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State investment activity in Ukraine for the 1st half 2014

Foreign investors invested $ 1298.0 million of direct investments (joint-stock) in Ukrainian economy in the first half of 2014.

Investments are directed into developed areas of economy.

Industrial enterprises are concentrated 32.1% of total direct investment in Ukraine, financial institutions and insurance – 25.3%.

Industrial enterprises are concentrated $ 16,079.5 million (32.1%) of direct investments, processing enterprises – $13542.3 million, mining and quarrying development – $ 1566.6 million, electricity, gas, steam and air conditioned enterprises – $ 896.6 million. The company metallurgical industry, manufacture of fabricated metal products supplied by $ 5780.6 million of direct investments, food, beverages and tobacco production – $ 2954.7 million, production of rubber and plastic products, other non-metallic mineral products – $ 1360.1 million, engineering, except the repair and installation of machinery and equipment – $ 1096.4 million, manufacture of chemicals and chemical products – $ 1048.6 million.

Financial institutions and insurance accumulated $ 12,669.4 million (25.3% of direct investment in Ukraine), repair of motor vehicles and motorcycles – $ 6424.3 million (12.8%), organizations specializing in real estate transactions – $ 4046.7 million (8.1%), professional, scientific and technical activities – $ 3313.2 million (6.6%).

The top countries- investors (83% of total direct investments) are: Cyprus – $ 15699.4 million, Germany – $ 5943.0 million, Netherlands – $ 5349.9 million, Russian Federation – $ 3051.9 million, Austria – $ 2782.8 million, United Kingdom – $ 2417.9 million, Virgin Islands (Brit.) – $ 2054.7 million, France – $ 1741.0 million, Switzerland – $ 1373.2 million and Italy – $ 1082.0 million.

The analysis of dynamic of capital investments

The leading sectors of economy, in terms of attracting capital investment in January – June 2014 remain: industry – 36.2 billion hrn.; construction – 15.3 billion hrn.; repair of motor vehicles and motorcycles – 8.6 billion hrn.; agriculture, forestry and fisheries – 6.4 billion hrn.; transport, warehousing, postal and courier activities – 6.1 billion hrn.; real estate – 3.9 billion hrn.; information and telecommunications – 3.4 billion hrn.; financial and insurance activities – 2.9 billion hrn.

Amounts of capitals for development increased in January-June 2014: temporary accommodation and catering – 2.3 percent (0.6 percent of the total); financial and insurance activities – 0.6 percent (3.3 percent); construction – 0.2 percent (17.7 percent).

The share of bank and other loans in total investment was 10.2 percent.

Ukraine remains prospective for investment and it is sufficiently integrated into the world economy.

By the World Bank’s rating in “Doing Business-2014″ Ukraine has risen by 28 positions compared to the “Doing Business-2013″.

For further improvement of Ukrainian economy topical issue for today is to improve the legal and institutional framework to enhance the capacity of mechanisms to ensure a favorable investment climate and forming the basis of preserving and improving the competitiveness of the national economy.

Positive steps in this direction have already been made:

  1. A legal framework has created for investment and development of public-private partnerships.
  2. Foreign investors get a national investment regime in Ukraine.
  3. If the investment activity stops, the foreign investor returns his investments in kind or in currency, without paying the duty and income from investments in cash or in kind.
  4. Ukraine ratified the Washington Convention 1965 on the Settlement of investment disputes between States and Foreign individuals (16.03.2000)
  5. Verkhovna Rada of Ukraine has signed and ratified international agreements on the promotion and protection of investments with more than 70 countries.
  6. A Council of domestic and foreign investors under the President of Ukraine has been created.
  7. Law of Ukraine № 2623 «On the preparation and implementation of investment projects on a” single window”» entered into force 1 January 2012.
  8. Law of Ukraine № 5205 «On stimulate investment in priority sectors of the economy for creating new workplaces» entered into force 1 January 2013. It include exemption from income tax by 2017 and exemption from custom duty.
  9. Customs Code of Ukraine which entered into force 1 June 2012 will help to attract foreign investments.
  10. Action Plan to promote foreign investors has been accepted 19 December 2012.
  11. Concept of public-private partnership in Ukraine in 2013 – 2018 years has been approved.

One of the main tasks for the Government is to create legislation and work out measures to improve the mechanism of public investment management. On website has been published Projects of Law of Ukraine “On Amendments to the Budget Code of Ukraine (regarding state investments)” and “On Amendments the Law of Ukraine “On Investments “. The main aims of it:

  • Improvement of the management of public investment,
  • Prevention corruption in decision-making on projects financing.
  • Promotion of the public sector by identifying the minimum amount of state general fund investments.
  • Decentralization of management.

Ministry of Economic Development adopted the draft Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine regarding incentives for investment”. It has been registered by № 2101a 22 May 2013.The main aims of it:

  • Amending Law of Ukraine “On Investments” – about taxation,
  • Amending Law of Ukraine “On stimulate investment in priority sectors of the economy to create new workplaces” – in establishing a list of priority areas of economy; about a single application, selection and order of state registration of investment projects; increasing the number of work places for enterprises which implement investment projects in priority sectors of the economy; competitiveness, modernization of the national economy; the introduction of modern technology; providing of energy efficiency.

Bill was adopted as a basis 09/05/2013.

Energy independence and state security through diversification of sources and routes for natural gas in Ukraine is expected.

After approval of all details of the national project “LNG – terminal” envisages investment tender will be held for the construction of the ground terminal in second phase.
New Law reforming gas and transport management allowsto European and American companies to participate in the management of Ukrainian gas transportation system, namely 51% shares belong to Ukraine, and 49% – the company can acquire the EU, the European Energy Community and the United States.

In order to improve the investment climate and investment support of regional development in Ukraine has implemented technical assistance projects:

  • The “Local Economic Development of Ukraine (MLED)” (Government of Canada, Federation of Canadian Municipalities).
  • EU Project “Support of Regional Development Policy in Ukraine” (2013-2016) (part of the State Agency of partners).
  • Ministry of Foreign Affairs of the Republic of Poland project “Applying Polish experience in attracting foreign direct investment in selected regions in”
  • Ministry of Foreign Affairs of the Republic of Poland project “Innovation, information, Expanding cooperation and investment attractiveness of small cities in Ukraine. “
  • Grant from Japan International Development Agency (JICA).
  • OECD Project “Strategy for sectoral competitiveness of Ukraine”.

According to the central and local authorities in Ukraine today are implemented 228 projects on the basis of public-private partnerships.Projects that are implemented on the basis of public-private partnerships include the following areas of economy:

  • collection, purification and distribution of water (59 projects)
  • production, transportation and supply of heat (4 projects)
  • construction and / or operation of highways, roads, railways, runways at airports, bridges, road overpasses, tunnels and subways, sea and river ports and their infrastructures (14 projects)
  • tourism, recreation, culture and sport (9 projects)
  • search, exploration and mineral extraction (4 projects)
  • waste processing (116 projects)
  • healthcare (1 project)
  • production, distribution and supply of electricity (5 projects)
  • other (16 projects)

The main factor that creates a positive investment image of the country is the quick and quality solutions of local problems. Small and medium business now have considerable potential for sustainable economic development in social sector.

These measures are to improve the investment climate in Ukraine and increase the inflow of foreign investment and capital investment in its economy.

Sadko consulting will be your advisor in Ukraine.

Please don’t hesitate to contact Sadko Consulting should you are interested in our services of market researches and reports in Ukraine.

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