“Plan B” for Ukraine. How to find domestic resources now, and what industries will businesses invest in after the war is over

The Ukrainian government is taking steps to increase domestic budget revenues in the first months of the new year, hoping that the US and the EU will approve large-scale aid packages for Ukraine, which will ensure a stable flow of funds in the coming months of 2024.

The IMF expects the Ukrainian government to focus on the generation of domestic resources, in particular tax revenues and borrowing on the domestic market.

“The economy will develop and economic activity will be supported by structural reforms, improved management, which will strengthen the economy and bring additional tax revenues,” says the director of the Fund’s European department Alfred Kemmer.

“But in addition to that, there is now a National Revenue Strategy to get more budget money and meet the needs of the budget at this time,” Kemmer added in an interview with Voice of America. He emphasized that donors “make extraordinary efforts to approve packages and provide funds on time.”

While large packages have not been approved, the advance payment of dividends of state-owned companies, as well as an increase in the volume of borrowing on the domestic market, are among the measures that the Ukrainian government is planning to “maximize” resources for January-February.

The Minister of Finance of Ukraine announced the so-called “plan B” financing Serhii Marchenko in the presentation of macro forecasts for 2024 at the Center for Economic Strategy, Ukrainian media reports.

In order to ensure income from the economy, it is necessary for Ukrainian business to work stably and create jobs. Business adapts to work in war conditions, observers say. After falling by almost 30% in 2022, Ukraine’s economy is expected to grow by 5% this year.

Those who have already “made money” in Ukraine are ready to invest now

Despite the war, some companies even expand production. Nestle is investing more than 40 million dollars in the construction of a new factory in the Volyn region. Earlier, the German Bayer announced an investment of more than 60 million dollars in agricultural production in the Zhytomyr region. Before the war, the company invested more than 200 million euros in agricultural facilities in the region.

Companies that have been working here for a long time and have “made their mark” are investing in Ukraine, overcoming various obstacles for business. Others are mostly preparing projects for investment after the end of the war. The partner and founder of the financial company FinPoint shared such assessments with the Voice of America Sergey Budkin.

He is convinced that next year will bring new investments to Ukraine.

“Next year, companies are planning new investments, and in 2024 there will be both greenfield investments, that is, the construction of new production, and investments in the purchase of existing companies by large foreign companies, but 99% of these will be only those that are already present in Ukraine,” – says Budkin.

In order to facilitate the work in Ukraine, international organizations started projects on war risk insurance.

Recently, such a program was opened by the American investment financing corporation, the World Bank and the EBRD. However, not all such programs have already worked, says Budkin.

“Unfortunately, now there is no system program where it would be clear: there is a window, you went there, paid an amount of money depending on where your production is located, received a certain insurance policy that will protect you from troubles related to with the war, starting with the “shaheeds” and ending with the threat of destruction of sales or supply channels,” he says.

The financier nevertheless points to successful war risk insurance projects, including the Swiss insurance program for Nestle, as well as the Polish program for Bayer.

The key phrase of most investors is “after the war”

As for the interest in post-war investments, the spectrum of opportunities here is quite large, says Budkin, who is working on attracting foreign investments to Ukraine.

There are those who are interested in the possibility of investing in traditional sectors of the Ukrainian economy, such as mining, while others are considering the possibility of investing in the newest industries, such as the production of technical hydrogen.

Budkin cited three areas in which companies from abroad show the greatest interest:

• Most of the interested companies are eager to join the post-war reconstruction as manufacturers of building materials
• Those who after the war seek to join the processing of Ukrainian minerals, development of green steel production in Ukraine, green energy
• Agricultural processing. Before the war, says Budkin, Ukraine was perceived as a country that exported grain without processing it, but now investors are interested in the possibility of producing goods with added value.
• Military and technical sector. The Ukrainian military-industrial complex began to develop in order to meet the needs of the Ukrainian armed forces, and after the end of the war, it may turn into a source of supplies for the troops of NATO and the West of technologies that “passed tests in Ukraine” and can become “weapons of tomorrow”, says the observer.