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 Ljudmyla Melnyk (IEP, Berlin). The discussion was moderated by Sergiy Solodkyy, Deputy Director of the NEC.
The experts stressed the importance of a functioning legal framework. 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.
The 3rd Germany Breakfast Debate took place within the framework of the “German Ukrainian Researchers Network” project (GURN 1, 2019-2020) and was conducted in close cooperation with the Ukrainian partner organisation New Europe Center (NEC). The format has been continued since March 2021 as part of the GURN 2 project.
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