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weekend.
But the disillusionment is rising as the number of Ukrainians that think the country is going in the “wrong direction” climbs back to its previous highs. In this sense Zelenskiy has been unlucky as until 2020 the country was making steady progress. Reforms were being pushed through. Investment in sectors like retail and construction was beginning. And incomes had started to rise. If 2021 proves to be a little easier then Ukraine could start to build up that momentum again.
2.0 Politics
2.1 Ukraine parliament adopts investment nanny bill
Ukraine’s parliament approved on December 17 the second reading of the investment nanny bill, which assigns state assistance and oversight to large investment projects.
The threshold for qualifying investment projects was reduced to €20mn from €30mn in the first reading. The final bill also includes a larger list of investment areas to include practically all economic activities, except the production of tobacco and alcohol.
Investment projects under the bill should create at least 80 new jobs with average wages of at least 15% higher than those in the same industry and in the same region. The investment contract should be concluded between the investor, Ukraine’s Cabinet of Ministers and local authorities (if government incentives are involved).
The major investment nanny incentives are exemptions from the enterprise profit tax, duties on imports of new equipment, possible discounts on renting land, and state financing of infrastructure (roads, lines of communication, electricity, gas, and water supply).
At the same time, parliament’s legal service in its legal opinion provided to the draft bill noted that the project contradicts the IMF-Ukraine memorandum of June 2 as Ukraine should abstain from introducing new tax incentives.
“The investment nanny project is in essence an admission by the Zelenskiy administration that it is incapable of carrying out systemic reforms that involve large-scale planning and long-term strategy. Instead of promoting competition, leveling the playing field and providing equal access to resources, the law might bring only piecemeal change in a particular area, if any at all,” Evgeniya Akhtyrko of Concorde Capital said in a note.
“That said, we don’t expect the adopted bill to become an effective tool to make a significant improvement in Ukraine’s business environment and boost investment flow to the country. However, it can provide some guidelines for some investors for assessing the costs of their projects,” Akhtyrko added.
6 UKRAINE Country Report January 2021 www.intellinews.com
