ABSTRACT
This chapter examines the relationships between the inflows of foreign direct investment (FDI) into Ukraine, as well as the level of imports to and exports from the country. It reveals that FDI from the European Union (EU) into Ukraine in extractive industries is mostly export-oriented and consequently complements trade, whereas FDI into manufacturing industries tends to substitute for imports. The chapter argues that primary-industry FDI from the EU is motivated by Ukraine's comparatively abundant and cheap natural resources, whereas secondary-industry FDI is motivated by cost factors in Ukraine and on the revenue side by its large and relatively untapped domestic market. It suggests that industry specifics may predetermine incentives for FDI inflows and the relationship between FDI and trade flows. If FDI into Ukraine were oriented toward the establishment of vertical production, it would raise the level of intra-industry trade and support an inference of complementarity.
