One day after finishing this article, Ukraine was once again targeted by the Russian missiles and drones. Like any war, the invasion has brought devastating damages to lives of each and every Ukrainian as well as destroyed thousands of buildings, strategically important bridges and roads and other significant infrastructural objects. As of August 2022, report by Kyiv School of Economics, the disastrous consequences of this war are totaling to $113 bn while it would take almost $200 bn to rebuild the infrastructure of various regions as at present.
In particular, among the top affected sectors that suffered the most losses in their infrastructure are vehicle industry (206 thousand damaged units), residential housing (131,3 thousand damaged units), commercial and educational buildings (total of 5,220 damaged units).
However, as harsh as it can sound, these excruciating figures can be turned into an opportunity for foreign investors, particularly in the construction and natural resources industries as the country is in a desperate need for a fast economic recovery.
Despite the ongoing active phase of the war and randomized attacks on Ukrainian regions, the country has already put rebuilding plans in place and is taking first steps of action. For instance, a recent start of reconstruction of one of the kindergartens in Ovruch town in Zhytomyr region became one of the first projects fully funded by a foreign government – Estonia. Likewise, Kyiv and Chernihiv regions that suffered from shelling and Russian occupation are now actively receiving substantial support from several members of the European Union like France, Latvia and others. As of September 2022, all EU member states have agreed to provide macro-financial assistance of 5 bn euro in long-term loans in three tranches to support the economy of Ukraine while it is recovering from the consequences of war. Washington has also provided 8.5 bn to contribute to the country’s economic growth.
Moreover, one of the major fundraising platforms launched by the President of Ukraine, UNITED24, has already raised over 11.7 million dollars in charitable donations allocated specifically towards rebuilding the country since May of this year.
In response to the great support of the EU and other partner-countries, the Ukrainian government is developing strategies and incentives to benefit foreign investors and companies who are willing to build business relationships with Ukraine. Since the end of March 2022, the Ukrainian parliament has eased the import restrictions and custom clearance conditions for the construction materials supplied by EU companies. The Ministry of Economy has also revealed that Ukraine has partnered with MIGA – political risk insurance and credit enhancement guarantees agency with a 24 bn dollar investment portfolio belonging to the World Bank, to launch a beta-version of a 30 mn dollar War Risk Insurance project to safeguard the capital of foreign investors.
Considering all the facts and constant war development, it is evident that the risk of investing into Ukrainian businesses and projects remains high. However, despite the daily attacks and shelling, Ukraine is actively rebuilding and renovating itself. There are many opportunities for both domestic and foreign investors as the country needs resources to be able to finance construction of buildings, roads and other important infrastructure. There are also many opportunities in the logistics sector as there is a need to plan transportation of the construction materials. It is up to the companies to decide how much risk they are willing to take and how high the potential returns on their investments could be. To minimize the likelihood of significant capital losses it is best to start with funding smaller projects that are less exposed to the threat of being hit by missiles. In that way, after the war, these projects will be advantageously positioned to grow and expand in a more peaceful economic environment.