40% of CEOs expect the improvement of the business climate during the next 6 months
Although the sentiment of entrepreneurs about the current state of the investment climate is not so optimistic. These are the conclusions of the Investment Attractiveness Index of Ukraine, which is measured twice a year by the European Business Association. According to a new wave of the survey for the second half of 2019, the index value is currently at 2.95 points out of 5 possible and is still in the negative area. Although compared to the previous period, the index rose slightly (2.85 in the first half of 2019).
The sentiment of the CEOs of the EBA member companies continues to fluctuate. Thus, 39% of CEOs consider investment climate to be neutral in Ukraine, while those who think it is rather unfavourable make up 37% of the respondents, and another 7% – extremely unfavorable. And only 17% of top executives gave a positive assessment of the business environment. It should be reminded that during the previous wave of the survey the business climate there were 19% satisfied with the business climate, and 25% of those at the end of 2018.
Business assessments of the dynamics of the investment climate have been rather controversial. Almost half of the respondents – 46% of CEOs believe that the investment climate remains constant compared to the previous 6 months, while 28% believe it has become better and 26% think it has declined.
Among the positive changes observed by the business over the last six months, CEOs noted the gradual stabilization of the political situation, the start of the reform of the land market, stable national currency, reform of the Tax and Customs services, the launch of the concession mechanism, the start of the Supreme Anticorruption Court, decrease in inflation, the abolition of dividend repatriation limits, increase in consumer buying power.
The top problems are traditionally high level of corruption, weak judicial systems, labour migration. Entrepreneurs also complain about the hasty and unsystematic work on tax changes, the slow de-bureaucratization of business processes, the situation around the National Bank and pressure from law enforcement agencies, the slow modernization of infrastructure, the potential breakdown of cooperation with the IMF, the turbo regime of the new government and populism.
However, despite the negative assessment of the current situation in the country, the business remains optimistic about the future. Thus, 41% of directors expect that the investment climate will slightly improve over the next six months, although 53% doubt whether Ukraine will be a profitable market for new investors.
The moods of general managers have gradually leveled off after the stressful start of the year, a period of political turbulence in the country. It’s good news that the index value again came close to the neutral mark of three points. This means that the business had a chance to become sure the reforms were continued and that the new authorities were adhering to the European integration course. The CEOs have already positively commenced work on opening the land market - although traditionally this has been one of the top 4 problems. We hope that in the next wave of the survey, we will see progress in the fight against corruption, judicial reform, combating smuggling and the shadow economy and creating favorable conditions for work in Ukraine.
HOW WE MEASURE THE INDEX
The European Business Association has been conducting research on the
“Investment Attractiveness Index of Ukraine” since 2008. Throughout the history of evaluation, the Index has not reached the positive value – above 4 points.
We ask our company members’ directors 5 questions:
1) What are your thoughts concerning the investment climate in Ukraine?
2) How do you evaluate the current investment climate for your company compared to the previous 6 months?
3) What are your predictions for the investment climate in the next 6 months?
4) Will it be profitable to invest in Ukraine in the next 6 months?
5) What are your expectations for conducting business in your field in the next 6 months?
122 company leaders of the largest international and Ukrainian companies have taken part in this wave of surveys.
For the Index calculations, we use a Likert scale which has 5 gradations. For that scale, 1 is very negative, 5 is very positive, and 3 is neutral.