"Investing in Ukraine is essential; we have great potential for development": Yevhen Savchenko on investing during wartime

17.10.2024

Yevhen Savchenko, Director of the Investment and Development Department at TERWIN Group

Yevhen Savchenko, Director of the Investment and Development Department at TERWIN Group, shared his thoughts on the prospects, opportunities, and challenges related to investing in Ukraine during wartime.

Ukraine is a land of opportunities. Despite the military risks and economic challenges, now is the time to invest in the country. The crisis opens up unique opportunities for capital investment, but investors must be prepared for the new realities to turn risks into growth opportunities.

On the Impact of the War on Ukraine’s Investment Climate

Investing in Ukraine right now is a risk that requires determination and readiness to face today's challenges. However, this risk can become an opportunity for those who understand the country’s potential.

The war has undeniably altered Ukraine’s investment climate. First and foremost, there is a labor shortage, as many qualified workers have either gone abroad or been mobilized. Attracting and training new specialists affects the efficiency of businesses.

When making investment decisions, one must consider military risks, such as the outflow of intellectual capital, constant threats of missile strikes, and power supply disruptions. Nevertheless, many investors still see Ukraine as a promising area for development due to its strategic location at the crossroads of transport routes between Europe and Asia. We still have specialists in various fields, including IT and engineering, a reform-minded government, and international support.

Companies already operating in the Ukrainian market continue to invest. They believe in victory and understand that investments are needed for the country’s development.

On Obstacles to Investment

One of the main obstacles remains corruption, which, despite reforms, is still a significant barrier to business development in Ukraine and negatively affects investor confidence. Investors fear that government actions may hinder project development and diminish their investments. Additionally, state regulation of processes is another barrier.

However, the system is gradually improving—government oversight and new agencies monitor financial flows and their use. Businesses now have protection tools, such as courts or media support, if the state makes unjustified tax demands.

Other challenges include:

• Political changes that may affect legislation and the regulatory environment, creating additional hurdles for investors.
• Economic instability, including currency fluctuations, inflation, and a drop in GDP.
• Legal uncertainty stemming from an imperfect judicial system, which may hinder contract enforcement and property rights protection.
• The war has also exacerbated infrastructure issues—damaged infrastructure complicates logistics and increases business costs.

On Risk Insurance

Several international institutions, such as DFC and MIGA, currently provide insurance for war-related risks.

We are collaborating with the IMF, World Bank, and EBRD to provide financial assistance and support reforms. European companies offer grant programs to our country. Additionally, there are international programs that encourage investors to invest in Ukraine through donor companies that finance us. These primarily fund the energy and agricultural sectors. However, at recent forums and the Ukraine Recovery Conference 2024 in Berlin, it was emphasized that other businesses requiring support will also receive donor assistance from Europe and America in the future.

Ukraine is implementing state guarantee mechanisms for foreign investors, launching infrastructure recovery programs, improving logistics, and offering credit and tax incentives to attract investment in priority sectors.

On Changing Investment Approaches in Ukrainian Business

Before the war, investments in Ukraine were made through state companies, with investors contributing billions. During the war, money mainly entered through the state. Investors did not withdraw their funds from Ukraine due to the National Bank's restrictions, so all the funds that remained in the country were reinvested and retained here.

During the war, investors acted cautiously, but now we are seeing improvements. The National Bank has allowed certain business categories to withdraw capital and dividends, which has improved the situation. These changes allow investors to feel more confident and understand that there are positive shifts on the economic front.

On the Investment Market in Ukraine

Many investors have established companies in Ukraine, mostly to analyze the market. They are observing the situation and waiting for some stability before acting. However, this could be too late. A more stable investment climate will change the approach to capital investment. During a crisis, conditions are more favorable, and one can enter any project at a much better deal. In stable times, conditions will be market-driven. Ukraine needs decisive action and risk-taking from investors now; otherwise, the country’s economic front may fall behind.

On WINHUB

WINHUB is the most ambitious project we have developed, and we believe it is extremely interesting for both us and investors. We began cooperating with the Ministry of Economy and UkraineInvest. They expressed interest in the project and invited us to present it at URC2024 in Berlin.

WINHUB envisions the construction of 1,000,000 m² of Class A warehouse complexes in four Ukrainian cities: Kyiv, Lviv, Odesa, and Dnipro. These are strategic locations with well-developed transport infrastructure, providing easy access to major markets in Ukraine and Europe.

The project will utilize the latest technologies for heating and electricity, a full cycle of waste processing and recycling, and the installation of electric vehicle charging stations. This enhances the energy efficiency and sustainability of the logistics centers.

The total project cost is approximately $700 million. We plan to attract $500 million in partner investments, while the remaining $200 million will be covered by our funds. It is one of the largest logistics projects.

On the Attractiveness of WINHUB for Investment

The project is a crucial part of Ukraine’s logistical and energy-efficient recovery after the war. Our potential tenants include major FMCG retailers, 3PL operators, e-commerce companies, and construction firms, ensuring a stable revenue stream and reducing the risk of under-occupancy.

Comprehensive services: WINHUB will include a full range of infrastructure for work and leisure, such as vehicle maintenance stations, hostels, restaurants, cafes, and staff recreation areas.

Phased construction: The project will be implemented in three phases from 2025 to 2030, allowing it to adapt to market conditions and tenant demand. This reduces financial risks and provides flexibility in execution.

Investing in Ukraine is necessary; we have great potential for development. Business must not stand still, and investments must work. While risks exist, they can be mitigated and factored into expectations, neutralized, and turned into opportunities for growth.