3rd Germany Breakfast Debate in Kyiv: “German investments in Ukraine: How to keep the old and attract new ones?

Foreign direct invest­ments are an essential factor for Ukraine’s economic integration with the European Union. However, despite its favourable location and reforms in the judicial and banking sector, the inflow of invest­ments remains slow/sluggish. The third Germany Breakfast Debate, which took place on September 22, 2020 as a hybrid format in Kyiv and simul­ta­ne­ously online with guests from Germany, was dedicated to the question of how the investment climate in Ukraine can be improved in a sustainable way.

Guests at the event were Alexander Markus, Chairman of the Board of the German-Ukrainian Chamber of Industry and Commerce, and Robert Kirchner, Deputy Head of the German Advisory Group at Berlin Economics. The event was opened by Alyona Getmanchuk, Director of the New Europe Center (NEC, Kyiv) and Lyudmyla Melnyk (IEP, Berlin). The discussion was moderated by Sergiy Solodkyy, Deputy Director of the NEC.

While the unresolved conflict in Eastern Ukraine is often in the foreground of discus­sions about invest­ments, this debate primarily focused on how to create long-term stable investment condi­tions despite the political situation. In this context, the impor­tance of a functioning legal framework was stressed. Only then, fair compe­tition and a certain degree of predictability can be guaranteed. In order for German entre­pre­neurs to be able to realis­ti­cally assess risks, but above all to recognise the oppor­tu­nities of an investment in Ukraine, it is also important to give a voice to investors, who have already been operating success­fully in the country for years, so that they can pass on their success stories.

The speakers also addressed the current situation under COVID-19. Despite a relatively good starting position due to the strength­ening of the indepen­dence of the National Bank and the ambitious growth concept of the government, which was accord­ingly honoured by foreign investors, there is still a great deal of uncer­tainty. In 2020, it materi­alised through massive personnel changes in the government, which led to an inter­ruption of the reform process and a delay in negoti­a­tions with the Inter­na­tional Monetary Fund (IMF). While the COVID-19 pandemic initially accel­erated the rapprochement, the situation is now much more difficult again. This is mainly due to the pressure exerted on anti-corruption insti­tu­tions, the salary limits in the public sector and the inade­quate budget for 2021. Without doubt, COVID-19 has had a noticeable negative effect on the Ukrainian economy, but it is in line with inter­na­tional devel­op­ments.

However, there are also positive trends, mainly due to the decen­tral­i­sation reform and in the trade sector. The Deep and Compre­hensive Free Trade Area (DCFTA) has a clearly positive effect on Ukrainian exports to the EU, which increased to over 40% in 2019. Overall, a slight economic recovery in the second half of the year is to be expected. It is now important to maintain cooper­ation with inter­na­tional financial organ­i­sa­tions and not to try to compensate the financial straits caused by COVID-19 with short-term populist solutions. After all, one thing is partic­u­larly important for foreign investors: long-term macro­eco­nomic stability.

In the ensuing Q&A and discussion, Ukrainian tariff regula­tions were mentioned as an additional barrier, as well as the lack of protection of intel­lectual property rights.

This event was part of the project “German Ukrainian Researchers Network” (GURN). GURN aims at estab­lishing a German-Ukrainian research network for junior and senior researchers and their organ­i­sa­tions, strength­ening country expertise and promoting joint cooper­ation projects. GURN is conducted in close cooper­ation with the Ilko Kucheriv Democ­ratic Initia­tives Foundation (DIF, Kyiv), the think tank devel­opment and research initiative think twice UA (Kyiv), the New Europe Center (NEC, Kyiv) and is kindly supported by the Federal Foreign Office.