Are Ukrainian cities able to compete for investments?

12-02-2019

Source: Economichna Pravda

We know how to create a paradise for investors, but many Ukrainian cities continue business as usual. If there is no paradise, there will be no money in the budget.

Registering a company in 15 minutes, obtaining construction and engineering networks permits at no charge, and as a bonus, paying 0% of income tax until 2026.

That would be a paradise for investors. The only problem is that it is about Georgian Adjara, and not about some Ukrainian region.

Today, developed cities are key sources of filling state and local budgets. They are scientific, economic and political centers.

Due to decentralization, their influence on state development is growing. The united territorial communities, cities and villages are able to manage their own funds, but priority is given to those that do everything to attract financial resources.

The intensity of competition is also increasing. While the world’s mega-cities are gaining ever greater competitive advantage, Ukrainian cities that do not work on investment attractiveness are losing their time and opportunities.

For two consecutive years, the BRDO Office has been analyzing the specifics of doing business in regions based on the World Bank’s methodology and presenting the Regional Doing Business rating.

We analyze how easy it is to open a business, pay taxes, register land plots or obtain a construction permit as well as whether electronic services are fully accessible or whether it is easy to connect to electricity networks in different cities of Ukraine.

It is obvious that the primary factors for attracting investments are private property security, infrastructure development and political stability. However, even without the above-mentioned criteria regulated at the local level, our regional centers will not be able to win competition even among the East European cities.

Our research allows us to assume what the chances of a potential foreign investor choosing the Ukrainian Rivne city instead of the Hungarian Szeged city, where the procedure for obtaining construction permits is ten times cheaper, but starting a business takes more time, are.

We not only analyze the information on procedures received from entrepreneurs, but also provide recommendations to local authorities. In 2018, some officials and deputies ignored these advices, but it helped others to implement useful initiatives.

One of the successful cases was a one-hundred-fold reduction in the share participation rate for non-residential premises in Chernihiv and accelerated procedures, which are now twice as fast in construction as in the Croatian capital of Zagreb, and far less expensive than in Kyiv. This improved the city’s position in the rating and helped attract investors.

Realizing that the transparency and business-friendly public services interface should also be implemented centrally, we have developed several tools.

Local authorities can attach their cities to these tools and simplify the process by supporting communication with start-up entrepreneurs and potential investors. We hope that they take advantage of them.

One of these tools is a Start Business Challenge state web portal, which provides guidance on starting more than 100 business types.

Adding cities to the portal through localization of instructions can help the government create a cluster of private entrepreneurs, increase revenues to the budget and create jobs. The portal will help both business owners and potential entrepreneurs.

However, not all cities are in a hurry to take this step: 14 regional centers have not yet joined the system. Instead, Vinnytsia, Sumy and Ternopil have localized all business cases.

Another web resource, with the help of which cities can improve their investment attractiveness, is a state web portal pmap.minregion.gov.ua. It contains links to all city planning documents required by investors and all citizens.

Access to such documentation is a long-standing national problem, so the Ukrainian regions now have the opportunity to publish all data online and be open. However, not all regions are in a hurry in this case as well. Only 67% of data are available online.

As part of the Regional Doing Business 2019 study, the BRDO Office is preparing proposals for improving the investment climate for regions in the Best Practices format that will help regions to adapt successful initiatives of their neighbors.

We will work not only with local authorities, but also with active representatives of the business community to increase the chances of their implementation. We hope that clear data and public communication will stimulate the government to engage experts and entrepreneurs in cooperation to build an investment-friendly country.

The views expressed in this article reflect solely the author’s point of view and do not necessarily coincide with the position of the EU Delegation to Ukraine.

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