Ukraine's inward FDI and its policy context

Abstract

With a population of more than 46 million people, Ukraine is a sizable potential market for foreign direct investment (FDI). Domestic firms are not very competitive. Together with a favorable geographic location and low costs of labor and other inputs, Ukraine offers attractive opportunities for foreign investors. This potential, however, is not yet exploited, as indicated by relatively low cumulative inflows of FDI, due to the slow progress of transition toward a market economy, a high level of corruption, absence of effective guarantees protecting foreign investors, and political instability. In the wake of the global financial crisis and recession, the Ukrainian Government introduced policy measures that can potentially make inward foreign direct investment (IFDI) to Ukraine more complicated. Overcoming the crisis, improving the investment framework, accelerating economic reforms (including transparent privatizations) and association with the European Union (EU) would all be key factors permitting Ukraine to exploit its considerable FDI potential.