Renaissance Capital's Geoffrey Smith "London proposes the largest pool of financial capital for Ukraine"

Even though Great Britain is the fifth-largest source of foreign direct investing (FDI) into Ukraine, an growing quantity of capital inflow is being channeled through London.

That's no wonder since London is Europe's financial capital.

"When we're discussing British investment into Ukraine we should remember the role London plays in channeling global investment into the country," reports Renaissance Capital's Geoffrey Smith. "London proposes the largest pool of financial capital."

Ukrainian companies have in the last years stepped up efforts to raise money and list stock on international markets. Despite a slowdown linked to the wolrd credit crunch, the expectation is that Ukrainian firms will raise record amounts of capital in the near term, and a long list of domestic firms will eventually list their stock via initial public offerings (IPOs) on the London Stock Exchange. So expect more investments with a London flavor spreading to Kyiv in coming future.

Since the beginning of 2007, more than $1.8 billion was raised by Ukrainian firms on the London exchange through IPOs, according to Kyiv-based investment bank Dragon Capital. Billions more will be raised in the nearest future.

For comparison, state figures suggest that some $2 billion in FDI from the UK has poured into Ukraine since the country got its Independence, less than the nearly $8 billion that came from Cyprus and Germany, and the roughly $3 billion attributed to The Netherlands and Austria. These top five investment countries account for about half of all international direct investment in our country, with inflows 40 percent up in the first half of this year.

Much of the money coming into Ukraine from London, be it syndicated bank loans or cash raised through IPOs, is not British originally.

Yet investing from London has also brought priceless reimbursements and experience to the Ukrainian business people. The more Ukrainian firms list in London, or borrow from top banks there, the more they find themselves playing to the highest global financial standards, regulations and rules of business.

Smith said the increased occurrence of the Ukrainian firms on the London exchange, and borrowing from London banks, is also "an important indicator of Ukraine's attractiveness."

It shows that London-listed Ukrainian companies such asproducer Ferrexpo and property for sale developer KDD "can compete for capital in a really global context," Smith added.

"The money that is invested in them can just as easily be invested in firms with mines in Latin America or Africa, or property projects in the Middle East or Central Asia. London offers the world's largest quantity of capital, and thus the broadest circle of potential shareholders or lenders. As a result the firms should be able to get the best possible price for their stock or bonds from that market."

Slowly, but surely, Ukrainian firms are succeeding in this challenge. And as they do, more British direct investing into Ukraine will follow.

Direct foreign investment by the British companies into Ukraine is gradually growing.

There is no single leading British investor in Ukraine that stands out as having invested the largest amount, or made the largest difference. There is, hence, the London based European Bank for Reconstruction and Development (LbEBRD), founded by the countries that are developing of the world for the purpose of supporting economic development in transition countries. The EBRD claims to be the hugest investor in Ukraine with some $5 billion invested through loans and acquisitions. Last year was a particularly powerful year for the EBRD, with annual business volume reaching $1.5 billion.

Many firmds acting in Ukraine, but backed by domestic or Russian businessmen, are registered in UK tax havens. Mapping them out and their would be British roots would entail writing a book.

Who are the true British investors in Ukraine? According to the British Embassy in Kyiv, there are more than 80 companies with UK connections operating in virtually all sectors of Ukraine. Like with all investing, regardless of origin, the most interesting for investors sectors are financial services, wholesale trade, Ukrainian real estate for sale, leasing, building, and metals.

And Ukraine, a country of 48 million, has not gone unmentioned by the British exporters.

Over the last four years, British exports to Ukraine have shown steady growth, between 30 and 40 percent annually, reaching a record high of $956 million in 2007, embassy figures show.

British exports to Ukraine are hoped to grow strongly now that Ukraine has joined the World Trade Organization (WTO).

But British experts who have been carrying out business in Ukraine since the early 1990s are cautious.

And longtime Brits active in Ukraine's real estate market, such as Terry Pickard, chairman of NAI Pickard, look back and say carrying out business in Ukraine is still tough. Referring to the notorious bureaucracy of development approval in Ukraine, and getting 300 signatures for it, Pickard mentioned: "The bureaucracy in general is very old fashioned and everything is very slow and difficult."

And it doesn't help to be a foreigner, according to Pickard. All foreign firms carrying out business in Ukraine complain that the justice system is very poor, he added.