Successfully investing in Ukraine

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published on May 16, 2018
 

How do you assess the current economic situation in Ukraine?

Since 2016, the Ukraine economy has been growing on average 2 per cent each year. The 2014-2015 crisis has been overcome and according to reports of foreign and domestic entrepreneurs, revenues have clearly increased, often at a two-digit rate. Also foreign investments are on the rise in Ukraine. New large investments are implemented in the following areas:

 

 

  • Renewable energy,
  • Expansion of infrastructure,
  • Energy sector,
  • Modernisation of establishments, and
  • Construction industry.  

 

The political conflict in eastern Ukraine has a local nature and does not affect the economic development in Ukraine. Despite the out-migration of labour, Ukraine is a very attractive production site – because of a low level of wages and energy costs. Thanks to money transfers from abroad, numerous industries (e.g. the construction industry) can develop in Ukraine, jobs are created and the buying power of the Ukrainian population is rising. All this sets very positive signals for the further economic development of the country. This is also confirmed by the forecasts for Ukraine made by international organisations or the World Bank for 2018. 

 

How would you describe the investment climate in Ukraine? Which sectors offer the largest potential? 

The Ukrainian government strives to create better conditions for investors and attract foreign capital to the country. Since 2014, numerous reforms have been put in place and numerous laws enacted in a bid to facilitate economic activities. For example, deregulations were implemented, which abolished many barriers to economic activities. The reforms, such as e.g. the judicial reform, aim to restore confidence in the judiciary and make Ukraine more attractive as an investment location.

 

Understandably, the reform process will continue for several years before it is entirely completed. Nevertheless, the investment climate has been improving year in and year out, and first successes have already become visible. In 2017, Ukraine was ranked 76th out of 190 countries in the Doing Business Ranking published by the World Bank (in 2013 the country was still ranked 142nd).

 

German companies can seize significant opportunities, in particular in export-oriented industries and in infrastructural projects financed by banks under various funding programmes. It should not be forgotten that Ukraine is a large market with over 42 million consumers and the buying power of the population will rise along with further economic growth.

 

 

What challenges do German companies face during their business ventures into Ukraine?

One of the biggest challenges for German entrepreneurs in Ukraine are the constant changes in Ukraine's legislation. On the one hand, this is good since many legal provisions have been adjusted to EU law. On the other hand, investors have to deal with amendments and new legal requirements. Here, in any case, it is advisable to have a reliable local partner by your side. 
 

What importance does Germany have for the Ukrainian economy?

Germany is one of the most important trading partners of Ukraine. The exchange of goods between German and Ukrainian trading partners has been significantly growing every year. In 2017, a rise of 22.4 per cent was recorded (source: AHK Ukraine). German products are very popular in Ukraine and thanks to the economic growth since 2016, demand for German products (in particular cars, machinery, household appliances etc.) has been growing again. Due to the low production costs, many German automotive suppliers have manufacturing facilities in Ukraine and automotive components represent the largest group of goods among Ukrainian exports to Germany. German companies have a strong presence in Ukraine and have reported increasing revenues since 2016 due to a rising demand for German products. The interests of German companies are very well represented by the German-Ukrainian Chamber of Commerce and also the Ukrainian government regards Germany as one of the most important trading partners. Therefore, German entrepreneurs are very welcome in Ukraine and, being reliable employers, are very popular with Ukrainian employees.
 

In your opinion, how will Ukraine develop?

Forecasts about the further development of Ukraine are very positive. In 2018, the Ukrainian economy should stay on the growth path and expand at a rate of between 3 and 3.5 per cent. The Ukrainian currency "Hryvnia" should remain stable and no economic reasons that would cause a significant devaluation are on the horizon. Due to the low production costs, the interest of foreign investors looking to use Ukraine's great potential is growing, in particular in industries that require a large amount of manual labour (e.g. automotive suppliers, furniture and clothing industry).
 

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