Factors and obstaclesof foreign direct investment inflows into the economy of

UkraineBy Pavlyna Kulish

Scientific supervisor Doctor of Economics, Professor Zadoia A. A. Language consultant Candidate of Science, Lecturer Kramarenko T.V.

Table of contents1. Theoretical and methodological approaches of the international

capital flows research.

2. The condition and prospects of foreign direct investment inflow development in Ukraine.

3. The ways of foreign direct investment inflow increase into the economy of Dnipropetrovsk region.

4. The conditions of labour protection and safety in emergency situations in the workplace of an expert on international economics.

Factors and obstaclesof foreign direct investment inflows into

the economy of Ukraine• The purpose of the diploma work is to examine the factors and

obstacles of FDI inflows into the economy of Ukraine taking Dnipropetrovsk region as an example and to devise the guidelines of FDI inflow increase.

• The object of the investigation is the process of FDI attraction into the economy of Ukraine on the whole and into the economy of Dnipropetrovsk region in particular.

• The subject of the investigation is the scope of FDI inflow into Ukraine from the point of view of industrial and regional structure; as well as factors and obstacles of FDI inflow into the economy of Dnipropetrovsk region and the possible ways of involved capital increase.

Factors and obstaclesof foreign direct investment inflows into

the economy of Ukraine• Foreign direct investment is a long-term international investment, placed by

foreign investors in foreign assets in different sectors of the economy for the purpose of production development, social services, business and future profits.

• The country or region investment climate is the totality of political, social, economic, financial, cultural, legal and geographic factors, which are, simultaneously, the combination of investment attractiveness and investment activities and which form the effective demand for investment.

• The factors which form the country’s investment climate:the political background, the legal environment, macroeconomic factors, the tax system, the regulatory impact.

Factors and obstaclesof foreign direct investment inflows into

the economy of Ukraine

Fig. 1. The volume of global FDI between 1993 and 2013

Fig. 2. FDI in Ukraine for the period from 2005 to 2013

Fig. 3. The dynamics of the index of investment attractiveness of Ukraine

FDI into the economy of Ukraine dating to 04/01/2013 (percentage)

The most “generous” investors

The most investment-attractive branches

The most investment attractive regions

• Cyprus (32.7%)• Germany (10.8%)• the Netherlands

(9.6%)• Russia (7.4%)• Austria (5.6 %)• United Kingdom

(4.7%)• Virgin Islands (4%)

• industry (31.5%)• finance (29.6%)• real estate, renting

and business activities (16.6 %)

• trade, motor vehicles service and household goods for personal use (11%)

• Kyiv (57%)• Dnipropetrovsk

region (18%)• Donetsk region (6%)• Kharkiv region (5%)• Kiev region (4%)• Lviv region (4%)• Odessa region (3%)

A significant imbalance in international investment attractiveness by sectors

A similar disparity in attracting foreign investment in the regions

Priority investment attraction

Dnipropetrovsk region

Strengths Weaknesses The favourable geographical lacation Substantial mineral resources Proximity to raw materials Favourable climate for farming Developed industry (mining and

metallurgical industry, coal, engineering, space)

Availability of high-skilled labor force

Significant level of wear and tear and municipal infrastructure

Deficiency of available financial resources Low diversification, high dependence of

region’s economy on heavy industry Low level of implementation of IT

technologies Outdated technology, low economical

innovationOpportunities Threats

The presence of domestic demand Implementation of international

cooperation programs Adoption of new legislation

“Export-oriented activity” of all region The growth of the shadow economy The outflow of people Lack of scientific potential support

programs Increase in the cost of energy resources

The ways of FDI inflow increaseinto the economy of Dnipropetrovsk

region

To use attracted foreign direct investment as a source of financing already existing industrial park in Dnipropetrovsk “Mashinobudіvnі texnologії (the example of the industrial park functioning in Kharkiv).

To pay more attention to the brand of Dnipropetrovsk region (the experience of Lviv).

To create in a unified permitting center in Dnipropetrovsk region (the project of Kharkiv «Edine vіkno»).

The ways of FDI inflow increaseinto the economy of Dnipropetrovsk

region

The imposition of preferential tax treatment for long-term lease of land in Dnipropetrovsk region for foreign investors:

• 1 hectare, 1 mil. UAH, 10% land tax rate• initial contributions ― 100 000 UAH• 50% discount 50 000 UAH (local budget deficiency per year)• 15 % ( payroll fund) 333 000 UAH (per year) 27 800 (per

month)• 8 people 3 000 UAH

A creation of specialized electronic resource, which would contain all the necessary information about the possibilities of FDI in Dnipropetrovsk region.

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