Ukraine Eyes Investments as Virus Shakes Up Supply Chains

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Ukraine is hoping a post-pandemic recalibration of global supply chains will lure more investment to its battered economy.

“Asia was the world’s leading production venue,” Sergiy Tsivkach, head of the state’s UkraineInvest agency, said in an interview. “But because of the coronavirus, it became clear that long supply chains can impact contracts’ effectiveness. It puts Ukraine on the map for European investors.”

Switching output closer to home, known as near-shoring, is becoming a hot topic as companies look to avoid a repeat of the shortages that occurred when Covid-19 spread across the planet last year. The cutoffs may prompt manufacturers located near eastern Europe to secure back-up capacity there, according to the European Bank for Reconstruction and Development.

While Ukraine benefits from its location between Asia and the European Union, endemic corruption and weak governance often act as deterrents to foreign direct investment, which turned negative on a net basis last year amid the pandemic.

UkraineInvest helped secure more than $600 million of investments last year, according to Tsivkach, who’s looking to agree on a further $7.7 billion starting in 2021.

“Everything’s in our hands -- there’s interest,” Tsivkach said. “We should ensure comfortable conditions” for investors.

The government has sought to relax the rules for sales of agricultural land to help expand an industry that’s becoming an ever-more-powerful economic engine. It’s also reduced red tape, liberalized the natural-gas market and brought many bureaucratic functions online.

But investors still complain, according to Tsivkach, about things like documentation approvals, law enforcement and the tax and customs agencies. Monopolies also affect the investment climate, though that issue may be eased by plans to overhaul the antitrust system and create a court to rule on competition issues, he said.

Incentives include granting benefits to some investors who commit more than 20 million euros ($24 million), with the government helping with roads and energy, water and electricity. Ukraine, whose economy is set to grow 4.8% this year after contracting 4.2% in 2020, also wants to update its EU free-trade deal to boost exports.

Ukraine Eyes Investments as Virus Shakes Up Supply Chains

Current projects include $1.1 billion of investments in mining and processing capabilities by Canada’s Black Iron Inc. and a new 200 million-euro facility to be built by manufacturing company Kronospan, according to Tsivkach. Belgian mattress-fabric maker Monks International and Danish furniture producer Hjort Knudsen are also building plants, he said.

Ukraine is also looking to attract energy investment, particularly in natural gas production, Prime Minister Denys Shmyhal said on Friday. The country is working to introduce more transparent regulation in the industry, where it also wants to strengthen links with the European Union.

©2021 Bloomberg L.P.

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