Parliament approves investment nanny bill

Ukraine’s parliament approved on July 21 the
“investment nanny” bill, which offers assigns state assistance and oversight to
large investment projects. The bill provides a 15-year state guarantee on
foreign investments upon signing a direct special agreement with the Ukrainian
government. The state assigns a manager to each project who is responsible for
the successful preparation and fulfillment of the project. Among the changes
since the president’s original proposal is lowering the required investment to
USD 35 mln, instead of USD 100 mln. The foreign investments also gain an
exemption from the profit tax, value-added tax and customs duties for new
equipment imported to Ukraine.

The bill simplifies the process for obtaining land for
these investments, while the building or reconstruction of necessary infrastructure
will occur at the state expense, including roads and utilities. Total state
support can be valued at up to 30% of the project’s cost. The project must be
completed in five years, must create at least 150 new jobs, with the average
wage at least 15% higher than the wage in the same industry in the region.

Zenon Zawada: This measure
is the latest one-off political solution offered by the Zelensky administration
to address a problem that otherwise needs commitment to large-scale planning
and a long-term strategy. It also reflects President Zelensky’s penchant for
autocratic rule, or rule by telephone, in which he or his closest officials get
personally involved in decision-making processes that should occur at
institutions independently. After all, for the appointed nannies to be
successful, they will need the personal backing of the president to deal with
non-compliant or corrupt officials.

Most of the 244 votes for this bill came from the
pro-presidential People’s Servant party, with no support from the pro-Western
parties (though most of these projects would likely come from the West).
Critics raised the same arguments that we have made as this proposal has
evolved. Namely, the government needs to be committed to intense and long-term
reforms in law enforcement and the judiciary that will make it comfortable for
all foreigners to invest in Ukraine, rather than a select few. They also said
too many incentives are being offered at the expense of state revenue generated
from such projects. Although it’s possible that’s the case, it’s not certain
without crunching the numbers of each project.

As we have said, the
investment nanny is an embarrassing admission that Ukraine is not a safe place
for foreign investment. Moreover, the appointed nannies could very well find
themselves having just as much trouble navigating through Ukraine’s murky
bureaucracy as anyone else (even with Zelensky’s direct involvement). But
ultimately, we have to view any investment initiatives as positive, or at least
better than nothing.