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Ukraine

Executive Summary

Ukraine offers a large consumer market, a highly educated and cost-competitive work force, and abundant natural resources. The government continues to advance legislation to capitalize on this potential.  In March 2020, parliament passed a law to lift the decades-old moratorium on the sale of agricultural land, effective July 1, 2021.  The World Bank projects that the establishment of the agricultural land market could attract $5 billion in investment.  Ukraine has continued to pass necessary legislation on intellectual property rights (IPR), including a new patent law bringing Ukraine’s patent regime closer in line with EU patent conventions.  The government also launched a new centralized body to speed up the review and issuance of patents.  On March 30, 2021, the Rada lifted a block on large privatizations and is looking at ways to facilitate the privatization process.

Ukraine’s Association Agreement with the EU gives the country preferential market access and is accelerating its economic integration with the bloc.  Many U.S. companies have found success in Ukraine, particularly in the agriculture, consumer goods, and technology sectors.  Ukraine is an agricultural powerhouse and the world’s second-largest grain exporter.  Ukraine has long had a skilled workforce in the IT service and software R&D sectors.  In recent months the Ukrainian government has increased its targeted recruitment of high-level IT talent into Ukraine.

Despite Ukraine’s potential, foreign direct investment (FDI) remains low. Ukraine experienced a net outflow of investment in 2020.  In addition to the pandemic, foreign investors cite corruption, particularly in the judiciary, as a key challenge to doing business in Ukraine.  To attract foreign investment the government adopted a new law in early 2021 granting considerable financial and operational incentives to companies that make large investments in Ukraine.

The April 2019 election of President Zelenskyy raised hopes that Ukraine would make the breakthrough reforms necessary to unlock its vast economic potential.  The government has worked to protect the gains of recent years and to implement many of the administration’s promises. Vested and corrupt interests, however, have resisted and even succeeded in rolling back some of the critical reforms enacted since the 2014 Revolution of Dignity.

Since 2014, Ukraine passed numerous reforms, including the launch of a number of anti-corruption institutions.  In fall 2020, however, the Constitutional Court of Ukraine invalidated key provisions of laws underpinning two of these institutions — the National Anti-Corruption Bureau (NABU) and the National Agency on Corruption Prevention (NACP).  These rulings have rolled back key provisions of prior IMF programs, preventing new disbursements of IMF, World Bank, and EU concessionary loans.  The Constitutional Court is also reviewing cases challenging the constitutionality of the High Anti-Corruption Court (HACC) and the Deposit Guarantee Fund.  The government and parliament are negotiating with international partners on legislation to reverse the effects of the rulings.

Table 1: Key Metrics and Rankings
Measure Year Index/Rank Website Address
TI Corruption Perceptions Index 2020 117 of 180 http://www.transparency.org/research/cpi/overview
World Bank’s Doing Business Report 2019 64 of 190 http://www.doingbusiness.org/en/rankings
Global Innovation Index 2020 45of 131 https://www.globalinnovationindex.org/analysis-indicator
U.S. FDI in partner country ($M USD, historical stock positions) 2019 $596 http://apps.bea.gov/international/factsheet/
World Bank GNI per capita 2019 $3,370 http://data.worldbank.org/indicator/NY.GNP.PCAP.CD

13. Foreign Direct Investment and Foreign Portfolio Investment Statistics

 

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
Host Country Statistical source* USG or international statistical source USG or International Source of Data:  BEA; IMF; Eurostat; UNCTAD, Other
Economic Data Year Amount Year Amount
Host Country Gross Domestic Product (GDP) ($M USD) 2019 $142,071 2019 $139,100 www.worldbank.org/en/country/ukraine/overview
Foreign Direct Investment Host Country Statistical source* USG or international statistical source USG or international Source of data:  BEA; IMF; Eurostat; UNCTAD, Other
U.S. FDI in partner country ($M USD, stock positions) 2018 $489 2019 $596 BEA data available at

https://apps.bea.gov/international/factsheet/factsheet.cfm

Host country’s FDI in the United States ($M USD, stock positions) 2018 $ 0.6 N/A N/A BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data
Total inbound stock of FDI as % host GDP 2018 29.4% 2019 33.9% UNCTAD data available at

https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx

* Source for Host Country Data: State Statistics Service of Ukraine

Table 3: Sources and Destination of FDI
Direct Investment from/in Counterpart Economy Data
From Top Five Sources/To Top Five Destinations (US Dollars, Millions)
Inward Direct Investment Outward Direct Investment
Total Inward $48.934 100% Total Outward $2,881 100%
Cyprus $14,958 30.5 % Cyprus $1,093 38.0%
Netherlands $10,004 20.4% Latvia $81.0 2.8%
Switzerland $2,758 5,6% Russia $67.6 2.3%
Germany $2,301 4.7% Lithuania $8,4 0.3%
Other $15.959 32.6 Switzerland $7.7 0.26%
“0” reflects amounts rounded to +/- USD 500,000.

Source: State Statistics Service of Ukraine

Table 4: Sources of Portfolio Investment
Portfolio Investment Assets
Top Five Partners (Millions, current US Dollars)
Total Equity Securities Total Debt Securities
All Countries 152 100% All Countries 78 100% All Countries 74 100%
USA 98 64.1% USA 71 90.2% Austria 96 130.3%
Austria 96 63.1% Cyprus 21 26.4% France 56 76.0%
France 56 36.8% % USA 27 36.4%
Cyprus 24 15.5% Other countries -13 Cyprus 3 3.9
Germany -102 -% Germany -102
Other countries -6

Investment Climate Statements
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