According to the State Statistics Committee, foreign investment in the Ukrainian economy reached $420.1 million in the first six months of 2000, a 58.6% increase over the same period of last year. Ukraine’s total nonresident capital reached $3596.1 million as of July 1, 2000. Direct foreign investments were made in Ukraine by 107 countries, mostly by nonresidents from the US ($629.3 million), Cyprus ($337.9 million), the Netherlands ($329.9 million), and the Russian Federation ($284.2 million).
As forecast by the International Long-Term Research Center, investment in Ukraine will reach about $1.1 billion in 2001. This forecast is based on the government’s intentions to carry out the revenue-raising privatization of large enterprises on a competitive basis, ensure equal conditions by canceling tax privileges, forbid non-monetary payments to budget coffers, and adopt a new tax code.
Simultaneously, the International Monetary Fund forecasts a decline of private investments in the states of Asia, Latin America, and Eastern Europe in 2001. According to IMF experts, investors will try to place their money in less risky projects, fearing economic slowdown and a slump on the US stock market. According to the Fund, the fall of share prices of the companies making part of the American NASDAQ index, has caused a 30% reduction in investor operations with the stocks and bonds of Russia, South Africa, Argentina, and Indonesia.
Jean-Luc Poget, director of the Ukrainian-European Policy and Legal Advice Center (UEPLAC), states, “The investment situation in Ukraine is characterized by two factors. On the one hand, there is a positive tendency: investments have risen by 60% compared to last year. Nonetheless, we should not forget that Ukraine is still on the list of countries least attractive for investment. The international investment situation is directly connected with the domestic economic situation in Ukraine. Ukraine is still exporting low-cost goods, with 70% of them ending up in the former Soviet states. This fact shows there have been no internal transformation in the Ukrainian economy. This urgently requires foreign investment, which will bring along with it new technologies and make it possible to produce goods competitive on the world market. However, we should also not forget here about the problem of the so-called pure investment. At least 50% of the Ukrainian economy is considered to be in the shadow sector. The cause lies in the weakness of state institutions and the legislative system. Obviously, such conditions engender the risk of the dirty capital being repatriated. The unfavorable investment climate in Ukraine has been caused by administrative obstacles, a complicated system of licensing, high taxes, and the fact that the tax authorities also perform arbitration functions. For these reasons, there are more attractive countries to invest in than Ukraine. This is why the IMF forecasts a diminishing flow of investments in the countries of Eastern Europe. You can water down the sand for a long time, but this does not mean something will grow there. For investments are expected to yield a profit from the very beginning. Ukraine should create normal conditions for investors. It is difficult to forecast investments for the next year. But even now we can single out the facts on which the size of investments will depend. If the process of reforms continues, this may help attract foreign investment. What is also very important is the way privatization is being carried out in Ukraine. The privatization strategy should serve to attract large foreign investors. When a tender is held, special attention should be accorded to transparency and clear-cut criteria for investors.”
