Ukraine is among the top 3 attractive countries for investment despite the war that has been going on for almost three years.
Eastern Europe is becoming increasingly attractive for German business. More and more companies from Germany are already investing or planning to invest in the region in the near future. Not least of all, this includes Ukraine.
Deutsche Welle writes about this.
“They [German entrepreneurs – ed.] consider Poland, Romania and Ukraine to be the most attractive countries for investment, followed by Hungary and the Czech Republic. A significant portion of the projects planned for the Ukrainian market will be implemented this year, despite ongoing Russian aggression,” the article says.
Transfer of production to Eastern Europe
The trend of transferring production to Eastern European countries is confirmed by a survey conducted by the international consulting company KPMG and the “Eastern Committee of German Economy”, in which 133 companies operating in this region participated.
More than half of them (55%) believe that the importance of Eastern European countries for their business will increase by the end of the decade. At the same time, only 7% are skeptical.
Regarding investments in Eastern Europe, 42% of respondents reported that they have already budgeted for the creation, expansion or relocation of production to Eastern Europe in 2025, and 56% plan to do so in the next 5 years.
“The well-known problems with the investment climate in Germany are forcing local companies to move their production abroad. The preferred destination is Central and Eastern Europe. German businesses have already made large-scale investments there, are well acquainted with local conditions and at the same time remain close to their home country,” explained KPMG representative Andreas Gluntz.
According to respondents, this region is attractive due to high domestic demand and qualified personnel. At the same time, low labor costs were only the third most important reason.
What attracts investors to Ukraine
The most unexpected result of the survey is the high interest in investing in Ukraine, despite the ongoing war.
“It is especially noteworthy that Ukraine took third place among the most attractive countries for investment. This speaks to the great economic potential of this country,” said Michael Harms, Executive Director of the Eastern Committee of German Economy.
Of the 133 companies surveyed, every fifth (21%) is already an investor in the Ukrainian economy, and slightly more than a third (35%) plan to invest by the end of this year.
At the same time, 41% of companies plan to invest in the Ukrainian economy in the next five years, as they expect its accelerated accession to the EU. This is almost the same number of companies as are planning investments in Romania, and significantly more than in Hungary (35%), the Czech Republic (31%) and Bulgaria (22%).
“Despite the ongoing war, more and more international and German companies are investing in Ukraine. This country has the potential to become an energy hub for the European Union, become an alternative production site and play a significant role for European companies in areas such as IT and outsourcing,” said Nikolai Kiskalt, head of the Central and Eastern Europe department at the German office of KPMG.
At the same time, two-thirds of German businessmen (67%) named political risks and lack of security as the main obstacles to investment in the region as a whole. At the same time, corruption and bureaucracy are much less of a concern for entrepreneurs – only 38% and 31% of respondents, respectively, consider them a problem.
Recall that America and Europe are interested in Ukraine's victory and its achievement of long-term economic success. Former US Secretary of State Mike Pompeo, who now sits on the board of directors of global telecom operator VEON and its Ukrainian asset Kyivstar, believes that Ukraine's Western allies should help it win the war and support economic recovery and growth with strong investments.
