Ukraine: An Emerging Investment Opportunity

Ukraine: An Emerging Investment Opportunity

As the Covid 19 pandemic wreaks havoc across the world’s stock markets. Big and medium-sized entrepreneurs are eyeing investment opportunities in the former Communist Bloc. Following the demise of the USSR, Ukraine proclaimed its independence on July 16, 1990.

Ukraine’s relations with the West have been warming [1] up since the so-called Euromaidan of 2014, with the hallmark being the country’s joining Deep and Comprehensive Free Trade Area with European Union at the beginning of 2016.

In February 2021, Fitch affirmed Ukraine’s B outlook with a stable perspective, owing primarily to the country’s macroeconomic policy. Big and mid-sized investors have also noticed that the country’s balance of payments has been resilient to the global coronavirus turmoil, with its foreign exchange reserves grossing USD 28bn.

Tips for Doing Business & Investing in Ukraine

There are several ways to invest in Ukraine:

  • Open a personal deposit account at a local bank
  • Trading on Ukraine’s emerging stock market
  • Investing in real estates in Ukraine
  • Starting an LLC or other business venture in Ukraine

Before exploring each of these investment opportunities in greater detail, let’s just mention that contacting an agency or professional consulting firm that operates worldwide could be a great first step towards investing in Ukraine.

Opening a current or investment account in Ukraine

Ukraine’s national currency is the Ukrainian hryvnia (UAH) (1 USD = 28 UAH). Foreign nationals are allowed to open bank accounts in the local currency, as well as in the most popular FIAT currencies, including USD, CHF, EUR, and GBP.

Opening an investment account

If you are planning to make investments in Ukraine, you are going to need an investment account, which allows you to send some of your profit back home. You are going to need an investment account prior to taking up any of the investment opportunities listed above.

The investment account will allow investors to send money to and from a bank account in their home country in UAH or a foreign currency listed by the local bank. Bank regulations in Ukraine are tight, and the state government keeps the country’s banking sector under strict control, which affects the flexibility of some investment instruments.

Documents you’ll need to open an investment account:

  • A valid passport
  • Residence Permit (if available)
  • EIN (if you have obtained one)
  • A filled-in application form provided by the bank
  • Power of attorney (if you are empowering a third party to operate the account)

Where to open an investment account in Ukraine

As mentioned above, every business or investment operation you undertake in Ukraine will go through your investment account. In its latest report, Moody’s has tagged Ukraine’s banking sector as “stable.”

Investors from Germany or Austria will probably feel the most comfortable opening an investment account in Raiffeisen Bank Aval, the Ukrainian subsidiary of Raiffeisen Bank International (RBI).

Established in 1992, PrivatBankis Ukraine’s most prominent and most substantial commercial bank in terms of assets and service portfolio. In 2016, Ukraine’s central bank moved to nationalize PrivatBank to protect its 20,000 customers from the emerging economic woes.

The State Savings Bank of Ukraine or Oschadbank was set up by the government in Kyiv to facilitate foreign trade. Currently, Oschadbank is the only Ukrainian bank where accounts are fully guaranteed by the state.

Investing in stocks in Ukraine

Stock market electronic board with numbers and blue layer

You can invest in shares of companies listed at Ukraine’s PFTS Stock Exchange without having to board the next flight to Kyiv. All you need is a stable internet connection, an appropriate device, and the comfort of your home.

Keep in mind that the trading sessions last between 10 am and 5:15 pm Kyiv time (UTC +2). You can choose to invest in any of the 220 listed companies, but the total daily trade volume seldom exceeds $60 million.

According to Bloomberg, Ukraine’s PFTS benchmark index has gained 3.43% since the beginning of 2021.

Where to invest?

According to the prestigious website Investing.com, Donbasenergo and Tsentrenergo are the two strongest performers at the Ukrainian Stock Exchange since the beginning of 2021.

If you can handle some medium-risk investments, you can look for some cash-settled futures for Ukrainian wheat, as the Black Sea market has been expanding rapidly over the past few years.

Buying property in Ukraine

Land and real estate have always been a safe investment option amidst global economic turbulence Foreigners buy luxurious estates in the capital, Kyiv, and the Black Sea port of Odesa for investment and rental purposes and, more rarely, as a holiday estate for personal use.

Ukraine’s real estate market is highly fragmented, so you must first try to find a real estate agency in the area you wish to invest in. When bargaining, never underestimate the language barrier.

Try to hire a local business consultant to guide you through the negotiation process. When you spot a piece of real estate you’d like to put your money into, keep in mind that broker’s fees vary between 1% and 5% of the deal.

Hire a local attorney to carry out register checks

Keep in mind that although Ukraine’s real estate market is sufficiently regulated, you should approach any real estate deal with due diligence. You should hire a local attorney to run a standard real estate register check and a court register check. The seller’s legal capacity check and the technical inspection of the property should not be overlooked either.

Where to buy real estate in Kyiv

According to GlobalPropertyGuide, the Khreschatyk neighbourhood is the throbbing heart of Kiyv’s nightlife. If you seek peace and quiet, you can check out the posh areas of Pecherskyi and Khreschatyk.

The neighbourhoods of Kharkivskyi and Obolonskyi along the Dnieper River are full of cozy residential blocks, but keeping the mosquitos at bay can be a real challenge during the summer months.

Where to buy property in Odesa

If you are planning to let out your property Odesa for rent, you should probably look to buy one in the vibrant Primorskiy or Arkadia areas, as they are true magnets for young people from across the globe.

If you are looking for a family-type estate, you can ask your local broker to check out the properties for sale in Malinovskiy, which is full of convenience stores, supermarkets, and DIY shops.

Setting up an LLC in Ukraine

Of all ways to invest in Ukraine, this one is perhaps the most challenging. Setting up a limited liability company (LLC) in Ukraine usually is a two-stage process.

During the preparation phase, you should contact an international business consultant operating in Ukraine to draft the Articles of Association and prepare the necessary paperwork.

It usually takes just one or two days to incorporate a business entity in Ukraine, after which the owners can file for a tax number and effectively commence doing business with local contractors. The VAT application can take up to 20 days to process.

Having obtained a Ukrainian tax ID, you can now go to a local notary and apply for registration with a copy of your passport and the LLC’s Articles of Association.

Required documents to start an LLC in Ukraine

As an LLC owner in Ukraine, you are going to need a residence permit and a work permit. You always start with the work permit, and an application usually takes about 30 days to process. When you obtain your work permit, you can apply for a temporary residence permit.

The next step is to open a business bank account. This is not an arduous process and should not take longer than five days to complete.

Must-know Challenges to Investing in Ukraine

The language barrier is the first challenge that foreign investors in Ukraine must consider. You should allocate sufficient funds for translation services. The good news is that most international business consultants working in Ukraine offer translation services in their packages.

Starting a business in Ukraine is an Arduous process. There is a lot of red tape to deal with, and you are certainly going to need a reliable local operation management provider. The civil service is clumsy and you must arm yourself with patience.

It is relatively easy to take out a business loan from a local bank, but you will again need a local consultancy firm to fill in the necessary application forms for you. For now, Ukraine’s banking sector is relatively stable, and money is transferred to the borrower’s account within a week of applying.

 Bottom Line

For a foreigner, investing in Ukraine can be an excellent opportunity, as well as a serious challenge.

That is why it is highly recommended to hire a reliable provider of business consulting services.


 

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byNiv Schwartz

APAC Strategy Expert Entrepreneur, Author, Speaker, Tech-savvy with rich experience in Technology business in APAC Region. Founder & CEO of Shanghai Xinergy Global Business Consulting

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