70% of Surveyed Companies Plan to Invest in Ukraine Despite Ongoing War, Reveals New Study

by Roman Cheplyk
Tuesday, November 5, 2024
4 MIN
70% of Surveyed Companies Plan to Invest in Ukraine Despite Ongoing War, Reveals New Study

In the third year of the conflict, a recent survey conducted by the European Business Association in partnership with NEQSOL Holding reveals a resilient investment landscape in Ukraine

According to the "Investment Attractiveness Index of Ukraine" study for 2024, a substantial 70% of surveyed companies intend to invest in Ukraine despite the ongoing war.

Incremental Improvement in Investment Attractiveness

The study indicates a slight increase in Ukraine's investment attractiveness, with the Integral Indicator of the Index rising to 2.49 points out of a possible 5 in 2024, up from 2.44 points in 2023. This rating places the current investment climate on par with the challenging "COVID" year of 2020.

Decreasing Perception of Unfavorable Conditions

There has been a notable decline in the number of business managers who view Ukraine's investment climate as unfavorable. The percentage dropped from 84% last year to 79% this year. Among these respondents, the proportion considering the climate as extremely unfavorable has significantly decreased from 53% in 2022 to 20% currently. Additionally, 12% of top managers now rate the investment climate as neutral (compared to 7% last year), and 9% view it as favorable.

Dynamics of the Investment Climate

Despite improvements in perception, the overall assessment of the investment climate's dynamics remains largely unchanged:

  • 49% of respondents believe the investment climate has worsened.
  • 39% see no significant changes.
  • 12% believe it has improved.

Increasing Confidence Among Established Investors

The survey highlights a surge in confidence among established businesses. The number of companies that are already operating in Ukraine and plan to continue investing has risen from 57% last year to 70% this year. However, interest among new investors remains modest, with only 17% believing it will be beneficial to invest in Ukraine, down from 32% in 2023 and 17% in the latter half of 2022.

Future Outlook and Challenges

Looking ahead, the majority of CEOs express concerns about the future investment climate:

  • 49% expect further deterioration within the next six months.
  • 33% do not anticipate any changes.
  • 18% hope for improvement.

In their respective industries, expectations mirror these sentiments:

  • 44% foresee a deterioration.
  • 43% expect no changes.
  • 13% are optimistic about improvements.

Persistent Negative Influences

The ongoing Russian military aggression remains the top factor negatively impacting Ukraine's investment climate, followed by corruption, a weak judicial system, the shadow economy, and attacks on the Ukrainian energy system. Additionally, 81% of surveyed companies cite restrictions on currency transactions as a significant hindrance to investment attractiveness.

Positive Influencing Factors

Despite these challenges, several positive factors are enhancing Ukraine's investment appeal:

  • EU Accession Candidate Status: Granting Ukraine the status of a candidate for EU accession bolsters investor confidence.
  • Customs Duty and Quota Cancellations: Removal of customs duties and quotas on Ukrainian exports facilitates easier market access.
  • Transport Visa-Free Access to the EU: Simplifying transportation logistics supports smoother trade operations.
  • Digitization of Public Services: Enhancements in digital infrastructure improve operational efficiencies.
  • Integration into the EU's Unified Energy System: Aligning with EU energy standards attracts investments in the energy sector.

Impact of Hostilities on Businesses

The conflict has had a tangible impact on businesses operating in Ukraine:

  • 54% of companies reported suffering losses due to hostilities.
    • 25% have already sought assistance from law enforcement agencies.
    • 11% plan to seek legal recourse.
    • 3% have appealed to national and international courts.

Legislative and Policy Developments

On September 20, 2024, the European Business Association (EBA) opposed a draft law in the Verkhovna Rada aimed at raising the military levy and imposing additional taxes on banks' incomes. The EBA advocated for prioritizing tax and customs reform to ensure effective allocation of the state budget, emphasizing the need for structural changes over increased taxation in the current economic climate.

Conclusion

The "Investment Attractiveness Index of Ukraine" 2024 study highlights a complex but resilient investment environment. While the war continues to pose significant challenges, a growing majority of companies remain committed to investing in Ukraine, driven by ongoing reforms and supportive measures aimed at enhancing the business climate. As Ukraine navigates the tumultuous economic landscape, strategic legislative reforms and sustained international support will be crucial in fostering a stable and attractive environment for both existing and potential investors.

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