Executive summary

The 2016 Investment Policy Review of Ukraine assesses the country’s ability to comply with the principles of openness, transparency and non-discrimination and its policy convergence with the OECD Declaration on International Investment and Multinational Enterprises, including responsible business conduct practices, which Ukraine adhered to in 2016. It also considers the interaction and coherence of Ukraine’s investment policy with other areas such as investment promotion and facilitation, infrastructure and financial development. In doing so, it evaluates progress made by Ukraine in response to the recommendations of a previous Review conducted in 2011.

In the past few years, Ukraine has made significant progress in improving its investment policy framework. Ukraine’s investment legislation includes the principle of non-discrimination of foreign investment and general provisions on foreign investment protection. Over the past two years, continuous efforts have been made to simplify establishment and licensing procedures. New policies have also been enacted for the purpose of creating a more transparent and efficient environment for public procurement. Ukraine also introduced significant tax reforms in 2015 resulting in better tax transparency.

The exceptions to the National Treatment instrument notified by Ukraine are limited. Ukraine maintains exceptions to national treatment for established foreign-owned companies for access to land and forests and in the following sectors: news information agencies, television and radio broadcasting, maritime transport and cabotage, and in the area of privatisation. Overall, the country ranks rather well in the OECD FDI Regulatory Restrictiveness Index with a legal regime for foreign direct investment more open than the average of non-OECD countries covered by the Index. Ukraine nevertheless ranks above the OECD average, a score that reflects in part the fact Ukraine still applies several transectoral and sectoral restrictions on national security grounds, which qualify for measures described in the Declaration.

Ukraine has also recently undertaken important policy reforms in many of the areas covered by the OECD Guidelines for Multinational Enterprises (Guidelines). The government has developed a comprehensive framework and has ratified the main instruments relating to human rights and labour rights. A new service has been set up to ensure consumer protection. Reforms have also led to the establishment of disclosure and, in general, corporate governance requirements, although further measures are needed to ensure corporate transparency and accountability. As an adherent to the Declaration, Ukraine has committed to further promote the Guidelines and establish a dedicated National Contact Point (NCP) in the Ministry of Economic Development and Trade to this effect. NCPs have the mandate to promote the Guidelines, and to address issues related to the observance of the Guidelines in specific instances, including receiving complaints related to the non-observance of the Guidelines by an enterprise operating in or from an adherent.

Many of these reforms illustrate willingness on the part of the Ukrainian authorities to take practical measures to improve the overall business climate and attract more foreign investment. Despite indisputable efforts by the authorities in this area, foreign investment flows to Ukraine have nevertheless proven particularly volatile in a context of an adverse geopolitical environment. In addition, investors’ perception gap in evaluating the country’s liberalisation achievements, combined with recurrent concerns about corruption and insufficient infrastructure development has been an important investment impediment to Ukraine.

This Review of Ukraine, which reflects an examination of the country’s investment policy conducted by the OECD Investment Committee in December 2015, is based on the laws, regulations and other materials supplied by Ukraine. It is also based on information obtained by the OECD Secretariat during three technical missions to Kyiv, in May, September and November 2015, during which the Secretariat met with representatives of the Ukrainian public administration, the private sector and representatives of adherents. Ukraine will report on progress in improving its regime for FDI pursuant to the OECD National Treatment instrument and in improving the overall business environment to the Investment Committee before the end of 2017. On this occasion, Ukraine will also report on action taken to establish and build capacity of its National Contact Point.