Foreign Direct Investment or FDI is defined as, “Net inflows of investment to acquire a lasting management interest in an enterprise operating in an economy other than that of the investor. It is a sum of equity capital, reinvestment of earnings other than long term capital and short term capital as shown in the balance of payment.”

The volume of foreign direct investment has seen a steady but very slow upward trend since 2003. The foreign direct investment from western and other foreign countries has not reached levels which had been expected when President Yushchenko and Prime Minister Tymoshenko came into power. It was believed that the warmth and good will generated between Ukraine and Western countries, when this government came into power would have helped increase foreign, especially western FDI. The belief that foreign investors invest in a country because they feel a warmth and friendship towards that country does not hold true. Investors invest in a country where they think that they can make a profit. Also FDI in Ukraine is low as investors fear change and Ukraine is a society in transition. Investors also like certainty and hesitate to invest in countries of which they do not have much knowledge. Hence Ukraine loses out on a lot of potential FDI. Today Ukraine holds a 94 ranking in its FDI potential.