26 октября 2005

    The Ukrainian Journal of Business Law

    The risk to lose the invested funds, unforeseeable blocking of construction works, sudden alterations of the provisions of the taxation legislation, bureaucratic barriers (altogether called an "unfavorable investment climate") have become the prerequisites for the reduction of the direct foreign investments to Ukraine by almost a half as compared to the same period of the previous year.

    The interpretation of the legislation is quite often subject to the opinions of local and national authorities, the judicial authorities are often "instable" in the settlement of investment disputes. These all generates natural apprehension of foreign and domestic investors for the safety of the invested funds.

    Re-privatization processes do not fully provide for the interests of foreign capital in Ukraine, because the investors have a lack of confidence that the state, having deprived the business once, will not do it again but now from the investor itself. Furthermore, the growth in the volume of the direct foreign investment does not always imply the quality of them. Privatization of large strategic and attractive enterprises, entry into the WTO, that are the main directions of the Ukrainian governmental activities, can cause the significant economical and, as a consequence, political dependency of Ukraine on foreign investors.

    In this situation, as a good example can be viewed the foreign investments attraction model, implemented in the countries of the Eastern Asia. This model provides for the attraction of the foreign capital together with the strengthening of the national capital, which is capable on equal terms to compete and cooperate with the foreign one.

    But still, in order to implement the same model in Ukraine, for the first place it is necessary to overcome the major problem - non-adherence by the state to its obligations in relation to domestic and foreign investors.