Long recognized for its economic potential, Ukraine now appears to have a second chance to establish itself as a top location for foreign investment. Many foreign businesses have already announced an investment of hundreds of millions, indicating interest in entering Ukraine despite the Russian invasion that is ultimately leading to the need for greater reconstruction of the country. U.S. International Development Finance Corporation (DFC) and U.S. Agency for International Development (USAID) have already signed the memorandum that will help the government of Ukraine to attract public and private investments.

Let’s list the benefits of the long-term investing.

Abundance of natural resources

With a population of over 42 million at the strategic crossroads of Europe and Asia, Ukraine is incredibly rich in terms of natural resources. Region is very appealing to foreign investments since it has access to important agricultural raw materials, clays, wood, and other essential products for manufacture.

The country’s exports provide food for more than 400 million people worldwide, thus called the ‘breadbasket of the world’. More than 55 percent of Ukraine’s territory is arable land. With a favorable climate and rich black soil, the country has become a leading producer and exporter of grains, including wheat, corn and barley. The agricultural sector plays a crucial role in Ukraine’s economy, providing employment and contributing to food security regionally and globally. By 2025, the agriculture processing industry alone has capacity to consume up to $20 billion on investments.

Additionally, Ukraine possesses 20 of critical raw materials, such as lithium, cobalt, graphite and zirconium. Country ranks 25th in mining globally, 6th in production of iron, 5th in titanium, and 7th in kaolin. The country’s coal reserves, particularly in the Donets Basin, have historically been a vital source of energy for both domestic consumption and export. Furthermore, Ukraine’s iron ore deposits, concentrated primarily in the Kryvyi Rih region, make it one of the leading procedures and exporters of iron ore globally.

Strategic Location

The neighboring consumer markets have a combined population of more than 800 million people, and it has more than 20 free trade agreements with 47 nations, including the EU. All of these factors combine to make Ukraine an essential link in the global supply chain. Ukraine’s location along major transport routes, including the Silk Road Economic Belt and the Trans-European Transport Networks, positions it as a key player in global trade. With its extensive network of highways, railways, and ports, Ukraine has the infrastructure necessary to facilitate the movement of goods and services across borders.

Perspective sector

Ukraine boasts a highly skilled and educated workforce, with over 36% of its population holding a tertiary education degree. Ukraine ranked 21st in the Global Skills Index 2022 with more than 60,000 specialists graduating each year, with high number of specialists in computer science, mathematics, software engineering, big data, and machine learning. This has led to a thriving IT industry, with Ukrainian programmers being recognized globally for their technical expertise and innovative thinking. There are more than 240,000 IT professionals and engineers accessible in Ukraine.

The IT industry in Ukraine was thriving before the war, accounting for more than 4% of the country’s GDP. It has experienced remarkable growth in recent years, with a compound annual growth rate (CAGR) of 20%. This growth is expected to continue, with the industry projected to reach $8 billion by 2025.

Nearly 80% of Ukrainian IT companies obtained new clients during the war, and more than half of the enterprises anticipate growth of between 5% and 30%. As a result, the sector was able to increase exports by almost 40%. More than a hundred Fortune 500 corporations, such as Google, Boeing, and Oracle, outsource work to Ukrainian businesses or base their research and development facilities in the country. Even despite the war, in 2022 the investment company Horizon Capital together with the International Finance Corporation (IFC) and several other financial institutions formed a new investment fund in the amount of $200 million just for Ukrainian startups.

Significant development potential

The necessity of rapid development of the country’s economy in upcoming period is creating an unprecedented number of opportunities for investors. More than 400 global companies pledged support for rebuilding the war-torn economy at the Ukraine Recovery Conference in London. Citi, Sanofi (SNY) and Philips are among businesses that have endorsed the Ukraine Business Compact, indicating their desire to increase foreign investment in the country. Moreover, a number of projects have been still carried out during the conflict, including US investments in the semiconductor industry, Austrian woodworking and winter sports equipment projects, German automotive and construction materials facilities, as well as several other investment fund initiatives.

In order to attract private investment, the Ukraine Development Fund aims to obtain so-called concessionary money from governments and development banks. According to a declaration made by the Ukrainian government at the Lugano Conference, 850 projects totaling $750 billion would be undertaken between 2023 and 2032 in order to restore Ukraine. The Ukrainian government has identified five industries to which initial investments from the fund will be directed: infrastructure, energy, manufacturing, agriculture and information technology.

Investment options

As a result, there is a wide range of instruments to invest in Ukraine’s economy. Ukraine can offer foreign investors a variety of industries that create high-added value and whose products can be competitive in global markets. The following are the top economic sectors in Ukraine where investors should focus in 2023:

• Energy ($177 billion of potential investment). Ukraine has the ability to generate dozens of green hydrogen and electricity facilities and has already started cooperation with foreign nations and obtain funding from international organizations. Ukraine has been designated as a priority partner in the EU’s Hydrogen Strategy, which places a high priority on boosting the use of renewable hydrogen.
• Logistics and infrastructure ($123 billion of potential investment). Due to it’s geographical location, Ukraine serves as a significant commerce transit route. Logistics is one of the most important sectors that is currently requiring large investments due to the outcomes of war.
• The agricultural sector ($34 billion of potential investment). Investors can finance the production of agricultural goods (by renting agricultural land, for example) as well as their processing.
• Metallurgy and metal processing ($26 billion of potential investment). Ukraine has experience in the entire titanium and titanium-containing product cycle as well as extremely complex metallurgical processes. The industry in Ukraine may continue to lead in both the market for direct reduced iron and green metallurgy.
• Industrial production ($16 billion in potential investment). One of the most significant industries, including the design, manufacture, and operation of machines and tools. Heavy, transport, and agricultural machinery, machine tools, instruments, radio and electrical engineering, and equipment for other industries, particularly chemical and food processing, are the most significant and advanced production links.
• Innovative technologies with a potential investment of $11 billion. Diia – a unified system of official and governmental documents in electronic form, was first developed by Ukrainians, who are now sharing their concept internationally. Additionally, Ukraine has a distinctive Diia City system, which provides an advantageous economic climate and legal framework for IT enterprises to fully realize their potential and compete globally. Ukraine is the fourth-largest cryptocurrency user in the world and ranks fourth in terms of the volume of financial transactions made using mobile devices.
• Natural resources (possible investment value: $5.6 billion). Coal, iron and manganese ores, graphite, kaolin, uranium, titanium, zirconium ores, germanium, non-metallic metallurgical raw materials, raw materials for the production of construction materials, and other minerals and mineral resources are abundant in Ukraine.

Security and guarantees.

Even achieving peace, Ukraine’s location will remain the same, therefore some issues would persist for some time. With Ukraine’s accession to the EU and NATO, however, investment security is expected to increase. This gives the international business community a strong signal. State guarantees and insurance incentives in Ukraine should help to provide additional reassurance. These involve a combination of monetary investments made through the transfer of technologies and equipment, and interactions with impact investors may also be used to address the issue. The Ukrainian government is actively working to provide comprehensive solutions for the wider investment community, including both small and major businesses. More than 100 investor meetings with local businesses and government have been arranged by Ukraine Invest in the previous two years, which has helped Ukraine attract more than $1.4 billion in foreign direct investment.

This report was made by Ukrainian Marshall on May 25, 2023

Ukrainian Marshal is a team of experienced managers from Ukraine and the West that helps with the reconstruction of the country. Many head of states are visiting Ukraine with a lot of promises, funds from international organisations are presented, but most projects need private initiates to get alive. Our team is visiting many cities, understanding local needs and analysing investment projects in production, logistics, agriculture, real estate, green energy, food, retail and many more industries.

We help to find international investors and to give those investors the right management support. Ukraine is moving towards European Union, many legals changes are on its way and corruption is considerably getting less. Despite the horrible war in parts of the country, now we see the right moment for international investors to come to Ukraine. It is important to create new jobs in Ukraine – for this reason we help Ukrainian producers to find new customers and international companies to settle down in Ukraine with very favorable economic opportunities. Soon, we will start our own Ukrainian Investment Fund where smaller investors will have the chance too to participate in the coming boom of the country.

For more information, please visit us at www.uamarshall.com

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