Lack of trust in judiciary is major obstacle to foreign investment in Ukraine- business survey
Mistrust in the judiciary has led the anti-rating of barriers to foreign investment, while the "leader" of previous years - corruption – has taken the second place, according to the results of an annual survey of foreign investors conducted by the European Business Association (EBA), Dragon Capital and the Center for Economic Strategy (CES).
"The lack of trust in judiciary was named the main obstacle to foreign investment for the first time in five years, while widespread corruption, the previous leader, moved to second place. The same obstacles were named by both portfolio and direct investors," EBA said in a release on Monday based on the October 2020 survey.
The EBA pointed out that among the biggest obstacles investors named the monopolization of markets and the seizure of power by oligarchs, and strategic investors, in particular, pointed to complex and unstable legislation.
"The investor community is resilient to a potential new coronavirus lockdown. 47% of the strategic investors already working in Ukraine think that a repeat lockdown will not affect their investment plans, while 27% would reduce or stop investments," the EBA said.
At the same time, 48% of foreign investors think that Ukraine became less attractive for investment, 42% consider the investment climate largely unchanged, and only 9% see improvements, the EBA said.
An effective fight against corruption will have the most favorable impact on the investment climate, both strategic and portfolio investors believe. Restarting the judiciary and the appointment of reputable reformers to key positions will also be important factors, according to the survey.
"Debt default is considered the top threat to the investment climate, followed by a shift away from democratic values and change in geopolitical direction from west to east. Strategic investors also view loose economic policies as an important negative factor, while portfolio investors would negatively react to failure to reach an agreement with the IMF on the next loan tranche," the European Business Association said.
Portfolio investors point to the failure to reach an agreement with the IMF with a significant threat after the default, the association added.