Ukrainian wages more than $ 1,000: what should be done?

Author : Oleksandr Okhrymenko

10:04, 24 March 2016

Ukrainian wages more than $ 1,000: what should be done?

Author : Oleksandr Okhrymenko

EU-Ukraine Association Agreement is not even worth the ink, spent to sign it, if there is no real action from the Ukrainian government

10:04, 24 March 2016

The official average salary in Ukraine about 170 USD. Even including the salary in the "envelope", it will likely not exceed $ 250. It is a shame. In Turkey the same average official salary is more than $ 1,000. Why Ukraine cannot afford it? Is Ukraine worse than Turkey? Especially, we now have an association agreement with the EU, like Turkey.

Indeed, Ukraine's economy is significantly behind the Turkish economy. In Ukraine, GDP per capita is about 3 thousand USD, and in Turkey it is more than 10 thousand USD. Current indicator of GDP per capita in Ukraine is like in 1996. It turns out that Ukraine lags behind Turkey at least twenty years. As it turns out, that Ukraine should be the worst countries in Europe and Asia? It is unacceptable. We need real reformsd. And here it may just help the experience of Turkey and the Association Agreement with the EU.

The agreement on association with the EU is not even worth the ink that has been spent to sign it, if there is no real action from the Ukrainian government. EU is not a charitable organization, which will help Ukraine. Ukraine needs EU. The association agreement was signed to obtain economic benefits for Ukraine from cooperation with the EU.

Related: Why Turkey might be useful for Ukraine?

Therefore, we need less to engage in politicking and work more. Now Turkey is one of the main EU trading partners. At the same time, the main export of Turkey to the EU is not corn, as in Ukraine, but engineering products. Exactly. In the first place in Turkey is export of cars, which are produced in Turkey, the EU and other countries of the world. Turkey produces for the EU not only cars, but also household appliances are already in cooperation with China, and finished food products, canned fruits and vegetables in cooperation with India and other Asian countries. We need to stop waiting for investors from the EU and Ukraine to create conditions for these same investors to German, English, Polish or Icelandic investors. To do this, you need something to learn from Turkey, but to make better and smarter.

Turkey secured a growth investor inflows largely due to the creation of free economic zones in 1985. Even in 1985 the net inflow of foreign investment in Turkey was at $ 88 million., But in five years, this figure has exceeded $ 1 billion. And on the results of 2014 the inflow of direct investments in Turkey amounted to more than $ 12 billion. In total, since the establishment of free economic zones in Turkey was invested in foreign direct investments worth more than $ 163 billion. For Ukraine, this kind of investment from abroad now seem miraculous. But it can be made a reality if we act wisely and correctly.

Related: Turkey interested in privatization of Ukrainian coal mines

Turkey was able to lure foreign investors through free economic zones. Now they are arranged in such a way that it is easy to import goods for processing and export, these are ports and airports. Free Economic Zone territory is not included in the customs area of ​​Turkey, but they can act European standards and technical specifications, which makes it easy to produce products to the EU under the European standards, without interfering with the standards in Turkey.

As a rule, most of the goods produced in the free economic zones, is intended for export, they also allow the delivery of goods to the territory of Turkey, but as imports of goods from the payment of all duties and taxes. During 2015 Turkey got goods worth about $ 5 billion from the free economic zone. For the same period, Turkish companies have put production at enterprises located in free trade zones, valued at more than $ 10 billion.

Related: Ukraine and Turkey agreed on joint production of military equipment and weapons

To attract investors we need incentives, otherwise why should they open production in Ukraine, even if it's free zone. Given the experience of Turkey, we must, as a minimum, abolish VAT on imported and exported goods, make a grace period of exemption from income tax or income tax must not exceed 5% for the entire period, Single social contribution should be not more than 10-12%, tax on income of individuals should be no higher than 10%. All of this will ensure the competitiveness of Ukrainian free economic zones. At the same time, Ukrainian companies that provide services and carry out work for foreign companies in the free zones will have to pay taxes as a full-fledged Ukrainian companies, and this will give an opportunity to earn extra income for the state budget.

Related: Ukraine and Turkey to increase turnover up to $10 billion

Launching of free economic zones is not a fast process, but it should be as fast as you can run. Turkey has spent about 7 years on it. Ukraine does not have this time. For Ukraine, it is important to have in 2016 a law on free economic zone in order to get the first successful results in 2020. This will increase the export of Ukraine and, most importantly, provide jobs for a large number of Ukrainians. This will allow the Ukrainians not to go to work abroad and to work in Ukraine and help revive the economy of Ukraine after the Maidan. In extreme conditions, which turned out to Ukraine's economy, we need to do extreme, but the right action. Without this Ukraine will never catch up with Turkey in terms of life, and the dream of a salary of $ 1,000.

Related: Turkish PM: Crimea is part of Ukraine

Related: Ukraine and Turkey step up to protect Crimean Tatars

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