Investment Attractiveness Index with the support of the InMind research company EBA Investment Attractiveness INDEX I/2011 Conducted by EBA with the support of InMind research company

Investment Attractiveness Index with the support of the InMind research company 2 Project summary The results of the 11 th wave of investment climate in Ukraine tracking research. Methodology: The 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: 91 CEOs of EBA members companies Timing: February 7 th, 2011 – February 23 rd, 2011 Survey Implementation: the Survey was conducted by EBA with the support of InMind research company

Investment Attractiveness Index with the support of the InMind research company 3 Key findings

Investment Attractiveness Index with the support of the InMind research company 4 Key findings

Investment Attractiveness Index with the support of the InMind research company 5 Key findings III/2008IV/2008I/2009II/2009III/2009IV/2009I/2010II/2010III/2010IV/2010I/2011 Investment Climate in Ukraine 3,12,32,02,32,22,12,73,83,63,53,7 Investment Climate Dynamics: last 3 months 2,81,82,12,72,52,63,2 3,13,43,6 Investment Climate Dynamics Expectations: next 3 months 3,12,2 2,82,62,83,43,03,2 Profitability for new entrants: next 3 months 3,42,32,42,72,62,52,93,33,2 3,4 Investment Climate of Primary Industry: next 3 months 3,32,52,42,72,92,83,23,13,03,1 General EBA Index3,142,22 2,642,562,573,083,253,203,283,40

Investment Attractiveness Index with the support of the InMind research company 6 Key findings

Investment Attractiveness Index with the support of the InMind research company 7 EBA – Index: Components

Investment Attractiveness Index with the support of the InMind research company Mean 3,12,32,02,32,22,12,73,83,63,53,7 Investment Climate in Ukraine The Investment Climate in Ukraine is… (5 point scale) 0 – + 8

Investment Attractiveness Index with the support of the InMind research company Investment Climate Dynamics: last 3 months The Investment Climate in Ukraine is… (5 point scale) 0 – + Mean 2,81,82,12,72,52,63,2 3,13,43,6 9

Investment Attractiveness Index with the support of the InMind research company 10 Investment Climate dynamics expectations: next 3 months The Investment Climate in Ukraine is… (5 point scale) 0 – + Mean 3,12,2 2,82,62,83,43,03,2

Investment Attractiveness Index with the support of the InMind research company 11 Profitability for New entrants: next 3 months Profitability for New Entrants … (5 point scale) 0 – + Mean 3,42,32,42,72,62,52,93,33,2 3,4

Investment Attractiveness Index with the support of the InMind research company 12 Investment Climate of primary industry: next 3 months Investment climate of primary industry… (5 point scale) 0 – + Mean 3,32,52,42,72,92,83,23,13,03,1

Investment Attractiveness Index with the support of the InMind research company 13 Positive Changes in Investment Climate during the last 3 months When asked about positive changes that took place during the last 3 months a half of investors (53%) underlined that there were no positive changes in the investment climate recently. Compared to the previous waves where stability was mentioned as the most remarkable positive change in I/2011 the Tax Code as a positive change was mentioned by a larger number of investors (13%) compared to the gained stability (8%). Other positive changes were mentioned by very small number of the survey participants

Investment Attractiveness Index with the support of the InMind research company 14 Negative Changes in Investment Climate during the last 3 months Remarkable large number of negative changes were mentioned by investors. The key is the Tax Code which means that its evaluation is contradictory with more negative comments prevailing. Corruption and bureaucracy increase was mentioned by a higher percentage compared to the previous wave (23% to 16%). The next most popular comments were related with worsening situation with customs (both imperfect legislation and difficulties with the procedures were mentioned) and continuing pressure from state administrations. Among newly mentioned barriers there are opposition oppression, export quotas introduction, raids on companies, and others Among other comments there are single answers such as “non-transparent reforms”, “rigged tenders”, Ukraine image worsening, and many others

Investment Attractiveness Index with the support of the InMind research company 15 Estimation of the situation with solving 7 issues The most unfavourable situation in solving 7 issues that EBA has raised is observed with corruption and court system reform. Other issues evaluation is rather negative as well. Currency regulation while being evaluated as neither favourable nor unfavourable received slightly higher scores compared to others Mean 1,8 2,63,02,22,02,3

Investment Attractiveness Index with the support of the InMind research company 16 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 In I quarter of 2011 the EBA Investment Attractiveness Index has reached 3.40 on a 5 point scale compared to 3.28 at the end of 2010 Changes were observed in the following Index components: the current investment climate evaluation has slightly increased to 3.7 (+0.2) the climate changes during the last 3 months evaluation has reached 3.6 (+0.2) the profitability to the new entrants in the next 3 months was evaluated as 3.4 (+0.2) Changes were observed in the following Index components: the current investment climate evaluation has slightly increased to 3.7 (+0.2) the climate changes during the last 3 months evaluation has reached 3.6 (+0.2) the profitability to the new entrants in the next 3 months was evaluated as 3.4 (+0.2) Future expectations on investment climate in Ukraine as well as in the primary industry where the investors operate remained unchanged and have the lowest scores compared to the other Index components (3.2 and 3.1. respectively)

Investment Attractiveness Index with the support of the InMind research company 17 Key findings Considering progress with 7 key points that EBA raised in the context of business and authorities interaction the situation remains overall unfavourable. The court system reforming and corruption are the most problematic issues: 84% and 79% respectively estimated the situation in these areas as rather or definitely unfavourable. Evaluating the positive and negative changes that took place in the investment climate during the last 3 months the majority of experts were keen to provide rather negative feedback. Tax Code received contradictory evaluation: whereas 37% mentioned its negative consequences, 13% highlighted the positive changes which are associated with it. Corruption remains another strong negative trend that is mentioned by almost every forth expert (23%). Among new negative trends that were mentioned there are difficulties which companies face when dealing with the Customs, export quotas introduction, as well as increased number of raids on companies. Evaluating the positive and negative changes that took place in the investment climate during the last 3 months the majority of experts were keen to provide rather negative feedback. Tax Code received contradictory evaluation: whereas 37% mentioned its negative consequences, 13% highlighted the positive changes which are associated with it. Corruption remains another strong negative trend that is mentioned by almost every forth expert (23%). Among new negative trends that were mentioned there are difficulties which companies face when dealing with the Customs, export quotas introduction, as well as increased number of raids on companies.

Investment Attractiveness Index with the support of the InMind research company