Ukraine has reported positive, albeit modest, economic growth consistently over the past 15 quarters. Meanwhile, according to the latest survey results, 88% of the American Chamber of Commerce member companies in Ukraine reported increased revenues in 2019 and 65% plan to increase their investments in Ukraine this year.
Ukraine has achieved macroeconomic stability over the past couple of years. It is now time to demonstrate accelerated economic growth. This can only be achieved by boosting Foreign Direct Investment. Here are the 10 steps that can help achieve this goal.
1. Effective judicial reform: Rule of law is critical for business, as it serves as a crucial precondition for investor trust and creates the confidence to put significant capital into Ukraine. This is what investors are demanding. No one should be exempt or above the law. This means effective judicial reform and extends to the mechanisms for selecting judges.
2. Macroeconomic stability: It is crucial to ensure continued macroeconomic stability, central bank independence, and continued cooperation with the International Monetary Fund (IMF). Cooperation with the IMF is seen as a seal of approval by foreign investors who are considering Ukraine. An independent National Bank of Ukraine plays a key role in the country’s macroeconomic stability as it is a powerful signal of trust for foreign investors.
3. Predictable tax policy: Fiscal policy stability and predictability are vital. Value Added Tax (VAT) refunds to exporters and a transparent tax administration are essential. Recent developments with VAT refunds are satisfactory and should continue. Meanwhile, the shadow economy, the illegal movement of goods across the customs border, and duties evasion schemes harm legitimate interests and distort market competition. It is crucial to reduce the shadow market.
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4. Protect investors: Investment and property rights, including intellectual property rights, must be secure. Protection of all investor rights, especially intellectual property rights, are pivotal for twenty-first-century economic growth. It is also important to launch land reform. This will further boost Ukraine’s already sizable agriculture sector.
5. Invest in a healthy nation: Ukraine should look to increase government spending on value-based healthcare and enhance food safety to safeguard public health. Government healthcare expenditure has been increasing, but spending needs to be at least double where it is today. A vibrant, healthy nation is the clear objective. With this in mind, the government should implement a waste management strategy based on an Extended Producer Responsibility model.
6. Boost exports: Proper implementation of the Authorized Economic Operators Institute and further improvement of the Single Window for import-export operations will boost international trade. Automation and simplification of customs procedures along with harmonization with the world’s best practices are important to improve and expand import-export operations.
7. Attract infrastructure investment: Business is ready to invest in Ukraine’s ports, railways, river transport, roads, and air transport. The right legislation must be implemented that will encourage private sector investment in Ukraine’s infrastructure.
8. Transparent privatization: The three-dimensional transparency of privatization, meaning transparency of the asset, transparency of the buyer, and transparency of the privatization process itself, are the key to its successful implementation. This, in turn, will help to increase the efficiency of state-owned enterprises, create new jobs, increase budget revenues, and help to combat corruption in the SOE sector.
9. Reduce labor migration: Greater efforts are required to reduce the outflow of human capital abroad. This means policies that encourage citizens to live, work, and invest in Ukraine. In today’s world, the competition to attract the best white collar and blue-collar talent is global. Ukraine must grow talents and fight for them by providing all the necessary conditions for the workforce to want to live and work in Ukraine.
10. Enable energy independence: Ukraine has the resources to become energy independent. The adoption of a new subsoil code, increasing transparency, deregulation, strengthening institutional capacity, as well as modernizing and simplifying access to oil and gas geological information, are what investors are looking for. Ukraine’s government should safeguard the stable operations of renewable energy producers in the new electricity market. No retroactive decisions should be made in the green energy sector.
The business community currently has a first-class dialogue with the Ukrainian government. We clearly see that the president, prime minister, national and local government officials, and MPs all understand the importance of boosting Foreign Direct Investment. The companies already operating in Ukraine are the country’s best ambassadors. Their success is an advert for further FDI and economic growth. We are ready to work together in making Ukraine a better place to do business.
Andy Hunder is president of the American Chamber of Commerce in Ukraine. He tweets @AndyHunder
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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.
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