foreign direct investment

Foreign Direct Investment or FDI is defined as, “Net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor. It is a sum of equity capital, reinvestment of earnings other than long term capital and short term capital as shown in the balance of payment.”

The volume of foreign direct investment has seen a steady but very slow upward trend since 2003. The foreign direct investment from western and other foreign countries has not reached levels which had been expected when President Yushchenko and Prime Minister Tymoshenko came into power. It was believed that the warmth and good will generated between Ukraine and Western countries, when this government came into power would have helped increase foreign, especially western FDI. The belief that foreign investors invest in a country because they feel a warmth and friendship towards that country does not hold true. Investors invest in a country where they think that they can make a profit. Also FDI in Ukraine is low as investors fear change and Ukraine is a society in transition. Investors also like certainty and hesitate to invest in countries of which they do not have much knowledge. Hence Ukraine loses out on a lot of potential FDI. Today Ukraine holds a 94 ranking in its FDI potential.

It is believed that to improve FDI statistics, the Ukrainian government has only one option and that is to sell large state companies. Also Ukraine has no real tends to promote investments and investors are disappointed with the States economy policy. The Ukrainian government has to pull its act together and bring about a policy hich will encourage FDI.

Cumulative FDI in Ukraine in the year 2006 was USD 21.186 billion and per capita FDI was USD 454.6. Thus in 2006 FDI in Ukraine grew by just USD 4.296 billion. The growth in 2006 was 45.2% less than the growth in 2005.

Investments by foreigners in Ukraine was USD 4.581 billion in 2006 and withdrawals were USD 0.553 billion.

Foreign Direct Investment came from a hundred and eighteen countries and of these, the nine main investor countries provided 85% of the total FDI invested in Ukraine economy. Some of these countries and the percentage of total FDI they invested are as follows: Germany 33.6%, Austria 8.7%, USA 8.4%, UK 7.1%, Russian Federation 4.9% and some others.                             ›› more

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