eba investment attractiveness index

Investment Attractiveness Index with the support of theInMind research company

EBA Investment Attractiveness INDEX

IV 2012Conducted by the EBA

with the support of

InMind research company


2

Project summary• The results of the 18th 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 into Ukraine over the next three months?

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

• Participants: 118 CEOs of EBA members companies

• Timing: December 1-14, 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/2012

II/2012

III/2012

IV/2012

0

1

2

3

4

5

3.14

2.22 2.22

2.64 2.56 2.57

3.083.25 3.20 3.28 3.40 3.39

2.56

2.19 2.18 2.19 2.14 2.12

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/2012 II/2012 III/2012

IV/2012

0

1

2

3

4

5

3.1

2.3

2.0

2.32.2

2.1

2.7

3.83.6

3.53.7 3.7

2.3

1.81.7 1.8 1.8 1.7

2.8

1.8

2.1

2.5 2.6

3.23.2

3.43.6 3.5

2.5

2.2 2.2

2.3

2.1 2.1

3.3

2.3

2.72.7 2.7 3.1 3.1 3.2 3.2 3.2 2.7

2.3 2.32.3 2.2 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

III/08 IV/08 I/09 II/09 III/09 IV/09 I/10 II/10 III/10 IV/10 I/11 II/11 III/11 IV/11 I/12 II/12 III/12 IV/12

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 1,8 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 2,3 2,1 2,1

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

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 2,5 2,3 2,3

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 2,19 2,14 2,12


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Key findings

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 2.2 2.1 2.1

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 1.8 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 2.3 2.2 2.3

General EBA Index

Present Investment Climate

Future Investment Climate (Expectations)


EBA – Index:

Components

7


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/2012 II/2012 III/2012

IV/2012

4%

24% 35%24%

22%19%

12%

2%2%

2%

20%38% 45% 42%

49%

43%

33%

51%47% 46% 53%

59%42%

11%15% 16%

8%12%

44%44% 40% 43%

35%48%

18% 15% 7% 12% 15% 15% 22% 19% 24% 20% 22% 27% 25% 15% 13% 11% 8% 7%

37%

6% 8%15% 5% 3%

20%

50% 49% 49% 51%35%

11%

2% 1% 3% 6% 2%

8%

4%3%

3%5% 3%

5%

19% 13% 13% 18%24%

1% 2%0%

4 - rather favourable to invest-ing

3 - neutral to investing

2 - rather unfavourable to investing

1 - definitely unfavourable to investing

буфер

Mean

Mean

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 1,8 1,8 1,7

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

0

–

+


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/2012 II/2012 III/2012

IV/2012

7%

41%36%

13%17% 10%

3%0%

1%

14%

23%28% 23% 36%

30%

28%40%

36%22% 29%

34%13% 23% 24%

15%13%

15%34% 46% 35% 29%

25%35%

50% 19% 17% 49% 47% 50% 56% 46% 51% 36% 30% 43% 40% 28% 32% 44% 31% 34%

12%

6%

13%5% 4%

26%20% 19% 35% 43%

20%11%

3% 3%3%

5% 1%

3%

5%

4%2% 2%

5%10% 6%

11%14%

22%

1%2% 1%

3%0%

4 - rather became better

3 - remained the same

2 - rather became worse

1 - definitely became worse

буфер

Mean

Investment Climate Dynamics: last 3 months

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

0

–

+

Mean

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 2,3 2,1 2,1

9


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/2012 II/2012 III/2012

IV/2012

2%

24%29%

6% 12%3%

3%

1% 1% 2%

11%

18% 24% 22% 26% 21%

22%38%

33%29%

32%37%

7%27% 24%

22% 16% 17% 27% 38%27%

36% 40%36%

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

39% 28% 41%

17%

6%

8% 14% 13%

37%

17% 21% 29%29% 22%

15%

5%7%

3%3%

1%

9%

2% 3%

6% 3% 1%

3%

7%9%

9% 7%9%

1%1%

3%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

–

+

Mean

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 2,3 2,2 2,3


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/2012 II/2012 III/2012

IV/2012

2%

30% 23%14%

19% 16%5%

2% 2% 3%1% 2%

15%

14% 28%28%

28%

22%

14%34% 32% 24%

39%30% 28%

15% 19% 16%15% 15%

26%48% 38%

41% 34%46%

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

23% 26% 29%

27%

11% 4%

15%

12%

13%18%

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

9%5%

7% 8% 3%

17%

4% 9%

5%

12%2%

5%

12% 6% 8%9%

13%

2%

1% 1%4%

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

–

+

Mean

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 2,1 2,3 2,2


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/2012 II/2012 III/2012

IV/2012

2%

23%23% 6%

10%

5%3%

2% 3% 3%3%

9%

13% 15%17% 24%

17%

17%25%

33%

31%

16%

24%13%

18% 24% 23% 19%18%

23% 37%30%

30% 32%44%

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

46% 37% 32%

16%7% 10%

6%22% 13%

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

4%5%

7%6% 4%

20%

7%4%

5%

3%

2%

7% 6% 7% 9%12%

3%

1%1% 2%

4 - will rather become better3 - will remain the same2 - will rather become worse1 - will definitely become worseбуферMean

12

Investment Climate of primary industry: next 3 months

Investment climate of primary industry…(5 point scale)

0

–

+

Mean

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 2,5 2,3


13

Positive Changes in Investment Climate during the last 3 months

Other

Customs services improving

Currency rate stability

The relative stability of the situation

Parliament elections went peacefully

No positive changes

5%

3%

3%

3%

11%

76%

When being asked about positive changes that took place during the last 3 months, 76% noticed the absence of such changes in the investment climate.11% of investors indicated relatively peaceful elections as a positive change . «Parliamentary elections went peacefully», «reduced number of inspections due to the elections», «elections finished, focus should come back to real life soon», «no more elections in near future» - with these words respondents described positive changes in last quarter of 2012.


14

Negative Changes in Investment Climate during the last 3 months

Worsening of the country image and relations with other countries

Worsening of business conditions for foreign companies

Lack of bank resources, lack of credits

No guarantees of business security, criminalization of power

Non-refundable VAT

Absence of positive changes, continued deterioration of situation

Growth of internal debt, worsening of financial indicators

Pressure of customs, unreasonable custom payments

Constant changes of laws

Low purchasing power, lack of working capital

Corruption,weak judiciary system

Political situation, elections, imbalanced work of the government

Currency fluctuations, monetary policy of the NBU, concerns about exchange rates

Increased pressure from fiscal authorities

No negative changes

3%

3%

3%

3%

3%

4%

4%

4%

6%

7%

8%

14%

19%

23%

14%

In comparison to previous periods, a lot of experts noticed the increase of pressure from fiscal authorities on business (this indicator decreased in Q2 & Q3 2012). Also the experts noted the problems of currency regulation, currency fluctuation and restrictions on foreign exchange transactions.The third important negative manifestation of Q4 2012 was the course of elections. The main part of experts negatively described the results of elections, because of lack of transparency, and impact on the economy - governmental populism and political influence on the distribution of budget funds.Also the situation of governmental corruption, inefficient judicial system, business conditions and position of Ukraine in the international arena did not improve.


15

Estimation of the situation with solving issues

Corruption Court system reform

Land reform Currency regulation

VAT refund Customs Procedures

simplification

Technical barriers to

trade

58%49%

19%

41%32%

19%26%

28%31%

32%

39%

31%

30%31%

11% 16%

45%

13%30%

39%35%

2% 3% 3% 4% 5%10% 7%

1% 1% 1% 2% 1%2% 1%

definitely favourable

rather favourable

neither un-favourable nor favourable

rather unfavourable

definitely un-favourable

0,0 -0,1 0,0 -0,4 -0,0 -0,2 0,0

1,6 1,7 2,3 1,9 2,1 2,5 2,2

Changes:

Mean:

For the 7 key priorities of the EBA, the situation was relatively unchanged in comparison to the previous quarter. Stable decrease of ratings was observed in the sphere of currency regulation – a mean value of this index declined in the third wave of the survey, and in the 4th quarter decreased by 0.4 points.


16

Summary

For the 7 key priorities of the EBA in context of business and relations with the government, the situation was relatively unchanged. Current situation was considered by experts almost entirely conducive for solving problems of corruption and judiciary system, and rather unfavorable for land issues, VAT and technical barrier of trade. Experts also negatively evaluated sphere of currency regulation. The most positive were estimates of power in solving problems of customs procedures.

For the 7 key priorities of the EBA in context of business and relations with the government, the situation was relatively unchanged. Current situation was considered by experts almost entirely conducive for solving problems of corruption and judiciary system, and rather unfavorable for land issues, VAT and technical barrier of trade. Experts also negatively evaluated sphere of currency regulation. The most positive were estimates of power in solving problems of customs procedures.

The integral index of investment attractiveness and its components did not change during the fourth quarter of 2012, and the indices of 2012 showed the lowest for the entire period of measurement.

The integral index of investment attractiveness and its components did not change during the fourth quarter of 2012, and the indices of 2012 showed the lowest for the entire period of measurement.

If to talk about positive and negative changes, that took place in the investment climate during the last 3 months, most of experts tended to negative evaluations, in particular they noted the increase of pressure from fiscal authorities on business. Also the experts negatively evaluated currency policy of NBU. The election results were also considered as negative – for example, nontransparent elections and their impact on the policy of the Government (making populist decisions, political influence on the distribution of budget funds, etc.). The largest positive change was a relatively peaceful course of elections.

If to talk about positive and negative changes, that took place in the investment climate during the last 3 months, most of experts tended to negative evaluations, in particular they noted the increase of pressure from fiscal authorities on business. Also the experts negatively evaluated currency policy of NBU. The election results were also considered as negative – for example, nontransparent elections and their impact on the policy of the Government (making populist decisions, political influence on the distribution of budget funds, etc.). The largest positive change was a relatively peaceful course of elections.


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eba investment attractiveness index

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