sources of financing and what prevents attracting investments

Foreign investments are beginning to return to Ukraine, but little and slowly, say representatives of business circles. In order to attract foreign business to Ukraine, Kyiv must seriously undertake reforms, and Western countries must guarantee investment security – economic and military. These days, the Conference on the Restoration of Ukraine is taking place in London. Voice of America correspondents spoke with the heads of agencies that represent the interests of American and European business in Ukraine and work to attract new investments.

Funds for Ukrainian recovery

For reconstruction, Ukraine hopes to receive profits from 5 sources, says Andrii Gunder, the head of the American Chamber of Commerce of Ukraine.

“Reconstruction is about money, and the main question today is what will be the sources of funding. Now we see 5 sources. We see the grants that countries give. The second is loans. The third is the Ukrainian budget. And the fourth is Russian assets, which Russia has to pay for this trouble it created. And fifth, this is the private sector, private investments that will enter Ukraine. We hope that it will be as soon as possible”, – said the head of the business association in a comment to Bohdan Tsyupyn, a journalist of the Ukrainian Service of the Voice of America.

According to Gunder, we are talking about investments of hundreds of billions of dollars. “Investing in Ukraine is a risk. But an even greater risk today is not to invest in Ukraine,” the head of the American Chamber of Commerce emphasizes. .

Governments’ statements of support for Ukraine at the conference in London are very important, Gunder emphasizes, they are a signal to private companies in these countries about the possibility of investing in Ukraine.

Ukraine heard a number of important signals at the Conference in London, Anna Derevyanko, executive director of the European Business Association, told Voice of America.

“We received a roadmap, the EU assured that it will cover the budget deficit by the end of 2023, we also heard today that the deficit will be covered by Ukrainian international partners by 2023, we also heard that the EU and other donors have promised 110 billion euros, where part of it will come from for closing budget deficits, and part for the reconstruction of Ukraine”, Ms. Derevyanko listed in a comment to Andrii Hetman, a journalist of the Ukrainian Service of the Voice of America.

Investments

In Ukraine, according to Gunder, 49% of businesses were destroyed or damaged, that is, almost one in two. According to him, it is very important that the companies that are still working in Ukraine send a signal to the outside world that it is possible to do business in Ukraine.

Some foreign companies are already coming back, Gunder says, mentioning America’s Coca-Cola.

“Reconstruction has already started, companies have already started it, investments are coming. We see this in cities like Gostomel – factories that were destroyed in the first days of the invasion, in February 2022, are already being rebuilt there. We see this in other cities as well, such as Trostyanets or the Coca-Cola plant near Kyiv. This is the largest plant in Europe in terms of volumes, it is already working again at the volumes that were before the war”, – says Gunder.

A similar thesis was voiced by the head of the European Business Association, Anna Derevyanko. According to her, European investors are already interested in when it will be possible to enter Ukraine.

“Business is already interested. We see and hear a lot from private investors: what is happening in Ukraine? When to invest? What are the reconstruction projects? And so on. That is, there is interest. On the one hand, some are interested in whether there are mechanisms to protect political risks, they are gradually appearing, and this is a plus. But next to this, in order to increase the flow of interested private business, it is necessary that security guarantees also appear. Then, together with the reforms, it will be easier to attract investors and offer opportunities for development on the territory of Ukraine”, Anna Derevyanko said.

“There is no guarantee of security, there is no clear answer as to how the reform process will take place inside the country,” so business is not in a hurry to return to Ukraine, continues the head of the association. “If the reforms and security guarantees were in place, then we would have a flow of investments to Ukraine, I repeat, if there are guarantees of the security of the sky, guarantees of political risks, if the reforms are continued,” says the executive director of the European Business Association.

Insurance

The main challenge for most companies that could potentially invest in Ukraine is war damage and destruction. Prime Minister of Great Britain Rishi Sunak at the Conference on the Reconstruction of Ukraine on June 21 announced the launch of the Framework Program of the London Conference on War Risk Insurance, which can pave the way for reducing the risk for investments in Ukraine.

According to Gunder, international investment security guarantees are very valuable for business: “Businesses now need risk insurance, they want to understand what the insurance policy is to insure the investment against war risks. And this is very important now, when the full-scale invasion continues.”

However, the executive director of the European Business Association, Olga Derevyanko, notes that this is not enough, because a number of Western countries have already announced similar investment insurance.

“The US has already offered a mechanism to protect investments, the DFC works, and they present various guarantees to companies. Moreover, they are not limited to American companies, they have a fairly wide geography. There is also the MIGA mechanism, which works to a lesser extent, but is nevertheless present. Also, the German government and the French government have mechanisms,” says Derevyanko.

According to her, the priority for Ukraine now is reforms.

“On the one hand, it is very good to have different mechanisms, but if we do not make reforms today in Ukraine related to the rule of law, related to the proper fight against corruption, then even the risk insurance mechanism will not solve the issues that are currently are at stake, will not force private business to enter Ukraine,” she said.

Corruption

The head of the American Chamber of Commerce, Andriy Gunder, said that the “perception of corruption” research shows that there are problems in Ukraine.

“Now we are talking about very large amounts of money that will flow to Ukraine. How to make sure that the mechanisms are ready so that it is difficult to take advantage of the temptation to steal this money. The role of preventive measures, civil society, and independent mass media is important,” he says.

“And the main thing is punishment. Now it is about increasing responsibility. If there are people who will be accused or the court will prove their involvement in corruption during the reconstruction, after such a big price that Ukraine paid, then the responsibility for this crime should be increased,” Gunder suggests to the Ukrainian government.

When asked whether the war eradicated the phenomenon of oligarchs in Ukraine, Gunder answered: “I think they have quieted down, but they are waiting.”

In order to change the level of perception of corruption in Ukraine, the head of the American Chamber of Commerce continues, the government must “prove very clearly in communication what exactly Ukraine is doing.”

“It is very important for investors to have the rule of law, to have independent courts, to reform the judicial system, to have anti-corruption bodies working,” he emphasizes.

At the same time, Gunder draws attention to the positive steps that Ukraine has already taken: “Today, 800,000 Ukrainians declare their wealth. It is the largest in the world. There is no other country in the world where so many people publicly declare their wealth. These are already some indicators.”

Involvement of Russian assets

One of the sources of attracting funds for the reconstruction of Ukraine is the redirection of Russian assets. According to Andrii Gunder, discussions on this topic have intensified in the West.

“We can see that, if only a few months ago, Russian assets were not talked about very loudly, in order to take away these Russian assets, which have been arrested, and to use these funds for the reconstruction of Ukraine. Today, we hear about it more and more,” says Gunder.

When asked which country is progressing in attracting Russian assets, Gunder named Canada: “I think Canada is moving the fastest in this regard.”

At the same time, according to him, lawyers in many countries are actively working on this issue.

“These conversations continue, lawyers are actively working on it now, and I think mechanisms will be developed. When there will be clear mechanisms, when it will be necessary for local parliaments to vote for this to happen, I think it is possible,” the economist analyzes.

According to him, Western countries, among other things, are currently calculating how Russia can react to such decisions, how Western assets, in particular in the private sector, can be arrested in response. “I think we will soon see results in this,” concluded the head of the American Chamber of Commerce.