Ukraine is facing one of the biggest economic challenges in its history. According to an analysis by the Kyiv School of Economics, the war damage to infrastructure, industry and residential buildings already amounts to over 400 billion euros (as of 2023). Russia's ongoing war of aggression has severely impaired infrastructure, industry and energy supplies. The European Union is the main customer for Ukrainian exports, which further exacerbates the challenges posed by the war. At the same time, reconstruction is creating enormous economic opportunities for German companies. The ongoing attack is having a significant impact on the economic structure and energy supply. The German-Ukraine Alliance supports German companies in doing business in Ukraine, finding the right partners and conducting market analyses. In this article, we take a look at the current Locationopportunities for Investors on Ukraine as a business location, as well as the most important aspects of Ukraine as a business location.
The current economic situation in Ukraine
The Ukrainian economy has suffered massive losses as a result of the war. According to the Kyiv School of Economics the damage to infrastructure amounts to several hundred billion euros. Companies are struggling with destroyed production facilities, disrupted supply chains and a labor shortage as millions of people have fled their homes. Mobilization measures and changes in conscription regulations are making long-term personnel planning more difficult and the availability of qualified workers is being further restricted. Nevertheless, resilience is evident: the Ukrainian economy is growing slightly again, supported by international aid, Investments and adaptation strategies of companies.
Opportunities for German companies
Despite the challenges, there are numerous opportunities for German companies to participate in the reconstruction and develop long-term business. The continued interest of German companies in the Ukrainian market remains despite the difficult conditions. One example of this is the German company Siemens Energy, which continues to invest in the modernization of Ukraine's energy infrastructure despite the war and provides technologies to stabilize the power grid.
The following sectors offer particularly attractive opportunities:
- Energy supply & energy securityThe Expansion of renewable energies is a central goal in order to Dependence on Russia to reduce. German companies can score points with technologies and expertise.
- Infrastructure & ConstructionReconstruction of destroyed cities, transportation routes and industrial plants requires billions in investment.
- AgricultureUkraine is one of the most important agricultural nations in the world. Modern technologies and sustainable concepts are in demand.
- Industry & TechnologiesMany companies are modernizing their production and need modern machines, IT solutions and automation.
Challenges for companies
Despite attractive opportunities, there are also numerous challenges:
- SecurityAttacks on infrastructures are a constant risk.
- Legal and economic uncertainties: Sanctions against Russia, changing political developments and changing regulations require good preparation.
- Labor shortageMillions of Ukrainians have fled, leading to a shortage of skilled workers in some sectors.
Economic recovery and reconstruction in Ukraine as a business location
The Ukrainian economy has slowly recovered despite the challenges posed by the war. Between January and October 2024, economic output increased by 4.2% compared to the same period last year. The construction industry, manufacturing and the transportation sector in particular contributed significantly to growth. Economic players in Ukraine are optimistic that the economy will continue to grow, even if there are still many challenges ahead.
The westward shift of the economy has led to a recovery of the Ukrainian economy. Ukrainian companies have proven to be highly adaptable to the war conditions and in some cases have at least partially restored production in areas heavily affected by the fighting. This shift has also led to an increase in domestic and foreign capital investment.
In order to return to pre-war levels, the Ukrainian economy needs around 486 billion US dollars. The current spatial reorientation of production is playing an important role in the economic recovery. Ukrainian companies and entrepreneurs have adapted to this by relocating part of their production and services from the most militarily endangered regions to strategically safer areas.
IT and digitalization as a growth driver
The IT sector in Ukraine is an important growth driver for the economy. Ukraine has greatly digitized state services. The state Diya portal contains more than 100 public services that can be accessed electronically. Citizens can use the app to process many official services easily and efficiently.
The digitalization of services is spreading and also includes medical care and the military. Many private companies use IT products on a large scale. Three quarters of people saw digitalization as an important step towards improving public services.
Funding programs and support for companies
The German economy in Ukraine is extremely active. Around 2,000 companies with German capital were active in the country before the outbreak of war. Even after the Russian invasion, hardly any company has completely stopped doing business in Ukraine. Some companies are even considering expanding their capacities. The German-Ukrainian Chamber of Industry and Commerce (AHK Ukraine) supports the German economy in Ukraine.
Funding programs and support for companies are crucial to strengthening the economy in Ukraine. The German government offers various funding programs to support German companies in Ukraine. The AHK Ukraine also offers numerous services to support German companies in Ukraine. These include arranging business contacts, assistance with legal formalities and help with applying for funding from the European Union.
The role of the German-Ukraine Alliance in Ukraine as a business location
The German-Ukraine Alliance supports companies in Ukraine as a business location:
- Personnel placement for specialists and workers
- Establishing and maintaining business contacts
- Assistance with visits to the authorities and legal formalities
- Support with customs clearance and import processes
- Market analysis & data to the Economy in Ukraine
- Mediation of partners through the Ukrainian Chamber of Commerce and Industry and the AHK Ukraine
- Support in navigating legal and regulatory frameworks
- Help with applying for funding from the European Union
Conclusion: Ukraine as a business location with a future
The reconstruction of Ukraine is an enormous economic challenge, but also a huge opportunity for German companies. The World Bank estimates the enormous costs and scope of reconstruction at over 486 billion US dollars. Experts estimate that the complete reconstruction of the country will take at least one to two decades, depending on international investment and political stability. Those who plan strategically and choose the right Partner can not only achieve economic success, but also contribute to the stabilization and modernization of the country.
The German-Ukraine Alliance stands by German companies as a competent partner in order to Investments safely and efficiently in Ukraine as a business location.
