The war in Ukraine has cast a long shadow over the country’s investment landscape, with 53.8% of foreign investors citing it as a key deterrent to investing in the region. This stark figure, revealed in a report by the Business Ombudsman Council of Ukraine (BOC), underscores the profound impact of conflict on economic activity. However, amidst the uncertainty, sectors like energy, construction, and industrial manufacturing remain beacons of opportunity, attracting significant interest from potential investors. The report, titled “Ukraine at War: Business Environment Transformation and Investment Prospects,” offers a nuanced view of a market in flux, where challenges coexist with promising prospects.
The construction sector, in particular, stands out as a focal point for foreign investment. According to the BOC survey, 23.1% of respondents expressed a keen interest in investing in construction projects. This interest is not surprising given the urgent need for reconstruction and infrastructure development in a country ravaged by conflict. The energy sector, too, is a magnet for investment, with 23.1% of respondents eyeing opportunities in this critical area. Industrial manufacturing follows closely, with 15.4% of respondents showing interest. These sectors are not only essential for Ukraine’s economic recovery but also align with global trends towards sustainable and resilient infrastructure.
The survey highlights a diverse range of foreign investors, with respondents hailing from countries such as Poland, Germany, Canada, the United Kingdom, Sweden, France, and Bulgaria. This international interest is a testament to Ukraine’s enduring appeal as an investment destination, despite the ongoing conflict. However, the path to investment is fraught with challenges. More than half of the surveyed companies (53%) indicated that they are waiting for the war to end before committing to funding the Ukrainian economy. This caution is understandable, given the risks associated with operating in a conflict zone.
The report also sheds light on the current state of Ukrainian businesses. Over half of the companies surveyed (58.3%) have already attracted foreign capital, either through direct investment in their authorized capital or other means. This foreign investment is crucial for sustaining business operations and driving growth in a challenging environment. However, the revenue distribution among these companies is skewed, with 56.5% reporting revenues of less than $5 million in the last financial year. Only 10.2% of companies had revenues exceeding $100 million, indicating a market characterized by small to medium-sized enterprises.
The BOC survey also reveals the diverse ways in which foreign companies are considering engaging with the Ukrainian market. While 38.5% of respondents are interested in making direct investments, others are exploring roles as consultants, donors, contractors, or subcontractors. Some are even considering providing certification services according to EU standards or partnering with national manufacturers. This multifaceted approach reflects a strategic and nuanced understanding of the Ukrainian market, where direct investment is just one of many potential entry points.
The report also underscores the need for regulatory and administrative reforms to improve the investment climate. Respondents emphasized the importance of ensuring access to justice, simplifying administrative and regulatory procedures, and combating corruption. These steps are seen as critical for attracting more foreign direct investment and fostering a more stable and predictable business environment.
Despite the challenges, there are signs of optimism. International financial organizations, such as the European Bank for Reconstruction and Development, continue to invest in Ukraine. The bank has pledged €1 billion ($1.1 billion) for its energy programs by 2025, demonstrating a long-term commitment to the country’s development. Additionally, several significant mergers and acquisitions (M&A) deals have taken place in 2024, indicating a resilient and dynamic market. For instance, French billionaire Xavier Niel’s acquisition of the Ukrainian mobile operator lifecell and fixed-line internet provider Datagroup-Volia for $524 million is one of the largest recent foreign investments in Ukrainian business.
Ukrainian businesses themselves remain the largest investors in their own economy. Avrora, Ukraine’s largest one-dollar store retailer, secured a deal to buy a 100,000 square meter commercial property from Dragon Capital. This deal, along with others like the acquisition of Idea Bank Ukraine by Polish Getin Holding and Ukrainian TAS Group, highlights the resilience and adaptability of the Ukrainian business community.
The war in Ukraine has undoubtedly reshaped the investment landscape, but it has not extinguished the potential for growth and development. As the country navigates the complexities of conflict and reconstruction, the construction sector, in particular, offers a pathway to recovery and resilience. The ongoing interest from foreign investors, coupled with strategic reforms and a commitment to sustainability, positions Ukraine at a critical juncture. The challenge now is to translate this potential into tangible progress, ensuring that the rebuilding efforts are not just about restoring what was lost but
