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This is an Open Access article, distributed under the terms 
of the Creative Commons Attribution CC BY 4.0

1 Lviv University of Trade and Economics, Ukraine (corresponding author)
E-mail: rboy@ukr.net
ORCID: https://orcid.org/0000-0002-4044-0217
2 Lviv University of Trade and Economics, Ukraine
E-mail: romanmarcenyuk1@gmail.com
ORCID: https://orcid.org/0000-0002-0968-7334
3 Lviv University of Trade and Economics, Ukraine
E-mail: arsenprots@gmail.com
ORCID: https://orcid.org/0000-0002-9933-9164

DOI: https://doi.org/10.30525/2256-0742/2024-10-5-120-130

ASSESSMENT OF THE REGION'S INVESTMENT ENVIRONMENT 
AND POLICY INSTRUMENTS FOR THE IMPLEMENTATION  

OF ITS INVESTMENT POTENTIAL IN WARTIME
Ruslan Boiko1, Roman Martsenyuk2, Arsen Protsykevych3

Abstract. The subject of the study is the processes of formation and implementation of regional investment 
policy in wartime. Methodology. The following methods of economic analysis were used in the study: 
analysis and synthesis (to ensure a systematic approach when characterising the investment environment  
of the region), statistical analysis and calculation (when analysing the volume, dynamics and structure, factors 
and functional features of the formation of the investment environment of the regional economy), strategic 
management (to determine the strategic goal, objectives, mechanisms, instruments and expected results 
of the regional investment policy in wartime). The article is aimed at characterising the state of the investment  
environment of the region and substantiating the instruments for realisation of the investment potential of the 
region in wartime (on the example of Lviv Oblast of Ukraine). The results of the study enabled the identification of 
the strengths and weaknesses, as well as the opportunities and threats, of the region's investment environment 
in terms of components such as production and resources, institutional and legal, security, infrastructure and 
macroeconomic. In particular, the article finds that the production and resource, safety and macroeconomic 
components of the region's investment environment are at a relatively high level. Instead, the institutional, 
 legal and infrastructural components are characterised by greater problems (and thus a negative impact on the 
intensification and improvement of the structural characteristics of investment activity). Conclusion. The Lviv 
Oblast has been shown to exhibit several distinguishing features when compared to other regions of Ukraine. 
These include a relatively large domestic market and a high level of development in the real sector, including 
financial and credit, and investment infrastructure, transport, logistics, and trade systems, construction, education, 
scientific and ICT potential, and a large population. The region's strategic location has also contributed to the influx 
of substantial capital investment, which has been allocated to the regional economy, particularly to real sector 
industries, productive sectors, and areas with a high level of added value. This indicates that the region's investment 
development is at a relatively high level. At the same time, the following shortcomings and weaknesses remain in 
the region's investment development: the presence of systemic deficiencies in the region's investment climate; 
small volumes of investment (per unit of resources) and limited rates of their increase; low investment activity in 
the real sector of the economy with high added value; low investment in intangible assets in industries that form  
human and innovative potential; critically low volumes of foreign investment, especially direct investment; limited 
public, intermunicipal and cross-border investment; underdeveloped system of risk financing of investment 
in innovation; underdeveloped stock market and small role of bank lending. It is substantiated that effective  
instruments of regional investment policy in the context of critical instability are: military risk insurance and 
diversification; use of concession agreements; private and public investments in the defence industry and critical 
infrastructure industries/sectors (energy, transport and logistics, medicine and pharmaceuticals, natural resources); 
support for innovative and technological startups in the areas of security, the real economy and infrastructure; 
stimulation of investments in human resources; support for investments in business projects of demobilised  



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persons, war veterans and other combatants; encouragement of investments in the development of export 
potential to maintain the country's financial security.

Keywords: region, investment, investment climate, investment environment, investment policy, sustainable 
development.

JEL Classification: E22, G21, G23, G24, G28, H54, R11

1. Introduction
The investment policy is a part of the general 

economic policy of the State/regional authorities and 
local self-gover nment, in a generalised form, aimed 
at meeting public and business needs for financial and 
other resources, means and technologies necessary 
for the implementation of important social and 
economic investment projects. Therefore, in order to 
achieve this goal, the public authorities organise and 
carry out the following tasks: on the one hand, the 
creation of a favourable investment environment that 
does not hinder, but, on the contrary, stimulates and 
increases the demand for capital investments; on the 
other hand, the development of the financial system 
of the regions, the investment sector, its infrastructure,  
entities and elements that develop the supply of 
investment resources.

 However, this is only the so-called resultant part 
of the objective of state investment policy, while 
in the course of its implementation a much wider 
list of functions and tasks of regulation is realised.  
For instance, the following issues are to be considered: 
the influence on the processes of renewal and increase  
in fixed capital, its redistribution between different 
sectors of the economy, types of economic activity, 
stages of social reproduction, the intensification 
of innovation and technological development in 
regions or sectoral economic systems, an increase in  
production capacities and the streamlining of  
production and economic processes, and the 
strengthening of the potential of social responsibility of 
economic agents. 

Consequently, an effective investment policy  
enables the formation of capital as a primary factor of 
production in the optimal amount and with sufficient 
availability. Furthermore, it facilitates the attainment 
of numerous systemic macroeconomic effects, 
encompassing structural changes and institutional 
reforms, during the processes of accumulation, 
distribution, and rational and efficient utilisation.

The results of the analysis of the investment 
environment have a high methodological and applied 
value, as they allow the direct identification of the  
causes of the state, dynamics and structural 
characteristics of investment processes. Thus, the 
volume and dynamics of investments and investment 
activity are determined, on the one hand, by the 
financial and economic capabilities of business 
entities, the resource potential of representatives of 

the investment sector and the country's financial and  
credit system, the income and already formed savings 
of the population (supply of investment resources),  
and, on the other hand, by the availability of ambitious 
projects that are interesting from the point of view of 
business and capital investment, as well as promising 
in terms of acceptable payback periods and high 
investment efficiency, return on invested capital  
and the possibility of its rapid and high-quality 
reinvestment (demand for investment resources).

At the same time, investment market conditions are 
mediated by the infrastructure (designed to coordinate 
the processes of preparing investment projects and 
developing investment proposals, accumulating and 
attracting funds, their distribution, use, implementation 
of measures, insurance and return of resources) and 
institutional (focused on the protection and security 
of property and assets, regulation and stability of the 
rules of the game, independence and efficiency of the 
judiciary, free competition and market environment, 
democratisation of society, absence of systemic 
deviations and imbalances in the functioning and 
development of the socio-economic and socio-political 
systems, etc.) environment.

The issues highlighted in this study underscore the 
critical importance of characterising the investment 
environment of the region and identifying policy 
instruments to realise its investment potential.

2. Methodological Provisions  
in the Field of Analysis of the Investment 
Environment of the Region  
and Regional Policy of its Formation

The relevant potential and capacity of the investment 
policy is determined by the budgetary possibilities, 
in particular the forecast amounts of financing of 
investment activity. According to this approach, the 
investment policy is not actually distinguished as 
a separate main direction of the country's regional 
development policy, serving only as a separate 
component of economic regulation and characterising 
the state's attitude to investment activity, the rules and 
principles of its implementation. At the same time,  
this approach is shared by some scholars, such as  
(Borsh, Gerasimova, 2007; Sheverdina, 2012).

However, in the majority of modern publications  
on the formation and implementation of investment 
policy, scientists clearly interpret it as an independent 



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area of economic policy implemented by the 
government and local authorities, with a clearly 
defined goal, strategic objectives, tasks, principles, 
methods, mechanisms and tools for implementation, 
and the results of such a policy, which go far beyond 
the attraction and use of capital for state, business 
and social investment projects, and which allow  
investment policy to be properly elevated to the rank of 
a systemic and comprehensive framework that affects 
national, regional and business economic interests 
and affects all phases of economic reproduction and 
spheres of society. The dissemination of such concepts 
is evident in the scholarly contributions of Koyuda, 
Lepeiko, Koyuda, Hrynyova (2008) and Sokurenko, 
Krishan (2010).

Another approach to the essential interpretation 
of the investment policy can be characterized as 
structural. This approach is defined by a meticulously  
organised array of mechanisms, tools and means 
employed by the state, lower-level authorities and 
governments to effect changes (improvements) to 
the fundamental structural relationships within the 
economic system (Kravtsiv, Melnyk, Antonov, 2011).

A number of researchers have proposed a security 
approach to the essential characteristics of the investment 
policy. For instance, D. Nikitenko concludes that the 
country's investment policy should be understood 
as a system of actions and measures organised 
and implemented by state authorities to intensify  
investment activity, accelerate and improve investment 
processes. This, in turn, has a positive impact on the 
investment climate and the institutional environment  
of business activity in general (Nikitenko, 2018).

M. Kondrashova (2008) also emphasises the 
importance of the investment policy in initiating 
structural changes in the economic system, as well as in 
scaling up reproduction processes. 

According to A. Zagorodnii, investment policy 
concerns macroeconomic decisions on the sources 
of formation and directions of use of investments  
for their rational distribution and efficient use in 
the economy as a whole and in its various sectors in 
particular, the elimination of spatial, structural and 
other imbalances in the functioning and development 
of the economic system, the equalisation of growth  
rates and trends in the spheres of material production 
and the social system (Zagorodnii, Vozniuk, 2007).

According to S. Chistov et al. investment policy is a set 
of state measures (institutional and legal, institutional 
and organisational, economic, administrative, social, 
political, informational, etc.) that have a systemic 
impact on activation and rationalisation of investment 
processes of business entities and the economy as 
a whole (Chistov, Nikiforov, Kutsenko, 2000). 

It is a set of measures organised and implemented by 
the state at different levels of economic management 
(central, regional, sectoral and microeconomic) to 

increase investment by improving the investment and 
business climate, creating new incentives for economic 
agents and investors of various types. This is stated in 
the search results (Nechiporuk, 2012). 

Developing such ideas, O. Gonta also establishes 
favourable incentive conditions for business in terms 
of efficient management and formation of investment 
capital, attraction and rational use of domestic and 
foreign investment in the strategic goal of investment 
policy implemented by the state in the economy, 
its sectors, types of economic activity and regions. 
According to scientists, the state carries out a number 
of relevant measures for this purpose (Gonta, Dubina, 
Pilevich, 2013).

As demonstrated in the works of P. Sokurenko and 
O. Krishan (2010), there are comparable guidelines 
concerning the function of investment as a primary 
catalyst in the process of social reproduction and 
the realisation of sustainable socio-economic  
development. These processes are contingent upon  
the conditions and environment of investment.

On the other hand, the authors can also contrast 
a significant number of studies in which social 
development, modernisation of social infrastructure 
and improvement of the quality of life of the  
population are defined by scientists as the main 
objectives/criteria for the efficiency of investment 
activity. For example, L. Hrytsenko (2012), revealing 
the essential features of investment policy, argues 
that it is a set of measures planned and implemented  
by government bodies to increase, on the one hand,  
the volume of production and, on the other hand, to 
create a social environment with a high level of quality 
of life, social services, their integration and modern 
progressive social standards.

It can be added that the idea of investing in the 
smart infrastructure of cities and territories, which 
can significantly improve the quality of life of the 
population by digitising most spheres of public life and 
administrative, social and other services, clearly fits 
into this context. These are the results of the research 
of A. Oleshko et al. (2022), Ya. Zhalilo and D. Oliynyk 
(2021), etc. 

V. Pshenychna (2011) conceptualises the investment 
policy as a multifaceted mechanism encompassing 
institutional, legal and economic dimensions.  
The policy's instruments are designed to engender 
a series of economic and social outcomes, characterised 
by their self-reinforcing nature and scalability.

It can thus be concluded, based on the aforementioned 
generalisation, that the investment policy constitutes 
a component of the economic policy of the state. This 
component comprises a system of methods, forms, 
mechanisms, and measures of influence (regulation) on 
the volume and structure of investment, and the course 
of investment processes to meet its purpose, goals, and 
objectives. 



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3. Identification of Elements of the Investment 
Environment and its Decomposition

This approach to the vision of the investment 
environment in the region facilitates discussion of the 
so-called investment environment, within which the 
differential features of such concepts as investment 
environment, investment climate, and investment 
attractiveness both function and crystallise (Figure 1). 

Consequently, the aforementioned findings provide 
a robust foundation for determining a high level of 
theoretical, methodological, and applied significance 
of the study of the characteristics of the region's 
investment environment. Moreover, in the case of the 
regions of Ukraine, the significance of the results is 
determined by the differentiation in the characteristics 
of the environment before and during the full-scale 
war, which clearly indicates both the reasons for the 
sharp deterioration of the investment climate and, 
consequently, of activity, and the ways and even potential 
means of regional policy to improve and significantly 

modernise the environment for foreign direct and 
domestic capital and other instruments, which are 
crucial from the point of view of structural reform  
of the regional socio-economic system, improving its 
quality and increasing social and productive capacity.

4. Analysis of the Regional Investment 
Environment on the Example of Lviv Oblast

Speaking about the investment environment, the 
authors should first characterise its production and 
resource component, i.e., the existence of a system of 
production (supply, provision) of investment activity 
with necessary resources, including financial, tangible 
and intangible, natural and human. For example, the Lviv 
Oblast has significant natural resources and minerals. 
The region is rich in land resources. The availability of 
natural and other resources and a developed economy, 
including industry, agriculture, construction, trade, and 
other basic economic activities, are favourable features 
of the region's investment environment. At the same 

Figure 1. Elements of the investment situation and its decomposition;  
place and components of the investment environment (conceptual vision)

Source: authors’ development

SUPPLY of investment resources 
 preparation and support of investment projects;

 accumulation, attraction, distribution, and return of funds;
 support and related services, etc.

DEMAND for investment resources 
Investment projects that are attractive from the perspective of: 

 investment payback periods;
 high financial and economic efficiency and return.

RESOURCE PROVISION 
of investment activity 

INVESTMENT INFRASTRUCTURE 
of servicing investment processes 

INSTITUTIONAL AND LEGAL 
ENVIRONMENT 

of investment activity 

SOCIO-ECONOMIC DEVELOPMENT 
of the region, territories, and communities 

Investment 
environment 

Investment 
situation 

SAFETY GUARANTEES 
of investment activity 



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Vol. 10 No. 5, 2024
time, the region remains in the rear of the full-scale war 
and has not suffered significant losses from military 
operations, so it remains attractive for investment in  
this regard.

The Lviv region also has a high potential in 
terms of a large number of business entities and 
a correspondingly developed business climate. As of 
01.01.2023, 77.5 thousand legal entities and more than 
130 thousand individual entrepreneurs (hereinafter 
referred to as IEs) were registered here, which is about 
5.5% of the total number in Ukraine. At the same time, 
the region is characterised by positive dynamics in terms 
of an increase in the share of enterprises compared to 
the national average. 

The existing production and resource potential 
as a component of the investment environment  
of the Lviv Oblast is also evidenced by good values of 
the leading indicators of socio-economic development 
of the region within Ukraine (Figure 2). 

For example, the share of housing starts in the Lviv 
Oblast was 10.6%, which placed the region third in the 
country for this indicator. The region played a significant 
role in the production of construction products  
(7.2% of the national value), export of services (6.7%), 
number of employed population (6.6%), retail sales 
(6.2%), number of current population and its income 
(6.0%).

In general, the Lviv Oblast demonstrated high 
rankings in the majority of the analysed aspects of 
potential, occupying positions from fourth to seventh 
out of the regions of the country. However, in terms of 

agricultural production, the region's ranking was 17th 

out of 20, with a share of 3.6% of the national volume.  
This can be regarded as a drawback, and as a way to 
solve this situation, one should consider improving  
the structure of agricultural production and increasing 
the level of depth of its industrial processing.

Moreover, it should be noted that between 
2010 and 2022, the Lviv Oblast's share of Ukraine's 
industrial product sales increased by 1.7 percentage 
points (from 2.4% to 4.1%), which is a substantial 
increase. Furthermore, the per capita volumes of 
industrial products sold in the region increased by  
2.6 times between 2015 and 2021, rising from 
23.1 thousand UAH in 2015 to 59.1 thousand UAH 
in 2021. With regard to the industrial production  
sector, the region consistently achieves a ranking  
of 8th in Ukraine, and 11th with respect to per capita 
output. The Lviv Oblast is a prominent contributor to 
the national economy, particularly in the domains of 
textile production and sales (18.0% in 2022), wood  
and paper products, printing (10.6%), natural 
carbonated mineral waters (40.1%), and pork 
(22.3%) (The potential of the Lviv region in Ukraine  
for 2021, 2022).

The region is also becoming increasingly significant 
in terms of the production and supply of agricultural 
products to the domestic market. Consequently, 
during the period 2010-2022, the region witnessed an  
increase in the share of crop production from 2.8% to 
3.2% (by 0.4 pp), and in the share of livestock production 
from 5.2% to 5.5% (by 0.3 pp). Simultaneously,  

Figure 2. Potential of Lviv Oblast in terms of key socio-economic indicators in Ukraine, in 2022

Source: compiled by (The potential of the Lviv region in Ukraine for 2021, 2022)

 

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Vol. 10 No. 5, 2024 
the region attained second position in Ukraine with 
regard to potato production, second position with 
regard to vegetable production, fifth position with 
regard to livestock production, and fifth position 
with regard to round wood stocking. The Lviv Oblast 
continues to be one of the leading regions with regard 
to potato production (7.9% in the structure of the 
national indicator), vegetable crops (8.3%), and 
sugar beet (7.8%) (The potential of the Lviv region in  
Ukraine for 2021, 2022).

In the period between 2010 and 2022, the Lviv  
Oblast's share of the total volume of manufactured 
construction products increased from 4.9% to 7.2%  
(an increase of 2.3 pp). Concurrently, the commissioning 
of the total area of housing (new construction) exhibited 
an increase of 1.6 pp, reaching 9.0% and 10.6%, 
respectively. It is evident that these and other trends  
have contributed to the region's attainment of 
a high ranking in terms of the volume of manufactured 
construction products (occupying fifth place among 
the country's regions) and the commissioning of 
the total area of housing (third place, including per 
1,000 population – fourth place).

The Lviv Oblast has historically been recognised 
as a region with considerable export potential and  
attendant opportunities. Consequently, between 
2010 and 2022, the share of the regional economy in 
the total volume of exports of goods increased from 
1.9% to 4.3% (an increase of 2.4 pp), and the exports 
of services – from 0.9% to 6.7% (5.8 pp). The region's 
ranking in terms of exports of services was third,  
imports of goods fourth, and exports of goods seventh.

It is recommended that the active development of trade 
and the direct contribution of regional development 
to the progress of domestic trade of the country be 
considered favourable (in light of the formation of the 
investment environment). The region was ranked 5th 
in terms of wholesale turnover, 6th in terms of retail 
turnover, 5th in terms of retail turnover index, and 8th 
in terms of retail trade per capita (The potential of the  
Lviv region in Ukraine for 2021, 2022).

The favourable macroeconomic prerequisites for the 
development of the region, and the positive impact 
of these trends on the investment environment, are 
evidenced by the data on the dynamics of progress 
directly in the real sector of the regional economy. 
Consequently, during the period 2015-2022, the 
volume of GRP escalated by 2.7 times (rising from 
94.7 to 251.9 billion UAH). Parallel growth rates were 
observed in GVA, which, in absolute terms, increased 
by 138.2 billion UAH. This signifies not only the 
augmentation of production capacities, but also the 
maintenance of the level of processing depth and the 
generation of added value per unit of manufactured  
and sold products.

It is important to acknowledge that certain  
economic activities exhibit even more pronounced 

growth rates in terms of GVA. These include  
construction (where the total GVA increased by 
5.2 times), the mining industry, and quarrying (where 
the GVA increased by 3.3 times). This observation 
underscores the pivotal role these sectors play in 
supporting production and facilitating investment 
processes within the region.

In order to stimulate capital investments in the  
regional economic system, it is vital to consider the 
stable trend towards an increase in sales volumes 
in the basic sectors of the Lviv Oblast's economy.  
The following sectors of the regional economy should 
be considered particularly attractive in terms of a quick 
return on investment (due to growing capacities, 
correspondingly high sales volumes and a larger  
pool of potential profits): the processing industry 
(with a market capacity of over 100 billion UAH in 
the domestic sales segment) and machine building  
(in the domestic sales segment), and the growth rate of 
industrial sales was 5.4 times), mining and quarrying 
(industrial sales increased 9.7 times over the analysed 
period, reaching about 12 billion UAH per year),  
and construction products (8.5 times and  
18.6 billion UAH).

In the context of the processing industry in the Lviv 
region, the following sectors have been identified 
as the most investment-attractive: the production 
of food products, beverages, and tobacco articles  
(with a total sales volume of 43.8 billion UAH,  
marking a 6.7-fold increase compared to 2010 figures). 
The manufacture of wood and paper products, and 
printing activity (12.5 billion UAH and 6.6 times), 
mechanical engineering (11.3 billion UAH and 
5.7 times), the production of rubber and plastic 
products, and other non-metallic mineral products 
(11.0 billion UAH and 4.7 times), etc.

However, the activation and improvement of the 
structure and return of capital investments in the 
region (which are the consequences of a proactive, 
balanced and effective regional investment policy) 
serve as a direct guideline for the further expansion 
of production capacities in these and other industries 
and the increase of export potential. Nevertheless, 
it is necessary to use the resources not only of 
powerful domestic and foreign investors, but also of 
the entrepreneurial sector of the economy and the 
local population. An argument in favour of such a  
conclusion is the rather high position of the region in 
the indicators of its contribution to the development  
of the small business sector in Ukraine. For example, 
the share of the regional economy in the total number  
of small enterprises in Ukraine was 5.6%, micro-
enterprises – 5.5%, individual entrepreneurs – 6.7%. 
The contribution of small enterprises to the economic 
parameters of the development of this sector of 
the economy was even higher: in employment 
promotion – 6.1% in the enterprise segment and 5.6% 



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in the sole proprietorship segment; in the volume  
of sales of small enterprises – 5.7% and of sole 
proprietors – 4.4%.

The development indicators of small enterprises 
within the regional economy remain high. The share 
of small enterprises in the total number of legal entities 
was 94.8%, and in the sole proprietorship segment 
it was 83.7%. Similar indicators for the number of 
employees were 29.6% and 33.5%, and for sales of 
products (services) – 26.6% and 13.4%. It is important 
to note that the small business sector in the region 
is undergoing consistent development. Between  
2010 and 2022, the number of small enterprises 
increased by 2.3% (in the micro business sector, this 
figure was 3.1%), and the number per 10 thousand 
persons increased by 3.9% (in the micro-enterprise 
sector, this figure was 4.7%). Concurrently, the number 
of individual entrepreneurs in the region exhibited 
a 29.5% increase, with a corresponding rise of 31.5% per 
10 thousand persons.

Consequently, favourable developments in the sphere 
of small business are both a prerequisite for increasing 
the volume of investment inflows into the regional 
economy and a factor that positively affects the quality 
of the investment environment.

5. SWOT Analysis of the Investment 
Environment of the Region  
(on the Example of Lviv Oblast)

In light of the aforementioned findings, and drawing 
upon the findings of other research in this field, it is 
recommended that conclusions be drawn regarding 
positive and negative practices, strengths and 
weaknesses, as well as further opportunities, prospects, 
and threats to the development of investment processes 
in the region (Figure 3).

At the intersection of strengths and opportunities 
identified by the SWOT analysis, prospects are 
identified. The implementation of these prospects 
serves to reinforce the influence of the course's 
investment processes in the region, as well as to utilise 
existing favourable opportunities for their activation 
and efficiency.

Consequently, at the nexus of vulnerabilities and 
threats, pivotal challenges are emphasised that regional 
and local authorities must address to safeguard the 
investment potential of the region and its territories, 
thereby averting the implementation of threats to 
business entities and the stability of the regional 
socio-economic system. Concurrently, it is imperative 
to capitalise on emergent opportunities (including 
leveraging existing strengths) and evaluate their 
impact on mitigating the deficiencies in the prevailing 
investment landscape, the integrated investment 
climate, and the quality and structural attributes  
of the economy's investment attractiveness.

It is imperative to consider and rely on the state and 
dominant characteristics of the investment environment 
of the regional economy, including their evolution and 
changes that have occurred during the full-scale war 
phase.

6. Tools of the Regional Policy  
for Implementing the Region’s Investment 
Potential

Drawing upon the findings of research conducted 
on a global scale, it is possible to summarise the 
key provisions of the regional investment policy  
(see Figure 4). It is important to note that in  
conditions of political and economic instability, 
military conflicts, and full-scale war, the tools of the 
regional investment policy are becoming more focused 
on the issues of economic security, which is a natural 
development. Primarily, it is imperative to curtail 
military risks, which have a tendency to stifle investment 
initiatives and generally function as prevailing 
disincentives to economic activity. Ensuring success 
in this domain would facilitate the preservation of  
pre-war or pre-crisis levels of management and 
macroeconomic proportions.

The subsequent point pertains to the utilisation of 
all opportunities and resources for the restoration 
of general and critical infrastructure facilities. This is 
a particularly challenging undertaking in conditions 
of financial and resource scarcity, when the majority 
of budgetary resources are allocated to the military.  
To this end, all available alternatives must be considered. 
The authors are of the opinion that concession 
agreements and private-public partnerships regarding 
investments in infrastructure facilities should be utilised.

Another element of the policy is infrastructure 
security through the introduction of investment tools in 
the defence-industrial complex and industries/sectors 
of critical infrastructure. It is imperative to safeguard 
energy facilities, the region's transport and logistics 
system, medical institutions, and pharmaceutical 
enterprises. The raw materials present within the 
territories are of significant value and should be optimally 
attracted and effectively utilised. Consequently, it is 
imperative to provide support for projects utilising  
these natural resources, which serve as the raw materials 
for other production sectors, including the agro-
industrial complex, industry, and construction. 

In conditions of war, it is advisable to stimulate 
investments not only in security and defence, but also 
to significantly ensure their development based on 
innovation and technological modernisation, which 
will contribute to strengthening the technological 
security of the economy of the region and the country 
as a whole.

It is evident that a number of factors are pertinent 
to the utilisation of investment potential in order to 



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Vol. 10 No. 5, 2024 

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enhance social security. These primarily encompass 
investment initiatives focused on the preservation  
and enhancement of general social infrastructure 
facilities, as well as the reduction of social vulnerability 
among the population, including IDPs and refugees. 
Other key areas include the promotion of social 
inclusion, societal consolidation, social integration, 
and the labour adaptation of demobilised persons  
and war veterans. Consequently, a distinct avenue  
of state support is constituted by business investments 
initiated by these vulnerable categories of the population. 

In the context of war, exports assume a pivotal 
role in generating GDP and generating employment 
opportunities within the population. Moreover, they 
facilitate the sale of products in foreign markets, 
particularly in instances of domestic market 
oversaturation and a decline in the aggregate demand of 
the population. Furthermore, these exports contribute 
to the foreign exchange earnings of the economy, 
thereby fostering monetary and currency stability.  
For this reason, regional investment policy is  
also focused on supporting and stimulating the 

Figure 4. Key provisions for the formation and implementation of regional investment policy

Source: authors’ development

Policy objective: increase volumes, increase efficiency, and improve 
the structure of investments. 

Policy tasks: 
 Formation of a transparent competitive environment;
 development of the institution of property rights protection;
 investment in strategic sectors;
 ensuring structural reforms;
 orientation towards the competitiveness of the economy;
 support for sustainable balanced development processes.

Regulatory mechanisms: 
 Institutional;
 economic;
 organisational;
 socio-psychological;
 informational.

Tools and means of the policy implementation 

in conditions of war, and economic instability: 
 Insurance of military risks, and their
diversification (macroeconomic security);
 use of concession agreements (resource
security);
 private and public investments in the
military-industrial complex and critical
infrastructure industries/sectors (energy, transport
and logistics, medicine and pharmaceuticals,
natural resources) (infrastructure security);
 support for innovation and technological
startups in the areas of security, the real sector of
the economy, and infrastructure (technological
security);
 stimulation of investments in the
preservation of human potential; support for
investments in business projects of demobilised
persons, war veterans and other combatants
(social protection);
 stimulation of investments in the
development of export potential to preserve the
country’s financial security, etc.

Expected results: 
 Attractive investment climate;
 increase in production capacity;
 development of investment infrastructure;
 increased motivation for private
investment.

under standard conditions: 
 Introduction of tax incentives;
 application of public and private
partnership instruments;
 development of public and private
investment;
 improvement of the system of elements
of financial and investment support;
 expansion of budget investment
programs;
 use of investment opportunities of
interstate co-operation;
 modernisation of investment 
infrastructure; 
 development of the financial sector of
the country/territories;
 impact on reducing the cost intensity of
business entities;
 support for the creation and
development of production and investment
clusters;
 provision of financial and resource
support for the promotion of investment
projects, etc.



Baltic Journal of Economic Studies  

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Vol. 10 No. 5, 2024 
implementation of investment processes to expand the 
export potential of the regional economy. The policy 
is focused on the implementation of projects that aim 
to increase export volumes, expand the production 
capacity of the processing industry, and enhance 
transport and logistics systems.

7. Conclusions
In the context of a profoundly intricate external 

business environment, characterised by numerous 
factors, including armed conflict, regional authorities 
and local governments must prioritise investment 
policy measures that are designed to stimulate 
investment activity, while concomitantly seeking to 
minimise the challenges and threats that are associated 
with this process. Concurrently, the imperative of 
ensuring investment security as a state of safeguarding 
the economic interests of business entities, society,  
and the nation from investment risks and threats 
assumes paramount importance. The overarching 
priority of regional investment policy should be 
the establishment of a conducive economic and 
legal environment for entrepreneurial activity and 
investment climate. This is a fundamental market 
prerequisite for business development, the desire to 
invest, and, consequently, the ability of the regional 
economy to form and attract investment resources. 
Other investment policy priorities related to the 
allocation and effective use of investment resources 
are based on it, namely: stimulating the development 
of economic sectors, territories, types of economic 
activity and industries; increasing production capacities 
and achieving processes of expanded reproduction; 
strengthening the competitiveness of strategic 
enterprises through innovative and technological 
development and technological modernisation; 
preservation, development and effective use of human 
capital; improving the quality of life; digitalisation  
and technologisation of all spheres of public life.

Compared to other regions of Ukraine, the Lviv 
Oblast is characterised by a sufficiently large domestic 
market and a high level of development of the real 
sector, financial, credit and investment infrastructure, 
transport, logistics and trade systems, construction 
complex, educational, scientific and ICT potential, 
a significant population and a good geographical 
location. However, the shortcomings and weaknesses  
of the region's investment development remain,  
namely: the presence of systemic flaws in the region's 

investment climate; small volumes of investment and 
limited rates of its growth; low investment activity  
in the areas of the real sector of the economy with 
high added value; low investment in intangible assets; 
critically low volumes of foreign investment, especially 
direct investment; limited public, intermunicipal 
and cross-border investment; underdeveloped risk 
financing system for investment in innovation; 
underdeveloped stock market; small role of bank 
lending. Simultaneously, the region is distinguished by 
advantageous prospects that ought to be capitalised 
upon, with the objective of further catalysing, 
expanding, and optimising investment procedures. 
These encompass the incorporation into the European 
financial and investment market; the migration of 
industrial capital from the eastern to the central 
and western regions of the country; the cultivation  
of cross-border collaboration in investment activity; 
and the mobilisation of public investment in local 
development, among others.

A proactive and high quality regional policy for 
the implementation of the investment potential of 
the region should also be aimed at overcoming and 
eliminating threats to the further development of 
investment processes in the region, which are mainly 
the prolongation of the war and the aggravation of 
security challenges; the deterioration of the economic 
situation, the stagnation of the production sector;  
the demographic crisis, the depopulation of the 
territories, the loss of human capital; the black 
economy and the outflow of capital; the high level of 
external migration of enterprises; the loss of the basic 
components of innovative and technological potential; 
the increase in structural and spatial disparities, 
sectoral disintegration, socio-political uncertainty  
and continuing institutional instability.

Effective tools of regional investment policy in 
the context of critical instability include: military 
risk insurance and diversification; use of concession 
agreements; public-private investment in the defence 
industry and critical infrastructure industries/sectors 
(energy, transport and logistics, healthcare and 
pharmaceuticals, natural resources); promotion of 
innovative and technological startups in the security, 
real sector and infrastructure sectors; stimulation 
of investments in human resources; support for 
investments in business projects of demobilised 
persons and war veterans; stimulation of investments 
in the development of export potential to maintain the 
country's financial security.

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Received on: 13th of October, 2024
Accepted on: 28th of November, 2024
Published on: 30th of December, 2024