FDI falls 9.4% in 2012

FDI inflow to Ukraine in 2012 declined 9.4% to USD 4.13 bln from USD 4.56 bln in 2011, according an Ukrstat report released on Feb. 14. Cyprus remained the top source of investment to Ukraine with its share being close to 74% in 2012.

Alexander Paraschiy: The investment decline reflects the deteriorating economic conditions and business environment in the country. Ukraine badly needs high quality investments to the country to improve its competitiveness and solve its fundamental structural problems. However, due to poor property rights protections, selective law enforcement and a weak judicial system, investors do not consider Ukraine very attractive, especially in view of many alternatives (like Turkey) in the region. As a result, FDI inflow to the country is too low and the quality of the investments is traditionally poor: 86% of 2012 FDI came from Cyprus, Netherlands and British Virgin Islands, the vast majority of which is Ukraine’s capital returning to the country.