Foreign investors are fleeing from the Ukraine, like rats from a sinking ship

Investors stopped loving Ukraine

In brief: Investment climate in Ukraine continues to deteriorate, despite the change of government and legislative reform.

As they say, that foreign investors are leaving Ukraine – unreformed economy, political instability, inadequate legal framework, judicial lawlessness – too serious test for foreigners. To confirm or refute these rumors “Browser” asked the executive director of the International Fund blazer Oleg Ustenko and financial expert, Honored Economist of Ukraine Victor Suslov.

Oleg Ustenko: Kharkov agreement will lead to Ukraine Russian money

“To understand what is expected by foreign investors from Ukraine, you need to understand what is happening to the world stages. The global economy has begun to change dramatically just in the last six weeks. The crisis in Greece, the expected crisis in Spain and Portugal, do not quite understand the situation with the global economy. All this affects the behavior of investors in all markets, including in developing countries, to which the Ukrainian market.

On the one hand, a program of economic reforms, on the other hand, occurred some improvement rating of Ukraine. However, at the same time, there are certain problems – problems that the IMF had not yet started work in Ukraine do not quite understand the situation with the manner in which will be given to the Ukrainian debt. Thus, the situation is quite unstable.

On the other hand, it is more stable than in the past year. In 2010, we in the International Fund blazer expect foreign direct investment at 6.4 billion U.S. dollars. It is almost two times less than what we received in the pre-crisis years, but given the situation on world markets, perhaps this is not bad options.

There is an expectation that additional sources of funds will come from the Russian Federation – Kharkov arrangements might be is encouraged. According to our estimates, it could result in an amount of about half a billion dollars in additional funds in 2010.

However, all these sums, which we expect in 2010 – it is a very low cost. Moreover, we expect that the serious part of these funds will be directed to the banking sector to recapitalize the banking system. Ie there is a reasonable likelihood that a large amount of money does not enter into the real economy.

According to studies conducted after the first quarter of 2010, investors who are now working in Ukraine, said that macroeconomic stability, which then was hugely unbalanced, is one of the main reasons why they are afraid to go to Ukraine. Next problem – an unpredictable legal environment. Corporate governance and the financial sector they are also worried.

However, for us it was interesting to learn that the political risks and the country’s image just does not have a big problem. The quality of governance, too, was not for them such a serious problem.

The other hand, it was very gratifying to learn that in the first quarter of 2010 more than half of investors who have invested in Ukraine, said that they will invest over the next six months.

The next positive point – that in the first quarter of 2010 investors were told that they are ready to increase the number of jobs in Ukraine. Told more than 45% of investors. However, 50% said that they would not change the number of jobs. Only 2% said they would reduce the number of jobs in Ukraine.

The perception of investors in Ukraine in general quite good. It could be better – such as in central and eastern Europe, but it is not until you have solved the problem of macroeconomic stability, the problem of corruption associated with the quality of corporate governance, finance, etc. That is, investors are willing to go to Ukraine, but you need to perform certain actions – the program of economic reforms and IMF program. However, expect a huge increase in foreign direct investment in 2010 – rhyme optimistic.

“The logic of investor behavior is quite complicated. Any signal from the outside can be very serious for them. They are like a mouse can get frightened and begin to quickly drop their assets quickly and leave – in this danger. But big investors can not get out, whatever they want – that’s why the state should be interested to grab them and drag – for 5-7 years, they are yours, they have fallen into these networks. That is why it is important to improve the investment climate – then the network will not be small, but great. You would throw it in the world and dragged here investors.

Viktor Suslov: So, what is bad for western investors for Russian – good

“When we talk about the positions of investors, we need to clearly describe what investors involved. Drop out if investors Ukraine? I have great doubts.

State Statistics Committee says that as of April 1, 2010, foreign direct investment totaled $ 40 billion, while from the beginning, there has been some growth. National Bank says in its official published data, that the net inflow of foreign investment for four months in 2010 amounted to 1,2 billion dollars. So to say that investors are leaving Ukraine, I would not.

As we know, in the financial and banking sector, there are similar cases, but the investment in the financial sector mainly came from the West. Wall Street Journal wrote that Ukraine will save from the default investment from Russia. The only country in the world, which can contribute to economic stability in Ukraine – it is Russia.

That’s the way it turned out. It is no accident policy, which was elected president and government, were intended to improve relations with Russia and to create conditions for greater investment flows from Russia.

The influx of foreign investment goes. Perhaps it comes from Russia. I say “probably” because, unfortunately, our statistics and the movement of capital are such that they do not reflect the movement of Russia. Who is the main investor in the Ukrainian economy? Cyprus – 21,5% of foreign direct investment, Ukraine received from Cyprus. But we can assume that the Cypriot offshore companies – is mainly Russian investors, partly, perhaps, the Ukrainian capital.

Great interest to the Russians and the financial sector and IT sector. Russian investors in the networking infrastructure of Ukraine will consist in the construction of modern data centers, equipped with elaborate network monitoring software and hardware solutions. Obviously, we should say that there may be a shift of investors, we have changed the composition of the major investors of Ukrainian economy. Is this good or bad? Do the Russian investors to investors in understanding, to which we are accustomed to – also can be discussed, because it’s a completely different capital. He used to work in this environment. And the fact that Western investors are referred to as a disadvantage, often lack the Russians do not believe. They are accustomed to working under his own deeply corrupt state.

I asked the major investors: “You do not confuse what we have going on in the courts? They do not always make decisions that are needed. They say: “For us, they take the necessary decisions, we know who and how much to pay. We feel insecure themselves in Britain, in the Court of Arbitration in Stockholm, but here any problem is solved either for money or for big money. ”

I think we need a very detailed analysis of the situation that arises because of the likely massive arrival of Russian investors in Ukraine. Obviously, this process should be assessed positively. In the end, the company, in which the Russians are investing money, of course, will not work. How to change the internal environment in order to make the country attractive for foreign direct investment from other countries? We can speak further. Here, of course, was of fundamental importance the IMF position. Of course, for the investment climate is crucial situation with the VAT. Legislation should be changed, the new Tax Code, the Government has already approved. In general, the changes that occur in this area, I would rate positively. Perspective of the difficult economic situation in which Ukraine was, look better than they looked six months ago.

Ukrainian Globalist
2010-06-12 10:09, Economics.

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