The Keys to Removing Barriers to Investment in Ukraine

Ukraine faces a long road of reconstruction amid the ongoing conflict — and, presently, lacks the capacity to absorb and disperse necessary international aid and investment. Addressing this issue will require extensive reforms and close oversight throughout the entire process to effectively utilize the funds.

As part of the U.S.-Ukraine Partnership Forum hosted by the U.S. Chamber of Commerce, leaders from around the world discussed the necessary reforms and oversight tools for reconstruction, as well as how international partners can help ensure those reforms take root. 

Public-Private Partnerships Can Aid in Recovery

Despite the war and loss of population and economic output, the Ukrainian economy remains resilient. The World Bank estimates reconstruction needs of over $400 billion, which requires private sector investment. To attract such investment, Ukraine needs a strong rule of law, competition policies, transparency, and an enabling environment.

The United States Agency for International Development (USAID) program and Advantage Ukraine help prioritize investment needs and provide technical capacity to attract investment. 

“Just as recently as 2020, a survey indicated that one of the top concerns for investment decision-makers in Ukraine is corruption,” said Isobel Coleman, Deputy Administrator of USAID. “And so it is a real issue.”

However, Ukraine has made strides in this regard with the establishment of anti-corruption entities and e-government processes. 

“This is truly an inflection point for the Ukrainian economy, as it hopefully transitions soon from a wartime economy to a peace economy and focuses on that ascension process to the EU to really continue with decentralization, transparency, and limiting the role of outsized persons and individuals in particular sectors,” Coleman said. 

The private sector can help Ukraine by investing in institutions, policies, and transparency, as well as recognizing the two different economies in the country. The Ukrainian government is responsive and eager to attract investment to help their struggling economy. Investing in sectors like housing, energy, and retail services can help bring Ukraine back on track to where it was before the invasion.

New Initiatives Aim to Remove Barriers to Investment

Reforms and improvements in energy have made Ukraine an attractive place for investment. Despite being at war, Ukraine has integrated into EU markets and has resumed exporting electricity to the EU. 

“It is based on the years of the very boring and long and almost invisible process of both technical and legal, and also transparency and in the liberalization of markets, establishment, independent regulator, and regulator commission,” said Taras Kachka, Deputy Minister of Economy of Ukraine.

Slow but steady progress is being made in judicial reform, including the criminal convictions of corrupt judges and the establishment of a council responsible for selecting judges. 

“It also took several years to investigate the small corrupted [and] big corrupted cases in [the] judicial community,” Kachka continued. “But now we have the final criminal convictions of those corrupted judges. At the same time … about half of [the] judicial positions in Ukraine are vacant now.”

The completion of negotiations on a modernized Canadian-Ukrainian FDA agreement is seen as a positive signal for the quality of Ukraine’s domestic regulations and its business environment. 

Ukraine Is Seeking Policies to Attract Investments

Despite a poor reputation among some in the business and investment community due to past corruption and oligarchs, Ukraine has a progressive business community that was just starting to gain momentum in 2022. 

“Unfortunately, the Russians had other plans for Ukraine,” said Eric Hontz, Director, Center for Accountable Investment for the Center for International Private Enterprise. “What will happen in the rebuilding of Ukraine is a re-engagement of this progressive business community that was already there.”

To rebuild, Ukraine needs a policy of competition to attract more investors and pressure the country to move in a positive direction. This policy will drive changes in the private sector, and investments in judicial reform and regulatory policy will also be necessary. The country has human capital and potential, and with time, Ukraine can transform from a laggard to a leader in the EU.

American Businesses Can Support Ukraine’s Future

The primary obstacle for investors looking to invest in Ukraine is the negative perception of Ukraine as an investment destination due to corruption and political instability. However, this perception is changing due to the efforts of companies already operating in Ukraine and initiatives by organizations, such as the U.S. Chamber of Commerce.

“There is [a] reason why this perception is there, but I think what we need to do now, and when I say we, it's really the companies that are already working in Ukraine,” said Andy Hunder, President of AmCham Ukraine. “Together with the U.S. Chamber and together with this [business initiative], it's really to get the messages out about what's going on.”

Multinational corporations, such as Coca-Cola, PepsiCo, and Unilever, have made significant investments in Ukraine and are contributing to local communities. 

“Our message is to the companies that aren't in Ukraine today … Ukraine is open for business,” Hunder said. “Come to Ukraine, invest in Ukraine, and start investing now. Don't leave it too late; don’t miss the bus.”