The Investment climate in Ukraine for 2013

Direct foreign investment play an important role in the development of the economy of Ukraine. Foreign investments attraction encourages activation of investment process, introduction of new technologies, using of front-rank and foreign experience, development of small and midsize businesses, growth of the investment potential of territories.

The international fund of Blazer forecasts, that in 2013 foreign investors will inlay more than $4 milliard of direct investment to Ukraine.

For the estimation of investment attractiveness of industry the system is used from three groups of indexes, reflecting the level of profit industry’s activity, perspectives of development and investment risk.

The level of profitableness includes all used and own assets, realization of products and expense on production.

The level of perspective reflects the value of industry in the economy, resistance of industry to recession, security-term of growth prospects of own financial resources and degree of state support of industries development decision.

The level of investment risks includes the level of competition of inflationary stability of products and level of social tension.

An integral index is settled on the basis of three groups of synthetic indexes taking into account the proportion of their level:

– profitability of activity – 65%;
– prospects of development – 20%;
– investment risks – 15 %.

According to this researches of 44 subindustries and corresponding analysis on the basis of two variants were conducted:

–         the ratio of profit from realization of products (commodities and services) to the sum of the used assets;

–          the ratio profit to the sum of used assets.

Calculations were conducted taking into account influence of inflation, taxation, prices and other factors allowed to define grade of importance of the sphere by priorities.

Most priority industries for the most developed countries – investors:

Country Industry in order of importance for investors
  1. Mechanical engineering and metallurgy.
  2. Medical equipment and pharmaceutics.
  3. Agriculture.
  1. Mechanical engineering and metallurgy.
  2. Food industry.
  3. Light industry.
  4. Transport, telecommunications, construction industry.
The United Kingdom of Great Britain
  1. Mechanical engineering and metallurgy.
  2. Food industry.
  3. Domestic and foreign trade.

The agriculture sector our country in the nearest twenty years will enter to the three most fast-growing in the whole world. Agriculture by 2020 will grow almost on one third, increasing production volumes of 29 %.  Such numbers contained in the joint lecture of the UNO and Organization of economic collaboration and development (ОEСD). The rapid rates of urbanization and household incomes will be main factors stimulating the growth of agro industrial complex.

The swift increase of investment streams in a real estate market of Ukraine. All segments of the real estate market in Ukraine are in the process of growth and are far from satiation. It allows investors to count on the rapid return of investments and high income. The considerable volumes of foreign funds are concentrated in the sphere of hotels and restaurants, trade-entertaining centers and in the market of the real estate leasing.

Experts also name production of competitive goods on global markets interesting for investors (for example, products of steel-making industry or chemical industry).

In this year reduction of volume of the attracted investment was observed. According to the statement of the National bank of Ukraine in February 2013 the inflow of direct foreign investment in the economy of our country grew up 45% (to $492 million) comparatively with the analogical period the last year. The basic recipients of direct foreign investment for the last two months were the enterprise of the real sector economy, including enterprise working in the real estate and lease.

The first two months of 2013 year foreign investors inlaid $855 million direct investment to Ukraine, 41,5 % less  than the analogical period of 2012 it is possible to explain the temporary slowdown in the global economy.

The same time, tendency of improvement investment climate in Ukraine is saved. The different rating researches testify this.

According to the results of annual rating research of IFC, group of the International Bank “Doing business 2013” Ukraine improved positions on 15 points, rising from 152 places to 137.

Rating of “Doing Business” as index of fostering the investment climate:

Rankings 2013 2012 Change

 in ranking

Easiness of Doing Business 137 152 + 15
Procedures (number) 9 9 – 2
Time (days) 22 24 +2
Cost (% of income per capita) 1,5 4,4 – 2,9
Paid-in Min. Capital (% of income per capita) 0,0 1,8 – 1,8
Dealing with Construction Permits 183 182 – 1
Procedures (number) 20 20 Without change
Time (days) 365 365 Without change
Cost (% of income per capita) 1262,6 1462,1 – 199,7
Resolving Insolvency 157 158 +1
Time (years) 2,9 2,9 Without change
Cost (% of estate) 42 42 Without change
Recovery rate (cents on dollar) 8,7 8,9 -0,2

Source: The International Bank for Reconstruction and Development: Doing Business 2013

In the Global index of competitive 2012/2013 prepared by the experts of the World economic forum, Ukraine moved up on 9 points, occupying 73 place from 144.
In the Global rating of economic freedom made by Heritage Foundation and Wall Street Journal, the estimation of freedom from corruption in Ukraine went down from 24 to 23 points.

The Ministry of Finance assures that during a few years Ukraine will enter the hundred best countries in lightness of business conduction. The Government program of economy activation on 2013-2014 is developed for it. This Program is worked out for the purpose of introduction of the new modernization methods the priority industries of the economy in the nearest two years.

This Document envisages realization of structural changes in economic and social life of Ukraine by the increase of efficiency state administration, modernization of the basic industries economy, creation of the favorable economic environment for the development of business and private initiative. Implementation of this Program must provide acceleration of development of the priority industries economy, encourage positive structural changes in the economy, diversification and decline of energy intensity of production. The Cabinet of Ministers of Ukraine forecast that implementation of the program will allow to keep the rate of inflation in the optimal limits of 5-6 %, budget deficit in 2013 – 3,2% GDP, direct state debt no more than 30,6 % of GDP.

The investment reform of 2011 is aimed to form mechanisms participation of the Ukrainian investment projects on the international investment market, creation of the investment infrastructure. Forming of new mechanisms collaboration of the state and private partners is assumed for mobilization of budgetary assets and concentration of facilities.

The new mechanisms of the investment marketing were designed for substantial improvement investment attractive of Ukraine. Creation of the State Regional Development Fund will provide realization complex plans of regions development and administration of charges on their realization. The basic function of Fund activity is creation of complex investment model separate region of Ukraine.

In conclusion, it is worth noting the fact that the Ukrainian financial market has a number of absolute values: stable money and stable prices. It is confidently possible to say that Ukraine has formed its banking and system, and it is solid foundation for the financial stabilization, which forms the basic conditions for the deployment of investment processes in Ukraine.