Download the presentation "Investment Activity in Ukraine" by the Ministry of Economy of Ukraine here.

According to the National Bank of Ukraine, the volume of foreign direct investment (FDI) into the economy of Ukraine (balances) (equity instruments and debt instruments) as of December 31, 2022 amounted to USD 50 986,7 million.

Investments engaged to already developed areas of economic activity.

As of December 31, 2022, the most significant amounts of direct investment (balances) were directed to industrial enterprises (41,9%) and institutions and organizations engaged in wholesale and retail trade, repair of motor vehicles and motorcycles (16,3%).

Main investor countries:

• Cyprus – 33,1%, 
• the Netherlands – 19,5%, 
• Switzerland – 5,1%, 
• the United Kingdom of Great Britain and Northern Ireland – 4,8%, 
• Germany – 4,97%, 
• Austria – 3,2%, 
• Luxembourg – 2,5%,
• France – 2,2%.

According to the National Bank of Ukraine, іn eleven months of 2023, the net inflow of foreign direct investment (FDI) was estimated at 4,4 billion USD, including reinvested earnings of 3,5 billion USD. For the corresponding period in 2022, the net inflow of FDI was 124 million USD (reinvested earnings for that period - 394 million USD). The net inflow of equity capital (excluding reinvested earnings) was 506 million USD (for eleven months of 2022 - 335 million USD). The net inflows through debt instruments amounted to 467 million USD (while there were net repayments of 586 million USD in eleven months of 2022).

In the context of military aggression by the russian federation and the imposition of martial law on the territory of Ukraine in accordance with the Decree of the President of Ukraine of February 24, 2022 № 64 "On the introduction of martial law in Ukraine", the Verkhovna Rada and the Government are working, in particular, to restore the economy, help Ukrainian entrepreneurs and create conditions for attracting investment to Ukraine.

The Law of Ukraine "On State Support of Investment Projects with Significant Investments in Ukraine" was adopted to stimulate the attraction of strategic investors to Ukraine's economy, increase the investment attractiveness of Ukraine, create new high-paying jobs, and increase the competitiveness of the economy by introducing state support for large investment projects.

On August 09, 2023, the Verkhovna Rada of Ukraine adopted the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine on the Implementation of Investment Projects with Significant Investments" (the "Law"), which entered into force on September 17, 2023.

The main purpose of the Law is to stimulate the attraction of foreign and domestic investments by simplifying the requirements for investment projects with significant investments, expanding the forms of state support for the implementation of such projects, which will create favorable conditions for attracting a wider range of investors and increasing the number of investment projects with significant investments, as well as contribute to the development of the regions where they will be implemented, and for now mostly to the Kherson region.

The Law, in particular, amended the Law of Ukraine "On State Support of Investment Projects with Significant Investments in Ukraine" in the part:

• expanding the areas in which an investment project with significant investments can be implemented;
• enabling the applicant, not earlier than 18 months prior to the date of submission of the application to the authorized body, to make significant investments in investment objects in an amount not exceeding 30% of the total amount of significant investments required for the implementation of an investment project with significant investments;
• enabling the applicant to act as an investor with significant investments if it is a separate legal entity established to implement an investment project with significant investments and as a party to a special investment agreement as an investor;
• supplementing the forms of state support, namely: compensation at the expense of the state, local budgets and other sources not prohibited by law for the cost of adjacent infrastructure (roads, communication lines, heat, gas, water and electricity supply, utilities, etc.) built by the applicant or investor with significant investments, necessary for the implementation of an investment project with significant investments; compensation for the costs of connection and connection to utility networks necessary for the implementation of an investment project with significant investments;
• reducing the threshold for significant investments (from EUR 20 million to EUR 12 million) and the number of new jobs created during the life of an investment project with significant investments, namely, changing and differentiating job creation requirements to enable a wider range of business entities to be involved in the investment process, etc.

Another mechanism for attracting investment is industrial parks, which are potential industrial sites for relocating companies from other countries to diversify their supply chains and help reduce the time to market for companies, taking into account the time required to find the optimal location, start construction and commission facilities.

The Law of Ukraine "On Industrial Parks" provides for a simplified procedure for granting lease or ownership of land plots within industrial parks, long-term and sustainable economic relations within industrial parks, provision of state incentives for the development of registered industrial parks. Such state incentives can be provided at the expense of the state and local budgets and other sources not prohibited by law, as well as by supporting investors by local and central executive authorities, specialized institutions and organizations in resolving issues related to the development of industrial parks.

In addition, on 21.06.2022, the Verkhovna Rada of Ukraine adopted the Laws of Ukraine "On Amendments to the Tax Code of Ukraine on Creating Favorable Conditions for the Operation of Industrial Parks in Ukraine" (hereinafter - Law № 2330) and "On Amendments to Article 287 of the Customs Code of Ukraine on Creating Favorable Conditions for the Operation of Industrial Parks in Ukraine" (hereinafter - Law № 2331).

In addition, according to the law, initiators and management companies of industrial parks may create small-scale electricity distribution systems for industrial parks.

The creation of small electricity distribution systems in industrial parks can significantly simplify and speed up the connection of participants and other entities of industrial parks to the electricity supply system.

Despite the objective difficulties related to the possibility of state incentives for industrial parks (this year there is no relevant funding from the state budget), the Government continues to cooperate with central and local executive authorities, other state bodies and institutions (in particular, the State Institution "Office for Attracting and Supporting Investments"), local governments, NGOs, as well as international and foreign partners to create conditions for the development of industrial parks in Ukraine.

Thus, following the results of joint cooperation between local governments, the Ministry of Economy and the Ministry of Finance, the Government has recently amended the Procedure for the Exercise of Powers by the State Treasury Service in a Special Regime under Martial Law, approved by the Resolution of the Cabinet of Ministers of Ukraine of 09.06.2021 № 590.

According to these amendments, local governments may spend local budget funds on the production of project (design and estimate) documentation, new construction, reconstruction, overhaul of engineering and transport infrastructure facilities necessary for the creation and operation of registered industrial parks located outside their territory.

The Ministry of Economy, with the assistance of a UNIDO technical assistance project and with the participation of interested central executive authorities, is also formulating a policy to promote the introduction of an eco-industrial park model in Ukraine.

In addition, the Cabinet of Ministers of Ukraine approved the Strategy for the Development of Industrial Parks for 2023-2030 (hereinafter referred to as the Strategy) by its Resolution № 176-r dated 24.02.2023. The Strategy is intended to help more effectively use the potential of industrial parks as part of the decentralization process and to help address issues related to stopping environmental degradation, creating added value and new skilled jobs.

In addition, the Law of Ukraine "On the State Budget of Ukraine for 2024" provides for the Ministry of Economy, as the main spending unit, to spend UAH 1 billion in a special fund under the new budget program № 1201340 "State Stimulation of the Creation of Industrial Parks" (the Law was adopted on 09.11.2023).

Another instrument is the Production Sharing Agreement (hereinafter – the Agreement). Under the PSA, one party, Ukraine, entrusts the other party, the investor, with prospecting, exploration and production of minerals in a certain subsoil area and carrying out works related to the agreement for a specified period of time, and the investor undertakes to perform the assigned works at its own expense and risk, with subsequent reimbursement of expenses and receipt of payment (remuneration) in the form of a part of profitable production.

Public-private partnership (hereinafter referred to as "PPP") is one of the most effective tools for attracting additional investments into the public sector of the Ukrainian economy and at the same time is an efficient mechanism that promotes the development of relations between government agencies and business. The state guarantees compliance with the conditions established by the legislation of Ukraine for the activities of private partners related to the execution of agreements concluded under the PPP, as well as the observance of the rights and legitimate interests of private partners.

One of the forms of PPP is a concession, which provides for the concessionaire to grant the concessionaire the right to create and/or construct (new construction, reconstruction, restoration, overhaul and technical re-equipment) and/or manage (use, operation, maintenance) the concession object and/or provide socially important services in the manner and on the terms specified in the concession agreement, and also provides for the transfer of the majority of operational risk to the concessionaire, covering demand and/or supply risk.

Despite all the challenges and difficulties that the war in Ukraine has brought, the Government of Ukraine is working to create conditions for the effective attraction of domestic and foreign investment in Ukraine's economy.

Thus, the amendments to the budget legislation introduced in 2022 opened a new mechanism for raising funds for the implementation of PPP projects, which allows public partners to make long-term commitments under PPP agreements, and gives private partners (concessionaires) confidence in the fulfilment of their obligations by the state and the functioning of the PPP (concession) mechanism.

This is an important step for the implementation of socially important projects, which are mostly implemented under the PPP model based on the availability of infrastructure with payments for operational readiness.

In addition, the Ministry of Economy of Ukraine is currently working on amending certain legislative acts to improve the mechanism for attracting private investment through the PPP mechanism to accelerate the restoration of war-damaged facilities and the construction of new facilities related to the post-war economic recovery of Ukraine.

The main principles of the strategy for infrastructure reconstruction in Ukraine (based on innovation and social responsibility) and the main prerequisites for the successful use of PPPs in Ukraine, in particular:

• strong institutional capacity and support from international financial organizations (IFIs) and development finance institutions (DFIs), including international development banks;
• payment guarantees for private partners;
• a clear and consistent list of viable projects;
• optimized and standardized transparent investor selection procedures;
• templates of tender documents for a group of projects are available.