Ukraine is one of the largest exporters in the world of a number of agricultural commodities. It has achieved this status not through careful legislative and public budgetary planning that would have encouraged investment in the agricultural sector, but it has been quite the opposite. One would expect that legislation preventing the purchase and sale of agricultural land and a judiciary that has allowed owners of farms to defraud their creditors would stifle the sector and in many respects it has.

According to the Food and Agricultural Organization of the United Nationa, Ukraine invests three times less into fertilizers than the rest of the world and when you consider the country has about one-third of the total arable land of the European Union, capital investment into the sector is meager ($2.3 billion in 2017). Nonetheless, Ukraine manages to achieve higher than average yields by global standards and has established itself as a serious agricultural player. This achievement is despite its national institutions and is instead thanks to one innate national asset: its fertile soil.

Just like Ukraine’s crops defy their environment, so does the nation’s output of innovation. Innovation thrives in transparent competitive markets with a sound rule of law. Ukraine’s markets, in contrast, are dominated by oligopolies and State companies that have no need to innovate to “succeed” and the country’s legislative framework is far from sound. Safeguarding investments in Ukraine are incredibly complex and deter many potential investors from entering the market.

Invalidating contracts in court, delaying enforcement proceedings ad infinitum and dissipating assets to nominees are all still commonplace. The tax system encourages companies to hire individual contractors, discouraging the creation of wholly integrated enterprises. Furthermore, in 2017, research & development expenditure in Ukraine was 0.45 percent of the gross domestic product, which by the same measure is less than one-quarter of the EU’s expenditure. It is therefore perhaps surprising that, as with its agricultural output, the country manages to defy these odds and deliver innovation to the world on the sort of scale one would expect from a country with a well-developed innovation ecosystem.

Ukraine has produced numerous successful startups such as Viewdle, purchased by Google, Petcube, a California headquartered software company selling products in 18 countries and Looksery, acquired by Snapchat for $150 million. The IT sector in Ukraine is booming and many companies like Amazon’s Ring conduct their R&D in the country.

So if the economic institutions of Ukraine are not to thank for these success stories, what is? Just as it relies on its soil to outperform in agriculture, Ukraine relies upon its entrepreneurial human capital to innovate. The problem with human capital, as opposed to soil, is that it can easily travel! It is the same for intellectual property and therefore is unsurprising that the above-mentioned successful startup companies and their valuable intellectual property rights do not reside in Ukraine. If the country continues to rely entirely on the entrepreneurship of its population to innovate then it will, at best, find itself in the Middle Income Trap whereby it attains a certain income thanks to this innate asset but progresses no further because the majority of the value is captured elsewhere.

Ukraine’s reforms are taking effect as can been seen from the acceleration of the IT sector’s contribution to GDP and the growth in real wages. However, these reforms have mainly been driven by exogenous factors such as programs of the International Monetary Fund, World Bank, and the European Investment Bank.

The country’s innovation and broader economic growth will only rise sustainably if far more reforms pass and the country’s own economic institutions support rather than hinder its innate national assets. It is interesting to think that Ukraine’s soil outperforms that of many global competitors despite yielding less than half its genetic potential. Its entrepreneurs continue to innovate at an impressive rate in similarly constrictive conditions; one can only imagine the growth the country could achieve independently were it to reach its full genetic potential. For this, support must come from inside as well as outside the country.

James Hart is an emerging markets finance expert and partner of Hillmont Partners. Hart started his career in Standard Bank Plc’s Family Office team in London. A board member of a number of European companies and a member of the Supervisory Committee of the Alliance for Public Health in Ukraine, one of the country’s largest charities. James was educated at Eton College and then Durham University, holds an Executive MBA from London Business School.