1. EBA Investment Attractiveness INDEX
Q3 2012
Conducted by the EBA
with the support of
InMind research company

2. Project summary
The results of the 17th 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 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: 103 CEOs of EBA members companies
Timing: September 12-24, 2012
Survey Implementation: the Survey was conducted by the EBA with the support of InMind research company

3. Key findings 3

4. Key findings 4

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
Investment Climate in Ukraine
3,1
2,3
2,0
2,2
2,1
2,7
3,8
3,6
3,5
3,7
1,8
1,7
Investment Climate Dynamics: last 3 months
2,8
2,5
2,6
3,2
3,4
Investment Climate Dynamics Expectations: next 3 months
3,0
Profitability for new entrants: next 3 months
2,4
2,9
3,3
Investment Climate of Primary Industry: next 3 months
General EBA Index
3,14
2,22
2,64
2,56
2,57
3,08
3,25
3,20
3,28
3,40
3,39
2,19
2,18
2,14 5

6. Key findings 6

7. EBA – Index:
Components

8. Investment Climate in Ukraine+
The Investment Climate in Ukraine is… (5 point scale) –
Mean
3,1
2,3
2,0
2,2
2,1
2,7
3,8
3,6
3,5
3,7
1,8
1,7 8

9. Investment Climate Dynamics: last 3 months+
The Investment Climate in Ukraine is… (5 point scale) –
Mean
2,8
1,8
2,1
2,7
2,5
2,6
3,2
3,1
3,4
3,6
3,5
2,2
2,3 9

10. Investment Climate dynamics expectations: next 3 months+
The Investment Climate in Ukraine is… (5 point scale) –
Mean
3,1
2,2
2,8
2,6
3,4
3,0
3,2
2,7
2,3 10

11. Profitability for new entrants: next 3 months+
Profitability for New Entrants … (5 point scale) –
Mean
3,4
2,3
2,4
2,7
2,6
2,5
2,9
3,3
3,2
2,1 11

12. Investment Climate of primary industry: next 3 months+
Investment climate of primary industry… (5 point scale) –
Mean
3,3
2,5
2,4
2,7
2,9
2,8
3,2
3,1
3,0
2,3 12

13. Positive changes in investment climate during the last 3 months
When commenting on positive changes which have taken place during the last 3 months, 70% of the respondents mentioned the absence of such changes.
10% of investors indicated positive changes in customs clearance and procedures brought by the Customs Code, 6% mentioned the improvements in the dialogue with tax authorities, 4% imply positive influence of EURO-2012 on the international image of Ukraine, several companies indicated further development of oil and gas industry, 2 companies mentioned improvement in VAT returns.
Sporadic comments are related to the increase of cash flow before the parliamentary elections, which has somewhat increased purchasing power of population, appearance of new personalities in politics, reduction of information about criminal prosecution of business.
EBA’s help in communication with local authorities was also mentioned. 13

14. Negative changes in investment climate during the last 3 months
Like in the previous wave, the most important for businesses are the issues concerning fiscal pressure and general business conditions, corruption and favoritism, tax pressure.
Also during several waves the experts mention decline of political and economic situation in the country, problems with judicial system.
In this survey wave the experts are more concerned with the expectations of UAH devaluation, negative influence of parliamentary elections on business. 14

15. Estimation of the situation with solving issues
Regarding 7 key problems brought up by EBA, the situation remains relatively unchanged comparing to the previous quarter. Steady decrease is observed in currency regulation area – average value of this index has been declining during two survey waves. In the previous wave considerable positive leap was observed in customs procedures area (0,7 points), in this wave the index is constant and the highest comparing to other areas.
-0,1
0,2
0,0
-0,2
Changes:
1,6
1,8
2,3
2,1
2,7
2,2
Mean: 15

16. Influence of parliamentary elections 2012 on the conditions of doing business in Ukraine
The new question was related to experts’ expectations of changes in business climate in Ukraine after the parliamentary elections in October The majority of evaluations are negative – over 50% think that the elections will have negative influence on business. Only 13% of experts expect the improvements.
How do you assess the conditions for doing business in Ukraine after the parliamentary elections 2012? 16

17. Summary
In the Q investor trust in Ukrainian business climate hit another rock bottom and dropped to 2.14 points - the lowest mark in 3 years.
Assessing positive and negative changes in the investment climate over the past 3 months, the majority of experts tend to negative expectations: decline of conditions of doing business and economic and political situation in the country in general.
Experts mostly regard improvement of customs procedures as positive changes. The rest of positive evaluations are rather sporadic.
In respect of seven key issues that was raised by the EBA in context of business and relationships with the government, estimates remain largely unchanged: the current situation is considered by experts almost not conducive to solving the problems of corruption and the judiciary, rather unfavorable for land issues, VAT and technical barriers to trade. Expert evaluation of currency regulation area have also decreased. The most positive are evaluation of authorities regarding solution of problems in customs procedures.
Among new negative expectations of EBA members – fears of UAH devaluation and grim predictions of the decline of conditions for doing business after the parliamentary elections 2012. 17