Results of the Investment Attractiveness Index in the second quarter of 2013

Issue 60, September 2013.

The EBA’s Ukrainian Investment Attractiveness Index for the second quarter of 2013 experienced slight improvements in comparison with the first quarter of this year with the measurement standing at 2.16 points out of a possible five. 40% of respondents believe that the investment climate in Ukraine has remained at the same level.


The research of the Investment Attractiveness Index in Ukraine was conducted by the European Business Association with the support of the research company InMind in July this year, with the participation of 144 CEOs of EBA member companies. Respondents’ views of the Investment Climate remained almost stable.

Results of the Investment Attractiveness Index
The third quarter of 2008 – first quarter of 2013

Investment Attractiveness Index


Methodology: Investment Attractiveness Index is calculated as an average of five components:


• Investment climate in Ukraine (1.7 points)
• Dynamics of the investment climate: last 3 months (2.2)
• Expected dynamics of the investment climate: the next 3 months (2.4)
• Utility for new entrants to invest in Ukraine: last 3 months (2.2)
• Investment climate in the key sector: the next 3 months (2.3)
Looking at the results obtained for each of the components in the first quarter of 2013, a minor improvement can be observed.
When asked what changes have occurred, respondents answered as follows - 40% of experts believe that in the second quarter of 2013 the Investment Attractiveness Index remained at the same level.


Positive trends linked to legislative changes, such as an international investment forum, a stable exchange rate, lowered tax burden, government recognition of the problems with the investment climate and clearer legislation on registration of expats were all noted.


However continuing negative trends such as unscheduled inspections, VAT refund problems, pressure from public authorities, corruption, trampling of laws and judicial weakness were again referred to.

Thus, compared with previous periods the vast majority of experts believe that positive changes have occurred - many of them report that there are expectations for positive changes, while specific improvements were named only by a few respondents.


Erik Versavel, EBA Board Member, Country Manager, ING Bank Ukraine:


The EBA Investment Index is an important measure of confidence and trust in the economic and financial environment of Ukraine. Small ups and downs are typical for comparatively small databases and not very meaningful. High level trends are more important, and now 48% of respondents state that the Investment Climate is “definitely unfavourable” compared to 43% 3 months ago and 4% 5 years ago.
From a financial perspective this negative sentiment reflects quite simply the fact that the Ukrainian economy has been “more or less” in recession since 2H2012, that the Sovereign credit metrics are deteriorating and that external financing flexibility and market access are vulnerable. This goes hand in hand with negative outlooks from external rating agencies.
Sentiment can change quickly on the basis of consistent policy and constructive trustworthy messages. As the natural resources of Ukraine are abundant and potential growth enormous, improvement of economic and financial parameters can follow automatically when trust is re-established.


Anna Derevyanko, Executive Director of the European Business Association:


Although the minimum boost, but forward, indicates that our mutual efforts are not in vain and that we are on the right track. It’s pleasant to note, that positive trends are observed more often, among which there is an international investment forum, a stable exchange rate, government recognition of the problems with the investment climate and clearer legislation on registration of expats.
However, the systematic problems of Ukraine haven’t disappeared yet for such a short period of time but continue to influence investors’ confidence. Reduced purchasing power, limited access to credit, and lack of equal conditions for doing business together with bureaucratic and administrative pressure on business and an unfair judicial system – all the same factors reduce the attractiveness of Ukraine for investors.
We certainly still have work to do, but thanks to our cooperation with the representatives of business and government, directed to overcome the underlying problems and drawbacks of the Ukrainian investment climate, we believe that with small but confident steps we can raise the rate of Investment Attractiveness Index Ukraine in the near future.
For additional comments please contact Yulia Gotsyk, EBA Communications Team Leader, by telephone:
+38 (044) 496-06-01, mobile +380 50 692 9002 or by e-mail: [email protected]


INFORMATION:
The Investment Attractiveness Index of Ukraine: The evaluation of the Investment Attractiveness Index of Ukraine is conducted by the European Business Association with the support of the research company InMind. The index is based on regular monitoring of the investment climate of Ukraine by the first persons of the EBA member-companies.