There is a “changing season” in Ukraine, says Mykola Stetsenko, Managing Partner at Avellum, who reports an unusual amount of activity to begin the year, in what is normally a quieter period in the market. “I may sound too optimistic — but I am quite positive.”
Stetsenko describes a flow of steady investments in the country, with most funds placed into such areas as IT (particularly software and video game development) and agriculture. The latter is experiencing growth even though the long-awaited land reform remains incomplete, and will probably not happen before the country’s presidential elections in March 2019. “I think we lost time,” he says, “and this is a very political issue.”
Finance is active as well. “Some companies are looking into debt capital market and issuing new Eurobonds,” Stetsenko says. International financial institutions such as the EBRD, the IFC, European banks, and recently OPIC are all active in the Ukrainian market. For example, the EBRD has recently increased its investment to Ukraine by a third. In addition, he notes, many banks are continuing their investments to long-standing clients this year, such as MHP, which will likely prolong sourcing funds for its pre-export facility.
Stetsenko reports that the instability in Eastern Ukraine is increasingly accepted by investors as a predictable factor. In addition, the slowing of the economy in recent years and devaluation of the hrivnya has resulted in a cheap workforce — Stetsenko reports that it’s actually cheaper than Chinese labor at the moment — also stimulating investing activity. This is particularly evident in Western Ukraine, which is reporting significant development and job growth, as a number of companies — particularly several focusing on spare parts production for automobile giants — have recently opened factories there.
Stetsenko acknowledges the relative success of the country’s well-documented judicial reform efforts in the fight against corruption, but he says the extent of the problem may have been overblown. “I think many experts make this mistake, saying that the biggest problem in Ukraine is corruption. I don't think so — I think it’s bureaucracy.” However, Stetsenko believes that the new Privatization law adopted in mid-January of this year will bring transparency to the system, by simplifying the privatization of state enterprises.