How to turn Ukraine into an investment Mecca

Author : Alla Shlapak

Source : 112 Ukraine

Ukraine has faced a huge problem that hinders the economy, raises unemployment, migration, and causes poverty. The name of this problem is a lack of investment
23:27, 28 December 2017

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Today Ukraine has faced a huge problem that hinders the economy, raises unemployment, migration from the country and causes total poverty of the population. The name of this problem is a lack of investment. Now we are in a situation where the direct foreign investments per person in Ukraine are less than 1.4 thousand dollars, while in Poland this figure is $ 5,600, in the Czech Republic - $10,700 and in the United States - $17,400 (UNCTAD data for 2015). Our economy requires conceptual changes and the use of effective methods to save Ukraine from the abyss of de-industrialization and turning into a raw material appendage to get rid of the "investment hunger" and total dependence on loans. Probably everyone understands the essential difference between a loyal loan and real investments in the economy.

Related: Kyiv Investment Agency raised over $71 million in 2014-2017

Related: Ukraine in top 50 in Global Innovation Index for the first time

In order to confidently invest in the future, in innovations, it is necessary to create a transparent legal field – effective, simple, predictable rules of the game that would remain stable for many years. So, at summits in Davos, the agenda is formed by questions for a 20-30-year perspective. In Ukraine there is no such culture, because no one is used to thinking about the future. This problem exists in the government, in business, and among ordinary citizens. Indeed, why make investments that will pay off even for 3-4 years (not to mention the period of 5-10 years), if an entrepreneur can only guess how many more years will his business exist?

That is why the country should create an investment-friendly tax climate, so that companies are interested in having a residence permit in Ukraine, rather than offshore. Our state needs to become an "innovative haven" for international corporations.

Related: Ukraine drops in Bloomberg Innovation Index

Ukrainian politicians often justify their action by the war, but if we look at the example of Israel, a country that has been fighting for decades, but only in the last year attracted 11.7 billion dollars of investments. Every foreign investor will be interested in supporting peace in the country. The country spoken of in the context of conflicts in the Middle East is now the second Silicon Valley. Why such a boom in the development of high technology and start-ups happened? First (strange as it may sound) reason is the war. The real threat of physical destruction better stimulates the search for non-standard solutions. The Israeli military-industrial complex has been and remains the main engine of progress in the innovation industry. And the beginning of this process was laid not 20 years ago, but much earlier. The computerized division of Israeli army - MAMRAM (Merkaz Mahshevim UMa'arahot Meida) - appeared in 1959. And thanks to close ties with the huge diaspora, many Israeli initiatives receive comprehensive support, including financial aid.

Related: Innovations in the Ukrainian schools

The Startup Genome rating placed the Israeli ecosystem of innovation in the second place after the Silicon Valley. In the coming decade, Israel will move forward and forward. Of course, if the state did not provide its support, such results would not be even possible. Israel provides a system of the government grants, as well as benefits to innovative start-ups. The Ministry of Industry and Trade has specialized management, which finances projects with the R & D component (Research and Development Center). This is a transparent and simple interaction: the success of the company means the return to the state of the invested funds. Usually, the amount of grants is several hundred thousand dollars. In case of a justifiable failure, in accordance with the terms of the agreement, there is no need to return the funds, because there is an adequate understanding of the entire riskiness of the venture business. Even a few successful ideas among the hundreds of unsuccessful cover all the lost funds.

Related: Great Ukrainian innovators: heart surgeon and inventor Mykola Amosov

Today, Israel has R & D centers of Microsoft, IBM, Google, Apple, Intel, CiscoSystemsOracle, Dell, and many others. The share of Israel's investment in the research and innovation sector is 4.3% of GDP, and this figure is number 1 in the world (compared to 2.2% in the United States). All the conditions for the effective development of the startup industry have been formed in the country: a high quality education system, transparent tax policy, competent investment legislation, an unprecedented number of free trade agreements, and stable macroeconomic indicators (stable ratings A and A + from Fitch, S & P etc.), as well as a high level of trust in the industry.

Related: Ukrainian start ups won $200 000 from Cisco

On the global labor market, you can be competitive only if you know languages, constantly self-developing and take into account the main aspects of project management. Of course, you need knowledge and skills that you can apply in practice. In my opinion, in Ukraine there is a problem precisely with the practical direction of education, and, meanwhile, the acquisition of certain skills gives the opportunity to work in the innovative business. Another problematic issue is our inability to capitalize on the good education. In Europe or America, getting the high-quality education is a guarantee of high salary. In Ukraine, unfortunately, there is no such guarantee.

Related: Ukrainian startups boost the Polish economy

Related: Heating via Wi-Fi: Ukrainian startup taught the Germans to save

In addition to the fact that Ukraine should create favorable tax conditions, reduce the level of corruption, carry out real rather than formal changes in the judiciary, we also need to reform education, secure the protection of intellectual property, and formulate a clear state strategy for the development of the IT sector. Another important global issue is a brain drain. And it is impossible to solve this problem without creating conditions in our country that would successfully compete with the conditions in the developed countries. Thus, now it is necessary to deal with the struggle against corruption, and the urgent issues of infrastructure, medicine, security and alike. Unfinished deficiencies should be offset by a favorable climate for entrepreneurship, low taxes, housing affordability and, on the whole, broad opportunities for development. Without solving these problems, we will always stay overboard, we will be considered a "third world". That is why the authorities need to develop a clear, consistent and long-term state policy.

Related: Girl from Ukraine receives scholarship for startup

Related: The number of successful startups in Tel Aviv grows 20% annually

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