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Ukraine sees slump in foreign direct investment

October 01, 2013, 15:49 UTC+3

A trend towards decline in foreign investment in the Ukrainian economy took shape about five years ago

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KIEV, October 1 (Itar-Tass) - The amount of foreign direct investment in the Ukrainian economy in January-August 2013 was $2.513 billion, a 41.4% slump year-on-year, the National Bank of Ukraine reported on Tuesday.

Foreign direct investment in Ukraine stood at $4.283 billion in January-August 2012. A trend towards decline in foreign investment in the Ukrainian economy took shape about five years ago, the director for economic programs of the Ukrainian Institute for Public Policy, Ildar Gazizullin, said. “Affecting it this year were deceleration of the economy, the lack of positive changes in the investment climate, suspended major privatization and uncertainty as to prospects to sign an agreement on free trade with the EU and renewed cooperation with the International Monetary Fund,” he said.

Before the crisis, Ukraine was annually attracting seven to eight billion dollars-worth of investment. In 2012, direct foreign investment in the Ukrainian economy made up $6.013 billion, which is a 7.2% decline year-on-year. “A sizable part of it is funds from Cypriot offshore zones, which are practically reinvestment of Ukrainian financial-industrial groups that had transferred money to Cyprus,” Gazizullin said. He said the main factor curbing the inflow of direct foreign investment was “the lack for quite a long period of time of positive news about the business climate in the country”.

According to experts, investors are scared away by a decline in Ukraine’s economy. As of July 1, Ukraine had received $55.318 billion-worth of direct investment since the collapse of the Soviet Union, and more than 77% ($42.8 billion) had been from the European Union. In 22 years of Ukraine’s independence, countries of the Commonwealth of Independent States have invested $4.37 billion in Ukraine’s economy, including $3.822 billion from Russia.

According to accountants PriceWaterhouseCoopers, the top five Ukrainian regions attracting investors are the Kharkov, Lvov, Donetsk and Dnepropetrovsk regions as well as the capital, Kiev. Offshore Cyprus, Germany, the Netherlands, Russia and Austria are the main investors in Ukraine.

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