Rostyslav Korobka: Five steps on the way to investment attractiveness of Ukraine

Today Ukraine is faced with many political, social and economic challenges. From 2014 until today, we have a military conflict with the Russian Federation in the East of Ukraine, our currency is unstable, there are major issues with legal guarantees, taxation, privatization etc. Due to all of these factors, we are still not able to create favorable conditions for foreign investments in Ukraine.  

According to the World Bank Group Report - Doing Business 2017, Ukraine ranks 80 (Europe and Central Asia region). Compared with 2016, Ukraine has moved up one position, showing a  positive tendency.

From 2015 until 2017, the Ukrainian government has reduced at least 50 regulatory acts and rules for national and foreign business, making their business more efficient.  Despite these positive changes, our country dropped from the 43rd to the 98th position in terms of ensuring compliance with contracts.  Also, we can see Ukraine’s fall in the rate of receipt of building permits for implementation of construction projects - from the 70th to the 140th position.

According to experts, one point in the Doing Business rating brings the state up to 600 million USD of investments.

According to all above-mentioned problems, we have identified 5 emerging steps that could help Ukraine recover its economic and political unstable situation and become an attractive country for investments.  

• As soon as possible, with support of our foreign partners, we need to stop the military conflict in the East of Ukraine.  This «war» is the key issue for resolving all challenges and problems

We have no any examples of the investment attractive countries which would have been involved in the military conflicts with economy declining and with political crisis.

The history gives us an example of Georgia case: five days of the war with Russia in 2008 contributed to threefold decline of investment flows. But on another hand Georgia is a «beautiful» example of the reforms efficiency. Many years Georgia takes the leading position in Doing business rates, taxation and regulatory rates for business.

In any case Ukraine is not a military state. We need to close this sad page of our history. 

• Making a reforms in Ukraine  

In Ukraine we have one infectious political disease which called Populism. We need not only to talk about new reforms and changes, make new strategies and action plans but it is very important for Ukraine to start make and implement this changes. To make all transparent and efficient: from regulatory acts to the taxation system of Ukraine. We need to support our small and medium business. Today we have Deep and Comprehensive Free Trade Agreement with EU and Canada. We receive a lot of international technical assistance regarding facilitation of our foreign trade capacity, investment promotion activities, reform of our public sector. I wouldn’t say all this support is inefficient. But for my point of view we need to create some kind of responsibility tools for our government that the countries which provide such assistance would be able to charge back all given facilities because of inefficient use. There is one more important thing that I want to be mentioned is time limit approach. I think that two years is enough for reforms in medical or regulatory sector or in order of decentralization or external diversification. 

• Financial and banking system

We urgently need to build the competitive and transparent banking system in Ukraine. We need to provide tools for SME sector. SME sector is an urgent question for Ukraine. In Ukraine we have very weak middle class. Because of corruption and political crises in Ukraine our government always had been focused on support of large Ukrainian companies.  For 20 years, we slowly killed our middle class instead of strengthen it.                                                                                                                                                       

• State guarantees and judicial system

In 2017 we still have no any state foreign investors protection tools. In the end of 2016 our government established Investment Promotion Office which is basically promotion and lobbying organization. We have National Investment Council in Ukraine which is basically acting as the consultation platform between all higher state authorities which are involved in the foreign investor’s relations. At the local level we have regional state administrations and regional development agencies which are acts more like local lobbying tools and information providing organizations. State guarantees are very important question for the potential investors. Everyone want be protected and feel this protection. As soon as possible we need to set up the State guarantees for investors at the local and national level at the same tome as soon as possible we need to clean our Ukrainian legal system from corruption and state influence to the transparency and independence. 

• Institutional «traps» which we must get rid of  

One and the main trap is corruption. We have it in all levels of our public sector. Populism vs. real reforms - We need to start to do something instead of just planning and hope that someone will come and make changes in all spheres and sectors. We have absence of a short term and long term strategy of economical recovery. We need to establish it and adopt it in all levels and all sectors. We need understanding of what kind of Ukraine we will have in 2020 and then in 2030. We want to be just one of the biggest agriculture export countries? Or we want to become the biggest world hub for Europe like a window on their road to the East? Or we want to be a motherland of the new Facebook or iPhone? We must know this and work hard for these goals. Only in this case we will become an investment attractive country.