The question of entry and development of German businesses in Ukraine is becoming increasingly relevant, especially in the context of recent political and governmental changes, including those in German-Ukrainian relations.
First of all, we should take note of the substantial practical assistance of the Government of the Federal Republic of Germany in implementing reforms in Ukraine as well as in the steady growth
of trade and economic relations and the investment cooperation between the countries. Of particular note is the appointment of the Ambassador of the FRG Anki Feldhusen to Ukraine, which will also have special significance and prerequisites for closer cooperation between Germany and Ukraine.
It should also be mentioned that German business becomes increasingly focused on the Ukrainian market in connection with the fulfillment by Ukraine of a number of obligations stipulated by the Association Agreement between Ukraine and the EU, including in the field of anti-corruption policy, the development of transport infrastructure, support for small and medium-sized businesses, energy efficiency, etc. These changes will certainly improve the investment climate and gradually adapt the European standards of doing business in Ukraine.
Before entering the Ukrainian market, any international German company weights all the pros and cons, taking into account the risks a business may face (for example, unstable political and economic situation, military conflict, disinterest of authorities in attracting investors, etc.). German companies will not start to work in Ukraine until they are 99% convinced that this business will work, i.e. generate profit, and that this business is insured in the event of any adverse circumstances, events or actions for such a business.
Many procedures relating primarily to the entry of foreign business into the Ukrainian market have been indeed simplified. But the main issues remain problematic. In fact, Ukraine occupies a relatively worthy place in the ranking of starting a business among other countries, including post-Soviet countries, and much has been done to deregulate business processes. If we take into account the level of legal regulation, the legal framework is in fact not that poor, and rather favorable.
Actually, starting business in Ukraine is not that hard. However, it is important for investors that such business should operate well, and it is undoubtedly that such business should be profitable. The capacity of law enforcement and fiscal authorities in Ukraine is not so clear for German investors. It is difficult for Germans to understand how, for example, it can happen that tax authorities can levy additional fees without good reason from foreign company that is going to fill the state budget with additional funds? Or conduct an unreasonable tax audit in order to fine the investor.
It should be noted that the similar situation is with raider attacks. We are introducing phased amendments to the legislation that aimed at countering this phenomenon, but in fact such changes have little effect on the actual number of raider attacks in the country.
The system of law enforcement and judicial bodies in Ukraine is so indifferent and helpless, even though Ukraine considers itself as progressive and European-oriented state. These are the main problems that repel serious German business from investing in Ukraine. The practice of “one step forward and one step back” can be traced in Ukraine and it scares German business.
Despite the imperfect law system in Ukraine and unfair work of local authorities, German business is interested in working in Ukraine. And this, first of all, is connected with a favorable geographical location, large number of natural (energy) resources, inexpensive raw materials (including agricultural), human and intellectual resources. That is why the Germans are more focused on the development of the agro-industrial sector, infrastructure, automobile industry and IT-industry.
We have to pursue reforms underway. Now good signals can be recorded in economic growth and conditions for foreign businesses are becoming more friendly, especially for Germany, which supports integration of Ukraine into the EU market. Smart regulation, public procurement reform, privatization – all this opens up opportunities for investment and growth, and consequently, increases the number of jobs and positive developments in Ukraine as a whole.
As Ukrainian attorney at law and foreign member of the Berlin Chamber of Lawyers (RAK Berlin), I would also like to note that in Germany, despite the stagnation of the economy, a record budget surplus of 58 billion euros was recorded last year. This is the highest surplus in the last 28 years since the reunification of the country. The surplus is noted at all state levels – federal, state, local, and at the compulsory social insurance offices. The highest figure is in the treasury of the federal government: almost 18 billion euros.
Comparing the economy of Germany and the USA, there is a deficit of a trillion dollars in the US. But the economy is still growing, as one of the fastest. And the capitalization of public companies is growing too. This is one of the reasons why German companies are gradually entering the Ukrainian market. In this regard, economically developed countries are gradually entering the Ukrainian market.
In this regard, economically developed countries are gradually entering the Ukrainian market, in particular the German one. The pace of investment by German companies in the Ukrainian economy is increasing. To a greater extent this will depend on the efficient work of the Parliament and the Government in Ukraine. And the most important thing is to pursue reforming of law enforcement, judicial, fiscal authorities which most exposed to corruption risks and on the effectiveness of which depends on attracting investment in Ukraine.
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