Investment Climate Reform In Ukraine

This Review assesses Ukraine’s investment climate vis-à-vis the country’s energy sector reforms and discusses challenges and opportunities in this context. Capitalising on the OECD Policy Framework for Investment and other relevant instruments and guidance, the Review takes a broad approach to investment climate challenges facing Ukraine’s energy sector.

The new government has started implementing wide-ranging reforms to improve the investment climate by increasing transparency in state-owned enterprises, eliminating unnecessary regulations, revamping procurement processes, and simplifying the tax code. However, its immediate focus is stabilizing the weak economy which has necessitated measures like increased import tariffs and administrative currency controls that are not business-friendly. The ministers of the economy and finance have acknowledged that 2015 will be a year of transition and reform and hope to see a stabilization of the situation and increased FDI in 2016. To support this goal these ministers have brought in a new team of reform-minded deputies, many of whom hail from the private sector, to be agents of change in the government. Instability in the East continues to cast a shadow across the Government of Ukraine's reform efforts as many would-be investors remain on the sidelines waiting for a sustainable resolution to the conflict.

Since its independence from the USSR in 1991, Ukraine has continued to make reforms to strengthen its economy. Following his election in 1994, President Kuchma has pushed forward economic reforms, maintained financial discipline, and tried to remove almost all remaining controls held over prices and foreign trade. Ukraine now offers great potential for international investment and has become an exciting business opportunity for companies wishing to take advantage of the country's wealth of natural resources and prospering technology industries, in addition to its highly qualified bank of human resources. "Doing Business with Ukraine" provides an authoritative appraisal of the new economic and investment climate, an update on market potential in the key business sectors, and unique 'best practice' advice on all aspects of investing in or trading with Ukraine.

Private firms are at the forefront of the development process, providing more than 90 percent of jobs, supplying goods and services, and representing a significant source of tax revenues. Their ability to grow, create jobs, and reduce poverty depends critically on a well-functioning investment climate--defined as the policy, legal, and institutional arrangements underpinning the functioning of markets and the level of transaction costs and risks associated with starting, operating, and closing a business. The World Bank Group has provided extensive support to investment climate reforms. This evaluation by the Independent Evaluation Group (IEG) assesses the relevance, effectiveness, and social value of World Bank Group support to investment climate reforms as it relates to concerns for inclusion and shared prosperity. IEG finds that the World Bank Group has supported a comprehensive menu of investment climate reforms and has improved investment climate in countries, as measured by number of laws enacted, streamlining of processes and time, or simple cost savings for private firms. However, the impact on investment, jobs, business formation, and growth is not straightforward. Regulatory reforms need to be designed and implemented with both economic and social costs and benefits in mind; IEG found that, in practice, World Bank Group support focuses predominantly on reducing costs to businesses. In supporting investment climate reforms, the World Bank and the International Finance Corporation use two distinct but complementary business models. Despite the fact that investment climate is the most integrated business unit in the World Bank Group, coordination is mostly informal, relying mainly on personal contacts. IEG recommends that the World Bank Group expand its range of diagnostic tools and integrate them in the areas of the business environment not yet covered by existing tools; develop an approach to identify the social effects of regulatory reforms on all groups expected to be affected by them beyond the business community; and exploit synergies by ensuring that World Bank and IFC staff improve their understanding of each other's work and business models.

Comprises the report prepared by the Ukrainian Government, the OECD assessment, the business perspectives, and presentations by national and international practitioners and experts. A broad set of issues are addressed, ranging from the general economic situation to achievements and difficulties in the fields of taxation, privatisation, financial sector and banking. Report also reflects the discussion on further steps in OECD-Ukraine cooperation, and outlines the activities of other international organisations and bilateral donors in support of the reform process; provides a record of the reforms under way and the ongoing debate on the reform process in Ukraine.

This report provides a case study for the development of sustainable energy lending in Ukraine. It reviews the macro-economic and political context for green investments in Ukraine, before looking in more detail at the role and capacity of the banking sector.

This report includes a report prepared by the Ukrainian Government, the OECD assessment, the business perspectives, and presentations by national and international practitioners and experts.