Investment attractiveness of Ukraine during the war

Abstract

The war ongoing in Ukraine since early 2014, and especially the full-scale Russian invasion from February 24, 2022, has led to destruction on a colossal scale. According to the World Bank, post-war reconstruction in Ukraine will require at least 486 billion USD. Attracting such an amount is impossible without private investments, philanthropic funds, and various foundations. The EU is striving to attract investments to Ukraine now, without waiting for the end of the war. Thus, creating a favorable investment climate and, accordingly, enhancing Ukraine's investment attractiveness are exceptionally urgent tasks. Without addressing these, the country's recovery is nearly impossible. This article aims to analyze the investment attractiveness of Ukraine under the conditions of a prolonged war (2014-2023). It examines the dynamics of the investment attractiveness index and the evaluation of Ukraine's investment climate by both international and domestic investors throughout the years of the Russian-Ukrainian war (2014-2023); it identifies positive and negative factors that have influenced and continue to influence the investment climate throughout this period; and it reveals the dynamic trends in the volumes of direct foreign and capital investments injected into the state's economy over the last decade.

It was found that during the years 2014-2023, Ukraine's investment attractiveness index never reached a positive zone – above 4 points, constantly remaining in the negative zone – below 3 points. Only in the years 2017-2018 did the index reach a neutral zone, slightly exceeding 3 points. Overall, it can be said that negative factors predominated in shaping the investment climate in Ukraine during 2014-2023, resulting in its unfavorable assessment by both international and domestic investors. The main obstacles for investors have been the ongoing war since 2014 and associated risks, high levels of corruption, the shadow economy, shadow employment, and illegal business activities, a high level of oligarchization of power and bureaucratization of business processes, a weak judicial system, financial instability, high tax and administrative pressure on businesses, low purchasing power of the population, political instability, slowness and low effectiveness of reforms, and the absence of effective legislation to support and protect investments.