October 29, Mariupol of Donetsk region hosted investment forum RE: think. Invest in Ukraine, the top leadership of the country came to campaign international organizations and businesses to invest in Ukraine. Interestingly, on the same day, a similar investment forum was held 100 kilometers from Mariupol, in Donetsk. And what is doubly interesting, it demonstrated that international business is ready to invest even in the unrecognized Donbas territories, affected by the hostilities. Ukrainian government states that 12 memoranda were signed during the event, without calling more precise information, while the so-called “Donetsk People’s Republic” speaks of contracts for 135 billion rubles (2 billion USD).
Zelensky invites investors, but so far only international banks
In Mariupol, international investors signed 12 memoranda with Ukrainian regions and companies. The government is confident that this will open the way for billions of dollars in investment. The experience of previous years says that this is unlikely without major reforms.
In 2018-2019, foreign direct investment in Ukraine has fallen. Despite the loud statements of the previous government about the flood of the country by investors, the reality is much more complicated. Representatives of international business argue that Ukraine would be an ideal place to invest money, if not for the problems with corruption and the return of invested funds. In Ukraine, security officials still have an impact on business, and the investors are worried about it.
In the summer, President Zelensky recorded a video message in English, urging investors to enter Ukraine and invest their money here. A few weeks later, Parliament began discussing changes to the Tax Code, which outraged large international companies already operating in Ukraine - in some industries, such as tobacco and metallurgy, the business announced its intention to close production and withdraw dividends from the country.
And so far, the key investors in Ukraine are USAID, the European Bank for Reconstruction and Development and the World Bank.
The EBRD is financing infrastructure projects in Ukraine. The Bank and the Cabinet of Ministers signed a memorandum of understanding on a program for financing regional roads in Ukraine. According to the document, the EBRD will lend to regional state administrations under local guarantees. The first tranche will be 300 million euros.
The EBRD also became a signatory to the memorandum on preparing Ukrzaliznytsia for an IPO. Chairman of Ukrzaliznytsia Board Yevgen Kravtsov is sure that entering the public stock market will increase the company's efficiency, eradicate corruption and attract several billion dollars over the next two to three years. This can be prevented by a powerful lobby that has been opposed for years to privatizing UZ, as a result of which officials close to power continue to earn money at state-owned companies.
Foreign companies are ready to invest in the modernization of Ukrainian ports through which mainly agricultural and metallurgical products are exported. So, COFCO Agri Ukraine, a subsidiary of the Chinese national corporation COFCO, which specializes in the export of grain and oilseeds, has signed a memorandum of cooperation for the development of the port of Mariupol, which will attract investments of $ 1.3 billion.
Prime Minister Oleksiy Honcharuk noted five areas that are most interesting to international investors - agricultural, IT, energy, infrastructure and manufacturing.
But Kyiv is also looking for investors willing to finance the restoration of Donbas. Although Satu Kahkonen, the World Bank’s Regional Director for Ukraine, Belarus, and Moldova, said that international partners would do their utmost to help Ukraine revitalize the region, while international capital would join the development of transport, medical and social infrastructure in Donbas, there were no real projects so far.
But investors are actively eyeing the Ukrainian land. The Ukrainian government promises to open the market and expects that after this billions will go to the country. However, a number of experts doubt this, and even the ruling elite itself does not yet have a single view on how to permit the sale of land.
It is noteworthy that the highlight of the investment forum was not the signed contracts (the authorities have nothing to brag about here yet), but Zelensky’s fiery speech that Ukraine is Apple, which begins its journey in the garage. While sitting in the garage and it is unclear when we get out of it.
Western and Russian companies are ready to invest in self-proclaimed “Donetsk People’s Republic”
Not only representatives of Russian business, but, representatives of 16 other countries came to the forum in Donetsk.
The main goal of the forum was the search for new ways to develop an unrecognized republic, whose economy has come to a standstill after five years of hostilities. The main goal of the “Donetsk People’s Republic” is to search for investments to restart the economy. The forum organizers claim that 34 long-term agreements totaling 135.6 billion rubles ($ 2.1 billion) were signed within its framework. It is mainly about engineering, metallurgy and the agricultural sector.
It is also important that the forum participants formed recommendations for the leadership of the self-proclaimed “Donetsk People’s Republic” regarding a set of measures to restart the region’s economy.
We are talking about creating an offshore zone in the “Donetsk People’s Republic” with the complete exemption of entrepreneurs from taxes and customs duties, reducing and removing a number of bureaucratic barriers to business, legalizing the blockchain infrastructure and creating a payment system compatible with Russian payment instruments, which can be launched in the near future.
A memorandum of cooperation between the illegal “Donetsk People’s Republic Chamber of Commerce” and Industry and the Black Shield Swiss Investment Fund was signed. In the future, this framework document will serve as the basis, in particular for launching investment projects in the fields of agriculture and infrastructure development, Black Shield says.
“We have rich experience, we know how to act in difficult situations. We worked in the 90s after the collapse of Yugoslavia. After 2010, we continued our work, so today we see a lot of examples where and how to invest in Donbas," Periklis Katsiulas, the director and investment manager of Black Shield, stated during the signing of the memorandum.
Black Shield is not the only Western company ready to invest in the economy of Donbas. Bulgarian Stefan Voinov, the owner of NET Telecommunications EOOD, has taken the initiative to develop a fiber optic communication system in occupied Donetsk and integrate it into the international data network. And the business development manager of the Greek company Green Investment EOOD Ioannis Arnautelis proposed making the uncontrolled territories of Donetsk region a platform for the development of renewable energy sources - solar, wind, bioenergy.
Russian companies from Crimea expressed a desire to invest in the agricultural sector of unrecognized “Donetsk People’s Republic.”
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“Donetsk People’s Republic” does not hope for a speedy reunion with Ukraine and is building long-term plans to restore the region’s economy. And official Kyiv does not offer any unrecognized republics any common investment projects that would contribute to the rapprochement of territories. While Ukraine is looking for investors to modernize the controlled territory, occupied Donetsk similarly attracts Russian and even Western money to rebuild its economy and infrastructure.