New foreign investors are afraid to invest in Ukrainian business - deputy business ombudsman

Risks associated with military aggression discourage foreign investors from investing in Ukrainian business. The lack of appropriate procedures for transparency and disclosure of business information also adds to their fears. This opinion was expressed by the deputy business ombudsman, Tetyana Korotka, in an exclusive commentary to UNN.

After a certain lull on the front, we have shelling again and this cannot but affect (the investment climate - ed.). Even if there were some optimistic forecasts that we have safe areas where we could invest more confidently and somehow develop - of course, the shelling of infrastructure, civilian infrastructure is quite massive in the western part of Ukraine - they still affected the risk assessment, of course

Despite this, according to her, some strategic investors are entering Ukraine, particularly in construction, manufacturing and processing. The latest example is French investments in the telecommunications market. "So we cannot say that nothing is happening at all, that would be wrong. But to say that the situation has improved a lot is difficult, at least for me from my subjective point of view," Korotka clarified.

In business, she said, parties need to understand who they are dealing with, because it's a matter of business culture in general.

Korotska explained that foreign investors, who are interested in Ukrainian markets for the first time, are afraid of local businesses. Even those that are stable and decent, "because they are like a black box - it is not clear what is inside, because there are no proper procedures for transparency and information disclosure," the deputy business ombudsman said.

At the same time, in her opinion, foreign investors do not feel protected by the state either. "In this sense, all these shortcomings and all the problems we have with occasional improper tax administration, occasional pressure from law enforcement agencies - foreign investors are not in some privileged state, they also have problems," Korotka explained.

She also recalled that a wave of business discontent has risen in Ukraine, including on the investment situation.

The private sector is under severe military conditions, just like the whole state is -  it's part of society. And therefore, when the state acts as if there is no war and there is no this external pressure factor - this psychological and operational pressure and comes with its standard bad practices - usually the business society reacts very sharply. You need to understand this and work with it

High-profile corporate conflicts do not contribute to this either. Investment disputes, such as the conflict around the Olympex terminal, do not improve the situation.

Recall

The GNT Group, owned by businessmen Serhiy  Groza and Volodymyr Naumenko, received investment loans from two US funds in 2019 and 2021 to develop the Olympex grain terminal in Odessa, which it owned at the time. These companies Groza and Naumenko, according to media reports, were actively cooperating with the company of sub-sanctioned smuggler Vadim Alperin, who was stripped of his Ukrainian citizenship.

Having decided not to return the funds to creditors, Groza and Naumenko took out loans in Ukrainian banks Vostok and Pivdenniy against the property of the grain terminal, which was already pledged to the Americans. 

Through an uncomplicated scheme using controlled companies and Ukrainian banks, they resold the property of Olympex several times, trying to retain control over the terminal in this way.

Ukrainian law enforcers have launched several criminal cases in connection with the situation around Olimpex. For instance, one of Naumenko and Groza's companies was accused of gray export of grain stored at the terminal.

And creditors, in turn, in international arbitrations demand the return of their funds and quite successfully. In particular, English arbitration decided to freeze Groza's and Naumenko's assets worldwide.

More details about the conflict around the grain terminal Olympex can be read in the material: "Groza and Naumenko's company GNT Group blocked the work of the grain terminal in Odessa. Detailed chronology of the conflict". https://unn.ua/ru/news/kompaniya-grozi-i-naumenko-gnt-group-zablokirovala-rabotu-zernovogo-terminala-v-odesse-detalnaya-khronologiya-konflikta