Every third businessman believes that the investment climate will improve in the next 6 months, – EBA

11/ 07/ 2018

One third of entrepreneurs say that investment climate will improve over the next 6 months, while half believe that it will remain on the same level. These are some of the results of the Investment Attractiveness Index which the European Business Association conducts every six months. The Index for the first 6 months of 2018 stood at 3.1 out of a possible 5 points. The data was released on July 11. View the Presentation The European Business Association notes that for the second year the Index is above three - which means that it got out of a negative space and moved to a neutral one. At the end of 2017 it was 3.03, at the end of 2016 - 2.85, at the end of 2015 - 2.57. Before then, the Index reached the mark of 3.39 in 2011 - one of the highest indicators on record. Anna Derevyanko. Executive Director of the European Business Association. Positive shifts include the fact that, for example, in 2017 58% were dissatisfied with the investment climate, now that number has decreased by 20%. This is significant. But we have a lot of things to work on. A full 38% of investors are still unhappy with the business climate. We see a signal that the country is gradually beginning to undergo changes, but the pace can’t be allowed to drop. The biggest reason for dissatisfaction is the high level of corruption. Nearly half of entrepreneurs mention it as a key issue. In second place - lack of trust in the judicial system (40.6%), on the third place - the lack of land reform (35.9%). Only 28.1% of respondents consider the investment climate attractive for investing. To improve the situation, it is necessary to start working on creating the Anticorruption court, to reform and restore trust to the judicial system, to open the land market, to reduce tax pressure on the wage fund, communicate positive changes and cases, downsize the state apparatus (according to some respondents, even up to 5 times reduction is needed). In addition, to develop innovations and to implement the second level of compulsory pension insurance are hot topics. According to the data, 30.5% of company executives believe that the business climate has already improved over the past 6 months. Business positively evaluates the adoption of three Laws - On Currency, On Companies with Limited and Additional Liability and On the Anticorruption Court. Also, hryvnia stability, development of electronic services and digitalization of the economy - which is a guarantee of transparency and openness - are successes. In addition, the entry of new foreign investors into the market, in particular in the field of retail, automatic refund of VAT, cancellation of bureaucratic seals, and beginning of reforms in the health care system are positive steps. At the same time, entrepreneurs note that the following negative phenomena have occurred: smuggling, which is a barrier to the development of legal business, increasing pressure of controlling bodies, aggravation of the conflict in some parts of Donbas and populism ahead of the election campaign. The EBA hopes government representatives will consider these data while planning their work for the next six months. Research Partner Reference information: The Index consists of three components: investor assessment of the previous period, forecasts for the next six months, and assessment of the current situation. The Index has been measured every six months starting from 2008. The mark of “3” is considered neutral; all the points above 3 mean positive shifts.

View the Presentation

The European Business Association notes that for the second year the Index is above three – which means that it got out of a negative space and moved to a neutral one. At the end of 2017 it was 3.03, at the end of 2016 – 2.85, at the end of 2015 – 2.57. Before then, the Index reached the mark of 3.39 in 2011 – one of the highest indicators on record.

Anna Derevyanko Executive Director of the European Business Association

Positive shifts include the fact that, for example, in 2017 58% were dissatisfied with the investment climate, now that number has decreased by 20%. This is significant. But we have a lot of things to work on. A full 38% of investors are still unhappy with the business climate. We see a signal that the country is gradually beginning to undergo changes, but the pace can’t be allowed to drop. The biggest reason for dissatisfaction is the high level of corruption. Nearly half of entrepreneurs mention it as a key issue. In second place - lack of trust in the judicial system (40.6%), on the third place - the lack of land reform (35.9%).

Only 28.1% of respondents consider the investment climate attractive for investing. To improve the situation, it is necessary to start working on creating the Anticorruption court, to reform and restore trust to the judicial system, to open the land market, to reduce tax pressure on the wage fund, communicate positive changes and cases, downsize the state apparatus (according to some respondents, even up to 5 times reduction is needed). In addition, to develop innovations and to implement the second level of compulsory pension insurance are hot topics.

According to the data, 30.5% of company executives believe that the business climate has already improved over the past 6 months. Business positively evaluates the adoption of three Laws – “On Currency”, “On Companies with Limited and Additional Liability” and “On the Anticorruption Court”. Also, hryvnia stability, development of electronic services and digitalization of the economy – which is a guarantee of transparency and openness – are successes. In addition, the entry of new foreign investors into the market, in particular in the field of retail, automatic refund of VAT, cancellation of bureaucratic seals, and beginning of reforms in the health care system are positive steps.

At the same time, entrepreneurs note that the following negative phenomena have occurred: smuggling, which is a barrier to the development of legal business, increasing pressure of controlling bodies, aggravation of the conflict in some parts of Donbas and populism ahead of the election campaign.

The EBA hopes government representatives will consider these data while planning their work for the next six months.

Research Partner

Reference information:

The Index consists of three components: investor assessment of the previous period, forecasts for the next six months, and assessment of the current situation. The Index has been measured every six months starting from 2008. The mark of “3” is considered neutral; all the points above 3 mean positive shifts.