Vasil Kisil & Partners Partner Volodymyr Igonin reports ongoing reforms in Ukraine amid the challenges of war, highlighting ambitious governance reforms, particularly in the state-owned enterprise sector, and a drive to attract investment through privatization and risk-protection measures. Despite obstacles, Igonin notes that both local and foreign businesses are investing in Ukraine, reflecting a cautious optimism for the country’s economic future.
“It’s impossible to talk about Ukraine without acknowledging the impact of the ongoing Russian aggression, especially since the full-scale invasion in 2022,” Igonin begins. “Despite these challenges, Ukraine is not only resisting but also making strides in development, thanks to the unwavering support of global allies who stand with us in defense of human values. In the face of this existential challenge, effective governance has become crucial,” he goes on to say. “A significant area of reform has been the governance of state-owned enterprises. In February 2024, the Parliament voted on an ambitious legislative update. And the government is about to adopt the State Ownership Policy with auxiliary regulations to create clear operational rules for over 3,000 SOEs, aiming to implement OECD-aligned corporate governance.”
Exploring how the Ukrainian state is addressing the future of these SOEs, Igonin says that “the government is assessing all of them to determine which ones should remain in the public sector and which should be privatized or liquidated to avoid further losses. Despite the war, we’ve seen successful privatization auctions.” According to him, this signals a measure of optimism among investors. “More auctions are planned, in particular for assets formerly owned by Russian entities. So, Ukraine is open for business and willing to adapt even under challenging circumstances.”
Furthermore, Igonin stresses that the private sector has shown remarkable resilience. “Logistics were a major issue early on due to the Black Sea blockade, but our army has since reduced that threat significantly. Currently, labor force availability is a primary concern, given that many men are drafted to defend the country,” he says. “Another challenge is the potential for electricity outages, as Ukraine lost over half of its electricity generation capacity to Russian attacks. Yet, businesses – both local and foreign – continue to invest here, and we’re seeing a recovery in the M&A market,” Igonin adds. According to him, a good example of this is “the recent USD 500 million acquisition of telecom companies Lifecell and Datagroup-Volia by a consortium led by NJJ Holding.”
As far as investor protection is concerned, Igonin reports that measures are in place. “Insurance against war risks is now available. MIGA issued its first USD 9.2 million war-risk guarantee in 2023 for an investment park construction. Also, the Ukrainian Export Credit Agency offers insurance for investments in exportable production, which provides investors with more confidence amid current uncertainties,” Igonin says. Moreover, Igonin reports that the country’s military technology sector is rapidly growing. “We’re seeing joint ventures with leading global arms manufacturers and a rise in small-scale producers creating drones, equipment, and software solutions. This sector has become vital for our defense and a potential growth area for the economy.”
Finally, Igonin reports on changes in the agricultural sector. “A major milestone was achieved on January 1, 2024, when Ukrainian companies were permitted to own agricultural land – a privilege previously reserved for Ukrainian citizens. This partial land ownership liberalization has spurred internal restructurings and new transactions within the agricultural sector,” he says.