Problems in creating a favorable investment climate in Ukraine
MINISTRY
OF EDUCATION AND SCIENCE OF UKRAINE
NATIONAL
AVIATION UNIVERSITY
Management
of Foreign Economic Activity of Enterprises Department
TERM
PAPERthe subject “International
Economic Relations”
Topic:
“Problems in creating a favorable
investment climate in Ukraine”
Performed
by:
student
of the 2nd year of study, FML 203Alexander Alexandrovich
Direction
6.030601"Management"
Checked
by: Ph.D.
in Economics,professor Lytvynenko L.L.
Kyiv
- 2016
CONTENT
INTRODUCTION1.
THEORETICAL ASPECTS OF INVESMENT CLIMATE IN UKRAINE
.1
The essence of investment climate
.2
Factors that forming investment climate2. ANALYSIS OF CURRENT INVESTMENT
CLIMATE IN UKRAINE AND WAYS OF
SOLVING PROBLEMS
.1
Dynamics of foreign direct investment (FDI) in Ukraine
.2
Ways of improving the mechanism of attracting foreign investment in Ukraine
INTRODUCTION
It is not a secret that economy in
our country, nowadays, is suffering from different factors, like aggressive
policy of Russian Federation, Crimean occupation, corruption, military actions
in eastern part of Ukraine etc. That’s why the problem of creating a favorable
investment climate in Ukraine is rather actual. Due to such situation,
investments - is one of the most important remedies in making our economy more
prospective and stable, ‘cause international investments facilitate integration
into world economy of receiving country by transfer of technologies, capital,
management experience, innovations and so on., we have to admit the fact that
Ukraine losses competition with other post-communist states not only in Europe
but in Asia too. We can say that situation with investments in Ukraine is not
obvious. Amount of investments is increasing, from one side. But we also should
mention that Ukraine is still in the list of the most non-attractive states for
foreign investors. Situation
with foreign investments directly related to the internal economic situation in
Ukraine. Ukraine is still exporting low cost goods and 70% of these goods are
going to the former USSR countries. It means that internal transformation of
Ukrainian economy has not happened. For this transformation we need foreign
investments that
will bring new technologies and will allow to produce goods competitive on the
world market.purpose of this work is to determine the role of investment
climate of Ukraine for the development of Ukrainian economy and to find ways
for making this climate more favorable.achieve this goal, in this work I’ve
tried to solve several tasks:
Ø to define factors
forming investment climate;
Ø to analyze current
features of investment climate in our country;
Ø to investigate the
role of foreign investments in forming favorable investment climate in Ukraine;
Ø to find out the
features of attractiveness of some industries in Ukraine;
Ø identify possible
areas of change in the investment climate of Ukraine in the near
future.research is based on the use of methods of economic and historical
analysis, systematization of theoretical approaches to the procedures and
methods of forming the investment climate, statistical method, comparative and
structural analysis of the volume of domestic and foreign investments.this work
I have been analyzed the current status and trends in the investment sphere in
Ukraine. Here shown particular areas of increased investment activity in
Ukraine.today's dynamic world investments play an important role. They can take
the role of core economy, the driving force of national production. However,
internal resources of Ukraine for finance in the national economy lacks the
proper amount. In this situation, the question arises about the attraction of
investment from other sources, including from abroad. Ukraine's economy has
significant resource potential, which many investors may want to invest their
money. Instability, inconsistency and lack of transparency laws do not allow
full use of existing investment potential. The problem of attracting foreign
capital becomes more actual due to situation in our state
[9].investments contribute to economic growth of
the host economy and its integration into the global economy through the
transfer of production capacity, transfer of technology, capital, management
experience, skills and innovation. According to the Law of Ukraine "On
investment activity" investments are all types of property and
intellectual values invested in business and other activities, which resulted
in creating profit achieved or social impact [8].are several classifications of
investments, including;
Ø property of
investment;
Ø nature of
participation in investment;
Ø period of
investment;
Ø investor ownership;
Ø regional nature of
investments;
Ø level of the risk
[13].
PART 1. THEORETICAL ASPECTS OF
INVESMENT CLIMATE IN UKRAINE
.1 The essence of investment
climate
investment climate
foreign
In modern literature, definition of
investment is often simplified, ‘cause of focusing attention only on some of
its essential features. The term "investment" affects many meaningful
concepts. Under the “investments”, they often mean the purchase of shares or
bonds with the expectation of some financial results. In broad sense,
investments provide a mechanism needed for the financial growth and for the
development of economy. In a more narrower sense investment means the
realization of long-term capital investment in their own country or abroad in
companies of different industries, business, innovation projects,
socio-economic programs; and the investor - is a depositor - a person,
organization or state that investing. So, public investments can be formed from
the state budget or state funding sources; foreign - invested by foreign
investors in other countries, foreign banks, companies; private, which formed
from private sources, corporate enterprises and organizations [4;22].
We can also mention industrial
investments that are directed to new construction or reconstruction, expansion
and modernization of existing enterprises; and intellectual investments that
are invested to create intellectual products. There can be control package of
investments (direct investments that provide ownership of more than 50% of
shares) and non-control (less
than 50%). [12]have a full understanding of the nature of the investment, first
we should consider the basic concepts, the structure of the investment process,
its members, types of investors.
▬ Securities
- a tool of financial investments that ensure the right to participate in the
company as the owner, the right to buy or sell stake in company;
▬ Property
investment - an investment in real assets of real or own property. Real assets
- land, buildings and so on;
▬ Actual
own property - is a gold, antiques, works of art and other collectible items;
▬ Options
- are securities that give investors the right to buy a security or other asset.[10]may
be:
· direct - a form of
investment that provides direct ownership of the securities and property for
the investor;
· indirect - set of
securities or property values. This form of investment doesn’t grant right to
manage assets of the company.also differ by degrees of risk, namely high-risk
and low-risk investments [23;3].above-mentioned types of investments and their
volumes depend on the investment environment, i.e. the characteristics of the
investment climate.term “investment climate” means the set of political,
social, economic, organizational, legal and geographical factors inherent in a
given country that attract or repel investors.main parameters that determine
the investment climate in the country usually include political and social stability,
the legal system, the economy, the system of receiving foreign capital, tax
treatment, the value of customs duties and excise taxes, the procedure of
registration of companies with foreign participation, etc.concept of
"investment climate" reflects the degree of favorable situations,
such as: [11]
Ø natural resources
and the economy situation of the state;
Ø quality of the
workforce;
Ø political
stability;
Ø the level of
development and infrastructure;
Ø quality of state
management;
Ø property rights;
Ø macroeconomic
stability;
Ø the level of
monopoly in economy;
Ø the quality of the
tax system;
Ø the level of
compliance with the law and order;
Ø the quality of the
banking system, credit availability;
Ø administrative,
technical, informational and other barriers.most significant factors
influencing the investment climate:
Ø macroeconomics;
Ø state debt;
Ø crime and
corruption;
Ø taxes;
Ø intellectual
property;
Ø bank system;
Ø monetary and trade
policy;
Ø compliance with
obligations mentioned in contracts.factors affect more negatively on the
formation of the investment climate in Ukraine, so they require the development
of complex measures for its improvement. Need a radical improvement of the
investment climate, as long as it is not attractive nowadays., quick change of
the situation is almost impossible. Many processes, such as ensuring reliable
operation of the judiciary, fighting against corruption and other changes have
long-term character.foreign investor with a large selection of countries where
he has the opportunity to place capital, chooses the most favorable conditions,
evaluates them, paying priority attention to these stable conditions and how
long they persist.political stability, there are several important features
like situation in the state economy and economic development policy. Constant
growth of gross domestic product and constant growth of production (even small)
- are pretty important factors.investors also assess the level of prices for
local raw materials, the degree of increase in wages, prices on local raw
materials and so on. Important role is played by inflation and inflation
expectations.- also one of the important factors that affect the foreign
investor.negative effect on the investment climate causes a lack of
transparency, lack of clear, easily understandable and generally accepted
methods of doing business in global markets and in the national economy.of
Price Walerhouse Coopers (auditing company) have made the evaluation of the
capital that have not come to the state. This evaluation method is performed on
five criteria: the level of corruption, non-transparency of the legal system,
economy and financial policy, accounting standards and relationships in
business. For each of the criteria for
every country was
given a certain number of points - from 0 to 150 (where
150
- absolute opacity). [24]evaluation can be
interpreted as: a country that intends to stimulate the inflow of foreign
investments must create on its territory favorable conditions for investors,
including lower tax burden.value foreign investor pays on the specific country
agreement on promotion and mutual protection of investments and how the country
fulfills its contractual obligations. The most important thing - the presence
of legal stability. Investor should clearly know the "rules of the
game" and be sure that they will be kept unchanged.sum up the above said,
we can conclude that the state investment policy must constantly respond to the
economic state of the environment, continuously adapting to the changes not
only in the country but also around the world. Particular attention should be
given to the stability, predictability and transparency of the economy.
1.2 Factors
that forming investment climate
Creating a favorable investment
climate depends on several factors.legal environment is one of the most
important factors in forming favorable investment climate. The experience of
many countries shows that the balanced budget, modern technology and strong NBU
not enough to guarantee normal investment activity. There should also be
effective courts; contracts with legal force; fair laws; protection of property
rights; predictable rules and procedures. Countries where legality is not the
basis of life are remaining as "countries with great potential" and
nothing more. The development of law is also the key to a successful fight
against corruption.in all countries have problems with taxes, customs
procedures and other requirements. But the attractive investment climate offers
entrepreneurs certain rights and guarantees.this area, "clarity" is
the key word. Each country creates its own legal system, and they are quite
complex. But the lawyer should explain investor about risks, in simple
examples, that he will meet. In other case, it will mean a lawyer mistake or a
mistake or imperfection of laws that are poorly formulated because of political
compromises or lack of time.of these features are very important for investors:
[16]
Ø civil, contract and
corporate law (corporate law in Ukraine is especially imperfect);
Ø ownership of land
and property, because no one wants to invest if the law can be repealed;
Ø reliable system of
land registration;
Ø the right to use
land as collateral for a loan that gives the bank or lender;
Ø guarantees in case
of insolvency of the debtor., foreign investors identify existing barriers to
investment in the Ukrainian economy, which form the unfavorable investment
climate: unstable and excessive government regulation, strict legal system,
corruption, high tax burden, problems in establishing clear property rights,
low income, lack of physical infrastructure etc.a climate conducive to business
development, strengthening rule of law, increase transparency - a key factors
to give more economic opportunities for Ukrainians. Our state should also work
on other key tasks.very important factor in creating a favorable investment
climate is the financial stability of the country. This factor increases the
urgency of reform, so Ukraine should make the order in its economy, lower
interest rates to attract much-needed investment.in Ukraine from US and other
foreign investors - is essential, and the reasons for this are clear:
Ø Ukraine is a market
of more than fifty million consumers;
Ø Ukraine occupies a
strategic position in Europe, so products can be easily delivered to Central
Europe and so on;
Ø Ukraine has the
most fertile agricultural land in the world and is rich in other natural
resources;
So, many foreign investors, in
theory, can and want invest their capitals. But, unfortunately, unstable situation
and not transparent legislation in our country do not allow to use the whole
potential. We
should not forget about the problem of so-called net investment. Ukrainian
economy is characterized as shadow at least on 50%.stocks in Ukraine are pretty
worn. The degree of deterioration is about 76% (by the end of 2013); In
industry - 57,3%; agriculture - 34,6%; transport communication - 96%. These
indexes are growing every year, but this doesn’t mean something bad for foreign
investors, ‘cause even small technical upgrade, made by investors - leads to
bigger productivity, revenues etc. That’s why purchase of machinery, equipment,
construction of craft buildings - are the most widely-spread forms of
investments [7].but undeniable fact is that Ukraine is losing in this
competition, and losing much. Foreign investments in Romania about four times
higher per capita than in Ukraine. In Slovakia - five times higher. US foreign
investment in Hungary higher per capita in the twelve-eighteen times than in
Ukraine.potential investors are interested in the large market of Ukraine, its
generous resources, its skilled workforce, but are not in a hurry to make this
step. Prospective US investors fear such negative factors of the investment
climate as excessive regulation; complex, confusing and high taxes; constantly
changing rules. All this creates a non-favorable environment for business and
investment. Ukrainian businessmen call the same list of negative factors.like
Grabenko O.V. and Gubskiy B.V. have defined other important factors of a
favorable investment climate:
Ø Taking money
abroad. As already noted, the exchange rate is one of the main economic risks
that exists in the world, except for the euro area. National Bank of Ukraine,
trying to defend the hryvna, has introduced a significant number of
restrictions on the transfer of money abroad and from abroad. Worse, these
restrictions are changing daily and this fact makes investors to reconsider
their ideas about investing capitals in our economy.
Ø Labor legislation.
Investor wants to know the principles of conduct with employees in the event of
collapse of business and the volume of its obligations. The harder it is to
stand off people from jobs, the more investor will be careful in hiring
workers.
Ø Opacity of
business. Unreliable annual reports on the balance of income and expenditure
provided by Ukrainian companies. Banks were established western accounting
standards, but they still remain unknown to many businesses. Of course, it
inhibits the desire of foreign investors to cooperate with Ukrainian companies.
Ø The high level of
crime. Crime threatens the security, welfare, health and even the lives of
people. In economic terms, it is a major factor influencing investor behavior.
He is forced to worry about protection, payment for this protection. It is
clear that a safe environment for businesses is an important task of the
government.
Ø Government
intervention in business activity. Despite promises to develop a market
economy, the Ukrainian government is constantly interfering in the affairs of
business. This is particularly noticeable in the banking sector, where the
impact on banks is obvious.it is clear that investment (especially abroad) - is
risky. Some types of risks inherent in business (competition) are healthy, so
they stimulate innovation, progress and prosperity. Other types of risk, with
the efforts of the government or other organizations, can be removed, providing
a favorable investment climate in Ukraine. To increase investors Ukraine must
first analyze and eliminate the barriers to foreign investment. This will
contribute to the Ukraine’s prospect.when investing in a country also take into
account secondary factors:
Ø cooperation in as
more countries as possible;
Ø the level of
competition;
Ø the level of import
duties or transportation costs., they will not invest if there will not be
profits, moreover relatively higher than in other country.
Why do companies invest in Ukraine if it is able to earn more in, for example,
US, Germany or Singapore? So, Ukraine
competes in the investment market with other world countries. And even when in
Ukraine there will be created good conditions for investment, they may not be
quite favorable compared with other countries. And this factor, unfortunately,
must be taken into account.that plan to invest in Ukraine should understand
that investment - is always a risky business, so it should be properly
assessed.degree of commercial risk affecting the following points:
Ø demand for the
product;
Ø creditworthiness of
customers;
Ø the behavior of
competitors;
Ø opportunity to
export their products from Ukraine to other states.problems concern any
investor.additional risks arising when investing in a foreign country, it is
very difficult to estimate, but they must be taken into account. It is, for
example, differences in mentality and culture of different countries. In most
cases, the language problem is an additional complication.economic problem
investing abroad is the risk associated with exchange rates. For example, the
company will invest in dollars or euros and profits from Ukrainian investment
receives in national currency. The question arises: what is the difference in
rate of hryvna against the major currencies at the moment when the investor
wants to get at least dividends? To reduce the risk of certain exchange rate
was the introduction of the euro in the European Union. However, in other
countries this type of risk is still present, in some states more, in others
less.reforms - the third important factor in creating a favorable economic
environment. It is not easy to implement economic reforms ‘cause one of the key
requirements of economic recovery - an investment. On the one hand economic
reforms - the key to improve investment climate, on the other - economic
reforms require investment.
1.1. Dynamics of main economic
indexes in
Ukraine [1]
Indicator
|
2011
|
2012
|
2013
|
2014
|
GDP(USD
bln)
|
163,6
|
175,78
|
183,31
|
131,81
|
GDP growth
(annual %)
|
5,2
|
0,2
|
0,0
|
-6,8
|
GDP per capita
(USD)
|
2084,77
|
2094,11
|
2098,88
|
2081,04
|
Inflation,
%
|
8,0
|
0,6
|
-0.3
|
12,2
|
Unemployment %
|
7,9
|
7,5
|
7,2
|
7,7
|
USD/HRN exchange (average)
|
7,97
|
7,99
|
7,99
|
11,89
|
Direct foreign
inv. (USD bln)
|
43,8
|
49,4
|
53,7
|
57,0
|
External debt
(USD bln)
|
34,7
|
37,4
|
38,6
|
37,5
|
European Business Association
presented its data on investment attractiveness of Ukraine for 2009-2013. Was
done a survey of 105 CEOs to determine the index of investment attractiveness -
evaluation of investment attractiveness of Ukraine, detailed information
described in Pic.1.1
Pic 1.1 Dynamics of investment
attractiveness of Ukraine [3]
case of the situation in Ukraine and
on the Crimean peninsula, most businessmen refrain from investment in the
Ukrainian economy. Situation in the country is very dynamic. Every day we can
expect the most improvident events and their consequences. For the first time
in the history of observations experts called no positive changes in the
investment climate.'s economy to foreigners - an object of world economy, in
which can and should invest. Foreigners show great interest to invest in
Ukraine's economy. The next logical step in attracting investment resources
must be decisive action from the side of the recipient. Like solution problems
with current situation, stabilization of hryvna to the world currencies,
reducing the damaging effects of corruption etc.and geographical barrier are
increasingly losing its relevance, to the potential economic and social
benefits. Some sectors of the economy dramatically need funding as investments.
Even small financial resources may cause significant economic and social benefits.
PART 2. ANALYSIS OF CURRENT
INVESTMENT CLIMATE IN UKRAINE AND WAYS OF
SOLVING PROBLEMS
.1 Dynamics of foreign direct
investment (FDI) in Ukraine
The change in the investment climate
of the state most clearly demonstrates the dynamics of foreign direct
investment, which is considered as changing indicator in the level of trust and
country rating.direct investments (FDI) play a significant role in the economy
of Ukraine. Comparing with them loans and credits of the state are less
important.can add, that saturation of the economy of Ukraine with FDI is quite
small, comparing with European countries and CIS (Commonwealth of Independent
States). Thus, it must be mentioned that it is important to formulate
economical attractiveness of Ukraine to foreign investors (TNCs).
2.1. Dynamics of foreign direct
investments (FDI) to Ukraine (2004-2015) [2]
|
Years
|
|
2004
|
2005
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
1015
|
FDI, blns. USD
|
6.8
|
9.0
|
16.9
|
21.6
|
29.5
|
35.6
|
39.2
|
43.8
|
49.4
|
53.7
|
57.0
|
45.9
|
FDI growth rate,
%
|
_
|
32.4
|
87.8
|
27.8
|
36.6
|
20.7
|
10.1
|
11.7
|
12.8
|
8.7
|
6.1
|
-19.5
|
to the information in the Table 2.1,
we can add, that amount of FDI increased up to 2013. It was able thanks to the
privatization processes within the state boarders.2014, FDI growth rate started
to fall.of January 1, 2015 amount of FDI in Ukraine was 45 bln.916mln.USD. This
quality is less on 19.5% than in 2014 (1072 USD per capita in 2015, in the
previous year - 1328 USD). [2]flow of FDI was from 125 countries of the world.
There are following states -investors: Cyprus, Germany, Netherlands, Russia,
and Austria. They make up 65% of total FDI (Pic.2.1).
.2.1. The structure of FDI to the
economy [4]
main cause
of reduced amount of investments was in withdrawal of assets, mainly from
banking sector.do a great impact on the economy of Ukraine. So, there are
global companies on some sectors of Ukrainian economy:
Ø Tobacco products -
TNC “Japan Tabacco International”, “Imperial Tabacco Group”, “Philip Morris”,
“B.A.T.”;
Ø Soft drinks
industry - “Coca-Cola”, “Pepsi”, “Orangina Group”;
Ø processing of
oilseeds and grains - “Bunge” (redemption of elevators, control of grain);
Ø milk processing -
TNC “Groupe lactalis”, “Bel Group”, “Danone” (France); “Unimilk” (Russia);
Ø confectionery
production - TNC “Nestle” (“Svitoch”, “Craft Foods”, “Corona”);
Ø production of
household chemicals and perfumes - TNC Procter&Gamble (USA).above companies
have built or bought specific production capacities, started to act as a part
of Ukrainian regional households. They act with local companies (provisors of
raw materials), have an aggressive advertisement and eliminate internal
competitors.order to successfully compete with other countries in attracting
foreign investment, you must first determine what the strengths and weaknesses
of the investment climate in Ukraine exist.do this, it is advisable to use a
SWOT-analysis - the method to identify the factors of internal and external
environment, which in this case may affect the investment attractiveness of
Ukraine.I have made the analysis to understand weak and strong sides of
Ukrainian investment climate for TNCs. I suppose that this analysis can help to
understand what problems do we have and in what way we should move to increase
the attraction of our state for huge companies, foreign investors and so on.
2.2. Factors of the investment
climate for the development of TNC in Ukraine
Strong sides
|
Weak sides
|
Resource
potential. Attractive geopolitical location. The level of trust of foreign
companies to Ukraine. Openness of the economy for foreign states.
International greements about stimulation and protection of investments,
exchange of regulations in the sphere of investment policy.
|
High inflation
level. Corruption. Weak state support. Shadow economy. Monopolization of
different branches of the economy. Lack of trust of foreign companies.
|
Opportunities
|
Threat
|
Minimal
interference of the executive bodies to the activity of the enterprise.
Availability of the law basis. Increase in manufacturing and service
industries. Transparency in decision-making area. Attraction of investors.
Reduced taxes. Availability of corruption. Stimulation of investments to the scientific,
technical and innovative activities.
|
Probability of
investment costs and income of them. The lack of an effective mechanism of
protection of rights. Administrative control and bureaucratic obstacles. Pure
transport structure and shortcomings of energy complex. Lack of competitive
advantages in attracting of foreign investments and high tax rates. Difficult
financial position of some enterprises. Low purchasing power and the lack of
trust of buyers. Instability in economical and tax policy.
|
, as we can see in the table,
despite the fact that our state has very huge potential we can’t realize it,
due to some factors. Today in our country there is the problem of inadequate
use of investment potential, which is associated with political instability,
excessive state intervention in the regulation of foreign investments, constant
changes in the current legislation, the large number of "gray
incomes".direct investment for us will only have positive effects. With
foreign investment creates the opportunity to modernize production base, job
creation, development of important sectors of the economy and so on. Thus, we
save the national budget that can be spent on any other important sectors of
the economy, social security.
2.2 Ways of improving the mechanism
of attracting foreign investment in Ukraine
Ukraine has a large consumer market.
In terms of industrial production Ukraine takes
one
of the leading places in the world, including ore mining and steel production.
Promising are ferrous and nonferrous metals, which make up almost a quarter of
all industrial production, mechanical engineering, chemical and petrochemical
industry, light industry.Technical Complex Ukraine in scope and potential is
one of the largest in Europe and second after Russia among CIS countries. The
country has the status of nuclear and space power., to convert these favorable
factors in the advantages of Ukraine in the creation of high investment
attractiveness of the state, primarily the implementation of necessary
measures., to stimulate investment provides:
Ø reduce state
regulation of business and ensure the stability of relevant legislation;
Ø eliminate ambiguity
interpretation of regulations and complete judicial reform;
Ø improve the regulatory
framework for property rights;
Ø complete
administrative reform, to ensure publicity and transparency in decision-making
bodies and eventually overcome bureaucracy and corruption;
Ø to establish
effective corporate governance;
Ø promote the
sophistication of capital markets, especially banking, securities and insurance
markets;
Ø reduce the tax
burden and provide stable political environment;
Ø step up efforts to
establish a positive image of the state.the main objectives, I should mention
such as:
Ø liberalization of
business activity;
Ø creating an
attractive investment environment;
Ø completion of a
stable regulatory framework which would be based on the principles of equality
of all investors;
Ø improving the
efficiency of bankruptcy procedures;
Ø increase the
investment attractiveness of privatization.these goals will contribute to:
Ø establishment of
joint investment institutions;
Ø development of
non-bank financial institutions;
Ø creation of
workplaces.effectively attract quality investments required permanent
coordination of foreign investors. But this is not enough to achieve the
necessary level of investment in the economy, to attract strategic investors.
For these purposes in host countries, special organizations, agencies are made.
Their work is that in different countries of strategic importance for the host
country, placed special bodies. The general direction of the main body is set,
located in the host country. Thus, a network of specialized institutions can be
created, whose main task - finding and attracting strategic investors.main
advantage of this method of active strategies to attract FDI is to have direct
contact with possible investors. There are a number of studies on the
effectiveness of such activities. Currently in Ukraine there is no single body
regulating the activities of foreign investors - one of the main points, which
will attract foreign investors and increase foreign direct investment.
An important tool of state
regulation of foreign investments in Ukraine is a tax system.
In this sphere we should intensify work to make the tax rules
according to international standards. It is necessary to complete the first
stage of the reform of the tax system by reducing the number of taxes and
simplifying tax legislation, ensuring its stability, significantly reduce the
tax burden on producers and introduce a tax to encourage investment.should
expand the scope of fixed taxes and eventually transfer tax entrepreneurs at a
single fixed tax.important step in the activation of foreign investment in
Ukraine's economy will be the introduction of effective mechanisms of
privatization of strategic foreign investors, which primarily include
transnational companies (such as the US, Germany, South Korea, etc.).TNCs are
aimed at the widest possible use of a powerful resource potential and achieve
profit from investment in Ukraine by adjustment of own production, dealer
network and exports. These companies tend to enter into agreement with state
authorities for a specified period of exploration and extraction of natural
resources. For such investors the most important fact is political and social
stability in the country, clearly defined their powers. These companies are
sometimes willing to go to considerable costs for the future promotion of the
market in case of improved investment climate.FDI through privatization as
convincing international experience, is one of the most common and effective
forms of foreign investment.majority of domestic firms after the selection of
foreign direct investment becomes more competitive; asset sales to foreigners
makes immediate cash flow and ultimately leading to further investment,
reinvestment of profits and so on.prospects in the deployment of investment,
including foreign investors, has leasing operations.offers several advantages
over other types of investments. Leasing allows to provide efficiency and
flexibility in solving production problems through the use of temporary
facilities and not purchase the whole property. Leasing also provides access to
the most advanced technologies. According to international experience, is
accelerating the pace of scientific progress is initiating a rapid development
of leasing.the development of this kind of investment necessary to create a
network of leasing companies and specialized funds.important step towards to
collective infrastructure investments are becoming private pension and mutual
funds, which will involve public funds. These funds have to become an effective
instrument for collective investment in priority sectors of the economy.is also
opening offices in Ukraine of first class foreign banks, the establishment of
commercial banks with foreign capital and private investment banks.the
investment climate in Ukraine is largely driven by the creation of a reliable
system of insurance against the risks of foreign direct investment, which today
is sometimes difficult to predict. For this goal law regulations of such risks
should be done.of the most promising foreign capital in Ukraine should be a
network deployment of investment funds and companies.
In this context, great importance is the flow of
venture capital. Venture capital associated with financing innovations and
scientific progress. It is different from other sources of funding by three
elements: investment usually takes the form of participation in the authorized
capital of the company; investment is long-term; investors are active in the
company, which they finance.main sectors in Ukraine that need investments more
than others are agriculture, energy, transport and communications. This capital
required for the implementation of scientific and technological developments of
Ukrainian scientists and designers.also should strengthen legal guarantees for
foreign investors. Without that, it would be hard for Ukraine to compete even
with their closest neighbors in the former Soviet Union to attract foreign
investment.attract large-scale foreign investment in Ukrainian economy in the
form of venture capital we should do a lot of work.starting point of state
regulation of foreign investment is to determine regulatory purposes. The
general objectives of state regulation of foreign investment are:
Ø procedures to grant
favorable investment climate;
Ø intensification of
foreign investment.
CONCLUSIONS
theme of this term paper, which is
devoted to research investment climate in Ukraine, is very actual.the course of
the research we concluded:
. Under the investment
climate they usually mean state of the legal, financial, socio-economic and
socio-political environment within the country, which leads to a particular
degree of attractiveness for investment.
. Nowadays, scientists,
experts, academics give negative assessment of the investment climate in
Ukraine. This requires a deep scientific study of the investment climate,
develop and implement a number of measures to improve it.
. The investment climate in
Ukraine today are still insufficient, and therefore control the investment
process in the country is extremely difficult.
. Flow of investment
processes, their character, intensity and effectiveness, as well as management
depends on the investment climate formed in the country.
. Foreign investment - it
values invested by foreign investors into objects of investment activity
according to the legislation of Ukraine for profit or achieving social effect.
Foreign investments are made in the form of direct and portfolio investment.
The main forms of foreign direct investment is the establishment of the
enterprise or its structural unit; purchase of shares; reinvest profits from
foreign investment in the recipient country; inter-corporation transfer of
capital.
. The basis of motivation of
foreign investors for the placement of capital abroad are: comparatively lower
costs (labor costs, especially the tax system, subsidies, quality of
infrastructure, including financial markets); the possibility of sales (local
market characteristics, including its growth potential, international
openness); the culture, language, political risk in the country. The effects of
foreign investment in the country should be considered in terms of positive and
negative effects. By means of minimizing the negative impact of foreign
investment is economic regulators of national policy., the investment climate
is unfavorable for Ukraine to encourage foreign investors to invest their
financial resources in the national economy. Therefore, to improve the
investment attractiveness of Ukraine in this work were suggested measures to
improve the tax climate and reform of tax incentives. They should provide
incentives modernization of funds, implementation of new technologies and
increased investment in innovative projects and support small business
investment activity. An important area of work in the context of improving the
favorable tax climate for business is to continue to simplify the tax reporting
and accounting, as well as reduce the tax burden on the business sector.can
conclude that the state investment policy must constantly respond to the
economic state of the environment, continuously adapting to the changes not
only in the country but also around the world. Particular attention should be
given to the stability, predictability and transparency of the economy.direct
investment for us will only have positive effects. With foreign investment
creates the opportunity to modernize production base, job creation, development
of important sectors of the economy and so on. Thus, we save the national
budget that can be spent on any other important sectors of the economy, social
security., main sectors in Ukraine that need investments more than others are
agriculture, energy, transport and communications.all the staff which is
mentioned above we can achieve the goal which is in making investment climate
of Ukraine more favorable.
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