We are now approaching the end of another challenging year for Ukraine. Many observers remain somewhat disillusioned by the slow path of reforms in the country during 2016, while others have been encouraged by the many signs of gradual but undeniable progress.
GROUNDS FOR OPTIMISM
One thing we are absolutely certain about is that Ukraine is firmly set on the path of reforms. The country is working hard to deal with external threats while addressing domestic challenges. The state continues to receive international financial and technical support, has a Government made up of willing reformers, and a strong civil society that keeps pushing for real changes. 2016 has seen the continuation of the IMF program, delivery of macro-financial stability, improvements in fiscal and tax policies, and further cleansing of the banking sector, as well as efforts to tackle top-level corruption with the e-declarations initiative.
Compared to the previous year’s results, Ukraine has moved up three places in the World Bank’s “Doing Business” rating, signifying gradual but internationally recognized advancement. Experts from the World Bank calculate that, on average, each point in the rating accounts for an additional USD 500 million of investments into a country’s economy. Compared to the previous year, Ukraine improved its positions in the registration of enterprises, electricity connection, and taxation. In 2016, the general outlook for Ukraine’s banking system was upgraded from “negative” to “stable” by Moody’s Investors Service. Official reserve assets of the NBU recovered from USD 5.6 billion in February 2015 to USD 15.6 billion in September 2016. Furthermore, Ukraine now has 16 working Free Trade Agreements (FTAs) with 45 countries.
2016 was not the most successful for Ukraine in terms of attracting foreign capital. However, a new institution was launched to support existing investors and attract new ones – the Investment Promotion Office under the Cabinet of Ministers of Ukraine. We sincerely hope that this institution will be of real help for business people eyeing opportunities in Ukraine and, most importantly, will effectively implement a national communications strategy targeted at raising Ukraine’s investment profile.
SERIOUS CHALLENGES REMAIN
Although many positive developments have already taken place in the country, some of the most detrimental problems remain largely unsolved. Ukraine continues to suffer from rampant corruption, a weak judicial system, and deeply entrenched bureaucracy. The inability to tackle these issues quickly raises doubts about Ukraine’s commitment to follow the course of much-needed reforms. According to UNCTAD data, Ukraine currently receives one of the lowest amounts of FDI per capita in the entire Emerging Europe and CIS region. To make matters worse, Ukraine has a serious image problem, which was emphasized this year by the Economist Intelligence Unit in its Global Livability Ranking. According to the report, Kyiv is among ten least livable cities in the world. Due to poor protection of intellectual property rights, heavy dependence on foreign creditors, and the systemic challenges described above, the business environment in Ukraine is often seen as hostile by international investors.
EXPECTATIONS OF INVESTORS
Many investors remain cautious about making real commitments. Ukraine will need to show tangible progress on the path of reform in 2017 in order to receive additional capital - something that is of exceptional importance at this stage of national development. By implementing several important tasks, the Ukrainian Government will make the country significantly more attractive in the eyes of both local and foreign investors. Among the crucial elements on this to-do list are further currency control liberalization, transparent privatization starting with the Odesa Portside Plant in December, implementation of measures that ban trading and distribution of illegally imported goods and services and, finally, simplification of tax legislation by adoption of the Draft Law #5368 “On Amendments to the Tax Code of Ukraine regarding Improvement of Investment Climate in Ukraine” which, inter alia, foresees implementation of a single register for VAT refunds.
SAYING THANK YOU
The American Chamber of Commerce in Ukraine held its traditional Thanksgiving Dinner on 19 November at the Hotel Hilton Kyiv and recognized organizations and individuals who have made the most significant contributions to the development of a favorable business environment in Ukraine over the past 12 months and promoted the country’s image internationally.
U.S. Secretary of Commerce Penny Pritzker and the team at the United States Department of Commerce were recognized for strong and continuous support of Ukraine. The Business Ombudsman Council was honored for fighting corruption, simplifying bureaucracy and improving the business climate. Oksana Drozach (Senior Consultant, International Trade and Customs, PwC) was recognized for her contribution to the introduction of the Authorized Economic Operator concept in Ukraine.
The highlight of the ceremony came when AmCham members expressed their most sincere gratitude to the Ukrainian Paralympic Team, which finished in third place at the Rio 2016 Paralympic Games. These inspirational athletes won our admiration for their will-to-win spirit and honorable representation of Ukraine in the international sports arena.
ENTERING 2017 WITH HOPE
We are confident that Ukraine is moving in the right direction. It cannot yet boast a muscular and well-developed democracy or a prosperous economy, but confident strides on the way towards success are being made. To all the skeptics and pessimists our answer would be simple and concise: little progress is not zero progress. Taking into account all the internal and external factors impeding swift economic growth in Ukraine, one can draw a conclusion that the country is doing quite well. The American Chamber of Commerce in Ukraine will continue to support the state in the coming year in its rigorous fight against the old system that opposes vital changes, and will make every effort to guard the interests of the business community.