eba investment attractiveness index

Investment Attractiveness Index with the support of theInMind research company

EBA Investment Attractiveness INDEX

III/2011Conducted by EBA with the support of

InMind research company


2

Project summary• The results of 13th wave of investment climate in Ukraine tracking research.

• Methodology: The EBA Investment Attractiveness Index is assessed as the mean value based on the following five questions:

• What do you think about the investment climate in Ukraine?

• How would you estimate the investment climate for your company in Ukraine at the moment compared to the previous three months?

• What are your expectations of the investment climate in Ukraine over the next three months?

• In your opinion, would it be profitable for new entrants to invest in Ukraine over the next three months?

• What are your expectations of the business environment of your primary industry over the next three months?

• Participants: 122 CEOs of EBA members companies

• Timing: September 7th, 2011 – September 23rd, 2011

• Survey Implementation: the Survey was conducted by EBA with the support of InMind research company


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Key findings

2,56 2,57

3,08 3,25 3,20 3,28 3,40 3,392,56

2,642,222,22

3,14

0

1

2

3

4

5

III/2008IV/2008 I/2009 II/2009 III/2009IV/2009 I/2010 II/2010 III/2010IV/2010 I/2011 II/2011 III/2011

EBA Investment Attractiveness Index


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Key findings

3,7 3,7

2,1

3,5

2,3

3,53,63,8

2,7

2,12,22,3

2,0

2,3

3,1

2,5

3,63,43,2

2,62,5

1,8

2,8

3,2

2,73,23,23,22,7

2,3

3,3

3,13,12,72,7

0

1

2

3

4

5

III/2008 IV/2008 I/2009 II/2009 III/2009 IV/2009 I/2010 II/2010 III/2010 IV/2010 I/2011 II/2011 III/2011

Current Investment Climate evaluationInvestment Climate Dynamics: changes to the previous 3 monthsExpectatin on Investment Climate change within next three months


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Key findings


Investment Climate in Ukraine 3,1 2,3 2,0 2,3 2,2 2,1 2,7 3,8 3,6 3,5 3,7 3,7 2,3

Investment Climate Dynamics: last 3 months

2,8 1,8 2,1 2,7 2,5 2,6 3,2 3,2 3,1 3,4 3,6 3,5 2,5

Investment Climate Dynamics Expectations: next 3 months

3,1 2,2 2,2 2,8 2,6 2,8 3,4 3,0 3,2 3,2 3,2 3,2 2,7

Profitability for new entrants: next 3 months

3,4 2,3 2,4 2,7 2,6 2,5 2,9 3,3 3,2 3,2 3,4 3,4 2,6

Investment Climate of Primary Industry: next 3 months

3,3 2,5 2,4 2,7 2,9 2,8 3,2 3,1 3,0 3,1 3,1 3,2 2,7

General EBA Index 3,14 2,22 2,22 2,64 2,56 2,57 3,08 3,25 3,20 3,28 3,40 3,39 2,56


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Key findings

3,2 3,3 3,4 2,63,43,12,62,62,63,1 2,2 2,2 3,3

3,53,3

3,53,7 3,6

2,42,7

3,2 3,1 3,1 3,2 3,2 3,3

2,72,9

2,42,3

3

2,5

2 2

2,72,3

2,7

3,3

2,3

III/2008Sep,3-Oct,2

N=151

IV/2008Oct,23-Oct,31N=53

I/2009Jan,19-Feb,12N=103

II/2009Apr,6-May,14N=78

III/2009Sep,2-Sep,30N=59

IV/2009Dec,14-Jan,12N=99

I/2010Mar,9-Mar,31N=61

II/2010Jun,1-Jun,18N=113

III/2010Aug,30-Sep,18N=96

IV/2010Nov,11-Dec,3N=110

I/2011Feb,7-Feb,23N=91

II/2011May,16 -

Jun,1N=124

III/2011Sep,7-

23,N=122

General EBAIndex

PresentInvestmentClimate

FutureInvestmentClimate(Expectations)


EBA – Index: Components

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Mean3,1 2,3 2,0 2,3 2,2 2,1 2,7 3,8 3,6 3,5 3,7 3,7 2,3

Investment Climate in Ukraine

The Investment Climate in Ukraine is… (5 point scale)

0

–

+

4%

24% 35% 24%22%

19%

12%

2% 2%

20%

16% 12%

44%

18% 15% 7% 12% 15% 15% 22% 24% 22% 27% 25%

37%

6% 15% 5% 3%20%

50% 49% 49% 51%35%

11%

8%

3%5%

19% 13% 13% 18%24%

2%11% 15%

33% 47% 46% 53% 59%42%

8%

51%

20%19%8%

5% 3%3%4%


5 - definitely favourable to investing

4 - rather favourable to investing

3 - neutral to investing

2 - rather unfavourable to investing

1 - definitely unfavourable to investing

Mean

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Investment Climate Dynamics: last 3 months


0

–

+

7%

41%36%

13%17% 10%

3%0%

1%

14%

28%36%

22% 29% 34%13% 23% 24%

15% 13%15%

34%

50% 19% 17% 49% 47% 50% 56% 46% 51% 36% 30% 43% 40%

12% 13% 5% 4%

26%20% 19% 35% 43% 20%

11%

3% 4%

5%10% 6%

11%14%

22%

1%

40%

6%

2%2%

5%


5 - definitely became better

4 - rather became better

3 - remained the same

2 - rather became worse

1 - definitely became worse

Mean

Mean2,8 1,8 2,1 2,7 2,5 2,6 3,2 3,2 3,1 3,4 3,6 3,5 2,5

9


10

Investment Climate dynamics expectations: next 3 months


0

–

+

2%

24%29% 6% 12% 3%

1% 1% 2%11%

22%33%

29% 32%37%

7%27% 24% 22% 16% 17% 27%

50% 36% 29% 50% 39% 45% 53% 47% 46% 39% 47% 51% 47%

17% 8% 14% 13%

37%

17% 21% 29% 29% 22% 15%

9%6% 3% 1%

3%

7% 9% 9% 7% 9%

3%38%

6%2% 3%


5 - will definitely become better

4 - will rather become better

3 - will remain the same

2 - will rather become worse

1 - will definitely become worse

Mean

Mean3,1 2,2 2,2 2,8 2,6 2,8 3,4 3,0 3,2 3,2 3,2 3,2 2,7


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Profitability for New entrants: next 3 months

Profitability for New Entrants … (5 point scale)

0

–

+

2%

30% 23%14%

19% 16%5%

2% 3%1% 2%

15%

14%32% 24% 39%

30% 28% 15% 19% 16%15% 15%

26%

40% 21% 32% 41% 19% 38% 44% 49% 44% 48% 36% 40% 42%

27%

11%15%

12%13%

18% 23% 29% 25% 38% 30%15%

17%

5%12%

2%5%

12% 6% 8%9%

13%

2%

2%34%

4%4% 9%


5 - Definitely profitable

4 - Rather profitable

3 - Difficult to say

2 - Rather not profitable

1 - Definitely not profitable

Mean

Mean3,4 2,3 2,4 2,7 2,6 2,5 2,9 3,3 3,2 3,2 3,4 3,4 2,6


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Investment Climate of primary industry: next 3 months

Investment climate of primary industry…(5 point scale)

0

–

+

2%

23%23% 6%

10%5% 2% 3% 3%

3%

9%

17% 33%31%

16%24%

13% 18% 24% 23% 19%18%

23%

45% 38% 30% 51% 48% 58% 52% 57% 52% 48% 54% 44% 57%

16%7%

6%22% 13%

33%16% 16% 19% 15% 23% 11%

20%

5%

3%2%

7% 6% 7% 9% 12%

3%25%

10%

7%4%


5 - will definitely become better

4 - will rather become better

3 - will remain the same

2 - will rather become worse

1 - will definitely become worse

Mean

Mean3,3 2,5 2,4 2,7 2,9 2,8 3,2 3,1 3,0 3,1 3,1 3,2 2,7


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Positive Changes in Investment Climate during the last 3 months

3%

2%

2%

2%

2%

2%

2%

6%

6%

3%

66%

9%

No changes

Positive changes in legislation

Business/market growth

Currency and exchange rate stabilization

Stability

Tax Code

Corruption acknowledgement /anticorruption actions

VAT refund

Dialogue with business

Some improvements in agriculture

Other

Difficult to say/no comment

When asked about positive changes that took place during the last 3 months two thirds of respondents (66%) state that they can not name any. Another 9% find it difficult to answer, totaling 75% (or three quarters) of investors who fail to name any improvements in the investment climate recently. This share significantly increased compared to II quarter 2011.

Among some positive changes in legislation there is a variety of singular comments included mentioning the Pension law, Subsoil and PSA law, Car leasing legislation, etc. Other trends marked by 3% each are business and market growth and currency stabilization.


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Negative Changes in Investment Climate during the last 3 months

16%

9%9%9%

7%7%

4%4%

3%3%3%

2%2%2%2%2%

8%7%

12%11%

No changes

Pressure & inspections from state administrations

Corruption and bureaucracy

Taxation

Problems with VAT refund

Uncertainty/instability

Opposition, freedom oppression

Customs procedures & legislation

Political control over the courts

No actual actions are taken

Export obstacles in agriculture

International financial crisis anticipation

Numerous negative changes / without specification

Weak energy policy

Inflation expectation

State control on economy

Raids on companies

Criminal structures influence increase

Other

Hard to say

The variety of negative changes mentioned by investors remains high. Main concerns are related to continuous pressure from state administrations, corruption practices, taxation, problems with VAT refund and general uncertainty.

The share of those who underline opposition oppression and political control over the courts as the negative driver of the investment climate has increased.

Among newly added comments there are the expectations of the international recession impact on the Ukrainian economy, weak energy policy of the government, and criminal structures influence increase.

Among other comments there are such issues as difficulties for small businesses, IMF requirements neglecting, worsening relations with Russia, and many others


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Estimation of the situation with solving issuesThe situation with solving 7 issues that EBA has raised remained unchanged compared to II quarter of 2011. Corruption and court system are still considered as the most problematic issues as over 75% of investors evaluate the situation in these areas as definitely or rather unfavorable.

Mean1,8 1,8 2,4 2,9 2,3 2,3 2,3

+0,1 0,0 -0,1 -0,1 0,0 +0,1 +0,1

Corruption Court system reform

Land reform Currency regulation

VAT refund Customs Procedures

simplification

Technical barriers to

trade

51% 43%

19%7%

30% 28%16%

25% 35%

33%

20%

29% 27% 43%

20%19%

35%

52%

29% 30%34%

2% 1% 12% 19% 11% 14% 6%1% 2% 1% 2% 2% 2% 2%

definitely favourable

rather favourable

neither unfavourable nor favourable

rather unfavourable

definitely unfavourable


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The 2nd wave of the economic recession expectations

Yes, it is definitely probable

Yes, it is rather probable

Difficult to say No, it is rather improbable

No, it is definitely improbable

15%

36% 34%

14%

1%

Estimating the probability of the second wave of the crisis in their sectors of business activity in Ukraine investors expressed apprehension of its rather high probability.

51% consider the next wave of recession in their industry definitely or rather probable, while only 15% consider it as rather or definitely improbable. Every third investor found it difficult to evaluate the crisis probability


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Key findings

• Five-grade scale is used to evaluate the investment climate, where 1 stands for the lowest evaluation and 5 stands for the highest evaluation

• In III quarter of 2011 the EBA Investment Attractiveness Index has averaged 2.56 on a 5 point scale compared to 3.39 in II quarter of 2011 reflecting the investors evaluation and expectation of the investment attractiveness of Ukraine.

• The main components of the Index were as follows:• the current investment climate evaluation received the lowest mark (2.3)• the climate changes during the last 3 months were evaluated at 2.5• future expectations of the investment climate received 2.7 on average


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Key findings

Considering progress with 7 key points that EBA raised in the context of business and authorities interaction the situation still remained unchanged while corruption and court system issues are evaluated as the most problematic issues.

In evaluation of the recent changes in the investment climate the negative feedback significantly prevails. Major concerns are related to continuous pressure from state administrations (12%), corruption practices (11%), unfavorable taxation, problems with VAT refund and general uncertainty (9% each). The share of those who underline opposition oppression and political control over the courts as the negative driver of the investment climate have increased. While 16% of investors stated that no negative changes took place recently the share of those who reported no positive changes significantly increased to 66%.

51% of investors consider the next wave of recession in their industry definitely or rather probable, while only 15% consider it as rather or definitely improbable. Every third investor found it difficult to evaluate the new crisis probability.


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eba investment attractiveness index

Documents

monthsthe investment

wave of investment climate

ukrainethe investment

ukraine tracking research

new entrants

point scale0 mean2

general eba index3

survey implementation