Regional development and foreign direct investment in transition countries: a case-study for regions in Ukraine

This paper evaluates the effects of foreign direct investment (FDI) on the economic development of Ukrainian regions based on selected indicators (gross regional product, change of gross regional product, share of the industrial (manufacturing) sector, and employment and unemployment rates) in the 2003-2016 period. Employing an exploratory panel time-series approach, the results suggest that there is only a limited impact of FDI on the economic performance of the regions. The small influence of foreign direct investments is, among others, a consequence of political instability, weak governance, the military conflict in the East of the country, and incompleted reforms of the Ukrainian economy. We suggest that it is necessary to focus on targeted programs at both the regional and state levels in order to enhance the existing state of the economy. It is also important to ensure stability and transparency in the legislative processes, tax reforms, and other policy fields to facilitate the attraction of foreign direct investment, the creation of new jobs, and the increase of the income levels of the Ukrainian population.