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A legacy of investments in Ukraine from Davos

What they say about the prospects for investment in the economy of Ukraine in Davos
  • Welcoming Ukrainians in Davos, Credit Suisse analysts forecast Ukraine’s GDP growth of 4% and more this and next year. “Our main expectation from the Ukrainian economy is that in coming years it will grow by 4% or more”, stated in report. With higher growth, a higher GDP-linked payroll ratio for liabilities of 2015 will be added. Analysts also predicted that the national bank of Ukraine will be more active this year to prevent hryvnia from strengthening. According to several other speakers, Ukraine’s strong macroeconomic position, 4% inflation and 4% forecasted GDP growth attract the attention of foreign investors.
  • Lack of a “well-functioning public administration” holds up disbursement in €4 billion in approved European Investment Bank loans to Ukraine, Jean-Christophe Laloux, the bank’s CEO, told the Ukraine House Davos. Noting that only €2 billion of € 6 billion in approved loans have been granted, he also said Ukraine needs to invest in public administration. “People need to be paid enough to make it a career, but not to leave after a couple of years”.
  • David MackLennan, CEO of Cargill Inc, recalled that Cargill Inc. invested more than half a billion dollars in Ukraine, and emphasized that he appreciated the changes in working with investors.
  • Referring to the announcement of a concession tender for Kherson port, Olga Magaletska, office head of the National Investment Council, said: “We have been talking about concessions for 20 years — and finally it has happened.” On Tuesday, Prime Minister Honcharuk formally announced that a Swiss-Georgian consortium, Risoil-Kherson, won the tender. Magaletska said ports, regional airports and private freight trains will be priority areas for foreign investment this year. Toll roads require new legislation.
  • Ukraine no longer can afford the luxury of discussing public and private sectors partnerships, Michael Yurkovich said, CEO of TIU Canada. “90% of Ukraine’s infrastructure will fail in 10 years”, he said, referring to a recent study by the Ukrainian Institute for the Future. “Ukraine needs $80 billion to keep the country on the level it was in 2005”.
  • Switching to green tariffs without a consensual agreement could be an obstacle to new foreign investment, Alain Pilloux warned, EBRD’s Vice President for banking. “Ukraine’s investment climate is at stake, the ripple effect may hit concession tenders and privatization.”
  • A major green investor in the audience, Joar Viken, group CEO of Norway’s NBT, warned that retroactive changes to the tariff would cause investors to lose trust in Ukraine. NBT has a wind energy project for southern Ukraine worth € 1.1 billion. This fall, the company plans to open Syvash Wind Farm, a €376 million, 250 MW project in Kherson. In addition, NBT is trying to line up funding for Zophia, a €700 million windfarm in Zaporizhzhia, on the north shore of the Sea of Azov.
  • “Every week I receive calls from investors from the EU, USA, Asia and the Middle East who are looking for investment opportunities in Ukraine,” Lenna Koszarny said, Horizon Capital CEO. “In the next 3-5 years, I see Horizon Capital’s new deals worth $ 1 billion that will be funded by Horizon together with our co-investors and debt partners”. Noting that the government has set a goal of attracting $ 50 billion of foreign direct investment over five years, she said: "This amount will be achieved only through infrastructure".
  • Andrey Gorokhov, UMG Investments CEO, said Ukraine had to work faster to attract more foreign direct investment. He predicted that his Kyiv group would invest $150-200 million in Ukraine projects in the next 3-5 years.
  • Yuriy Kosyuk, MHP founder, noted that Ukraine should become the best country for investment. To do this, we need to follow the example of neighboring countries. In Poland, the government exempted investors from 50% of taxes to cover the costs of new investments for 10 years. Moreover, the conditions in the country were much worse than are in Ukraine now. But, despite this, over 20 years they managed to attract investors to the country and stimulate business development, and, as a result, increase the number of jobs.
  • Regarding infrastructure investments, Volodymyr Osadchuk, CEO of COFCO Agri Resources Ukraine, said his company is negotiating to get permission to load China-bound container trains with wheat, corn and soybeans. Currently, trains return to China from Europe largely empty. COFCO, a Chinese company, predicts that 35 container trains per week can cross Ukraine, loaded with food for Western China, an importing region. Urumqi, the largest city, is approximately equidistant from Shanghai and Kyiv.
  • German Deutsche Bahn and Ukrzaliznytsia are to sign a memorandum of cooperation in Davos. Alexander Sichko, a member of the Verkhovna Rada Committee on Transport and Communications, writes: “A large-scale cooperation project between Ukrzaliznytsia and the largest German railway operator Deutsche Bahn is being prepared…It is about attracting German experts, experience, managerial and technological solutions”.
  • In IT sector, a $100 million Ukrainian startup fund is being created by the government, Oleksandr Bornyakov said, Deputy Minister of Digital Transformation of Ukraine. The Ministry of Finance reports, this Saturday nine finalists out of 300 applicants will present their projects to the competition committee of the Ukrainian Startup Fund. On Tuesday, the government unveiled "Diia: Digital Education" a national project to teach 6 million people digital skills, Bornyakov said. This program has a larger goal of closing internet ‘white spots’ or extending internet use to the last 10 million Ukrainians. In addition, as part of increasing the nation’s IT professionals from 200,000 today to 500,000 in 2024, the government wants to train people for key support roles, notably IT marketing managers.
  • Five years without income tax were promised by Volodymyr Zelenskiy, President of Ukraine, to investors who come to the country under the "$ 10 million +" program as part of the privatization program, as well as tax holidays, that means 5 years without income tax for investors with an investment of over $ 100 million. The President also noted that more than 500 objects of state property will be subject to privatization in Ukraine.
  • Radical cleanup of three big state-owned banks during the Zelenskiy government is envisioned in a strategy document posted on the National Bank of Ukraine website. Non-performing loans are to drop from 53% today to 10% in 2024. The state-owned banks’ share of banking assets is to drop from 60% today to 25%. The level of public confidence in the financial system is to increase from 10% today to 60% in 2024.

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