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Key investors evaluated business climate in Ukraine

20/ 12/ 2017

According to the top managers of EBA member companies, the Investment Attractiveness Index of Ukraine remains in the neutral plane.

The Index has reached 3.03 points on a 5-point scale (Likert scale) at the end of the year. In the first half of 2017, the index left the negative plane for the first time since 2011, thus amounted to 3.15 points. Last year the index was 2.88 and 2.85 points – in June and December, respectively.

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What does “neutral” mean for the current investment environment?

How did top managers of the EBA member companies evaluate the business climate in the country?

What are the predictions of top managers for the next 6 months?

What needs to be done to further improve the investment environment in Ukraine?

We have analyzed the expert assessments of 78 executives of the largest international and Ukrainian companies and have answers to these questions.

GENERAL PICTURE 

The beginning of this year was quite successful for many. Among the positive signals at the time were the Government’s special attention to innovation, IT and the creative economy, capacity building, the opening of additional research centers and terminals, the expansion or consolidation of retail chains, and so on.

The respondents also mentioned other positive changes such as open public data, gradual deregulation, significant development of electronic services (in particular, electronic VAT refund system), simplification of the procedure for obtaining building permits, a moratorium on inspections, weakening currency controls, introduction of private contractors. adoption of a squeeze-out law, etc. Besides, Ukraine has acquired a visa-free regime, which is the marker that the country follows the European model of development.

In the second half of 2017, several positive changes also took place, which is also mentioned by the business. In particular, in June-December, the respondents of the index noted the following “victories”:

  • automatic VAT refund;
  • law ” stop masks-show “;
  • optional sealing;
  • more e-payment options;
  • improving electronic workflow;
  • medical reform, etc.

At the same time, it cannot be said that the situation has changed radically for the better. Also, a certain percentage of respondents (24%) did not notice any positive for their business, and 46% of EBA top managers believe that there were no significant changes, and everything has remained the same.

Such a sentiment prevails in business circles today. And obviously, this explains why the index varies within 3+ range, namely 3.03 points in the 2nd half of this year.

WHY IS IT JUST 3,03?

The results of the index show that the negative sentiments have not gone anywhere. High level of corruption and failures to tackle it, lack of progress in establishing an anti-corruption court, the slow pace of judicial and land reforms, lack of privatization, conflict in the East – these and other factors, unfortunately, do not give investors much optimism.

At the same time, the business has noticed several positive changes that have already been discussed. It seems that such a symbiosis of negative and positive factors has made the current index result. Significant changes have not yet taken place, but there are positive moments that matter.

Going back to the statistics: in the second half of the year, we have 58% of investors dissatisfied with the business climate, while there were 54% in the first half of the year. We see an improvement, but it is insignificant. This again indicates the status quo in this issue throughout 2017. The percentage of satisfied decreased slightly to 11% (in the first half of the year we had 13% satisfied, and at the end of last year there were only 9%).

HOW TO IMPROVE THE RESULT

The top business priorities that require special attention from the government can be divided into 4 main groups:

  • corruption (there is no fight against corruption, its level has increased, there is no progress in establishing an anti-corruption court);
  • economic factors (eg currency instability, devaluation, inflation, cumbersome tax procedures, etc.);
  • slow progress of reforms (lack of judicial reform, labor market reform, land reform, slow modernization of infrastructure, etc.);
  • political factors (political instability, political and legislative uncertainty, “wars” between law enforcement agencies, etc.).

Therefore, in our opinion, the authorities should first of all concentrate on solving these issues, so that next time the index would at least remain at point 3.

*HOW WE MEASURE THE INDEX

The European Business Association asks 5 questions to the top managers of its member companies quarterly:

  1. What do you think about the current investment climate;
  2. Whether the climate has changed compared to the previous quarter;
  3. What are your forecasts, how will the investment climate change in the next quarter;
  4. Whether it will be profitable to invest in Ukraine in the next 3 months;
  5. What changes do you expect in your industry for the next quarter and one bonus question – which of the public authorities is currently the most and least effective?

We use the Likert scale, which has 5 gradations, where: 1 is extremely negative and 5 is extremely positive. 3 – neutral.

Research Partner 

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