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You're reading: Rhetoric vs. reality in investment climate

Every year politicians make the same grandiose proclamations about raising the country out of the morass of economic stagnation, and each year insignificant progress is made.

This year, heralded by Royal Dutch Shell’s multibillion-dollar gas exploration deal, Ukrainian politicians are proclaiming not only an improvement to the business environment, but an entirely new business paradigm. In reality, these statements are more rhetoric than reality, and Shell’s transaction is more an insular investment than transformational change.

The business environment in Ukraine is much the same as it was at independence – centralist, corrupt, and perpetually transitioning from a soviet state to a market economy. Both empirical and anecdotal evidence contradict the assertions of a paradigm shift. The Global Competitiveness Index, published by the World Economic Forum, ranks Ukraine a respectable 73rd out of 144 countries. The ranking is skewed upwards due to Ukraine’s large market size, extensive education system, and regional macroeconomic conditions. However, the true story is in the ranking of the non-market economic conditions: property rights 134th, bribery 133rd, legal framework 141st, customs procedures 138th, and soundness of banks 142nd.   

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