24.04.2024
Before adoption of Ukraine Facility for 50 billion euros, macro stability was financed exclusively in Ukraine at the interstate level. This is fiscal, price,Recently, Council of the EU approved a new financing facility — Ukraine Facility, with a volume of 50 billion euros. What is it, and how will it affect Ukrainian economy and business.
Julia Kiryanova, CEO of Smart-Holding.
Translation of column in media NV.
financial stability. Four-year long-term financing plan from the IMF, for $15.6 billion. With Ukraine Facility, in addition to macro stability, financing of business segment is also added. But impetus for this, main driver, was also the need to finance the budget deficit. 7-8 billions, of the 50 billions, can potentially go to business financing. All the rest – is a macro situation and reforms.
Ukraine Facility Plan through the eyes of private sector. It is not a plan to join the EU. It is a document that records certain reforms and steps. But to be honest, it is all that Ukraine should have done within 30 years. Now we will get money for doing this. There is a "step by step" program, according to which the funds are allocated, so that we reach a certain level of reforms. Most likely, no more than 30% of 7-8 billion will be sent to private sector. All the rest — to state companies.
What role of Ukrainian private sector will be on the way to the EU? One of European think tanks I met with recently made an analysis concerning Ukraine, its integration with the EU. It has three very simple points, sensible spots, which can complicate Ukraine's path to the EU.
The first is weak institutions. It is the entire legal system, three branches of power, which must be independent and permanent, and other state institutions. They must ensure rule of law and exist in a responsible and efficient manner. And also public institutions, which, in particular, in dialogue regulate what is taking place in the state.
The second, that concerns more private sector, — is labor efficiency. Ukraine has the lowest labor efficiency compared at the moment to Romania before its access to the EU. To increase this efficiency, several points are needed:
— infrastructure, which is also destroyed after war,
— education, innovations, R&D.
The third important aspect is the level of production development. Currently, in Ukraine metallurgy, agricultural sector and IT are more resource-based industries. Because there is no production in the scale, which, firstly, can support the resource base of the country, and secondly, stimulate a quantum leap of economy. Private sector will face this challenge, because it is the private sector which pretty much depends on the "rules of the game" and framework of interaction with the state, which is still not built.
Ukraine Facility — a plan that, in my opinion, is definitely useful in the path of reforms. This is a high-level document. But I really hope that it contains real plans, similar to what we see in business, with KPI, deadlines, with those responsible. Ukraine Facility pushes forward base of reforms, which will later on be the basis of Ukraine's accession to the EU. This is generally the basis for any development in the country.
The main thing is that the state wants to raise business to the partner status. According to conclusions of analytical centers, public-private partnership is the basis of a strong economy of any country. And that is not a partnership in the form of shares in companies, but partnership that allows to develop the country's economy in balance and incentives. Status of a partner is to have an equal status with the state, a partner, not a subordinate, voice and rights, not only duties. In big business – it is the biggest expertise, discipline, understanding of financing requirements, development models, all processes. Big business is the engine of changes. We all need a cultural change. It is necessary to move to a different consciousness, not to break businesses and investors into categories, create alliances, coalitions. Then the unity in the country will not only be declarative and public, but will have a display in actions, when state, analytical centers and business community will be able to reach in consensus their own positions, their own opinion on access to the EU and free markets. As a result, a clear vision of a favorable negotiating position for Ukraine shared by key stakeholders will be formed. And I am sure that business is ready to start such a partnership. But is the state ready?