The Ukrainians have called the new distance to Poland is 50 years. That a considerable period was announced by the Minister of Finance Oksana Markarova. That’s how much time we need to catch up with its Western neighbor at the current pace of economic development.
However, the Finance Minister only repeated the conclusions of the world Bank. That, in turn, voiced in terms of “playing catch”, based on GDP per capita. In Poland he is 29 thousand dollars per person per year, and we have, at the end of 2018 – a total of 9.21 thousand.
Even if suddenly a miracle happens, and due to the reforms we will be able to go, not on the current 2-3% and 5% annual growth to attain the Polish level of life Ukraine will be able in 25 years, calculated economist Viktor Skarshevsky.
The economic success of Poland was based on the fact that in the past decade it has been able to attract significant investment. A large Corporation placed there production taking into account of cheaper labor than in Western Europe.
At the stage of signing by Ukraine of an Association Agreement with the EU in 2014, many experts talked about the chance for our country to repeat the Polish breakthrough.
They say investors will rush to open production in Ukraine, where even cheaper labor. However, in practice this did not happen. As experts point out there are three main reasons. First – war and tense relations with the biggest neighbor that discourages major international players. Second – corruption and incomprehensible to Western corporations rules of the game. The third competition of the poles. Poland has managed to gain the support of cheap Ukrainian labour and expense it expands its production and attracts investors. Despite the fact that it is a member country of the EU, which is a major plus when deciding about investing.
That is, in fact, took the place that was intended for Ukraine. How is it understood the “Country”.
Chicken and bezviz
As the main achievements of the Association with the EU, Ukrainians are presented with two facts – bezviz and increased exports of our products to Europe. Allegedly, due to the quotas on duty-free supply of certain goods, the European market was able to replace the Russian.
Meanwhile, the statistics suggests that the decline in exports from Ukraine to Russia amounted to 2018 (compared to 2013) more than 11 billion dollars. While the growth in exports over the same period, the EU accounted for less than 3.5 billion.
But the main thing is.
According to the economist Alexei Kusch, the Association Agreement and Agreement on free trade Zone could allow Ukraine to integrate into the European chain of value added creation.
Simply put, we can become a manufacturing destination for multinational corporations. To do this, Ukraine has at least one trump card – the labor is cheap. Released on the Ukrainian capacities of the goods under the contract of Association, is possible to export back to the same Europe without duties, or with minimal taxes. The contract stipulates a sharp reduction of interest rates for a number of commodity positions from Ukraine, from clothing and shoes and finishing equipment up to 1-5% of the customs value.
“It was a real chance to move from exporting tomatoes to supply turbines,” says Kusch.
However, to date, we continue to drive in Europe mainly commodities – chicken, grain, metal and other.
For the first 8 months of last year, the trade turnover of Ukraine with the EU countries amounted to 5.4 billion dollars, which is 330 million more than last year. While agricultural products delivered 3.6 billion In the lead – grains ($1.2 billion), oil (702,5 million), seeds of oil (581,4 million), meat (about 170 million), and more.
Most of the products we supply in the European quotas, that is, without fees. But the quotas themselves are miserable, many of our manufacturers manage to choose the annual volume for a few months. So in April of last year, our exporters fully used 6 quota – honey, malt, processed tomatoes grape and Apple juice, wheat and corn.
That is, to increase exports of agricultural products to the EU, most likely, will not work.
“For raw materials and semi-finished products duty we nobody lowered. They account for 7-10%. Plus Europe protects domestic producers of such products, that is, to us there is especially nothing”, – says Alexei Kusch.
“The same chicken we supply to Europe quota of 20 thousand tons and in excess of quota additional 2 thousand tons. For comparison, in the UAE are already exporting more than 300 thousand tons per year”, – said economist Alexander Okhrimenko.
So count on the fact that the export of our usual range of goods in the EU will spur the growth of the Ukrainian economy is not necessary.
For goods with high added value, which theoretically can be transported to the EU in unlimited quantities and at reduced rates, not too easy.
“In its current form, our engineering products in Europe uncompetitive. It simply no one will buy,” – says Okhrimenko.
The situation could change the launch in Ukraine of the European production sites, as it once happened in Poland. However, while European investors to us not in a hurry.
Horror stories for investors
Foreign direct investment in Ukraine reduced. If in 2013 it was nearly $ 4.5 billion in 2016, received a total 3.2 billion, in 2017 – 2.2 billion, and by the end of 2018 – about 1.5 billion.
“And even then, most of the money came from offshore companies controlled by domestic enterprises”, – says the head of the Ukrainian analytical center Alexander Okhrimenko.
Why wouldn’t it work spelled out in the Association agreement with the EU format?
Actually there are several reasons. Okhrimenko said about the failure of the process of harmonization of Ukrainian legislation with European legislation that was to provide our power. Of more than a hundred European directives into national legislation is implemented only a few dozen, and that in practice the updated laws almost don’t work.
“Potential investors need the so-called European passport. For example, a German firm, say, in the production of Windows, should be just as easy to open a shop for the manufacture of its products in Ivano-Frankivsk region, like she does at home, and ideally even easier. That is, without additional permissions, paperwork and so on. But this requires an appropriate regulatory framework, and we don’t have it” – says Okhrimenko.
Not yet run and format various preferential formats for business. For example, in Poland at the time, EN masse has created technology parks, free economic zones, multimodal logistics corridors. “On their territory for business included the green light, provided tax benefits. Naturally, this attracts potential investors. But in Ukraine there is no such examples,” – says Alexei Kusch.
Lviv authorities announced the establishment of a Technopark for the IT business, but, in the opinion of the tabernacles, our understanding of the industrial parks are fundamentally different from the European one.
“Classic Park shall include scientific, educational institutions and production that worked together. Plus tax benefits. In Lviv on the basis of the local Polytechnic University established coworking for performing Western orders it people – and that’s all,” he notes.
Reforms in this area, according to experts, largely hamper sitting in the cash flows of the officials. “Who benefits from Porto-Franco in Odessa, if they earn billions of dollars by smuggling. Similarly, other markets – Ukrainian monopolists will have to move voluntarily to give way to foreign businesses, and they are not ready,” says Kusch.
Plus – a traditional Ukrainian problem – a weak judicial system, lack of safeguards for private property owners, and widespread corruption.
With this list of risks and without additional “gingerbread” European investors to us in the coming years will not come, – said the head of the Secretariat of the Council of entrepreneurs under the Cabinet of Ministers Andrei Zablovsky.
And that’s not to mention the main issue – the war.
“This one aloud will not say, because politically incorrect and unpatriotic. But really the situation is that while Ukraine is in a state of almost war with Russia, our largest neighbour and nuclear power, large investments, we do not have to count. It’s like, what if Mexico were in the same relationship with US as we with Russia. Many investors would go to Mexico? The situation for us can change the normalization of relations with Russia and the restoration of her full-fledged free trade area”, – said “the Country,” a representative of one of investment funds.
But this time the poles
Some examples of opening we have production sites European investors are.
This, in particular, plants for the production of components for vehicles in the Western region of Ukraine.
However, while we ran the shop for sewing car seat covers, in neighboring Poland opened a huge car factory Volkswagen 3 thousand jobs.
It is planned to produce 100 thousand vans Сrafter a year, in particular, for deliveries to the Ukrainian market. Last summer in the Polish aviation cluster “Aviation valley” opened a new plant of the international Safran group, specializing in the production of aviadvigateli. Investments amounted to € 48 million.
Then in Jawor near Wroclaw was launched the plant of Daimler in the production of Mercedes cars per thousand jobs.
I mean, it’s obvious that the Association of Ukraine with the EU and, supposedly opening new opportunities for us, does not interfere with Poland and continue to develop the niche that we were supposed to, was supposed to take.
And to give in its place the poles clearly did not intend. Actively functioning in the country, the Ministry of investments by foreign businesses are all new and new offers that are hard to refuse. These include work on preferential terms in numerous technology parks and special economic zones, state assistance in the construction of large enterprises and so on.
According to Andrew Sablukova, Polish conditions are increasingly attracted and Ukrainian businessmen.
Here, for example, the proposal from the industrial Park Lobachev located 13 km from KP “Pears – Budomezh”: land of 1 ha 16 PLN/sqm (it’s just 4 euros, which is ten times cheaper than the minimum price in the commercial market), well-developed road and rail infrastructure, exemption from real estate taxes, as well as discounts on income tax (50-70%) for 1-5 years (depending on the number of jobs created and the maximum 40 places), free legal assistance when making investments. To find such conditions in Ukraine – is simply impossible, what determines the selection of potential investors.
Until recently, Poland was lost to us in only one – the cost of labor.
As economic growth in the country has increased and salaries. But with the introduction of bezveza, the problem was practically solved at the expense of our workers.
They actively go to work in Polish factories for 700-900 euros per month. In the end, our businesses, including, and the new plant with foreign investment are unable to find staff, although the offer is also not enough by Ukrainian standards – the equivalent of about 450-500 Euro.
And, apparently, the problems with labor resources in Ukraine will become chronic, because Poland is doing everything to put the migration of Ukrainian workers to the stream.
Attract not only ready-made professionals, but also young people and even couples “after 40”. In Ukraine, experts close to retirement age are not wanted. But the poles sensibly decided that, with the addition of them, they can count on the relocation and their children, students and young professionals.
In such a situation Ukraine was in fact a trap. On the one hand, she is not getting all the advantages of Association with the EU, on the other, begins to feel the effect of the disadvantages.
“Because, for example, we cannot introduce protectionist measures to protect against European imports in their production or individual segments of the market. And wages growth due to the migration of workers due to the increase in productivity, deprives us of even the meager benefits to the neighbors, in particular Poland the same,” says Kush.