Will NSDC’s Recent Decision Change Investment Situation in Ukraine?

NSDC resolutions task authorities to make Ukraine’s domestic investment climate more attractive than in some of the neighboring countries. NSDC’s recent sitting noted, among other things, that foreign inland investment procedures remain nontransparent and too expensive, so they have to be replaced with new ones acceptable to potential investors. NSDC Secretary Petro Poroshenko told journalists after the sitting that “the state must take several concrete steps to add to [the investor’s] confidence and investment influx. He believes that there are a number of industries where “the state won’t survive” without direct investments.

Volodymyr SPIVAKOVSKY, president, Ukrainian Brand Guild:

I think that these decisions will certainly help foreign inland investment influx in Ukraine. I also think that the [Ukrainian] government is finally reaching a consensus of sorts. Issues relating to land and business are being resolved; there is headway in privatization in all its manifestations. An overload in the economy appears to me as good for business as a PC being rebooted now and then.

It would be difficult for me to single out any decision having a most positive effect on the investment climate because I wasn’t present at the [NSDC] sitting and no one has informed the public about its resolutions. The latter are being kept secret. For me, the most important thing is that they discussed a range of issues that are of utmost importance to this country, and that their decisions appear to be largely positive. Even the gas resolution is constructive. I haven’t noticed a single problem stemming from personal controversies, unlike the previous government that was riddled with them. Such overloads will slowly but surely lead the Ukrainian government in the right direction. Things are taking their normal course, even though various political forces are snarling and snapping at each other. Even with the president’s highly controversial “four vectors” we’re making progress. NSDC appears to have finally realized what they should be actually doing. The president’s secretariat is doing some decision-making, the press writes what it likes, business is trying to do its best. So what’s the problem?

Oleksandra KUZHEL, president, Akademiya Analysis Center:

I was amazed by Valentyna Semeniuk’s commentary after the NSDC sitting. She declared that enterprises were allowed land sales. What kind of land? What sales? If they mean farmlands, we have the Land Code forbidding such sales before 2007. I understand that they want to replenish the central budget which is falling apart and can’t be implemented in the first half of the year. Still, I don’t see a specific mechanism. I mean working out a bill, submitting it to the Verkhovna Rada... The situation doesn’t seem clear.

Volodymyr MAISTRYSHYN, MP:

This [NSDC] sitting won’t have any effect on the investment climate. Time to put an end to presentations and declarations; time to resort to concrete actions. We’ll be able to discuss things only after such effective actions. Yet we need far more such actions than at first, when all one had to do was to take a couple of steps toward business to hear everybody talking about improvements in the investment climate. Now we have to travel miles to convince everyone that we’ll never turn back.

Declarations won’t help. They were previously made for appearance’s sake, they made no sense; declarations meant for bureaucrats meant that they would start revising laws, trying to figure out what clause to change and where, this might work, but... For example, we must have a law allowing the importation of equipment to be used in solid production complexes, without the import VAT. While deliberating budget amendments we accepted this standard, but it proved to considerably worsen the investment climate. I know of several enterprises keeping their enterprises at border checkpoints because they have to pay 20% VAT out of $8,000,000 worth of equipment. God knows when this equipment will be activated and will start paying back. Too bad no one at the [NSDC] sitting gave any instructions to change this or any other such situations. There were declarations.

Andriy BLYZNIUK, director, National Service and Trade Development Association:

The situation hasn’t changed much under the new government. Those currently wielding power remain aloof from business as their predecessors; their decisions regularly contradict [domestic business] interests. Yesterday’s [NSDC] sitting was different [from all previous ones] only because the head of the cabinet’s council of entrepreneurs was invited to attend. This served as a good impetus as there was an opportunity to submit one’s own proposals — ones duly considered by the council — and from what I know they reached NSDC. I think that this sitting will have a positive effect on the investment climate. Licensing and registrations procedures will be simplified. Business receives positive signals when others start communicating — or at least when others are beginning to understand it. Such was the case with the simplified taxation bill. Everyone had been expecting it, even those enjoying [the existing] simplified taxation procedures. It was a signal: would they start understanding business or continue ignoring it. Our expectations were justified. Another positive decision related to land tenders. Petro Poroshenko said, “If no investors come to this country, the situation will be a matter of national security.”

The important thing is that such matters are being discussed.

Prof. Oleksiy PLOTNIKOV, Institute of World Economy and International Relations under the National Academy of Sciences of Ukraine:

We have a disgusting investment climate; despite all political changes, nothing has changed for the better in terms of [foreign inland] investment. The increment is precisely what we had last year and the year before. Another thing is who should be in charge of investment. By no means the National Security and Defense Council! Their business is keeping us secure and defended and the absence of investments won’t bother them. Indeed, this topic is worth being dealt with, but with the aid of some other councils or associations. As for the NSDC resolutions, they aren’t likely to affect the investment climate anyway.

Vasyl RADIONOV, director general, PentoPak Co.:

NSDC notes that investors have turned away from Ukraine. Some decisions made by our government haven’t produced any good results for our economy. Thank God they have admitted as much. Our president urged to pay attention to the fact and I hope that he will be heard. At long last directions were outlined that could interest investors, so even those who’d changed their minds would risk investing in Ukraine.

The sitting showed a number of positive aspects, among them the possibility of canceling the deadline of 90 days to have proceeds returned from abroad. Foreign investors whose money “worked” in Ukraine would find this requirement humiliating. It’s nice to know you can open accounts with foreign banks using simplified procedures and enjoy world electronic bank transfer networks. And it was good to hear about the return of free [trade] areas and hopefully, technoparks.

Viktor LYSYTSKY, AKB Privatbank board adviser, ex-state secretary of the Ukrainian cabinet (under Premier Yushchenko):

Today the NSDC resolutions, which I personally find quite correct, won’t have the kind of effect they would’ve had several months ago, I mean before our premier and other politicians took the liberty of interpreting the legislation the way they pleased, primarily in terms of taxation, and who conducted long public discussions concerning reprivatization. As a result, the NSDC decisions turned out a bit belated. Do you really expect foreign and domestic investors to believe that the new decrees will improve the situation or will at least return it to last year’s status? This government must closely follow every step taken by business. Now statements like the one made by Yulia Tymoshenko about the undesirability of the Nikopol Ferroalloy Works should be refrained from, lest businesspeople feel trapped. Then confidence will be restored and decisions will work.