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OECD Investment Policy Reviews: Ukraine 2016

image of OECD Investment Policy Reviews: Ukraine 2016

Ukraine’s post-Maidan authorities have embarked upon an ambitious reform programme to improve the country’s framework for investment and strengthen the country as an attractive investment destination. This review, which was prepared in close cooperation with the Ukrainian authorities in response to their 2011 request to adhere to the Declaration on International Investment and Multinational Enterprises (OECD Declaration), analyses the general investment framework as well as recent reform, and shows where further efforts are necessary. It assesses Ukraine’s ability to comply with the principles of openness, transparency and non-discrimination and its policy convergence with international investment standards such as the OECD Declaration. In light of the recently updated OECD Policy Framework for Investment, it also studies other areas such as investment promotion and facilitation, infrastructure development; financial sector development and responsible business conduct practices. In the scarcely two years since a new attempt at economic reforms was launched in earnest, Ukraine has made quite important progress in introducing a modern legal framework for investment. But additional efforts are required in some policy areas to reaffirm Ukraine’s attractiveness for investors.

 

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The role of FDI and multinational enterprises in Ukraine's economic development

Attracting foreign investors has been a top priority for Ukraine’s authorities, particularly since 2014. Ukraine underwent a deep recession and a sharp macroeconomic adjustment in 2014-15, in large part due to unprecedented geopolitical tensions and military conflict in the East. As a result, FDI inflows reached their lowest level in a decade in 2014, before partially recovering in 2015. Companies from the European Union (EU), the United States and Russia are major foreign investors. The FDI Stock (49% of GDP at the end of 2014) is heavily concentrated in metallurgy, finance, retail trade and other non-tradable sectors. Over the long-term, attracting more export-oriented, efficiency seeking FDI projects in a broader range of manufacturing sub-sectors would benefit both export diversification and a better integration into EU value chains.

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