On 12th August 2015, the Ukrainian-British City Club (UBCC) held a panel discussion entitled ‘Doing business in Ukraine in the times of reforms: practical challenges and how to overcome them’.
As Ukraine approaches the 24th anniversary of its independence on 24 August 2015, the implementation of the reform package designed to stabilise the economy and eliminate corruption in the country has finally got under way. Are the reforms progressing fast enough? What does the Ukrainian government need to make the process of implementation more efficient? Do the businesses and foreign investors feel any difference when working in Ukraine? What are the main challenges which businesses have to deal with on the ground? Are there any practical ways to resolve these challenges?
These questions comprised the focus of the panel discussion. Event was moderated by Irina Tymczyszyn, Managing Director of the Ukrainian-British City Club and Global Head of CEE & CIS Team at Bryan Cave.
The first speaker,Volodymyr Khomanets, Minister-Counsellor, Head of Economic Department of Embassy of Ukraine in the UK, presented a government viewpoint on the current situation. He concentrated on the achievements, naming among others: stabilisation of the economy, stabilisation of banking system, and the launch of judicial reform. There is a great attention to Ukraine at the moment, but the country is mostly perceived through the tragic events in the East. The Ukrainian economy is understandably facing difficult times, related to the geopolitical conflict. Nevertheless, most of Ukrainian territory is operating as normal and there are signs of recovery coming soon.
Mr Khomanets acknowledged the IMF support of 17.5 billion USD offered for the coming years, as well as 8 billion USD from a number of other international donors. As a sign of things getting better, Volodymyr named the increase of national reserves by the National Bank of Ukraine (NBU) from 7.3 to 10.3 billion USD. The next target, recently announced by the head of the NBU, would be to increase the national reserves to 18 billion USD by the end of 2015. The public finance deficit is sure to reduce, and the taxation system was considerably simplified (the number of taxes was cut from 22 to 11). Major opportunities for tax fraud were eliminated, due to the introduction of cash registers and electronic systems for VAT refunds.
By the end of the year Ukraine should return to the path of growth. Volodymyr Khomanets, Embassy of Ukraine in the UK
The next goal set by the government is to improve business management and administration. Economic reforms have been implemented not as fast as it was expected, but nevertheless Ukraine intends to apply for full membership in EU in 5 years.
The second speaker, Dmitriy Gilgur, Director and Founder of VimesVC, a business consultancy based in the UK and Ukraine and focused on Eastern European market intelligence, private equity and venture capital transactions.
Mr Gilgur started from the issues of the current situation. The major problem in his view is the bureaucracy in government institutions, which is even worse than corruption. Investors have sometimes hit bureaucratic dead ends, when everything is done according to the books but no results can be achieved. The next problem is the attitude of the Ukrainian government:the Government sees business as a ‘cash-cow’from which they should squeeze money. Among the other problems are the acute lack of credit,the still post-communist mindset of business owners, and the limited exit market.
It’s not a government’s job to create investment climate. Dmitriy Gilgur, Vimes VC
Among the positive sides of the Ukrainian market,Mr Gilgur mentioned the outstanding investment opportunities, the low cost of highly-skilled labour, its geographical location (close proximity of Ukraine to developed European countries), and implicit protection for FDI.
Presentations were followed by the Q&A session. One of the comments from the audience stressed the need for Ukraine to better publicise its successes. Despite the hardships of the past year, there were some very important steps taken, including declaration of income by MPs, declaration by companies of their shareholders, cleaner public procurement via electronic systems.
Ukraine isn’t getting support it deserves. Event participant
Volodymyr Khomanets holds a Ph.D. in Economics and has been serving as the Head of Economic Department of Ukrainian Embassy to the UK since May 2012. He joined the Ukrainian diplomatic service in 1996. Before being posted to the UK, he was the Head of Economic Security Division of Policy Department in the Ministry of Foreign Affairs of Ukraine. His previous diplomatic postings included the Republic of Lebanon and the United States of America.
Dmitriy Gilgur holds a MSc in Finance and Economics from the University of Manchester. He worked for eight years in finance in the City of London before founding VimesVC in 2012. VimesVC is based in UK and Ukraine and provides consultancy services in areas of corporate and strategy and direct investment between the two countries.