Unfortunately, bad traditions die incredibly hard in Ukraine. Among these traditions is the perennially negative answer to the rhetorical question, “Was it worth fighting for?” Now, just a year and a half after the Orange Revolution, more than one-third of Ukrainian business people polled by the KDP-100 firm at the request of the Institute of Competitive Society are expecting the government to have a negative impact on the business community in 2007.
The survey was conducted in September and October 2006 among 2,524 entrepreneurs aged over 18, who work in various regions of Ukraine — Donetsk, Kirovohrad, Vinnytsia, Sevastopil, Severodonetsk, Dnipropetrovsk, Kharkiv, Khmelnytsky, and Ivano- Frankivsk. The margin of error was 3 percent at most.
Asked what they think about the impact of governmental policies on business next year, 37.5, 42.2, and 12 percent of the respondents said that it would be negative, neutral, and positive, respectively, while 7.6 percent are undecided. In addition, 35.3 percent of the polled businessmen forecast that their business conditions will not change in 2007, 33.6 percent hope for an improvement, and 24.3 percent expect things to worsen.
Opinions differed on the prospects of Ukraine’s economic development over the next two years: 2.8 percent predict considerable growth, 20 percent expect some growth, 30.6 percent expect the same level as now, 27.8 percent predict a certain slump, and 11 percent, a considerable slump.
Like before, entrepreneurs have no fruitful contacts with the authorities: 41.2 percent of respondents do not think they can influence central government decisions, and only 18.2 percent believe that they can. As for the ability to influence regional and local administrative bodies, the results are 40.7 and 21.1 percent, respectively.
Most respondents (51.9 percent) think that high tax rates and mandatory social contributions are the main problem facing entrepreneurship. A considerable number of those polled (46.9 percent) believe that the most serious problem is rampant corruption in central, regional, and local governmental bodies. In any case, business is dissatisfied with the rules of the game or, perhaps, with the lack of such rules. More than half of the polled entrepreneurs think that the Cabinet of Ministers and the Verkhovna Rada should tackle the most burning issues that are hampering their businesses.
Meanwhile, the nation’s highest-ranking leaders, President Viktor Yushchenko and Prime Minister Viktor Yanukovych, are not losing any time inviting foreign investors to Ukraine. But do investors really obtain information about the business climate in our country from newspapers alone? By all accounts, the most effective purveyors of information on this matter are entrepreneurs, who seem to have nothing to hide from their foreign counterparts when they see them at business meetings or on vacations.
Still, some useful and, unfortunately, negative information can be drawn from the mass media. For example, Channel 5 recently aired Yehor Sobolev’s program on the misadventures of an entrepreneur in the corridors of bureaucracy. Who will be eager to make the same blunder?
Meanwhile, the government as a rule is not afraid of this and is acting with regularity, as if it were a noble undertaking. Some reports claim that after the adoption of the 2007 budget attempts are being renewed to cancel, ahead of schedule, the moratorium on taxing banking deposit revenue for individuals, which is in force until January 2010. This risky step sparked bitter protests from the Association of Ukrainian Banks. It is clear that, in the absence of a viable stock market, the outflow of banking deposits may squeeze the financial resources of the population, including small— and medium-scale entrepreneurs, from transparent circulation into the “shadows.”
Matters will be further complicated if the law setting out the procedure of meetings of joint-stock and private limited company employees comes into force when the president signs it on Jan. 1, 2007. Under this law, a meeting of the members of a joint-stock or a private limited company is deemed legitimate if it is attended by members or their representatives who own more than 50 percent of shares. Passed for the sole purpose of changing the situation in just one company (Ukrnafta), this law is fraught with a mass of corporate conflicts or even raider attacks in other large and small economic entities, the utter humiliation of minority shareholders with whom nobody will ever reckon, and, as a result, spells grave consequences for the business and investment climate in Ukraine.
The government should make a careful study of the results of the above-mentioned survey and draw some conclusions from it. Clearly, it is very counterproductive to learn from your own mistakes. But there seems to be no other option in sight.
