Local companies worsen assessment of the business climate in their regions
The level of regional development is an important indicator for the country, which, among other things, depends on the successful operation of local businesses.
Thus, the European Business Association decided to learn from regional business representatives about the way they work at the local level and how conditions there can be improved. We assessed the experience of companies in four strategic regions where the EBA regional offices are presented. These are Lviv, Odesa, Kharkiv, Dnipro. With this new wave of research, we could also track the dynamics of the business climate compared to last year.
At present, it is difficult for companies in most regions to do business, although last year the situation was assessed as satisfactory. As shown by research, the most favorable place for doing business is in the Western Ukrainian region – 2.95 points out of 5 possible, the second place goes to Kharkiv – 2.69 points, the third is Dnipro – 2.34 points and the last place is South Ukrainian region – 2.25 points. Thus, the integrated index of all regions appears to be in the negative plane.
As for the factors hindering business development, the most common is corruption and bureaucracy. And as for the positives, we should mention that the assessment of transport infrastructure has improved in most regions compared to last year.
Let’s have a detailed look at the situation in each of the regions.
Lviv entrepreneurs rated the business climate in their region the highest of all others. Thus, 52% of respondents say that the level of the business climate in the region is satisfactory (last year there were 74%), while the opinions of others are divided – 24% say that it is difficult for them to do business, and another 24% say that it is easy. Last year, only 6% rated the business environment as favorable.
As the TOP-3 factors that negatively affect the ease of doing business in the region, respondents included (1) bureaucracy, (2) corruption, (3) unsatisfactory state of infrastructure. Last year, this anti-rating in the region was dominated by corruption, and the bureaucracy was in third place.
About 52% assessed the state of transport infrastructure in the region as satisfactory, 29% as negative, and 19% as good. And these estimates have improved significantly compared to last year. As in the previous year, the priority tasks for further improvement of the transport infrastructure included the reconstruction of highways and modernization of railways. More than half of entrepreneurs, namely 52%, assessed the level of development of electronic services as satisfactory, another 38% as good, and only 10% as bad.
Besides infrastructure development, entrepreneurs expect improvement in the work of courts and law enforcement agencies, an effective fight against the shadow economy, and reduce the burden on the payroll fund.
The vast majority of respondents, namely 57% do not expect significant changes in the business climate over the next six months, another 24% hope for positive changes, and 19% fear the situation will worsen. One-third, namely 33% of companies are planning new large-scale investment projects for 2022. Besides, 43% plan to expand the staff, and 86% plan to increase salaries.
On the contrary, entrepreneurs in the Southern region rated their business climate the worst. 56% of respondents say that it is difficult for them to do business in the region, the other 44% consider the conditions to be satisfactory. No entrepreneur answered that it is easy for him to work, although last year there were 13%.
As the TOP-3 factors that negatively affect the ease of doing business in the region, respondents named (1) corruption, (2) bureaucracy, (3) unsatisfactory state of infrastructure. This year, the factor of corruption came to the fore.
71% of respondents rated the state of transport infrastructure in the region as bad and very bad, 25% – as satisfactory, and only 4% as good. And these numbers certify to significant deterioration compared to last year’s ones. Among the most anticipated infrastructure initiatives are the reconstruction of highways, modernization of railways, development of river and sea infrastructure. Almost half of the respondents, namely 48%, assessed the level of development of electronic services in the region as unsatisfactory, another 33% – satisfactory, and 19% – good.
The local companies expect that the reduced pressure from regulatory authorities (it has made it this year to the TOP-3 obstacles to doing business), the development of transport infrastructure, the improved work of courts and law enforcement agencies will help to make the business situation in the region better.
The vast majority of respondents, namely 59%, expect that working conditions will not change over the next six months, another 26% believe that they will deteriorate, and 15% – that they will improve. 41% are planning new large-scale investment projects for 2022. Only 33% plan to expand their staff and 67% of companies can count on a salary increase.
Businesses in the Kharkiv region have also slightly worsened the assessment of current working conditions. Thus, 45% believe that doing business in the region is difficult, another 41% said it is satisfactory, and another 14% believe it is easy. Last year, the majority, namely 61%, assessed working conditions as satisfactory.
The business was divided almost equally into three groups with different opinions on the state of transport infrastructure in the region. With a small difference, the positive assessment prevails – 36% consider that the infrastructure is in a good state. Last year this opinion was not popular. Another 32% consider that the infrastructure is bad and the other is satisfactory. The top tasks for further infrastructure development are road reconstruction, railway modernization, and construction of additional office space. The development of electronic services in the region was assessed by 41% of entrepreneurs as satisfactory, by 32% as good, and by another 27% as bad.
This year, entrepreneurs have completely updated the list of factors that could improve the business climate in the region. It now includes simplification of permitting procedures and the procedure for providing administrative services, expanding the list of electronic services, reducing pressure from regulatory authorities.
The majority (55%) do not expect significant changes in the business climate over the next six months, 14% hope for positive changes, and 32% believe that the situation will worsen. 41% are planning new large-scale investment projects for 2022. At the same time, 55% will hire new employees, and 95% plan to increase wages.
The vast majority, namely 52%, say that it is difficult for them to do business, 43% consider the conditions to be satisfactory, and another 5% refer to them as easy. By the way, the last category was absent from last year’s survey report. The ease of doing business in the region is primarily negatively affected by (1) corruption, (2) bureaucracy, (3) complicated relations with the authorities. The latter factories mentioned only by the representatives of Dnipro in the TOP-3 of negative factors affecting the investment climate.
The Dnipro entrepreneurs, in general, have improved assessments of the state of transport infrastructure. 57% of respondents consider it satisfactory, another 24% as good, and only 19% as bad. To improve the situation, the business expects the construction of the airport, reconstruction of roads, improvement of railway connections.
The level of development of e-services in the region is assessed mostly neutral as 52% consider it satisfactory, and 24% consider it bad and good. Among the main positive changes expected by the business is the reduction of pressure from regulatory authorities, the improvement of the judicial and law enforcement systems, and the simplification of permitting procedures and the procedure for providing administrative services.
Most entrepreneurs, namely 62% do not expect significant changes in the business climate over the next six months, while 24% hope for positive changes, and 14% expect the situation to worsen. Almost half, namely 48%, are planning new large-scale investment projects in 2022. At the same time, 67% will create new jobs, and 81% plan to increase wages.
The survey was conducted from October 19 to November 16 in nine regions of Ukraine. Altogether 91 companies from the EBA regional offices of the European Business Association took part in the survey.