Speech at the International Economic Forum in Davos on January 22 was President Zelensky’s first international experience with the economic elite. Speaking in front of an almost empty hall, Zelensky nevertheless voiced the usual idea to the audience - Ukraine needs investments, and in order to “lure” them, the authorities are ready to promise many things. Even more than necessary. But will the promised “solution to investor problems” help attract these investors to Ukraine? Over the years of independence, Ukrainian presidents have publicly promised a lot to foreign business. What is the result?
Leonid Kuchma: reforms, privatization, and political stability
The 90s were a very difficult period, so our country was clearly not spoiled by the attention of investors; the situation began to change, rather, from the second term of the second president of Ukraine, Leonid Kuchma (1999 – 2005).
This experienced so-called "red director" could not be remembered by any loud statements for foreign investors, and his public statements sounded quite conservative. The prospects of the Ukrainian market, successful economic reforms and their continuation, the privatization of strategic facilities, political stability - this is a simple set of advantages for investors that the second Ukrainian president used in his rhetoric.
I must say that the calls did not go unanswered - during 2002-2004, Ukraine received $ 3.832 billion of direct foreign investment (FDI), which made it possible to achieve a record GDP growth of 2004 at the end of 2004, according to the IMF, at 11.8%.
However, 2005 showed that Ukraine could be much more attractive to foreigners.
Viktor Yushchenko: reprivatization and black soil
The former chief banker of Ukraine in the role of president was in the shadow of two strong prime ministers in the person of Yulia Tymoshenko and future president of Ukraine Viktor Yanukovych and was not much perceived as the person who ruled the country. Nevertheless, Yushchenko honestly performed his functions and at official meetings he always called in foreign investors to come to Ukraine. And he was able to raise $ 39 billion over his term - more than other presidents.
However, before 2005, there was a year when Ukraine liquidated special economic zones, which attracted the vast majority of foreign investment. The president accepted the decision made by the Tymoshenko government and promised “honest” investors compensation from the state.
Two years later, at the Kazakhstan-Ukraine: New Business Opportunity business forum in Kyiv, Viktor Yushchenko, speaking about the importance of Kazakhstani investments, promised to create an appropriate state commission to deal with the problems of Kazakhstani investors entering the Ukrainian market.
In 2008, during a meeting with Lithuanian Prime Minister Gediminas Kirkilas, the Ukrainian president lured Lithuanian investors with profits that they could extract from Ukraine’s preparations for Euro 2012.
Against the background of the global financial and economic crisis in 2008, the priorities in luring foreign investors have changed, now the agricultural sector and the Ukrainian black soil have taken the main place.
"There are unique opportunities in this sector both from the point of view of production and from the point of view of production... 20-22 million tons of grain is the export that Ukraine should provide from the annual harvest of 45 million tons," Yushchenko said in October 2009, meeting with representatives of the investment company Horizon Capital.
In general, according to statistics, the period of Viktor Yushchenko’s presidency turned out to be the most “fruitful” for foreign direct investment in Ukraine - already in 2005, FDI amounted to $ 7.808 billion, but the lion's share of it - 4.8 billion – fell on Kryvorizhstal, Ukraine's largest integrated steel company, reprivatization. In general, 2005-2009 brought Ukraine in the form of FDI $ 39.032 billion. The Orange Revolution opened up good prospects for Ukraine, but we did not take full advantage of them.
Viktor Yanukovych: stability, skilled workers and the benefits of geopolitics
The fourth president of Ukraine, Viktor Yanukovych, also came from the "red directors," and therefore it is not surprising that his arguments for investors in many ways resembled those of Leonid Kuchma.
The main leitmotifs of the president’s speeches for investors were successful reforms and stability.
"I came to tell you: political and economic stability reigns in Ukraine for a year now, and this trend will only continue and consolidate... I would like you to hear me: Ukraine is and will be a reliable partner. This is our life principle - my political team, which came to power in Ukraine with me, is reliability and respect for the mutual interests of our partners," the press service quoted the head of state on January 18, 2011.
Already in March, Viktor Yanukovych, during a meeting with representatives of American business circles in New York, assured US businessmen of the success of regulatory reform, with the ultimate goal of reducing the licensing system by about 90%.
"This is a revolution in this direction. We will create a system at the level of legislation that would meet modern European standards," the press service reported on the statements of the head of state.
Then the president saw the final result of the reforms in "transparent rules of the game and equal conditions for all."
In March, the president argued that investing in Ukraine for businessmen from Brunei was that the economic downturn in Ukraine caused by the global crisis had ended and the stage of economic growth had begun. Viktor Yanukovych also called the benefits of a geopolitical location, including proximity to the EU, CIS countries and highly qualified workforce.
Finally, the creation of the State Agency for Investment and National Project Management of Ukraine and the Council of Domestic and Foreign Investors, designed to confirm the state’s work to improve the investment climate in the country, were used as such a trump card.
On the whole, Viktor Yanukovych’s result of "luring" investments into Ukraine turned out to be the second among the presidents - $ 26.602 billion for 2010-2013.
Petro Poroshenko: cheap labor and residence permit for investors
The strategy of Petro Poroshenko to lure investors into Ukraine was based on an ambiguous statement about cheap labor in Ukraine and proximity to the EU.
“We have a cheap and very skilled workforce, absolutely fantastic logistics. From this point of view, this is an opportunity for effective synergy of the potentials of Ukraine and Indonesia. Therefore, I told President Joko Widodo: Ukraine should become a platform for Indonesian goods to access EU open doors” said Poroshenko in August 2016 in an interview with CNN Indonesia.
Another unusual innovation for Ukraine was the adoption of international experience in attracting investors by simplifying the regime of residence in the country. So, in 2017, the law “On amendments to some legislative acts of Ukraine regarding the reduction of barriers to attracting foreign investment (regarding the deregistration of foreign investments and amendments to the rules for the employment and temporary residence of foreigners)” was finally adopted. This document assumed the right of the foreign investors to obtain a residence permit in Ukraine provided that they invested 100,000 EUR in Ukraine as part of the authorized capital of a Ukrainian company. However, in general, the efforts of the fifth president of Ukraine can be estimated as average - for 2014-2018 FDI in the country amounted to $ 11.212 billion, however, there were many external reasons.
Volodymyr Zelensky: investment and tax holidays
Zelensky began his presidency, writing in English an appeal to foreign investors, in which he urged them to invest in our country, saying that we are waiting for everyone with open arms. However, they are in no hurry to invest millions of dollars in Ukraine. And some even leave the country amid a reshaping of the Tax Code initiated by the Zelensky’s team.
Judging by the speech of the sixth president at the Davos Economic Forum on January 22, at some points he is following in the footsteps of his predecessor Petro Poroshenko
Promises tax amnesty for foreign investors: with investments in the privatization of more than $ 10 million, vacations will last for five years.
"The first 2 years we give tax holidays to all investors who will go into privatization for $ 10 million plus: you will not pay income tax for 5 years," the president emphasized.
Another innovation, a kind of “trick” of Zelensky’s speech in Davos, was the promise to the largest investors who invested in the privatization of personal investment advisers.
Regarding FDI received in Ukraine in 2019, for 9 months they amounted to $ 1.711 billion, including 497 million in January-March and should be attributed back to the time of Petro Poroshenko.