You're reading: Economist report slams Ukrainian business climate

Respected think tank places Ukraine 56th out of 60 countries surveyed in terms of friendliness of its business climate

Economic analysts in Britain view Ukraine as a grim place to do business over the next five years. But analysts actually in the country aren’t so sure.The London-based Economist Intelligence Unit (EIU) on May 11 ranked Ukraine near the bottom of a survey on global business conditions.

Out of 60 countries surveyed by the EIU, Ukraine placed 56th in terms of the friendliness of its business climate. The survey covers anticipated business conditions through 2004, according to a report on the Uatoday.net Web newspaper.

Ukraine’s ranking placed it in the same league as countries like Iran, Nigeria and Iraq. Neighboring Russia was three positions ahead of Ukraine in the survey. The criteria chosen by the EIU for compiling the ranking were unclear from the Uatoday.net report, but foreign economists regularly point to red tape, high taxes and heavy government’s interference as the main impediments to business in Ukraine. Ukraine’s international image has also been tarnished by a number of high-profile disputes with foreign investors.

Though analysts here agreed with the EIU’s finding that present business conditions in Ukraine are poor, they questioned the research agency’s ability to reliably forecast Ukraine’s business climate over the next five years.

Valery Antonov, an economist with Alfa Capital brokerage, said he could not assess the accuracy of projections, until he knew the EIU’s criteria for making the ranking.

Hlib Vyshlinsky, an analyst with the International Center for Policy Studies think tank, said he was skeptical that any reliable criteria could be used in making a forecast for the country’s business environment.

“No methodology can be 100 percent correct,” said Vyshlinsky.

He said the future business climate in Ukraine will depend on the possible staff changes in the government, the government’s economic policy and a number of other complex developments which are difficult to predict today.

He said a volume of foreign direct investment in a country was a more objective indicator of the business environment in a country.

Over the first quarter of this year, Ukraine drew $245 million in foreign direct investment (FDI), the country’s highest quarterly figure since 1998. The overall level of FDI Ukraine has attracted since independence remains at over $3 billion, a small amount compared to about $40 billion that foreigners have pumped into neighboring Poland.

The EIU expects the Netherlands to be the best place in the world to do business in 2000-2004, while Hong Kong has fallen from the world’s best place to do business to the sixth best. The report cited political and regulatory changes after the 1997 handover to China as the reason for the downgrade.