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European Business Association: Trust of investors in Ukraine before election plunges to record low indicator

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Oct. 5, 2012, 1:31 p.m. | Business — by Interfax-Ukraine

Activists carry a giant Ukrainian National flag in Kiev on August 23, 2012 to mark National Flag Day on the eve of the 21st anniversary of Ukrainian independence.
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Representatives of business in Ukraine at the end of the third quarter of 2012 assigned a record low assessment to the business climate and conditions for doing business in the country – 2.14 points out of a possible five, which is the lowest indicator since 2008.

The press service of the European Business Association (EBA), according to the investment attractiveness index of Ukraine (103 top managers of companies that are EBA members took part in the poll), the trust of business in the Ukrainian economy fell even compared to the previous quarter by 0.5 notches. The main problems prompting the negative assessments of the respondents remained unchanged – fiscal pressure, corruption and the unstable political situation before the election.

"We see now that the circle of problems that investors face has not changed – corruption, dependency of legislation, overregulation of the market, fiscal and administrative pressures. What caused the sharper fall in the level of trust of business? The answer can be found in pre-election instability, disharmony of strategies and promises of political forces: everything affects the mood of investors," said Hanna Derevyanko, the EBA's executive director.

EBA President and Dragon Capital CEO Tomas Fiala said that the fall in the index indicators reflects the slow in the pace of growth in industrial, farming and construction sectors.

"According to preliminary data, Ukraine's GDP in Q3, 2012 fell by 1.5-2% and its obvious that companies are affected by this. On one hand, the main factor of this pace is growth in external demand, and on the other hand – the increase in tax pressure and the strict monetary and credit policy in the country play a negative role. We hope that after the election the government will focus their efforts on the economic policy aimed at growth," he said.

A managing partner Ernst & Young, Alexei Kredisov, said that negative expectations are reflects in business decisions in recruiting and investment strategies.

"Among the most problematic issues are still groundless tax pressure, the spread of corruption and red tape, unequal conditions for doing business, conflicts of interest and imperfect legislation. The Ukrainian authorities should present a plan aimed at solving the above-mentioned problems, earn the trust of business and start [the plan's] realization. Only in this case we can hope that positive steps, which will stimulate investment and increase employment and the competitiveness of the Ukrainian economy, will be seen," Kredisov said.

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