By Murad Rakhimov | 2024-08-29

KYIV -- Despite more than two years of war, Ukraine continues to attract foreign entrepreneurs in what analysts say is a sign of trust in the future of the country.

Citizens of 101 countries have started 3,075 companies in Ukraine from March 2022 through July 2024, according to the Opendatabot platform.

Turkish citizens account for the most foreign-owned businesses in Ukraine with 396 companies, or almost 13% of the total companies started, followed by Uzbek citizens (312 businesses, over 10% of the total), and Polish citizens (224 businesses, 7.3% of the total), Opendatabot reported August 12.

US citizens have started 7% of new foreign businesses in Ukraine, while Kazakh citizens round out the top five with 5.2% of the total.

The largest concentration of companies with foreign owners -- over 30% -- is involved in wholesaling, about 7% are real estate companies and almost 6% are computer programming companies.

ТЕНС1МА, owned by an Armenian, is the biggest business started by a foreigner since February 24, 2022: it has 1.28 billion UAH (more than $31 million) in authorized capital.

A sign of trust

Kyiv is the most attractive business destination for foreigners, with nearly half of all foreign-owned companies -- 1,517 -- registered there.

Meruert Makhmutova, director of the Public Policy Research Center in Almaty, Kazakhstan, said this is a sign of trust in the Ukrainian government.

"Kyiv has been able to preserve a favorable investment climate even though the war is in its third year," she told Kontur.

"This is a tribute to the Ukrainians' resilience in the face of the aggressor and shows faith that their country will remain standing in this war and will win," she said. "Then these investors will take part in Ukraine's postwar reconstruction."

Talai Sary, a 49-year-old entrepreneur, moved from Kyrgyzstan to Kyiv in 2005. He imports and exports a range of goods, primarily in the construction industry.

"For the most part life is continuing in Kyiv ... even though it's true that when the warning sirens go off, people are afraid," he told Kontur. "On the other hand, people have already gotten used to living with that."

His sales are about 15% to 20% of what they were before the war, but he said he expects to see healthy growth when the war ends.

Another Kyrgyz, Adil Turdukulov, a journalist from Bishkek, said he found this news somewhat unexpected but entirely logical.

"Many entrepreneurs from the Central Asian countries, Uzbeks, Tajiks, truly understand the long-term prospects of Ukraine's accession to the EU [European Union] and what that can offer for their business," he told Kontur.

At the same time, Russia is driving out Central Asians with onerous document checks and legal restrictions, he said.

Ukraine thus has become an alternative: it is a place with a similar mentality, and a Russian-speaker can conduct business there.

Investing in military

For obvious reasons, the military technology industry is attracting investment money. It is a crucial new segment of the economy, and its role will grow.

Serhiy Fursa of Kyiv, an investment banker and economist, said that major investors are nevertheless waiting for the war to end.

"No one is making large-scale investments in Ukraine's economy," he told Kontur. "There are sole proprietorships and small businesses. This is probably an indicator of migration to Ukraine from Uzbekistan now amid an acute worker shortage."

The military sector is attractive for investment but because of its distinctive character, it can draw only a limited group of investors, he said.

RBC Ukraine has reported that the military technology industry is actively courting investments.

"Every month we receive teasers and requests for $500,000 to $2 million in investment," Artem Shcherbyna, chief investment officer and director of research and development at Capital Times, an investment company, told RBC Ukraine in March.

"This is a noteworthy, expanding and vital new segment of the economy," he said. "Its role will grow. We expect that in 2024-2025 we could see $10 million contracts come about in the industry, and in particular with bringing in investments from leading foreign defense firms."

There is considerable promise for dual-purpose goods like drones and navigation systems, which are now needed on the front but could be used in the future in civilian industries such as agriculture.

The business community has stepped up its investment in food processing, machine building and woodworking. But after the war, the three leading industries may be information technology (IT), construction and agricultural technologies, Shcherbyna said.

New investment opportunities

Ukraine is an attractive investment site in the long term because damaged infrastructure will need to be rebuilt, creating new opportunities not only for the construction industry but also for suppliers, architects and others, analysts say.

"The prospect of EU membership is making Ukraine attractive for the production of goods and services that will be in demand in the EU," Tymofiy Mylovanov, president of the Kyiv School of Economics, told RBC Ukraine in March. "That applies to the energy sector, production of critical materials, certain segments of the food industry, furniture and the IT sector."

Despite the wartime conditions, the many efforts by the business community, state and public confirm Ukraine's steadfastness and resolve to overcome this challenging period.

"Ukraine has held firm in the crisis caused by the Russian aggression and is unequivocally demonstrating the will and enthusiasm to improve and shore up its activities in manufacturing, exports and creation of new investment opportunities," Svitlana Shcherbatyuk, an executive at KPMG in Ukraine, told RBC Ukraine.

The main driver of desire to invest in Ukraine is the abundant financial resources allocated to Ukraine during the war, said Alisher Ilkhamov, director of London-based Central Asia Due Diligence.

"The West has allocated $380 billion to Ukraine, including $260 billion as economic aid," he told Kontur. "That creates significant demand along the service and supply chain since these resources are being injected into the country's economy."

Large Western companies are investing in Ukraine, especially in the metallurgy, energy, food and pharmaceutical industries, to name a few, consequently creating demand for supplies and services, he said.

"Turkish and Uzbek businesses clearly found their niche in this situation since this is strengthening ties between our countries," Ilkhamov said.