2020 Expected Investments

Long before the end of 2019, the EXPATPRO team started making projections for 2020. We constantly follow the political situation and economic environment within our country while working with both foreign and Ukrainian investors. In fact, it is our company’s progress that best displays the country’s investment climate. At the moment, the state of affairs demonstrates business environment recovery able to attract an ever-increasing number of large-scale and effective investments.

Nowadays our clients are constantly seeking projects that interest them. Agricultural sphere, high technology, and alternative energy are of the highest interest. The government anticipates $50 billion of investment inflow over the next 5 years. It is absolutely possible given the establishment of favorable business conditions. As soon as Ukrainian businessmen realize it is comfortable and safe to start their own long-term vision business, it won’t take long for foreign businessmen to join. This will happen when Ukrainians begin sharing the system workflow with their foreign colleagues. Hence, it is our priority for the immediate future to gain primarily local entrepreneurs’ trust.

According to the annual survey results of the European Business Association, Ukrainian businessmen have high expectations for the year 2020. To be exact, 77% of interviewees expect favorable business dynamics growth, exceeding by 3% the preceding year’s rate. Back then, the pessimistic sentiment was due to the presidential election. Nevertheless, the positive dynamics return is a good sign that implies rapid situation stabilization.

However, it is worth noting that such optimism derives rather from hopes and expectations than from the previously met businesses’ needs and requirements. Thus, it is the government’s priority today to put in great effort to meet those hopes. Besides, it should be kept in mind that a single person is unable to change the situation without team support and integrated solutions aimed at numerous governance areas. And, business representatives, for their part, should continue to reveal and communicate the message regarding their requests, preferences, and vision of change. The government and authorities, for their part, are expected to take action towards protecting property rights and creditors, anti-corruption efforts, as well as land market establishment.

The first step towards progress in the protection of property rights and creditors was the enacted law “On amendments to some legislative acts of Ukraine on promoting investment activity in Ukraine.” It does have the potential to enhance Ukrainian business and investment climate since the chosen ways of improvement were the result of the integrated assessment insuring that the Ukrainian legislation is in conformity with the practice, described by the World Bank Group in Doing Business rating methodology. This law is aimed at the elimination of some legal gaps as well as the incorporation of innovative legal instruments into the Ukrainian legal system. For instance, it is expected that the adoption of the law will result in the reduced violation of the minority shareholders’ rights, lowered credit resources prices, reduced costs for the construction of residential and non-residential facilities, increased quality of justice in terms of business affairs, and shortened processing period of economic disputes. Furthermore, there is a plan to increase the number of Limited Liability Companies operating under the LLC model articles.

One of the Ukrainian business environment constants is the investors’ expectation of anti-corruption initiatives. Due to the existence of the corruption factor in the country, investors are obviously afraid to lose their funds, and the law will not be on their side in that case. The understanding that local players still happen to have more power, and their own levers of influence, restrains the investment inflow into Ukraine. Therefore, we expect the efforts against corruption to be continued and the authorities’ decisions to be accurate and effective. Moreover, it would be highly appreciated if the process of the economy “coming out of the shadows” is prompt. It often happens that the real business-processes and cash flow are not declared, or stored in cash. This leads to a delay in market development.

Another expected event is the creation of the land market, which caused numerous discussions. This initiative has been one of the new government’s key promises, and the relevant law was already adopted in its first reading. Upon the appropriate legislative framework, the new path for the inflow of Ukrainian and foreign investments will be created. It is likely the sovereign and private funds will become the new key land buyers and, thus, the projects are expected to be large-scale.

Overall, the investment climate will continue enhancing if appropriate policy decisions are made and Ukraine’s actual economic development is in line with the government’s projections and targets. In particular, it means the reduction in the discount rate from 16.5% to 8% and the control of inflation at 5%. Today, the capital is still too expensive for investors, and the business environment remains unstable. Still, there are solid grounds to expect positive change and qualitative progress.

Hence, the EXPATPRO team will continue advising investors to believe in Ukrainian business and to develop it in 2020. We are sure that the government is on the right track, and consequently, the Ukrainian market will increase its investment attractiveness throughout the year. At ours end, we shall keep the interests of Ukrainian and foreign businesses safe, as well as contribute to the recovery of the business climate.

Liubomyr Kuziutkin