Ukraine sees significant growth in foreign investment in 2001 (11/04/01)

Ukraine sees significant growth in foreign investment in 2001

by Roman Woronowycz
Kyiv Press Bureau

KYIV - Ukraine recently has seen an increased rate of growth in foreign investment, according to a top official in the country's central bank, as a rapidly expanding economy has begun to catch the eye of outside investors.

During an international conference on liberalization of capital movement in countries with a transition economy, held in Kyiv on October 22-23, Anatolii Shapovalov, vice-chairman of the National Bank of Ukraine, said the country had experienced a relatively sharp rise in investor interest in the first half of this year with an additional $515 million being invested in the country, which is a 1.6-fold increase over the same period of the previous year. The new foreign capital brings the total investment in Ukraine by foreign companies and individuals to a total of $4.3 billion since Ukraine opened its markets after independence in 1991.

Although the overall sum remains paltry compared to that of Ukraine's neighbors such as Poland, which is approaching $80 million in foreign investments, the growth over the first two quarters is a sound 22 percent. Mr. Shapovalov said much of the recent money is being drawn from offshore havens, such as Cyprus, which in the first months of 2001 was the third largest investor in Ukraine, an indication that money moved out of Ukraine in the early and mid-1990's is returning.

Today the most significant investors in Ukraine, however, remains the United States, followed by the Netherlands, Germany, Great Britain and Russia. Together these countries account for about 50 percent of all new investment in the country. The number of Ukrainian companies with some foreign investment has grown to 7,680, which is a threefold increase since 1994.

Mr. Shapovalov said that what is preventing a flood of new foreign investment is that which has held back foreign firms for the last several years: confusing and ever-changing laws; a burdensome tax system; and no effective guarantees that investors will able to do business in an open and fair manner.

He underlined that changes had taken place and would continue.

The Ukrainian economy remains on fire even as most countries in the West have shown a marked slowdown. In the first nine months of this year the gross domestic product in Ukraine has risen 9.3 percent, while inflation has remained minuscule at 3.7 percent for the year-to-date. Industrial production has continued to remain strong at around 16 percent growth, while the agriculture and consumer goods sectors also continued to expand.

James Wolfensohn, president of the World Bank told Ukraine's Prime Minister Anatolii Kinakh in Washington on October 30 that he was pleased with Ukraine's economic resurrection.

"We're very happy to have partnered with Ukraine during these past two years of economic success," said Mr. Wolfensohn. "We would like the Ukrainian government to stick with the reform program and consolidate these accomplishments."

Mr. Wolfensohn underscored the need to translate Ukraine's strong performance into better conditions for the poor, and congratulated the government on the recent adoption of a comprehensive poverty-reduction strategy for the country.

Mr. Kinakh also met with the World Bank's country director for Ukraine and Belarus, Luca Barbone, who stressed the need for Ukraine to maintain the confidence of international investors by clearing the way for the next round of privatization of energy companies.

"It is important that the government holds to the agreed privatization schedule if it is to send a clear signal to investors that Ukraine is determined to reform the energy sector," said Mr. Barbone.

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