NBU estimates round tripping investment of FDI at 10% in 2017

National Bank of Ukraine (NBU) estimated the round tripping
foreign direct investment (FDI) for 2010-2017, the central bank reported in a
press release on July 18. “Round tripping” is a term to identify the flow,
which is reported as FDI, but in fact involves just the return of domestic
capital previously withdrawn from the country. To make this estimation, the
regulator distinguished the flows where the ultimate controlling investor was
the resident of Ukraine.

In 2010-2017, round tripping FDI amounted to USD 7.9
bln, or 22% of the total FDI inflow to the country. In 2010-2013, the volumes
of round tripping were the highest, reaching around one-third of net FDI. In
2016-2017, the share of round tripping investment was just 6.9% of net FDI,
while a net outflow under such operations was observed in 2014-2015.

In 2017, round tripping FDI amounted to USD 270 mln,
or 10.4% of FDI to Ukraine. Around half of such investments came from Cyprus,
while the Netherlands, Switzerland and Austria were other top players.

The NBU will do this estimate on the annual basis.

Evgeniya Akhtyrko: This
assessment is important for getting a more relevant picture of Ukraine as an
object of foreign investment. This data reveals that Ukraine has been of even
less interest for foreign investors than it appeared in general statistics. At
the same time, the phenomenon of round tripping points to persistent problems
with capital protection in Ukraine. Under a highly corrupted environment and
ineffective regulatory system, businesspeople are made to withdraw their
revenues from the country for safety reasons.