There was a net outflow of foreign direct investment (FDI) from Ukraine in the first quarter of this year of $1,451 million, reversing the trend of inflows of the last several years, according to data from State Statistics Agency.
Ukraine has been attracting foreign investment but at disappointingly low levels. New FDI in 2019 was $1.9 billion, the stats agency said. About one quarter, or $506 million, was from Cyprus, a famous offshore jurisdiction. The next four sources were: Russia – $396 million; the Netherlands – $262 million; the United Kingdom – $212 million; and Germany – $119 million.
The only sector to attract substantial FDI has been the renewable power sector, which has seen more than $4 billion of inflows in the last two years to take advantage of the attractive tariff regime. However, the government undermined confidence in the sector after it decided to reduce the tariffs, to the outrage of investors. A compromise was struck in June, but the investors remained unhappy and some were still contemplating taking their complaints to international arbitration.
The investment case for Ukraine has been in decline since Ukrainian President Volodymyr Zelensky shook up the government with a major reshuffle on March 3. The arrival of the coronavirus (COVID-19) epidemic has only undermined the case for investment further. The latest shocker was resignation of the National Bank of Ukraine, Yakiv Smolii, who complained over “political pressure”. In May there was a fresh $323 million net outflow of FDI that followed on from an inflow of $360 million in April. (UNIAN/Business World Magazine)