WEB-ресурс научно-практических конференций

Zakharova K.

Taras Shevchenko National University of Kyiv, Ukraine

THE IMPACT OF MACRO FACTORS ON THE CURRENT STATE OF UKRAINE 'S INVESTMENT CLIMATE

The influx of foreign investment is one of the key criteria of the country’s status and the success of its entry into the world economy. Therefore, it can be stated that the issues of attracting investment capital into the economy of Ukraine is very important, and which is why the efforts of many academic economists are being focused on its investigation and search for effective implementation of investment projects in Ukraine.

In 2010 4,681.2 million U.S. dollars was invested in Ukraine 's economy by foreign investors: 3,617 million dollars (77.2% of total)-direct investment from EU countries, 728 million dollars (15.5%) – from Russia . Among individual countries Cyprus should be allocated, its investments account for almost a quarter of all Ukrainian FDI; it is followed by Germany, with its 15% share in Ukraine’s FDI, then comes the Netherlands (10%) and Austria – 7%. Total volume of foreign direct investment on January 1, 2011 amounted to 44,708.0 million USD [2] .

One of the largest recipients of foreign direct investment in Ukraine last year was the banking system. However, these funds were mainly received by current financial structures from their parent companies, and they were not meant to be used for development, but only to maintain the solvency of banks during the crisis. Another characteristic of Ukrainian investment is that much of the incoming investments of past years were, in fact, not investments, because they came from Cyprus , which is an offshore zone. That means these investments were actually just refunds from the offshore.

To assess the current investment climate in Ukraine a great attention should be paid to international rankings of business and competitiveness of our country’s economy on the basic parameters.

According to World Bank and International Finance Corporation's project “Doing Business” an annual "Doing Business" index, which is an integral indicator of the 10 ratios that influence its formation, is calculated for each country. In the latest report “Doing Business- 2012” Ukraine was ranked 152nd place out of 183 countries studied (Table 1) .

Table 1. Ukraine ’s topic rankings in “Doing Business” 2011-2012 [1]

Reforms relating to four areas out of ten were taken into consideration by the new “Doing Business- 2012” . A year ago, positive changes were noted in three areas, the year before last year – only one. Since the publication of the previous “Doing Business” report the Ukrainian government managed to implement reforms in the areas of starting a business, dealing with construction permits, resolving insolvency and taxation.

The biggest shift is made in the regulation of starting a business. During this year Ukraine climbed six steps up in this sphere, including last year – 24. This result reflects the following novations : reduction for the companies’ required authorized fund, introduction of the declarative principle in the permit system, the model statute, et cetera.

Although formally there was an improvement in the tax area, the assessment of these improvements have not been performed yet. The reason for this is that the rating takes into consideration the period from January ,1 to December,31, in this case of a year 2010, and the Tax Code of Ukraine came into force on January,1 2011. Therefore, its impact has not yet been reflected in the current study. So in "paying taxes" indicator our country still takes 181 place out of 183 possible.

According to the ranking, potential investors in Ukraine will spend the most time on establishing new production capacity. To obtain a building permit in Ukraine entrepreneur spends more than a year – 375 days and more than 274 day goes to have electricity connected. In terms of problems with the connection of electricity Ukraine is put in 169th position.

Another problem of Ukraine ’s investment attractiveness is the conditions for foreign trade. They have never been particularly convenient in our country, but in the last year conditions for exporters and importers have deteriorated significantly. Mainly because of problems at customs Ukraine 's last year rating in the international research “Doing Business- 2012” has not risen, but fell 3 steps down. During this year total cost for one container registration for export from Ukraine increased by 300 USD – up to 1856 USD, and the cost for import increased by a third – to 2,155 dollars per container [1] .

However, on November 3, 2011, the Customs Code in new edition was adopted. The new version introduces electronic declaration of goods and reduces the time of customs clearance up to four hours; introduces the norm of authorized economic operator (id est a company that can pass customs control using a simplified scheme). The law also introduces a new system of risk analysis and reduces the list of documents required for clearance. Whether this event is going to change Ukraine 's position in the ranking or not will be seen only in the following year.

According to the annual survey conducted by the World Economic Forum, among the factors that impede the development of entrepreneurship and business in Ukraine the most are the following (the percentage of respondents who chose this option is indicated in parentheses): political instability (16.5%), access to financial resources (13.5%), corruption (10.3%), the tax legislation (10.1%), government action (9.8%), inflation (8.4%), bureaucracy (8.2%) currency regulation (6.5%) tax rate (3.9%) [3] .

To sum up the above, it can be argued that to improve the investment attractiveness of the country the first thing that government should do is create an enabling political and legal environment by entering the tax system that would not restrain business and investment activity (expansion of the use of tax credit for investment, reducing the rate of a single social tax, et cetera) and reducing administrative barriers, because so far the government system in Ukraine continues to work less on development, but on formal control, and this considerably weakens the competitiveness of the domestic economy.

The list of references:

1. Materials from Doing Business 2011 report [Web resource]. – Access mode: http://www.doingbusiness.org/reports/global-reports/doing-business-2011

2. Site of the State Statistics Committee of Ukraine [Web resource]. – Access mode: http://www.ukrstat.gov.ua

3. World Economic Forum statistics [Web resource]. – Access mode: http://www.weforum.org

4. Снежко Е. Закон и реальность / Е. Снежко , Д. Рябкова // Инвест газета . – 2011. – №44. – С.10-13.

5. Красильникова И. Сила воли / И. Красильникова // Инвест газета . – 2011. – №40. – С. 12 -15.