The lack of national capital and the need for restructuring of business, from one side, and the need to compensate technological gap–on the other side actualize the issue of attracting foreign investments in Ukraine.
Attracting long-term foreign investments, as well as intensifying activities to “promote” them during almost all the years of Ukraine’s independence was one of the priorities of its economic policy, which was determined by several official documents.
However, according to one of the indicators that reflects the degree of integration of the country into the world economy, the development of its foreign economic relations and the desire to create an open, export-oriented economic model – accumulated foreign investment.
Needless to say that Ukraine has many attractive factorsfor investments, such as the expansion of investment connections: a large and actually growing domestic market; geographic location on the crossings of the main transport routes between Europe and Asia; relatively cheap labor; scientific potential; the infrastructure (ports, bridges, warehouses, water supply) etc.
FDI (foreign direct investment)
The process of foreign investment in Ukraine has certain features.
Firstof all, despite the fact that as of July 2018 foreign direct investment (FDI) in the economy of Ukraine came from about 130 countries. This indicates a slight geographical diversification of FDI exporting countries to Ukraine.
Second, FDI in Ukraine is formed by two groups of capital: those directly owned by foreign residents and those controlled by foreign companies’ resident in Ukraine. A survey of FDI exporting countries to Ukraine’s economy shows a low share of FDI from developed countries, while the number of offshore zones is quite significant. As of the end of 2017 the total amount of accumulated FDI from such areas reached $ 13,045.7 million, which is more than 33% of total FDI. In this way, offshore investments displace the capital of developed countries from the Ukrainian economy and provide only quantitative indicators of the growth of FDI inflows to Ukraine, and not qualitative ones.
The current geographical structure is not optimal for foreign investors and does not correspond to the structure of investors who place their capital in most developed countries. Investments are important for the Ukrainian economy from countries that are technological leaders and specialize in the production of goods with a high share of value added, namely from the “old” member states of the European Union (France, Italy, Germany), as well as the United States and Japan.
The Most Attractive Ukraine Industries for Investors
As for sectoral priorities, they are different for foreign investors: today FDI is available in the most sectors of the Ukrainian economy. At the same time, most investors on the Ukrainian market are willing to invest in the processing industry, as well as wholesale and retail – where new products appear quickly, the range changes, costs and low commercial risks pay off quickly. Also, there are popular industries that do not require long-term investment and development of new technologies, including the financial sector and the real estate.
Despite the fact that investments are attracted to highly profitable sectors of the economy, they do not strengthen the country’s competitive position in world markets. Excessive FDI in the financial sector, on the one hand, fills the financial system with working capital, which contributes to the stable liquidity of the country’s financial system, on the other – creates the basis for extensive development of the national economy.
First of all, FDI should promote sustainable and balanced development, structural modernization of the national economy, increase its level of international competitiveness.
FDI should be a priority in the development of high-tech and science-intensive industries (for example software development or energy industry) that help expand export potential and strengthen the competitiveness of Ukrainian goods on world markets.
