A little more than one week after President Yanukovych released an economic reform program, three deals have been inked by foreign investors in Ukraine. The economic reform package pledges to significantly encourage foreign investment to revive its staggering economy.

Barclays Capital, the investment banking division of Barclays Bank PLC, committed investments of $2 million to establish its third global technology center, in addition to those already established in Singapore and Prague. In partnership with EPAM Systems, the largest and most recognized software development outsourcing services provider in Eastern Europe, the international investment bank plans to build and operate Ukraine’s most secure and state-of-the art facility, with a team of up to $500 IT professionals by the end of 2012. “The Kyiv center will provide the essential front-line services necessary for the operation of Barclays Capital’s global banking business,” said Karl Robb, president of EPAM EU Operations.

A few days earlier the World Bank’s private investment arm, the International Finance Corporation (IFC), announced that it will invest $25 million in Globino, a leading meat processing company and meat and dairy brand in Ukraine.  The proceeds from its investment will be used to increase and expand the company’s production capacities worth $100 million. On June 10, Spain’s Hera Holding announced a €30 million investment into the construction of a garbage recycling plant in the Crimea through the Joint Implementation mechanism under the Kyoto Protocol.

Over the last few years political instability has been named by many foreign investors as a key factor putting their interest off and making them to take a “wait-and-see attitude” towards investing in Ukraine. Now, when the country has shown some signs of reestablished political stability with the functioning government and the economic reform package in place, experts see some cause for optimism. Tomas Fiala, managing director Dragon Capital, Ukraine’s leading investment bank, said that if Yanukovych’s economic reform program is successfully implemented in the next five years and foreign investors show good faith in the Ukrainian growth story within the coming six months, “Ukraine can enjoy an investment boom as early as at the end of the current year,” with an inflow of FDI exceeding $10 billion in 2011.

According to Ukrstat, total FDI in Ukraine has accumulated to some $4.1 billion as of April 2010. By origin of investment, Cyprus has been the dominant foreign investor (22.8% of all FDI), followed by Germany with 16.6%, the Netherlands (9.6%), Russia (6.7%), Austria (6.4%), the United Kingdom (5.6%), and France (4.2%).

But how serious are Yanukovych’s reforms? While these recent examples in FDI indicate progress, the Yanukovych reform agenda is highly ambitious – international integration and cooperation including a free trade zone with the EU, a visa free regime with the EU, and free trade zone with the CIS. Speaking in Washington on June 14 on the occasion of Yanukovych’s first 100 days in office, Ukrainian political economist Nazar Kholod voiced skepticism of the government package, saying that the current administration has neither the money, the strong team or the commitment to successfully implement reform. Kholod noted Vice Prime Minister Tihipko’s suggestion that $19.2 billion needs to be borrowed from the IMF, an amount of money that is constantly increasing.

Possibly related posts:

1. IMF: Ukraine Reform Not Ambitious Enough
2. Ukraine’s International Bailout
3. Ukraine Election Update: March 2010
4. Investor’s Dilemma

finance · foreign investment · reform · Ukraine · Yanukovych

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