Business in Ukraine Is Being Restored

by Roman Cheplyk
Monday, February 27, 2023
Business in Ukraine Is Being Restored

Investment opportunities for foreign investors in Ukraine

Before the start of the full-scale Russian invasion of Ukraine, the production capacity of Ukraine had a profit of more than $200 billion. The Russian war brought 3 problems to the economy: the closure of most private and state businesses and a shortage of related services, a lack of electricity and a disruption of the import and export chains of goods. The state's economy fell by 34%, which is the worst indicator in the times of the Soviet Union.

On February 24, Russia launched a full-scale attack on Ukraine. As early as February 25, food shortages and panic among the civilian population began in Ukraine. When the Armed Forces of Ukraine liberated the Kyiv region from the occupation in the spring of 2022, the economic background improved and positively affected the rest of the regions, especially in central and western Ukraine. According to the Ukrainian European Business Association, which includes more than 1.000 Ukrainian and foreign businesses, at the end of May 2022 (3 months after the start of the full-scale war), 47% of EBA participants resumed work at the pre-war level, another 50% restarted work, but with nuances.

After the Russian attacks on Ukraine's energy sector, enterprises' productivity dropped sharply. More than 60% of energy infrastructure facilities were damaged or destroyed. But after the massive import of generators/equipment for the restoration of energy facilities and the abolition of the import duty, the business got back on track. Last year, at least 669.400 generators were imported into Ukraine.

"We see that small and medium-sized businesses adapt to the electricity shortage quite quickly by buying generators, batteries and other equipment, and the damage to the infrastructure remains moderate," Olena Bilan, chief economist of the investment house Dragon Capital Ukraine.

Logistics. Russia blocked the seas, making exporting Ukrainian agricultural products impossible. The issue was especially acute in the agricultural sector because the export of Ukrainian grain is not only a guarantee of food security in the world but also 40% of exports and 12% of Ukraine's GDP. Exports fell by 29.3% (annual) = 29.7 million tons. The grain agreement mediated by the UN and Turkey partially helped to unblock the Black sea and level the situation with maritime logistics. And that's what: Ukraine began to develop logistics through the Danube and railway through other countries and then - through the seas of these countries. The logistics problem has been solved.

Damages caused by Russia to Ukraine exceed $138 billion (the figure is valid for December 2022), and the budget deficit this year may reach $38 billion. The state leadership is making significant efforts to stabilize the situation: they attract private investors, insure business activities on the territory of our state, and create specialized programs to improve the state's investment climate.

"The government of Ukraine has taken measures that helped to reduce the monthly deficit in 2023 to $3-3.5 billion, which is still a huge number," the minister of finance of Ukraine, Serhii Marchenko.

Consequently, a number of problems created by the Russian war are stabilized and kept under control. International private investments began to flow to the state, and foreign entrepreneurs are already interested in establishing their offices in Ukraine. It is obvious that today the construction industry is essential for Ukraine and profitable for businessmen. All-Ukrainian reconstruction has already begun, and everyone has the opportunity to occupy their niche in business on the territory of Ukraine.

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