukraine offers significant opportunities for international investors.

The country's key sectors for investment include agriculture, alternative energy, aerospace, IT, and manufacturing. With 30% of the world's black soil, Ukraine is a major global producer of grains, sunflower oil, and other agricultural products.

Notably, Ukraine supplies 10% of the world's wheat, 15% of its corn, and 13% of its barley. It is also the largest exporter of sunflower oil globally, ranking second in sunflower seeds and third in potatoes and maize.

Renewable energy holds substantial potential in Ukraine, particularly in the biomass sector, which is experiencing rapid growth.

Ukraine is emerging as a significant source of green energy, including electricity, gas, and hydrogen, with the potential to meet up to 15% of Europe's energy needs, reducing dependence on Russian energy.

The Ukrainian National Recovery Plan aims for €104 billion in spending on the zero-carbon energy transition, with over €35 billion dedicated to developing green hydrogen production.

Ukraine is rich in natural resources, with 117 of the 120 commonly used minerals found within its borders. The country holds significant shares of the world's titanium (63.8%), iron (7.2%), and manganese (3.6%) output.

Ukraine's strategic location at the crossroads of Europe, Asia, and the Middle East makes it an ideal hub for transit trade. The country has an extensive network of roads, railways, ports, and airports that are being upgraded with foreign investments.

The Ukrainian government has simplified legal procedures for doing business and offers state-guaranteed investment security. Efforts to foster a competitive market and implement public-private partnership projects aim to attract foreign capital.

Although the war presents heightened risks, Ukraine's long-term potential and attractive valuations make it a compelling opportunity for investors with higher risk tolerance and a long-term horizon. Proper due diligence and risk management are essential when investing in Ukraine at this time.

The World Bank estimates that Ukraine's reconstruction represents a €368 billion multisectoral opportunity. The private sector is actively investing, with international companies such as Kingspan (€257 million in construction) and Bayer (€60 million in pharmaceuticals) making significant investments in 2023.

The full-scale invasion has catalysed Ukraine's integration with the West, accelerating reform and EU accession negotiations. The World Bank projects that these reforms could attract an additional €44 billion in foreign direct investment by 2033.

This has also opened new sources of financing backed by governments and International Financial Institutions e.g. Nestlé secured a €38M loan by EBRD for a new production facility in Western Ukraine. Specialized instruments like the "Ukraine Facility" are also being proposed to manage the complexities of reconstruction.

The Government of Ukraine is committed to investment attraction and is working on reforms to improve the business environment. A comprehensive toolkit of incentives, de-risking programs, and other instruments is already in place and is being reviewed and amended continuously.

The Government acts as a supportive partner to potential investors, assisting with feasibility studies, local partnerships, and preparation for entering the Ukrainian market.

Ukraine has developed incentives to attract large investments. Incentives for industrial parks include: interest rate compensation; non-refundable financing; compensation for connecting to engineering grids; 10-year corporate income tax exemption (contingent on reinvesting); VAT exemption on imported equipment for exclusive use; favourable land tax rates; customs duty exemptions on new equipment.

The Ukrainian Government offers financial incentives for companies making significant investments (€12M+) and creating new jobs, which include: 5-year corporate tax exemption; VAT and import duty exemption for new equipment; land tax exemption and lower tax rates; compensation for infrastructure costs and for connecting to engineering grids; lease of state or communal land without auction.

For the IT sector, the "Diia City" virtual economic zone offers incentives to attract IT companies and startups. These include a special corporate income tax regime, 0% tax on individual income from dividends (if payable once every two years), tax rebates, flexible cooperation with IT specialists through "gig contracts," and the application of English law best practices in employee stock ownership plans and warranties and indemnities.

The Ukraine Recovery Conference (URC2024), scheduled for June 11-12, 2024, in Berlin, aims to help investors understand prospective investment projects and create conditions to attract private investments, accelerating the reconstruction process and transforming Ukraine on its path to EU integration. The conference will focus on six crucial industries for Ukraine's recovery: renewable energy, critical minerals, metal manufacturing, transport infrastructure, logistics and warehousing, and digital technologies.

The conference will provide investors with information on the investment climate, government support, and potential projects in these sectors, highlighting the benefits of investing in Ukraine.

By attending the conference, investors can gain a deeper understanding of the investment opportunities in Ukraine and the support available to help navigate the process.

Investing in Ukraine is opening up new opportunities across various sectors, driven by the country's strategic location, human resources, cost competitiveness, and ease of doing business.

Ruslan Nimchynskyi, the Ambassador of Ukraine to the Republic of Cyprus