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This tool could be a mechanism to support the processing industry, as provided for in draft laws No. 13414 and No. 13415
The development of the processing industry is becoming a key condition for the economic survival of the state during a prolonged full-scale war. It is this industry that ensures the creation of high value-added products and new jobs, generates higher tax revenues, and reduces dependence on imports.
In early November, the Verkhovna Rada approved two bills (No. 13414 and No. 13415 — amendments to the Customs and Tax Codes, respectively) on compensation for capital investments through taxes in the first reading. Unlike other instruments of state support, these bills are aimed exclusively at stimulating the development of the processing industry.
Investment support system
Ukraine’s industry is entering a difficult period: in the first half of 2025, production fell by 3.9% after two years of recovery, the agricultural sector fell by 14%, and construction slowed significantly. Imports exceeded exports by almost $34.6 billion in ten months, which increases the economy’s dependence on external markets and puts pressure on the balance of payments. A significant amount of international aid is not being converted into domestic investment — it does not reach the real sector but remains in the NBU’s reserves, which does not stimulate economic recovery at all.
In such conditions, the development of the processing industry is a prerequisite for the country’s economic survival in the context of a protracted full-scale war with the Russian aggressor. It is industrial processing that creates high value-added products, creates jobs, generates larger budget revenues, and reduces dependence on imports. A strong economy is the key to defense capability.
At the same time, the war has destroyed or damaged hundreds of production facilities, thousands of enterprises have been relocated, infrastructure has been destroyed, and the risks for investors are unprecedented. In such a situation, classic market mechanisms do not work — investments do not come on their own.
To kickstart recovery, a combination of tools is needed, including:
- stimulating new modern production facilities;
- modernizing existing capacities;
- supporting relocated enterprises;
- preparing investment projects in line with international standards;
- guarantees of predictability and capital protection.
Around the world, such tasks are solved with the help of systemic state programs – compensation for part of investments, tax incentives, industrial grants, long-term lending, and industrial parks.
Ukraine currently has only some elements of this system in place, such as industrial parks, a number of resource-limited state programs to support small and medium-sized businesses, and favorable conditions for investors. However, there is a lack of a comprehensive industrial (and, frankly, general economic) strategy that would combine all these instruments into a single model. Moreover, in these conditions, decisions have been made that are not motivated by urgent economic needs to liquidate the Ministry of Strategic Industries and the Ministry of Agrarian Policy, which were responsible for key areas of the national economy.
Can bills No. 13414 and No. 13415 help?
The bills, which were passed by parliament in the first reading, propose another tool—compensation for investments through a tax mechanism. The USPP supported this initiative at a meeting of the Anti-Crisis Headquarters for Economic Stability under Martial Law, where one of the initiators of the bills, Deputy Chairman of the Verkhovna Rada Committee on Economic Development Dmytro Kysilevsky, answered questions from the business community. In addition, the USPP sent a letter to the Prime Minister, as it is important to create all conditions for the localization (creation of new and scaling of existing) of value-added production.
At the same time, it is important to consider these projects in a broader context.
First, this is only one of the additional tools needed in wartime in the process of forming a systematic state industrial policy aimed at increasing the self-sufficiency of the national economy.
Second, effectiveness will depend on whether businesses have access to long-term financing (available loans, grants, etc.), transparent and effective insurance against military risks, and a clear regulatory policy.
Third, in wartime, any investment incentive will only work if the state guarantees consistency and predictability in its actions and optimal administration.
Otherwise, even the best mechanism will remain “on paper.”
Should these mechanisms be extended to the extractive industry and the iron and steel complex?
Our position: in the current circumstances, government incentives should primarily be directed towards areas where high added value is created.
The iron and steel complex is one of the key sectors for the economy, providing a significant share of exports, foreign exchange earnings, and employment. At the same time, the extractive industry is traditionally profitable and capital-intensive, and has not previously been focused on deep processing. Therefore, it is logical for businesses in this sector to request incentives for investment in the deep processing of ore, scrap, ferroalloys, pipe production, and machine building.
In our opinion, the following are most suitable for the iron and steel complex in this regard:
- investment guarantees for large projects (from $100 million);
- access to energy resources at competitive rates;
- development and security of logistics (ports, railways);
- stability of rents, tariffs, and tax policy;
- modernization of production facilities to meet the requirements of the EU’s “green” markets, along with a postponement of the introduction of CBAM mechanisms.
Therefore, the effect of draft laws No. 13414 and No. 13415, as well as other similar initiatives in the future, should be extended to the iron and steel sector, but only for those projects that create products with new added value that can compete in foreign markets and contribute to the technological modernization of production.
In other words, it is necessary to stimulate not just extraction, but industrial and innovative development based on extraction.
Ukraine needs to launch a full cycle of deep industrial processing – from the processing of agricultural products to other strategic sectors of industry, in particular the iron and steel complex. Initiatives such as No. 13414 and No. 13415 can be part of this process, but they cannot replace the formation of a systematic modern industrial policy, which requires further joint work between business and government, involving (where possible) the assistance of international partners.
Only a combination of tools, predictable government policy, and partnership between the state and business can put industry back on a growth trajectory.
Anatoliy Kinakh
president of USPP, co-chairman of the National Tripartite Socio-Economic Council