The following Op-Ed has not been authored by a securities salesperson or broker, and should not be viewed or construed as instruction in finance (personal or otherwise), financial planning advice of any kind, or equities markets investing advice of any kind.
Ukraine is the epitome of a contrarian's candidate for foreign investment. I have been following politics and business in Ukraine, the country of my birth, over the last few years. Albeit omitted from U.S. media coverage, the country has achieved surprising feats in recent years.
In an attempt to quell its pervasive corruption, myriad structural reforms have been put into effect: major parliamentary cleansing, a digitization of public services (Ministry of Digital Transformation) and a dramatic deregulation of the energy sector, to name but a few.
These transformative — and long overdue — political and economic changes are opening Ukraine to a plethora of undiscovered opportunities. This is overshadowed by fears of Russian invasion; yet, coupled with an availability of deeply discounted valuable assets and talented human capital paves the way to a very propitious future for the economically unstable former Soviet colony. Western investors should take notice.
Ukraine's geographic location, combined with 19 Free Trade Agreements with 46 countries, makes Ukraine an important transit corridor for trade and travel between Europe, Asia and the Middle East. As the last significantly sized emerging and cost-competitive market in Europe, Ukraine signifies a scope of potential, its structural reforms now positioning it as an industrial hub and prospective member of the EU down the road.
Ukraine flaunts some incredibly valuable cross-industry assets. With a strong footing in the IT, agricultural, energy and tech sectors, it plays a key part in the global value chain. Since 2019, Ukraine's government has been scrutinizing and removing any unnecessary trade barriers.
As the largest — and most geographically central — country in the heart of Europe, Ukraine is located at the crossroads of major transportation links. It is a focus for trade and a key transit corridor between Europe, Asia and the Middle East.
Ukraine's looming conflict with Russia is an opportunity to get in on the newly opened land market at a deep discount. In the country known as the "breadbasket of Europe," historically agriculture has been dominated by oligarchs since the privatization of state-owned land following the collapse of the Soviet Union in 1991. Now, the land market is opening up.
Ukraine has already attracted investment from global retail giants such as IKEA and Germany's METRO. Known for moving in quickly on transition economies, their early investment is a positive indicator; it implies they, too, believe in a long-term sustainable recovery for Ukraine.
Ukraine's Law 552-IX ended the moratorium on sale of land, and allowed individuals to purchase up to 100 hectares of land starting July 1, 2021. Both individuals and corporations shall be allowed to purchase up to 10,000 hectares starting January 1, 2024.
Banks will be able to seize land for nonpayment of a loan, but will have to auction off the land for agricultural use within two years. Investors that currently lease land will receive priority when the land is up for purchase, while foreigners will be able to lease land in Ukraine.
There are highly educated people across Ukraine, 70% of whom have had secondary or higher education. With a deserved reputation for hard work, this makes for a highly sought-after workforce. Likewise, with more than 130,000 engineers graduating each year, the country is recognized as the largest software engineering force in Central and Eastern Europe.
Ukraine's rich talent pool makes it a major outsourcing destination for many American and European businesses. In fact, with annual reports amounting to a gigantic $5 billion in 2020, the country's IT sector has risen by a jaw dropping 20%. Somewhat defying the economic downturns of the COVID crisis then, this sector, which accounts for 8.3% of total exports, is a driving force for Ukraine's economy.
According to a HackerRank study, Ukrainian security developers rank #1 globally and mathematical developers #4. In addition to this, with expert knowledge, a high English proficiency level and expertise in emerging disciplines such as AI and blockchain, Ukrainian programmers are acknowledged among the top 5 IT professionals worldwide.
Considerable efforts have been made to launch Ukraine into the digital age. The Ministry of Digital Transformation's manifesto states an increase in the share of IT in the country's GDP to 10%, with the goal of teaching digital skills to 6 million Ukrainians and provide high-speed internet to 95% of the population by 2024.
Ukraine has an exceptionally rich supply of mineral resources, containing an impressive 5% of the world's natural resources. This is one of the key contributing factors to its economic growth and sets the country in good stead for investment.
But it's not just raw materials Ukraine's got up its sleeve. In 2019, it exported $3.75B in seed oils, making it the largest exporter of seed oils in the world. With a profusion of fertile farmland, the country generates a great deal of wealth from agricultural farming.
Ukraine's invention portfolio is rather impressive. From Grammarly and Snapchat filters to virtual reality gloves and Uber for yachts, the list of high-tech innovation just keeps growing. Despite its economic shortcomings, the Ukrainian workforce has proved its potential for ingenuity and invention. We can only imagine then, the staggering results that would arise from an increased investment.
Perhaps the most attractive of reforms for the prospective investor is law No. 1071. It is a bill passed by the Ukrainian parliament to demonopolize the space industry from state control; the new law now opens it up to private investment.
"Space monopoly" lifted and VAT taxation waived on space technology importation and aircraft production, this law launches Ukraine's space industry sector into an undiscovered universe of investment potential. What's more, is if you were to find a Ukrainian project of interest, becoming associated with its stock would be relatively feasible. Not to mention, diversifying your portfolio with a new geographical location is always a smart idea.
Ukrainian investment opportunities are constantly arising with direct foreign investment increasing by $1.665 billion in the first quarter of 2021. Between 2015-2019, foreign direct investment flows reached a staggering $16 billion, resulting in the construction of over 100 manufacturing plants and giving rise to tens of thousands of new high value jobs.
Clearly, Ukraine's investment potential is not going unnoticed by savvy institutional investors. The conflict with Russia and political instability present an opportunity for arbitrage and discounted valuations for the calculated entrepreneur.
Yuri Vanetik is a private investor, lawyer and political strategist based in California. Read Yuri Vanetik's Reports — More Here.
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