STRATEGIC DIRECTIONS FOR ENHANCING FOREIGN DIRECT INVESTMENT ATTRACTION MECHANISMS IN THE CONTEXT OF UKRAINE’S ECONOMIC RECOVERY
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Abstract
Introduction. In the context of ongoing wartime challenges and large-scale economic destruction, attracting foreign direct investment (FDI) has become a critical prerequisite for financing Ukraine’s post-war reconstruction and ensuring long-term economic modernization. Despite the country’s considerable investment potential, foreign capital inflows remain significantly constrained by elevated military and political risks, institutional weaknesses, insufficient investor protection mechanisms, and limited availability of comprehensive war-risk insurance instruments. These challenges necessitate the development of innovative and resilient approaches to establishing an effective FDI attraction framework capable of supporting economic recovery under conditions of uncertainty.
Purpose. The purpose of the article is to examine the current state and structural characteristics of foreign direct investment inflows into Ukraine and to substantiate strategic directions for improving FDI attraction mechanisms during the period of post-war economic recovery. The study considers international best practices, contemporary global investment trends, and the specific characteristics of Ukraine’s wartime economic environment.
Methods. The methodological framework of the research is based on a combination of general scientific and specialized methods, including analysis and synthesis, comparative analysis, statistical assessment, systems analysis, economic and mathematical modeling, forecasting, and scenario analysis. The empirical and informational foundation of the study includes scientific publications by Ukrainian and international scholars, as well as analytical reports and official data from the World Bank, the Multilateral Investment Guarantee Agency (MIGA), the Ministry of Finance of Ukraine.
Results. The study examines the dynamics, sectoral characteristics, and structural transformations of foreign direct investment in Ukraine under conditions of geopolitical instability and economic shocks. A comprehensive framework of strategic priorities for enhancing FDI attraction mechanisms is proposed, including institutional modernization, strengthening investment protection guarantees, expanding war-risk insurance instruments, and improving cooperation between public authorities and international financial institutions.
Particular attention is devoted to the adaptation of international experience through the development of Military-Tech clusters as drivers of technological modernization, the introduction of special economic regimes, the expansion of public-private partnership mechanisms, acceleration of European integration processes, and implementation of the “Paperless Investment” digital model. Furthermore, the article proposes a conceptual framework for leveraging international investment guarantee mechanisms to stimulate private foreign capital inflows and reduce investment barriers.
Originality. The scientific novelty of the research lies in the development of an economic forecasting model for assessing potential FDI inflows into Ukraine until 2030. Unlike existing methodological approaches, the proposed model is based on an adapted Weighted Average Cost of Capital (WACC) framework, supplemented by a dynamic war and political risk coefficient ($R_{war}$), which reflects the gradual reduction of uncertainty under the influence of international institutional guarantees and security mechanisms.
The study further develops the conceptual foundations of state FDI policy by integrating the principles of “Build Back Better”, targeted risk-mitigation instruments, and digital transformation approaches. In addition, the multiplier (“crowding-in”) effect of international donor support as a catalyst for attracting private foreign capital is theoretically and mathematically substantiated.
Conclusion. The study demonstrates that effective attraction of foreign direct investment is a primary determinant of Ukraine’s successful economic recovery and long-term resilience. Implementing the proposed strategic framework will contribute to enhancing the country's investment attractiveness, reducing systemic risks, and fostering a new model of high-tech economic growth. The practical significance of the findings lies in their applicability to the development of state investment policy and national recovery programs, enabling Ukraine to transform from a recipient of reconstruction aid into a regional hub of advanced production and international investment cooperation.
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