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  • Investors are ready to finance top-end projects if see insurance mechanisms working: an interview with Mykola Shevchenko, representative of private equity fund umgi

Investors are ready to finance top-end projects if see insurance mechanisms working: an interview with Mykola Shevchenko, representative of private equity fund umgi

In 2023, Ukraine’s investment climate greatly improved despite of war. While investors mainly focused on risks after the full-scale invasion, now benefits are coming to the surface.


At this stage, potential investors in Ukraine scrutinize our country’s potential and business opportunities in more detail. Some are already preparing project documents for the future implementation of their investment projects if security situation becomes more stable.

In 2023, Ukraine’s investment climate greatly improved despite of war. While investors mainly focused on risks after the full-scale invasion, now benefits are coming to the surface. Investors assess opportunities and respond to insurance mechanisms. There are already some investors who are ready to finance Ukrainian companies, especially the technology sector.

Mykola Shevchenko, Deputy Chief Investment Officer of umgi, told us about the most promising sectors of our economy.

UMGI is an investment company that establishes and develops businesses with high growth potential. The company focuses on investments in the green economy, mining, industrial goods, logistics, and other promising sectors in Ukraine and many other countries around the world.

How do you assess the investment climate in Ukraine at the time of war? Is there any positive dynamics?

Regarding the investment climate. Of course, there are number of challenges, including military operations and serious limitations in the logistical capabilities because of attacks, which affect investment projects. However, some positive changes can be noted. In particular, Ukraine has got the status of a candidate for accession to the European Union. This, of course, is not a specific membership deadline, but it fuels optimism, as it is expected that Ukraine may join the EU in the future. Now we have almost free trade with the European Union. This is also understood as a positive factor, as the abolition of duties and quotas makes Ukraine an attractive investment destination. In addition, there is a visa-free regime for transportation of goods, and new projects are being actively developed, in particular, transport logistics routes and infrastructure that facilitates trade. Ukraine has recently been included in the list of countries a hydrogen corridor can go through. This opens up additional opportunities for hydrogen production and storage in Ukraine. We also have large gas storage facilities that can be used for hydrogen storage. The hydrogen trade infrastructure is also developed, which promotes interest of investors in the future.

Who is ready to invest in Ukraine now?

Of course, investors from international organizations will be ready to invest, even in times of war. We see how active is the European Bank for Reconstruction and Development (EBRD) and other financial sponsors that have quasi-public funds under their management. That is, these are not fully private funds, but rather political investments and capital aimed at supporting Ukraine. I believe that they will invest regardless of circumstances of the war. However, it should be noted that such projects are large and long-term, and at this stage, the main focus is on developing project documents. In this context, the war does not prevent further improvement of the regulatory framework and project development.

One of the main factors that deterred foreign investors from investing in Ukraine was the lack of insurance against the war risks. Now, global companies are ready to do it, and there are relevant legislative implementations. Will it improve the situation and how?

This issue used to be quite relevant, but now parties have moved on to implementation. There are organizations, including private insurance companies, that cover war risks. In addition, the Verkhovna Rada adopted draft law No. 9015, which allows the Export Credit Agency to insure all military risks. These mechanisms have already been used and all risks associated with investments and construction of new production facilities are being actively studied. With certain reservations, all investors who want to invest in Ukraine and build something will have access to effective mechanisms and guarantees. In other words, there will be a state export credit agency that will be able to insure these risks, as well as international insurance companies. This will apply not only to foreign investments but also to Ukrainian investors. As far as I know, this draft law provides for insurance not only for the risks of foreign companies, but also for Ukrainian ones. This means that investments in new production facilities will be insured. Such projects are being developed even during military operations. At this stage, we can call them pilot projects, but in the future, it is expected to become much larger. We can say that this is an absolutely normal and working option.

Which regions in Ukraine are currently the most investment-attractive and which investment area is the most popular? What sectors can you invest in profitably?

Of course, many investors are considering remote areas. Let’s say, locating fat away from the main hostilities. And this contributes to the fact that many businesses that are very close to the war zone are attacked not only by long-range missiles or drones, but also by rocket artillery. Naturally, they are moving their sites to the west of the country to reduce risks and optimize logistics routes. That is, to be closer to the western border. That is why the western regions are quite popular. But in principle, I think that traditional industrial regions are still of interest. Because there is a certain infrastructure, traditions, and a number of professionals and specialists. That is, not everything can be relocated, including the labor force. Therefore, we also pay attention to this. Most likely, there will be many relocations of investments and production to the west of Ukraine. Of course, the first reaction of investors was to move as far away as possible, so that at least the chances of missiles or drones hitting were less. As for the sectors. I think that different types of processing will be interesting. This applies to both food and other productions, including those related to packaging and various other industries. Of course, traditional areas remain important, perhaps those related to electronics and the military-industrial complex. These areas also attract investors, as Ukraine, unfortunately, has become a large testing ground for everything that has significant potential. Of course, we should not ignore traditional industries that are of great interest to investors, such as information technology (IT). Nowadays, this sector is not tied to a specific region, but rather depends on availability of qualified specialists. Investment attractiveness of this sector is growing, and more product companies are emerging. Previously, most companies focused on providing services abroad, but now more and more companies are becoming product developers. This also attracts investors, as this business can grow rapidly and provide opportunities for rapid capitalization growth.

Your company invests in the green economy, mining, manufacturing of industrial goods, logistics, etc. How profitable is it in Ukraine, in which regions? Could you tell us in more detail?

There is no such strict focus in terms of geography. We have investments in central Ukraine, in western Ukraine, and investments in Donetsk region. We still have our businesses that have not been occupied and, despite the difficult times, are still trying to work. In terms of sectors, we are actively developing what is called the green economy. We have a business line related to the processing of various waste, materials and gases. One example of this in Donetsk region is the production of electricity from coalmine methane. We have turned the gas that was traditionally dangerous for miners into a part of our business and investments, including its utilization. When electricity was interrupted during enemy strikes, all the facilities that generate electricity from coalmine methane showed good results. At the beginning of the full-scale invasion, our company launched three projects in this area, and one relocation took place.

Will you please say something about the green economy separately. Is this industry only gaining momentum in Ukraine? What are its benefits?

The green economy is not a question of profitability. This is a trend that is fundamentally laid down in the European Union and around the world. And various international financial organizations invest into this. An issue that is quite important for society. And in many Western countries, the mechanism of emissions trading has worked very well. This is also part of a compensation mechanism for investors, because they make money on it. Accordingly, we see prospects in Ukraine. The industry is just emerging. Although this has been discussed for a long time, we hope that it will reach a normal commercial level. Businesses see that it is not only beneficial for society as a whole, but also has good prospects as well in terms of profitability. An example of our investment is in the processing of various waste products from meat production. These are Ukrainian products. Previously, many companies simply buried all animal remains, which created risks and other problems for the environment and human health. Now it is all processed at a modern plant into fats and protein for pet food. Accordingly, the problem of utilizing and reducing emissions of harmful substances is being solved. At the same time, this is a fairly profitable business. We see that there is interest and support from various European players in financing such projects.

What are our attractive industries compared to other countries?

In fact, the investment market is quite competitive. We have many neighbors in Central and Eastern Europe who are also competing for investments. Therefore, it is not easy to single out any specific industries that are better than others. Well, of course, agriculture remains more powerful than in some other Central and Eastern European countries. Yes, but agriculture faces some challenges in the war time because logistics routes are cut off, supplies are limited, and costs are very high. Therefore, foreign investors are probably less interested in agriculture than they were before the war. Although, now agriculture is more interesting due to processing of various products. Take for example eggs production. It is a concentrated protein that is based on agricultural production and is converted into a concentrated form. Therefore, it would be less profitable to export tons of grain than to export hundreds of kilograms of dried products. Perhaps Ukraine could export some types of starch or other types of agro-processed products.

What are your forecasts for investments in Ukraine?

Of course, investors are quite cautious about investing in a country that is at war. Many understand that Ukraine needs support, but many of them also say that we are now investing our time and energy to better understand the potential of Ukraine and its business opportunities. However, the investments will be made after the fighting stops. This is the main position of most investors. But there are some investors who are ready to invest in Ukrainian companies, especially in the technology sector. Perhaps, companies that use intellectual resources are less likely to be affected by the destruction. Such investors are ready to provide financial support despite the war. In principle, there are investors who are ready to finance top-end projects, especially when see that insurance mechanisms are working. However, most investors will wait for cessation of hostilities. The role of support from international organizations, financial sponsors, and investors who have been investing in Ukraine for a long time and understand what is happening here in terms of the investment climate and political support from our allies is very important.

Source: PaySpace Magazine