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2022 – View from the EBA: A Year of Real Change

14/ 01/ 2022
  Anna Derevyanko. The European Business Association Executive Director. 2021 was a year of challenging transformation, not only for Ukraine but for the whole world. Some important things were, nevertheless, missed. In 2022, it’s time to focus on what we, as a country, can do to enhance our development and correct the mistakes of the past – so a year of real and effective change beyond just hopes and expectations. What do I mean?. Unfortunately, businesses don’t see great progress in fundamental reforms concerning the rules of the game, such as fair rule of law and effective law enforcement. This has been true at least for the last 10 years, while the European Business Association (EBA) has been conducting its Investment Index research. Each year, the EBA’s research shows that investors’ sentiments tend to fluctuate between 2 and 3 points out of 5 and have never reached the maximum score. In other words, even when the country’s macroeconomy is stable, not many dare to invest in Ukraine. And without fundamental reform or an increase in investment, there is little reason to expect any economic growth beyond gains arising from the anticipated post-COVID rebound. When corruption, rather than efficiency, investment and fair competition, becomes the main source of economic success, it clearly becomes a drag on growth and welfare. No wonder therefore that the richest nations are also the ones that are generally assessed to be the least corrupt. Unfortunately for Ukraine, the poisoned cherry on the cake has been renewed and growing tensions with neighboring Russia. What are the consequences?. In 2021, investment sentiment slightly deteriorated (to 2.7 out of 5) and COVID-19 is hardly the reason. Reasons include stagnant reforms, geopolitical tensions, the energy crisis, imperfect public administration, a complex tax system and constant rotations in the government. Is there a solution?. To be transparent, businesses and authorities have to be on the same page – that is to work to make the country stronger, join together and really listen to each other. Sure, sometimes it seems that working alone can bring results much faster. But we need to balance both speed and effectiveness to make Ukraine a country attractive for doing business as well as living. Therefore, transparent businesses need more dialogue with the country’s leaders to help stimulate positive changes. And yes, industry is looking forward to meeting the President this year! As recent practice shows, comfortable and progressive countries do not lose investors, even in times of crisis. For example, investment in Sweden more than doubled last year from $12 billion to $29 billion. Meanwhile, it grew from $18 billion to $26 billion in Israel, and from $15 billion to $17 billion in Japan. It would show real progress for Ukraine to be on this list in the near future. Effective dialogue does bring effective results and each year we see it in the EBA. For example, in 2021 thanks to cooperation between business and government, a new land market along with urban planning reforms were launched, the use of registrars of settlement operations was not postponed, and VAT rates on grain and oilseeds were reduced from 20% to 14%. In addition, the country has digitalized dramatically – in tax, customs, issuance of warranty cards in electronic form, and through the launch of the “Diia” service. Macroeconomic stability was preserved, the exchange rate was maintained, and “Diia City” was taken forward for further IT development. Ukraine isn’t alone in enduring difficulties whilst in the throes of massive change. Indeed, progression is very much a marathon and not a sprint. Prosperity can be achieved by hard work, solid governance and justice. It also requires harmony, trust and respect, with fair competition and everyone in the country playing an active role. Industry is almost certainly ready for that scale of change. Among 1000 companies representing the biggest Ukrainian taxpayers, we see a push to become more active, willing to talk about difficulties to solve them together and to embrace dialogue with the authorities. Therefore, in 2021 the EBA received the largest number of collective appeals from businesses ever, with resolution rates of 68% (from 374 appeals) and 85% (from 165 appeals). Thinking back to 22 years ago when the EBA started operating, a shared approach would hardly have been imaginable, but today we can see the art of the possible. On a final note, it is worth emphasizing that challenges can be overcome even if the path seems fraught with difficulties. Moreover, if we don’t try, we won’t stand a chance of succeeding. That in itself would be a depressing thought. History tends to repeat itself if lessons are not learned. So, let’s collectively work to put all our efforts into building a stronger country – together – without conflict and with a shared sense of direction. Source: KyivPost
Anna Derevyanko The European Business Association Executive Director
2021 was a year of challenging transformation, not only for Ukraine but for the whole world. Some important things were, nevertheless, missed. In 2022, it’s time to focus on what we, as a country, can do to enhance our development and correct the mistakes of the past – so a year of real and effective change beyond just hopes and expectations.

What do I mean?

Unfortunately, businesses don’t see great progress in fundamental reforms concerning the rules of the game, such as fair rule of law and effective law enforcement. This has been true at least for the last 10 years, while the European Business Association (EBA) has been conducting its Investment Index research.

Each year, the EBA’s research shows that investors’ sentiments tend to fluctuate between 2 and 3 points out of 5 and have never reached the maximum score.

In other words, even when the country’s macroeconomy is stable, not many dare to invest in Ukraine. And without fundamental reform or an increase in investment, there is little reason to expect any economic growth beyond gains arising from the anticipated post-COVID rebound.

When corruption, rather than efficiency, investment and fair competition, becomes the main source of economic success, it clearly becomes a drag on growth and welfare. No wonder therefore that the richest nations are also the ones that are generally assessed to be the least corrupt. Unfortunately for Ukraine, the poisoned cherry on the cake has been renewed and growing tensions with neighboring Russia.

What are the consequences?

In 2021, investment sentiment slightly deteriorated (to 2.7 out of 5) and COVID-19 is hardly the reason. Reasons include stagnant reforms, geopolitical tensions, the energy crisis, imperfect public administration, a complex tax system and constant rotations in the government.

Is there a solution?

To be transparent, businesses and authorities have to be on the same page – that is to work to make the country stronger, join together and really listen to each other. Sure, sometimes it seems that working alone can bring results much faster. But we need to balance both speed and effectiveness to make Ukraine a country attractive for doing business as well as living. Therefore, transparent businesses need more dialogue with the country’s leaders to help stimulate positive changes.

And yes, industry is looking forward to meeting the President this year!

As recent practice shows, comfortable and progressive countries do not lose investors, even in times of crisis. For example, investment in Sweden more than doubled last year from $12 billion to $29 billion. Meanwhile, it grew from $18 billion to $26 billion in Israel, and from $15 billion to $17 billion in Japan. It would show real progress for Ukraine to be on this list in the near future.

Effective dialogue does bring effective results and each year we see it in the EBA. For example, in 2021 thanks to cooperation between business and government, a new land market along with urban planning reforms were launched, the use of registrars of settlement operations was not postponed, and VAT rates on grain and oilseeds were reduced from 20% to 14%. In addition, the country has digitalized dramatically – in tax, customs, issuance of warranty cards in electronic form, and through the launch of the “Diia” service. Macroeconomic stability was preserved, the exchange rate was maintained, and “Diia City” was taken forward for further IT development.

Ukraine isn’t alone in enduring difficulties whilst in the throes of massive change. Indeed, progression is very much a marathon and not a sprint. Prosperity can be achieved by hard work, solid governance and justice. It also requires harmony, trust and respect, with fair competition and everyone in the country playing an active role.

Industry is almost certainly ready for that scale of change. Among 1000 companies representing the biggest Ukrainian taxpayers, we see a push to become more active, willing to talk about difficulties to solve them together and to embrace dialogue with the authorities. Therefore, in 2021 the EBA received the largest number of collective appeals from businesses ever, with resolution rates of 68% (from 374 appeals) and 85% (from 165 appeals). Thinking back to 22 years ago when the EBA started operating, a shared approach would hardly have been imaginable, but today we can see the art of the possible.

On a final note, it is worth emphasizing that challenges can be overcome even if the path seems fraught with difficulties. Moreover, if we don’t try, we won’t stand a chance of succeeding. That in itself would be a depressing thought.

History tends to repeat itself if lessons are not learned. So, let’s collectively work to put all our efforts into building a stronger country – together – without conflict and with a shared sense of direction.

Source: KyivPost

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