General aspects of investment climate in Ukraine

The investment climate is a general description of the complex of social, economic, institutional, legal, political, social and cultural backgrounds, which leads to the attractiveness and feasibility of investing in a particular economic system (the economy, the region and corporation). The clear vision on investment climate of Ukraine could appear from dichotomous division of those abovementioned backgrounds on economic potential (investment potential) and real conditions of doing business in our country (investment risk).

Ukraine remains attractive for investors in terms of geographical position, which allows developing better trade relations with European and Asian countries.

We cannot but mention about one more positive change in market expanding. That is the Association agreement with EU, the economic part of which, as many say, allowed Ukrainian business to join the EU market. Nonetheless, the discursive character of this statement remains. Ukrainian industrial facilities still do not mainly meet the standards of EU market and the reducing export payments is not enough to make our business change the outage fixed assets.

The parties agreed on a significant liberalization of import duties on products, and more than 90% of the final rates are zero. The most significant reduction of tariff barriers for Ukrainian producers will be in areas such as: automobile industry, chemical industry, engineering, food industry, which will improve access Ukrainian manufacturers on the relevant markets. The establishment of tariff quotas is allowing zero exports to the EU under quota, creating opportunities for Ukrainian business to conquer the market. That is why investments in these industries will appear much more attractive for foreign businessmen.

The draft law «On amendments to some legislative acts of Ukraine concerning the abolition of mandatory state registration of foreign investments» to the number 2763 was registered in the current session of Ukrainian parliament. Instead of state registration of enterprises with foreign investments it was offered to submit a report on foreign investments. These amendments will create the same legal guarantees for the free movement of capital which exist in member states of the EU instead of the bureaucratic procedure that creates opportunities for corruption.

Another field for the further development of investment activity, including foreign investments, is public-private partnership relations. The recent legislation changes from November, 24 2015, were aimed at improving the mechanism of such relations, removing the obstacles of free access of private business representatives to the industries and activities that constitute public interest. It should be noted that the supplemented areas where PPP could be applicable constitute a not exhaustive list now, authorizing the public partner to expand that list. The other changes include additional types of state support under the PPP:

- paying the private partner other payments under the contract concluded in the framework of public-private partnerships,

- supplying goods (works, services) required for the PPP;

- right to appeal to international arbitration and / or arbitration to resolve disputes;

- provisions of the stability of law;

- the right of a private partner to suspend the fulfillment of investment obligations if prices (tariffs) for goods (works, services) are the subject of state regulation, and are not economically justified, and do not provide a proper compensation.

The other positive tendency is a growing interest of investor in segmental parts of Ukrainian economic. Although the reputation of Ukraine in the matter of investment opportunities is not highly-appreciated because of the general crisis, several branches, like IT-start-ups can change the situation, as it opens to investors certain advantages. This is especially favorable tax climate for the industry. According to the Tax Code of Ukraine from January 1, 2013 to January 1, 2023 IT companies are exempt from paying value added tax and income tax that from 2015 is paid at the rate of 18%. Also, the benefits could be found in a significant number of higher education institutions that provide high quality education in this field, and low average wages of the programmers in Ukraine.

Today foreign business shows only pointed interest in the projects separate branches - the sphere of IT, pharmacy, energy, medicine and agricultural sector. However, creating a positive image of the whole domestic market requires more actions.

Under such circumstances several mechanisms of protection the investors’ pecuniary and non-pecuniary interests had to been developed in Ukrainian legislation in order to increase the attractiveness of our industrial facilities.

1.      In case of termination of investment activity a foreign investor is guaranteed the return of it investment without paying fees and incomes from investments. The state also guarantees the free and prompt remittance abroad of profits and other sums in foreign currency obtained as a result of foreign investments.

2.      Guarantees in case of change of legislation. If special legislation on foreign investments will change guarantees to protect foreign investment (Chapter II of the Law), then within 10 years after the e