Investors tell ЕВА they are gloomier about nation's business life

While a new financial crisis is believed to be heading toward Europe, Ukraine’s investment climate is suffering its own misery.

In the third quarter of 2011, the European Business Association Investment Attractiveness Index posted the biggest drop since 2008. Experts blame both global factors and inner difficulties, such as bureaucracy and pressure from state agencies, as the culprits for the disappointment of investors.

Results made public on Oct. 6 show severe drop of Investment Attractiveness Index of Ukraine. In third quarter of 2011, it was 2.56 out of a possible high score of 5.0, which means it dropped 83 points in three months. It is the first time the index dropped that badly since the end of 2008, the global crisis year, when it lost 92 points at once.

Krzysztof Siedlecki, EBA board member and country manager at Astellas Pharma Europe BV, identified the reasons For the drop.

"One is the global economic situation. Investors now are looking for a ’quiet cove’ to survive the expected crisis, and Ukraine is not one. Another reason is internal. It’s not like the Ukrainian government doesn’t do anything to improve the investment climate, but the process is way too slow. Investors expect progress, and when they don’t see any, they are disappointed," he said.

Tomas Fiala, EBA president and CEO of Dragon Capital, agreed. "We don’t see any progress in establishing contacts with bureaucratic system," Fiala said. "State agencies’ pressure on business increased this year."

Fiala believes the most attractive investment are remain agriculture, real estate and the grocery sector. "Mainly there is interest in spheres that are not regulated by government," Fiala specified.

According to Anna Derevyanko, EBA executive director, this is the first time the EBA will officially inform the Ukrainian government about the drop in the Investment Attractiveness Index. She also will recommend action.

"First, investors’ trust must be brought back. It can be done only if the government becomes open and ready for companionship. The suggestions of the business community must be embodied," Derevyanko said. "The effective use of the country’s potential and increasing investments is possible only with government and business collaboration."

EBA also published the results of several polls. Answering a question about whether there were any positive changes in Ukraine’s investment climate during the third quarter of 2011, 66 percent of respondents said no. Only 6 percent have noticed positive legislative changes.

"Legislation meant to simplify the life of business hasn’t really reached business," Fialo said. "It stays somewhere at the parliamentary level."

Ominously, more than half of experts interviewed claimed that the second wave of the global crisis was "quite probable" to come.