"Investing in Ukraine is investing in a future EU member" – this thesis of German Chancellor Olaf Scholz was repeatedly voiced during a meeting of German and Ukrainian businesses with government officials and experts from both countries.
Thus, the German government developed tools to stimulate such investments, one of which is the Federal Investment Guarantee Scheme for German companies in Ukraine.
On January 31, there was a discussion on this scheme organized by the European Business Association, Global Business for Ukraine (GB4U), the German-Ukrainian Chamber of Commerce and Industry (DIHK), the German-Ukrainian Chamber of Industry and Commerce (AHK), and the German-Eastern Business Association (OA). We talked about how investment guarantees work and how businesses can apply for the scheme.
The German Federal Ministry for Economic Affairs and Climate Change is already cooperating with Ukraine in the energy sector to help overcome the consequences of attacks on energy infrastructure and provide the country with vital equipment for autonomous power supply. However, the Ministry is now planning to deepen economic cooperation, particularly by providing investment guarantees and political risk protection to encourage German businesses to invest in Ukraine.
The Ministry of Economy of Ukraine considers political risk insurance to be an extremely important tool to support and activate the private sector. Currently, Ukraine is exploring various options in this area, including an agreement with MIGA, and welcomes the introduction of such instruments at the national level in European countries.
"This initiative of the German government is very timely, as we see the interest of new investors in Ukraine. And, for sure, seeing its practical application is even more important to share this experience with other countries, so they can launch similar programs," comments Anna Derevyanko, Executive Director of the European Business Association.
Germany offers investors to use the Investment Guarantee Program so that German companies invest in Ukraine now without waiting for the end of the war. With this instrument, the federal government protects German investors from political risks to avoid or compensate for potential losses.
What are the terms of the Scheme?
PwC has been commissioned by the Federal Government to implement the Investment Guarantee Program. Before applying, you can consult with PwC specialists, find out more information and apply on a special platform.
The program covers the following risks: war, expropriation (nationalization), transfer and conversion risk, and breach of contract risk. The cost of participation in the program consists of a one-time payment (none for investments up to EUR 5 million and 0.5% for investments over EUR 5 million) and an annual payment determined by the amount of coverage.
The guarantees apply to new projects and investments, but in some cases can cover recently invested funds. The application process can take from several weeks to several months, depending on the complexity of the project. The minimum investment amount may be quite small, but all details should be discussed with PwC.
The Investment Guarantee Program aims to mitigate long-term risks for German investors, prevent or compensate for losses, and facilitate the receipt of funding for investment projects.
We hope this case will become a positive trend for other countries to follow!