eba investment attractiveness index

Investment Attractiveness Index with the support of theInMind research company

EBA Investment Attractiveness INDEX

I 2012Conducted by the EBA

with the support of InMind research company


2

Project summary• The results of the 15th wave of investment climate in Ukraine tracking research.

• Methodology: 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: 149 CEOs of EBA members companies

• Timing: March 6, 2012 – March 26, 2012

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


3

Key findings

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

IV/2011

I/20120

1

2

3

4

5

3.14

2.22 2.222.64 2.56 2.57

3.08 3.25 3.20 3.28 3.40 3.39

2.562.19 2.18

EBA Investment Attractiveness Index


4

Key findings

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 IV/2011 I/20120

1

2

3

4

5

3.1

2.3

2.0

2.32.2

2.1

2.7

3.83.6 3.5

3.7 3.7

2.3

1.81.7

2.8

1.8

2.1

2.5 2.6

3.2 3.2 3.43.6 3.5

2.5

2.2 2.2

3.3

2.3

2.72.7 2.7 3.1 3.1 3.2 3.2 3.2 2.7

2.3 2.3

Current Investment Climate evaluation

Investment Climate Dynamics: changes to the previous 3 months

Expectatin on Investment Climate change within next three months


5

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 1,8 1,7

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 2,2 2,2

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 2,3 2,3

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 2,3 2,1

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 2,4 2,5

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 2,19 2,18


6

Key findings

III/20

08 S

ep,3-

Oct,2 N

=151

IV/20

08 O

ct,23

-Oct,

31 N

=53

I/200

9 Jan

,19-F

eb,12

N=10

3

II/200

9 Apr,

6-May

,14 N

=78

III/20

09 S

ep,2-

Sep,30

N=59

IV/20

09 D

ec,14

-Jan,1

2 N=99

I/201

0 Mar,

9-Mar,

31 N

=61

II/201

0 Jun

,1-Ju

n,18 N

=113

III/20

10 A

ug,30

-Sep

,18 N

=96

IV/20

10 N

ov,11

-Dec

,3 N=11

0

I/201

1 Feb

,7- Feb

,23 N

=91

II/201

1 May

,16 - J

un,1

N=124

III/20

11 S

ep, 7

-23 N

=122

IV/20

11 N

ov,29

-Dec

,12 N

=164

I/201

2 Mar,

06 -M

ar,26

N=14

9

3.1 2.2 2.2 2.6 2.6 2.6 3.1 3.3 3.2 3.3 3.4 3.4 2.6 2.2 2.2

3.0

2.0 2.0

2.52.3 2.4

2.9

3.53.3

3.53.7 3.6

2.3

1.8 1.7

3.3

2.3 2.3

2.7 2.7 2.7

3.2 3.1 3.1 3.2 3.2 3.3

2.7

2.3 2.3

General EBA Index

Present Investment Climate

Future Investment Climate (Expectations)


EBA – Index: Components

7



4%

24% 35% 24%22%

19%

12%

2% 2% 2%

20% 38% 45%

33%51%

47% 46% 53% 59%42%

11% 15% 16%8%

12%

44%44% 40%

18% 15% 7% 12% 15% 15% 22% 19% 24% 20% 22% 27% 25% 15% 13%

37%

6% 8%15% 5% 3%

20%

50% 49% 49% 51%35%

11%2% 1%

8%

4%3%

3% 5% 3%

5%

19% 13% 13% 18%24%

4 - rather favourable to investing

3 - neutral to investing

2 - rather unfavourable to investing

1 - definitely unfavourable to invest-ing

буфер

Mean

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 1,8 1,7

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

0

–

+



7%

41%36%

13%17% 10%

3%0%

1%

14%23%

28%

28%40%

36%22% 29% 34%

13% 23% 24%

15% 13%15%

34% 46% 35%

50% 19% 17% 49% 47% 50% 56% 46% 51% 36% 30% 43% 40% 28% 32%

12%

6%

13% 5% 4%

26%20% 19% 35% 43%

20%11%

3% 3%

3%

5%

4%2% 2%

5%10% 6%

11%14%

22%

1%2%

4 - rather became better

3 - remained the same

2 - rather became worse

1 - definitely became worse

буфер

Mean

Investment Climate Dynamics: last 3 monthsThe Investment Climate in Ukraine is… (5 point scale)

0

–

+

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 2,2 2,2

9



2%

24%29% 6% 12% 3%

3%1% 1% 2%

11%18% 24%

22% 38%33%

29% 32%37%

7%27% 24% 22% 16% 17% 27% 38% 27%

50% 36% 29% 50% 39% 45% 53% 47% 46% 39% 47% 51% 47% 38%41%

17%

6%8% 14% 13%

37%

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

5%7%

9%

2% 3%6% 3% 1%

3%

7%9%

9% 7% 9%

1%

4 - will rather become better

3 - will remain the same

2 - will rather become worse

1 - will definitely become worse

буфер

Mean

10

Investment Climate dynamics expectations: next 3 months

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

0

–

+

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 2,3 2,3



2%

30% 23%14%

19% 16%5%

2% 2% 3%1% 2%

15%

14% 28%

14%34% 32% 24% 39%

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

26% 48% 38%

40% 21% 32% 41% 19% 38% 44% 49% 44% 48% 36% 40% 42% 28%29%

27%

11% 4%15%

12%13%

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

15%9%

5%

17%

4% 9%5%

12%2%

5%12% 6% 8%

9%13%

2%

1%

4 - Rather profitable

3 - Difficult to say

2 - Rather not profitable

1 - Definitely not profitable

буфер

Mean

11

Profitability for New entrants: next 3 months

Profitability for New Entrants … (5 point scale)

0

–

+

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 2,3 2,1



2%

23%23% 6%

10%5%

3% 2% 3% 3%3%

9%13% 15%

17% 25% 33%31%

16%24%

13%18% 24% 23% 19%

18%23% 37%

30%

45% 38% 30% 51% 48% 58% 52% 57% 52% 48% 54% 44% 57% 45%46%

16%7% 10%

6%22% 13%

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

4%5%

20%

7%4% 5%

3%

2%

7% 6% 7% 9% 12%

3%

4 - will rather become better

3 - will remain the same

2 - will rather become worse

1 - will definitely become worse

буфер

Mean

12

Investment Climate of primary industry: next 3 months

Investment climate of primary industry…(5 point scale)

0

–

+

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 2,4 2,5


13

Positive Changes in Investment Climate during the last 3 months

When asked about positive changes that took place during the last 3 months most of respondents (70%) stated that they could not name any, 7% of respondents found it difficult to answer, totalling 77% (or over three quarters) of investors who failed to name any recent improvements in the investment climate.

Among some positive changes is “more positive legislative activity” (by the opinion of 5%), 3% of respondents said that “officials became more open”.

Positive changes in governance

EURO 2012 preparation

VAT refund

Regional administrative support

UAH stabilisation and exchange rate liberalisation

Doing business improved

Dialogue with the investors started

Customs procedures improvement

Fair competitiveness

Simplified tax system

More positive legislative activity

Liquidity of banking system

Actions against corruption

Officials became more open

No changes/difficult to say

2%

1%

2%

1%

1%

1%

1%

1%

1%

2%

5%

1%

1%

3%

77%


14

Negative Changes in Investment Climate during the last 3 months

When asked about negative changes, the respondents had a great deal more to say. Political developments, concerns over Ukraine-EU relations, tense gas talks with Russia, technical barriers for investors, Tymoshenko imprisonment are top of the list of concerns for businessmen worried about Ukraine's political and economic state.

Increase in pressure from the state authorities was specially emphasized. Destructive corruption (15%), the poor legal framework for doing business (11%) and an unjust court system (5%) are still among the business community's chief concerns. Barriers to the export trade in the form of customs clearance obstacles and VAT refunds were reported as troublesome by 13% and 7% of the respondents respectively.

Meanwhile, 5% of those who contributed to the poll said the banks crisis and restricted access to loans and credits had presented fresh problems.

Finance: banks crisis, access to loans

Court system: business insecurity

UAH devaluation/buying power decrease

VAT refund

Unfair legislation, technical barriers to doing business

Customs: new Customs Code, pressure

Corruption

Administrative pressure, overregulation,

Fiscal: pressure from taxmen, new Tax Code

Politics: EU-Ukraine relations, gas talks, IMF, Tymoshenko

No changes/difficult to answer

5%

5%

6%

7%

11%

13%

15%

18%

25%

26%

20%


15

Estimation of the situation with solving issuesThe situation with solving 7 issues that the EBA has raised remained unchanged compared to the IV quarter of 2011. Corruption and court system are still considered as the most problematic issues as over 85% of investors evaluate the situation in these areas as definitely or rather unfavorable. The situation on customs and evaluation of technical barriers to trade are insignificantly worse than in Q4 2011.

Mean1,6 1,6 2,2 2,6 2,2 2,0 2,0

0,0 -0,1 -0,1 0,1 0,0 -0,3 -0,2

Corruption Court system reform

Land reform Currency regulation

VAT refund Customs Procedures

simplification

Technical barriers to

trade

58% 60%

22% 13%30% 32% 33%

30% 25%

42%

31%

36% 36% 40%

8% 12%32%

40%

26% 26% 23%

1% 1% 2%12% 7% 4% 1%

definitely favourable

rather favourable

neither unfavourable nor favourable

rather unfavourable

definitely unfavourable


16

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

24%

34% 31%

10%

1%

definitely unfavourableWhen commenting on double dip recession expectations, 58% of the respondents said a further economic slowdown was either a certainty, or probable.

This was more optimistic compared to the last quarter's results (69%), but the outlook is still a good deal more cloudy than bright. Every third investor found it difficult to evaluate the crisis probability.


17

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 mark.

• In the I quarter of 2012 the EBA Investment Attractiveness Index has averaged 2.18 on a 5 point scale compared to 2.19 in the IV quarter of 2011 reflecting further decrease in investor evaluation and expectations of the investment attractiveness of Ukraine.

• The main components of the Index that contributed to such decrease were as follows:

• the current investment climate evaluation received the lowest mark and also decreased compared to the previous wave (1.7 compared to 1.8)

• the climate changes during the last 3 months were evaluated at 2.2 (no changes)

• future expectations of the investment climate received 2.3 on average


18

Key findings

When asked about the progress with 7 key points that the EBA raised in the context of business and authorities interaction the respondents still saw the situation remain unchanged with corruption and court system issues still on the agenda as the most problematic. Customs clearance problems and technical barriers to trade were also reported as troublesome.

In the evaluation of the recent changes in Ukraine’s investment climate negative feedback significantly prevails. Major concerns are related to political developments (26%), increased pressure from state authorities (18%), problems with taxation and the new Tax Code of Ukraine and customs clearance obstacles (25% and 13% respectively), corruption (15% of respondents). The poor legal framework for doing business (11%), VAT refund (7%), unjust court system (5%), UAH devaluation and buying power decrease (5%), banks crisis (5%). 77% of those surveyed failed to name any positive changes at all. When commenting on the negative changes and concerns that are behind the brewing investor discontent, the respondents had a great deal more to say.

When commenting on double dip recession expectations, 58% of the respondents said a further economic slowdown was either a certainty, or probable. This was more optimistic compared to the last quarter's results (69%), but the outlook is still a good deal more cloudy than bright.


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eba investment attractiveness index

Documents

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wave of investment climate

ukrainethe investment

investm climate

ukraine tracking research

new entrants

point scale0 mean3

point scale0 mean2