Ukraine investment conditions have worsened, CEOs say in survey

Ukraine’s ranking on the European Business
Association’s Investment Attractiveness Index fell in the first half of 2020 to
a negative score of 2.51 out of 5.0 from 2.95 in the prior period, according to
the survey published on July 2. Only 4% of the surveyed CEOs view the business
climate as favorable, compared to 17% in the prior period. About 62% view it as
unfavorable, while 34% are neutral. When asked about the dynamics of Ukraine’s
business climate, 55% said it has worsened from the prior six months, 35% saw
no changes and 10% said it has improved. That’s despite identified
accomplishments such as the launch of the farmland market, the floating
currency, the new IMF loan program, a cut in the discount rate and the stable
hryvnia.

Besides the traditional negative factors (the weak
judicial system, the absence of progress in combatting corruption, the large
role of the shadow economy), survey respondents cited new ones, namely
restrictions related to COVID-19, political and economic instability caused by
rotating officials, higher tax pressure and changes to the tax code and reforms
being halted. Only 15% of CEOs expect an improvement in the investment climate
in the next six months. In the second half of 2019, 41% of CEOs expressed
optimistic expectations, 44% expected no changes, while 41% were concerned
about worsening conditions. The survey was conducted by the EBA and the Vasyl
Kisil and Partners law firm.

Zenon Zawada: This survey indicates Ukraine’s CEOs are not impressed with the
Zelensky administration, which claimed that improving the investment climate
would be among its top priorities. It even submitted the legislation for its
Investment Nanny project to parliament this week. Yet corporate executives
understand that these nannies are likely to face just as many difficulties as
their own employees, and especially their lawyers, when dealing with the
Ukrainian bureaucracy and courts. We agree with the conclusions reached by
Ukraine’s CEOs and expect rough investment conditions in the next few years.