Ukrainian emphasis on the export of processed products: forecasts, options and realities

Yuliya Svyridenko, the First Deputy Prime Minister of Ukraine and head of the Ministry of Economy, emphasized on the air of the National Television Marathon that in the conditions of limited logistical possibilities, it is important for the country to export goods that physically occupy a smaller area, but have added value. Therefore, the state should focus on increasing the export of processed products, because exports for Ukraine are oxygen, which generates foreign exchange earnings, and therefore increases the state's income.

"Today, the main export positions remain grain crops, ore and oil, which we will continue to export. At the same time, we use additional tools to expand our export potential. The "5-7-9" program, which is also aimed at farmers, provides an opportunity to take loans of up to UAH 1 million under state guarantees. There is also a program of affordable financing through loan insurance by the Export Credit Agency. It is important that the EKA program is aimed at non-raw material exports," the Ministry quotes Yulia Svyridenko as saying.

According to the report, banks have provided a total of UAH 221 million in loans under the mentioned program. In particular, since June, 29 exporters have been financed, and 36 loans have been granted. This contributed to the realization of more than 3 billion UAH of new, especially non-raw materials exports.

During the same speech, the Minister emphasized that the Government is doing everything to interest potential investors in participating in the reconstruction and development of Ukraine. Currently, through the special platform Advantage Ukraine, foreign investors can already take preparatory steps, choosing areas of interest to them: IT technologies, Military-tech, agriculture, etc. According to Yulia Svyridenko, this potential interest must be turned into concrete projects. For this purpose, the Government is looking for opportunities to insure such investments. It is known that the MIGA agency, which is part of the World Bank, has already agreed to insure military risks for Ukrainian and international companies that will invest in Ukraine today, in particular in the agro-industry.

It is worth noting that, despite the significant losses of the Ukrainian agricultural sector due to the aggression of the Russian Federation, Ukraine retains a significant export potential in the agricultural sector. Yulia Svyridenko made such a statement in an interview with CNN.

"Over the course of 11 months of the current year, Ukraine exported 50.9 million tons of agricultural and food industry products worth $21.1 billion. In terms of volume, it is 16.7% less, and in value - 13.7% less than in 11 months of last year," she said.

According to the Ministry of Economy, despite the loss of the agricultural sector of Ukraine, among the products of the agro-industrial complex and the food industry, the most exported were corn ($5.3 billion), wheat ($2.3 billion), sunflower oil ($5 billion), and meal from vegetable fats and oils ($671.2 million).

It should be noted that, according to the report prepared by the KSE Institute together with the Ministry of Agrarian Policy and Food, losses (that is, direct losses) of the agricultural sector reached $6.6 billion, and indirect losses - $34.25 billion. Obviously, this is precisely why for the recovery of the Ukrainian economy and , in particular, the agricultural sector, necessary changes in the emphasis of production and export, as well as a favorable investment climate.

It should be noted that foreign asset managers are already beginning to take the first steps towards investing in the recovery of Ukraine, potentially providing the necessary financing to restore the country's destroyed infrastructure and economy. After all, as noted in the Financial Times article, the recovery of the Ukrainian economy, according to estimates by the World Bank and the European Commission, may cost about $349 billion. Currently, some investors are already considering potential investments both in Ukraine itself and in companies in Europe that are potential suppliers necessary materials and equipment, especially after Russia increased attacks on Ukrainian energy infrastructure.

"Under such tragic circumstances, it can be difficult to think about investment opportunities, but for active investors, a positive outcome of the war will open up many opportunities ... we would like to act as soon as possible, rather than later," said Alexandra Morris, investment director of Skagen Funds.

By the way, recently, during a speech at the Ukrainian Infrastructure Forum in London, Deputy Minister of Economy of Ukraine Oleksandr Hryban emphasized that for investors, Ukraine "will become one of the best in the world in terms of opportunities."

At the same event, a number of investors have already announced that they are actively studying the possibility of investing in companies in Ukraine and neighboring countries.

In addition, CrossBoundary, an investment manager and consulting firm specializing in emerging markets, is known to be working with four investment management teams to create Ukraine-focused debt and equity funds. In particular, one multi-sector fund focused on small and medium-sized enterprises aims to raise $40 million at the initial stage, but can be increased to $250 million.

"It could be like a push," said Scott Richards, head of CrossBoundary's advisory division in Eastern Europe.

According to him, it is noticeable, noticeable, "...how the interest of investors gathers momentum with Ukrainian military successes, and then stops or retreats with a significant increase in Russian attacks on infrastructure." That is why he personally expects that "investors will manage risks, first targeting investments in Western Ukraine, and then moving to the "Center or East".

However, major financial institutions are likely to be wary of investing until the hostilities cease. In addition, concerns about corruption and the effective rule of law may prove to be another obstacle. After all, in 2021, Ukraine ranked 122nd out of 180 countries according to Transparency International's corruption perception index, and its judicial system is constantly facing accusations of imperfection and inconsistency.

 
Therefore, according to investors, there is a lot of work ahead in Ukraine. In particular, Richard Deitz, president and chief investment officer of VR Capital Group, an asset management firm specializing in emerging markets, noted: “The question is what happens the day after the war, will we have the rule of law or more specific control over the business? Investors should be convinced that political risks will approach European norms."

In this regard, the previously mentioned Yulia Svyridenko has already emphasized that the country plans to provide investors with the opportunity to work under English commercial law, in order to remove any concern about the country's judicial system.

Thus, if all the planned measures are implemented, investors will not have any obstacles and, hopefully, doubts about business in Ukraine.