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What's wrong with new payment for Ukrainian labor migrants?

Author : Anna Peshkova

Source : 112 Ukraine

The authorities periodically make statements about attempts to return the brains flowing abroad to their homeland, mainly by helping to create a business in our country. And now the prime minister has decided to hand out funds from the state budget to those wishing to start their own business - up to UAH 150,000 (5,358 USD) "in hand". However, receiving this assistance will never interest Ukrainian migrant workers and will not solve the migration problem.
21:47, 1 February 2021

Open source

To begin with, not everyone can get help. First, a person must also invest his own money, and not less than the state. But having 5,000 USD in hand to confirm the seriousness of intentions is not all. The applicant must have more than a year of work abroad and more than 10 years of insurance experience. That is, the "young and promising" will not be able to get an incentive from the state. They can only be provided with assistance on a returnable basis.

There is a simple pattern: the fewer criteria the state sets during the implementation of the program, the fewer corruption components take place. And this program also runs the risk of not becoming an exception, because those who fit the description will be waiting for competition. Which business plans will have the best chance of success is unclear. Most likely, based on the prime minister's speech, the main criterion will be the creation of new jobs. So those who want to open a small coffee shop are likely to be left out of business.

Related: Ukraine expects $10 billion of income from labor migrants this year

The scale of the new program is amazing. Based on the funds allocated for its implementation, only 720 (!) citizens will be able to receive assistance in full. This is less than 0.048% of Ukrainian entrepreneurs, and in terms of migration, it is just a drop in the sea. There are no official statistics, but, according to the estimates of the ex-Minister of the Cabinet of Ministers Dmytro Dubilet, about 4 million Ukrainians have left abroad in search of a better life.

Of course, if Ukrainians apply for a smaller amount of aid, then several thousand people may become its recipients. But one way or another, there is no need to say that thanks to the new program it will be possible to combat migration trends.

Such a limited number of potential beneficiaries is due to the fact that only UAH 108 million (3.8 million USD) will be allocated for the program. And this happens while developed countries are allocating billions of dollars to support the business. Those wishing to start a business in Poland, for example, were given loans at 1% per annum before the pandemic. At the same time, the entrepreneur was taught everything and helped in drawing up a business plan.

You will say that the state has no money to distribute to entrepreneurs right and left. However, tens of billions of hryvnias were pledged for Big Construction. In addition, according to the estimates of financial analyst Oleksiy Kushch, if the state did not make early payments to creditors, it could accumulate from 300 to 400 - not millions, but billions (!) - hryvnias.

Such a scheme of "assistance" to business in Ukraine is as old as the world. A tempting offer is sounded, due to which the elites manage to score points before voters who do not delve into its specifics. Information noise is created. There are no real costs - as, of course, there is no real effect on the economy.

It's easy enough to check. Let us recall the program of concessional loans for business at 5-7-9%, which was called "Come back and stay" back in December 2019 and was supposed to help the migrant workers. The scale of its implementation at the start turned out to be extremely modest: in a month, less than a hundred workers were able to receive this assistance. Then, due to low popularity, the program was expanded to include a number of entrepreneurs inside the country, and then to those affected by quarantine restrictions.

Related: Ukrainian labor migrants transferred USD 12 billion to motherland in 2019

But even then, preferential loans did not gain high popularity due to the difficulties in obtaining them. In addition, taking into account, for example, the National Bank's interest rate, a loan at 7% seemed not so tempting to entrepreneurs. As a result, the vast majority of loans received under this program are re-issuance of previously received loans. There can be no question of any stimulation of business development.

And now there is bad news for PM Shmygal. There is no "magic pill" to return workers to Ukraine. Until the state provides real large-scale business support programs, until there is noticeable progress in the fight against corruption, bringing big business out of the shadows, until there are high-quality law enforcement and judicial reforms, until quarantine restrictions become reasonable and understandable for business - Ukrainians will continue to go to work abroad, where all this is present.

Most likely, it is precisely because of a clear understanding of the level of development of the business climate in the country that such a modest amount of funds is going to be allocated under the new program. Officials are aware of the risks that this money may simply not return to the state budget in the form of taxes from the new business.

Related: Ukrainian labor migrants stuck at border with Poland

And even if the business climate improved, this system cannot solve the problem of migration. There is a small, but very simple nuance: a very limited number of people can run their own business. This requires entrepreneurial brains.

Among the Ukrainian migrant workers, there is mainly low-skilled personnel in seasonal work. Instead of taking risks opening a business in Ukraine, they, like welders, packers, can earn about 1.5 thousand euros in Poland. And with no headache. Moreover, food in this country costs about the same as in Ukraine, and the quality of life is incomparable.

Employees with high qualifications abroad are offered such a salary that the offer of 5,000 USD in Ukraine will never interest them.

What can I say, even the pandemic did not contribute to the fact that the Ukrainians who temporarily returned to their homeland stay here. As soon as the borders opened after a hard lockdown, those migrant workers who had such an opportunity returned to work in Europe. The volume of remittances from our labor migrants for 9 months of 2020 compared to 2019 practically did not change - they decreased by only 2.5%.

So do not deceive yourself. Until the Ukrainians feel a tangible increase in the standard of living in the country, the flow of economic refugees to more developed countries will not dry out. And neither a thousand nor five thousand "affordable" startup funds will fix that.

Related: Europe ready to organize charter flights to bring Ukrainian labor migrants for seasonal works

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