Results of the EBA Investment Attractiveness Index in the third quarter of 2013

For the first time since the end of 2011, the European Business Association Investment Attractiveness Index of Ukraine shows a small but growing correlation. In the third quarter of 2013 the Index was fixed at 2.39 points — and for comparison, the previous rate was 2.17 points. However, despite some improvements, the EBA Investment Attractiveness Index still remains in a negative place.

After nearly two years of consistently low reviews by experts, the Index increased by 3 points — from 2.1 at the beginning of the year to 2.4 in Q3.The most significant increase can be seen in investors’ expectations — with positive changes anticipated in the next 3 months, taking the Index from 2.4 to 2.7. The optimism of experts — 144 top managers of member companies of the EBA — is mostly based on their confidence in the European integration intentions of the government and related positive steps in business activity.

However there is no further positive feedback or opinions. In fact, 67% of respondents still see no favorable changes for businesses and they continue to complain about the permanent increase in fiscal pressure. Simultaneously 15% of those polled worry about the situation in the financial sector as well as the reaction of the government to this scenario and devaluation of Ukrainian hryvnya. Only 2% of businesspeople talk about the new wave of trade confrontation with the Russian Federation.

Positive Changes in Investment Climate during the last 3 months

TOMAS FIALA, EBA President, Chief Executive Officer, Dragon Capital

It is encouraging to see our Index finally make an upturn after languishing dose to the bottom for almost two years. Its improvement was driven by expectations of the positive impact the signing of the AA/DCFTA will have on Ukraine’s business climate and investment flows. European integration has had a positive effect on all countries of the former communist bloc and Ukraine will be no exception. We hope the positive energy of the Government will be sustained to fulfill all the remaining conditions, sign the Agreement and continue with its implementation at the same inspiring pace as shown recently.

ANNA DEREVYANKO, Executive Director of the European Business Association

The main significant problems still remain unsolved. Such barriers leave Ukrainian businesses struggling to breathe, particularly: unequal rules of the game, corruption, and the weakness of court system, which, by the way, provokes the spread of corporate raiding and deprives business of feeling confident when seeking redress through the Ukrainian legal system. In this context the long-awaited assignment and further ratification of the Association Agreement with the EU might be the instrument that helps our country to fight against any difficulties and consequently rescues our economy. Anyway, the Agreement is just a stimulus as everything depends on concrete business itself and undoubtedly political will.

OLEG VERZHBYTSKY

EBA Board Member, Managing Director,

DB Schenker

I’m very surprised about the increase in the Investment Attractiveness Index. This is likely to be a result caused by the positive sentiment of some companies. In my view, all things considered, the whole puzzle will be at the end of the year when we will fix the annual index measurements. As you know, the end of fourth quarter represents the peak activity for all businesses. I believe the business climate in Ukraine still needs to be improved. We see it when we talk to our partners and clients who are thinking about quitting the Ukrainian market. These discussions prove that no tangible improvements are taking place.

ALEXEIKREDISOV EBA Board Member, Managing Partner of EYin Ukraine, Co-Leader of the Emerging Markets Center at EY Global

The increase in the investment index is not primarily driven by improvements in the business climate, in the investment infrastructure or in legislation. Rather, the index rose because business leaders have positive expectations about the Ukraine-EUfree trade agreement. Ukraine has yet to improve significantly its investment climate or its attitude to business in a way that could drive a sustainable improvement in the EBA investment index. The free trade agreement with the European Union could be a critical catalyst of that sort of improvement.

KRZYSZTOF W.SIEDLECKI MD, EBA Board Member, Country Manager, Astellas Pharma Europe B.V.

Growth of the EBA Investment Attractiveness Index in the 3rd Quarter appears to be a good sign. I would love to take it as a harbinger of the constant improvement of the investment climate in Ukraine. However, it is definitely too early to come to such a conclusion.

It is rather obvious that the improvement is directly related to the upcoming potential signing of the free trade agreement and indicates expectations rather than real progress. November will be a critical month for business in Ukraine. Depending on the Vilnius Summit results we may see a fast climb in optimism among investors or a dramatic fall. I want to emphasize that one should not expect instant changes in the economic environment. However, the psychological impact may be significant.

ERIK VERSAVEL, EBA Board Member, Chairman of the Management Board, ING Commercial Banking Ukraine

The slight improvement of the Investment Index is not in itself a reflection of an improved business environment. It just illustrates what enormous potential can be unleashed when a country has the prospect of improving its overall conditions. People want to believe in the future. Let’s hope there is no setback to this process of gradual progress.