US Investment in Ukraine – is there any Appetite?

By Myron B. Rabij, Partner, Dentons Kyiv/NY


On 12 November 2014, Dentons hosted in our New York office the conference  “Invest in Ukraine” organized by A7 CAPITAL. The following week, on 20 November, our Washington DC office hosted a USUBC luncheon with the esteemed economist and Ukraine expert, Anders Aslund, as to his views on necessary reforms in Ukraine.  I was fortunate to represent our Kyiv office and our dedicated New York Ukraine Desk at both events.  I’m happy to say that both events were well attended.

One of the many topics discussed at these (and other) events was:  where is the promised US / Western appetite for investment in post-EuroMaidan Ukraine?

The common jaded response I have heard from both US and Ukrainian businessmen is:  What has post-EuroMaidan Ukraine actually done to attract investment?

I have lately been spending more time in New York than Kyiv.  Distance gives to reflection.

I trust that the New Government of Ukraine – just formed yesterday as of this writing – intends to vigorously allay the healthy skepticism that has grown among the people in Kyiv and Ukraine and in the boardrooms and offices of Ukrainian and foreign companies.  The Government (to coin a Ukrainian saying) has been quite “slow to be saddled and reined” - in hopes - that it will now “run quickly.”

And move quickly it needs to do. 

But I’m an optimist not a skeptic, so let me start with a list of Ukraine’s Post-Maidan principle accomplishments to date.  Let’s bear in mind that all of these are direct promises made on the Maidan or their logical follow-up:

The Exodus of the Regions / Yanukovich Clan;

A Presidential election on May 25th;

Signing and ratification of the EU Association Agreement on March 21 and 16 September respectively;

IMF Loan (May and August);

Parliamentary elections and local elections on 26 October;

The evident consolidation of the population around a Pro-EU and Pro-Ukraine, Pro-Reform National Agenda;

New updates to Anti-corruption laws of 14 October (including establishment of the National Anti-Corruption Bureau (still to be peopled));

The Lustration Law of 16 September;

Reduction of Government oversight bodies and oversight functions by almost 50%;

Licenses decreases from 143 to 84;

Less corruption and less corrosive interface with government officials through improvements in corporate registry and registration regulations;

Beneficial Ownership of companies to be declared and fully implemented by April 2015;

Elimination of spot inspections of businesses by the tax authorities;

VAT tax and reporting reform;

Company seals no longer required on most documents; one-step company registration;

All of these developments are significant.  They would not have been possible – nay – imagined – under Yanukovich.  And let’s remind ourselves, they have taken place since a start-date of March.

That is impressive, but – and when a lawyer starts caveating a statement, please take note – that’s not enough.  That’s already 9 months gone by when the country has been saddled by:

Crisis in Crimea;

The short-lived faux “autonomy” movement in Donbas (the internal combustion of resentments and an attempted oligarchical resurgemento) 

Full-out War in Donbas (let’s call it what it is);

A trade war;


Intense Anti-Crisis Measures pushing business to its limits:

Emergency and Detrimentary Regulation of the Energy and Gas industries (fixed pricing, government monopoly on sales, increased tax burden);

No prosecution of those guilty of Euromaidan repressions;

Questionable tactics such as announcing at the beginning of December certain Oblenergo privatizations for the 24th and 25th of December (clearly not intended for a Western buyer; clearly the buyer(s) have been pre-determined); and

No other significant reforms

People have become impatient. The business community has become impatient and analysts are saying that there is not much more time left before the economy goes into meltdown.  The list of accomplishments against the list of things that need to be done in the time left to do them can look as much as indictment as praise.

The Government needs to move beyond crisis management and emergency fiscal policy measures.

Do I remain an optimist?  Yes. 

Am I pleased with the formation of the new Government and even the appointment of technocrat expats to government ministries?  Certainly.

Do they have their work cut out for them.  Absolutely.

And ultimately we will judge them on their track record – as we would any new government. 

We wish them luck but we know that luck has very little to do with it.  Performance has always been the test for investment.  Ukraine has no choice but to pass that test.   Ukraine has no choice but to move forward.  But it is the tempo of the forward motion – it must be staccato – that will be the measure of success.

The Ukrainian Journal of Business Law

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