Recent Financial Crises - US-Ukraine Business Council

1 downloads 134 Views 841KB Size Report
W H E R E O P P O R T U N I T I E S E M E R G E. But some “soft” indicators of “Business Environment” show a dif
Regional Differences in Doing Business In Ukraine Dr. Edilberto Segura Partner and Chief Economist, SigmaBleyzer President of the Board, The Bleyzer Foundation

June 2013 1 W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

Regions of Ukraine North Population* GDP per capita, $ Real GDP growth**

West Population* GDP per capita, $ Real GDP growth**

10.7

2200

The West and East have equal populations.

8.0

5400 04-07 08-09 10-11

But they differ significantly in GDP per capita and economic growth.

11.0 -5.8 3.0

04-07 08-09 10-11

Center

5.7 -5.1 4.7 Population* GDP per capita, $ Real GDP growth**

8.7

GDP per capita of the Eastern region is almost twice as much as in the Western region.

3900 04-07 08-09 10-11

7.7 -7.1

5.2

East South Population* 7.0 GDP per 2800 capita, $ Real GDP 04-07 08-09 10-11 growth** 5.5 -0.6 2.8

Population*

11.2

GDP per capita, $

3900

Real GDP growth**

04-07 08-09 10-11

6.2 -8.8

7.3

Also, the Eastern region grew much faster during 200407 and 2010-11 than Western one. But it also suffered more during the crisis of 2008-09.

Source: State Statistical Service of Ukraine, Wikipedia, The Bleyzer Foundation * As of end-2011, million W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

Regional Shares in Sector Value-Added 100

100

West

25 80

29

West North 60

Center

16

South East

100

13

100

15

West

38

Center

15

40

40

11

South

22

36

16

Center

19

South

Center

15 40

9

20

South

30

East

East

0

0

North

60

18

East

East

9

North

20

20

19

West

60

60

South

80

32

North

16

West

80

80

Center

Construction and Real Estate

Industry

100

North

0

0

Agriculture

31

20

39

East

0

West

15

40

South 20

19 80

8

40

16

20

60

Center

26

40

80

13

North

17 60

100

10

0

Transp'n/Com'n Finance Trade Source: State Statistical Service of Ukraine, The Bleyzer Foundation W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

All regions of Ukraine are suited for agriculture. However, the Central and Western Regions contribute the most to the sector. The Central Region has an advantage in grain production, while the West specializes more on animal breeding.

Industry is concentrated in the East and Central Regions. But the Eastern oblasts have also good agricultural potential, contributing to agriculture on par with the South and North. Northern oblasts (including Kyiv city) lead in Construction and Real Estate, and Services, particularly Trade and Finance. Having access to ports in 2 seas and a good transportation network, the Southern region is a large contributor to Transport Services.

Regional Distribution of FDIs - $54.5 billion total FDI Stock, $ billion 30

3.0

26.6

Average FDI Flow, 2011-12, $ billion 2.6

25

2.5

20

2.0

15

1.5 10.5

10

3.7

5

3.8

2.8

0.9

1.0

7.1

0.5

0

0.7 0.5

0.2

0.2

0.0

West North Center Kyiv South East

West North Center Kyiv South East

• FDI flows to Ukraine are heavily concentrated, with Kyiv city firms taking 49% of the total. • Measured by the stock of FDI, almost 80% of overall FDI was directed to firms in Kyiv city, Dnipropetrovs'k (Center), Donetsk and Kharkiv (East), Lviv, and Kyiv (North) oblasts. W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

FDI Stock by Region and GDP per Capita GDP per capita, 2011, weighted average, thousand US$

11 9

Kyiv city 49%

7

East 13%

5

Center 19%

North, 5%

3

South, 7% West, 7%

1

0

5

10 15 20 FDI stock, $ billion

25

30

Source: State Statistical Service of Ukraine, The Bleyzer Foundation

The regional distribution of FDI is correlated to GDP per capita (proxy for the size of local consumer markets), which supports the idea that foreign companies in Ukraine implement investment projects that target domestic consumers. W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

FDI Stock Breakdown by Sector and Region 100

100

Other sectors

Financial services

29

80

6 4

19

9

11

8 1

9

13

80

16

9

7

21

7

Transport'n/Comm'n

5

60

12

55

85 65

52 20

Industry

32

9

14

10

12

4 3

7 5

0

Agriculture

1

0

61

44

40

Construction/Real Estate 20

60

Trade

17

40

24

Agriculture

FDI Stock

3

Industry

Construction /Real Estate

Trade

Transp'n /Comm'n

North

Center

Kyiv city

South

West

Source: State Statistical Service of Ukraine, The Bleyzer Foundation

4 3 Finance

East

• The sector distribution of FDI reflect the economic profiles of the regions of Ukraine.

• Kyiv city received the most FDIs to financial sector, transportation, trade and real estate. • Eastern region leads in FDIs into industrial sector, while the Western region had the highest contribution to agriculture. W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

FDI Flows by Sector & Region for 2011-12, $ billion 2500

Other 2000

Finance

1500

Transp'n / Comm'n

1000

Trade

500 0

Construction /Real Estate

-500

Industry

-1000 -1500

Agriculture West

East

North

Center

South

Kyiv city

Source: State Statistical Service of Ukraine, The Bleyzer Foundation W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

Impact of Factors of Production and Infrastructure on FDIs Labor Quality

Infrastructure Quality 5.0

5.0

Technological Readiness 6.0

4.86

4.73

5.62 5.5

4.5 4.13

4.23

4.5

5.0

4.0 3.62 3.63

4.5

3.73

3.5

3.96

4.0 3.73

3.69

4.05 4.0

3.73

3.5

3.0 3.5

2.95

3.0 2.59

2.5

2.76

2.95

2.68

2.5 2.0

3.0

2.0

Source: Own calculations based on Ukrainian National Competitiveness Report 2012, Foundation for Effective Governance

• The above business environment indicators are scored from 1 (worst) to 7 (best). • In addition to the market size, FDI pattern to various regions is broadly consistent with the quality of their infrastructure, labor quality and technological development. • Because of these favorable factors, Kyiv City and the East are ranked highly in surveys of competitiveness, whereas the West is generally ranked low in competitiveness. W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

But some “soft” indicators of “Business Environment” show a different picture: Public Governance 4.0

3.86

Legal Environment and Judiciary 4.0

3.82

3.77 3.56

3.65

3.5

3.5

3.38

3.31

3.29

3.09 3.0

3.15

3.20

South

East

3.0 2.74

2.5

2.5

2.0

2.0

West

North

Center

Kyiv

South

West

East

North

Center

Kyiv

Source: Own calculations based on Ukrainian National Competitiveness Report 2012, Foundation for Effective Governance

• Although the West is in a less advantageous position in terms of infrastructure and factors of production, it has a more friendly environment for doing business in most of the “soft” indicators, such as public governance and legal environment and judiciary. • Kyiv city, however, is rated poorly on these indicators.

W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E

Impact of Business Environment (2) Business Regulations and Access to Finance

Corruption and Crime 5.0

4.0

4.58

3.65

3.62

3.59

4.5

3.53

3.5

4.45

4.48

3.37

4.21

South

East

3.95

4.0

3.16

4.17

3.5

3.0

3.0 2.5 2.5 2.0

2.0

West

North

Center

Kyiv

South

East

West

North Center

Kyiv

Source: Own calculations based on Ukrainian National Competitiveness Report 2012, Foundation for Effective Governance

• The West has also somewhat better indicators on other indicators, such as business regulations, access to finance, and corruption and crime. • Though doing business in the Western region seems to be easier in many respects than in other regions, the region lags behind in FDI inflows. • This is due to the fact that, Ukraine, in general, attracts FDIs on the basis of its natural resources, availability of production factors, infrastructure and market size, which are more favorable in the East. W

H

E

R E

O

P

P O

R T

U

N I

T I

E S

E

M

E

R G

E