Ukraine Makes One Step Up

30 May 2016

The World Competitiveness Scoreboard presents the 2016 overall rankings for the 61 economies covered by the WCY. The economies are ranked from the most to the least competitive and the results are ranged from the previous year panel based on 333 criteria’s (2/3 hard data (competitiveness measured) and 1/3 survey respondents (competitiveness perceived). Therefore, Ukraine has achieved range 46.512 (41.986 – 2015) out of maximum 100 points and is ranked the 59th (60 – 2015) in overall rank followed by Mongolia and Venezuela. Further represented some of the major considerations on Ukraine:

BUSINESS EFFICIENCY - Extent to which enterprises are performing in an innovative, profitable and responsible manner. The 2016 rank 60 (2015 – 55) shows reduction by five spots, leaving one country below. Four business efficiency sub-factors were down - Productivity & Efficiency from 57th to 58th; Labor Market from 51st to 59st; Management Practices from 57th to 58th; Attitudes and Values from 44th to 46th. Further factors breakdown condemns the feeblest ones such as ranks for Labor force growth, Large corporations, Health, safety & environmental concerns, Shareholders' rights, Finance and banking regulation, Venture capital 61th spot; Credit, Regulatory compliance (banking laws), Stock markets, & Financial risk factor 60th spot; Investment risk 60th spot. And yet, Ukraine desperately needs to boost productivity, bring into line labor market and corporate finance in order to insure 2016-2017 improvements. Ukrainian businesses have not undergone thus far major restructured reformation for capital, technology, and management practices, so they still basically operate in outdated overregulated by the state and highly corrupted business and socio-political environment. The issue is all about prerequisites for accelerated adoption of business & consumer products/services standards corresponding with EU requirements.
ECONOMIC PERFORMANCE - Macro-economic evaluation of the domestic economy; rank for Ukraine 60th, (2015 60th position) shows backslide in three sub-factors – Domestic Economy (from 60th to 61th), Employment (from 53rd to 54rd), and Prices (from 54rd to 56th). The worst was Real GDP growth (61th spot second year on a roll), consequently followed by GDP (PPP) per capita (59th), Real GDP growth per capita (61th), Household consumption expenditure - real growth (59th), Gross fixed capital formation (57th) Exports of goods per capita (57th), and Exports of commercial services (61th). Basically, all mentioned factors aggravated by almost drastic economic deterioration and the so called “price effect” or “goods costs” a well as households’ consumption expenditures and gross fixed capital formation both with lowest spots respectively making support for future growth of national economy practically impossible.

GOVERNMENT EFFICIENCY - Extent to which government policies are conducive to competitiveness. The 2015 rank 57th (2014 rank – 59th) reveals two steps up leaving below four countries respectively. Four out of all five major sub-factors such as Fiscal Policy (from 37th in 2015 to 36th in 2016), Business Legislation (from 54th in 2015 to 51th in 2016), and Societal Framework (58th in 2015 to 54th in 2016) are up, but Institutional Framework is down (from 59 in 2015 to 61th in 2016). Tax evasion has 59th rank, Pension funding – 58th ; from fiscal policy two areas represent problems - Collected indirect tax revenues 58th and Real corporate taxes 57th ranks respectively. Auxiliary factors breakdown highlights truly significant ones that determine country slide down - Country credit rating (61th spot), Real corporate taxes (57th spot), Exchange rate stability (59th spot), Bribing and corruption (58th spot), Public sector contracts (60st spot), Competition legislation (57th spot), Ease of doing business (58th spot), Personal security and private property rights (60th spot), Risk of political instability (60st spot). Cost of capital (55th spot), as an extension of both - no prolific National Bank monetary policy (in term of high level interest rate) and hypertrophied liquidity of fanatical market operators result in inadequate business entities capital structure. Depreciated national currency by almost 83% for two cosequitive years (officially) distorts real productive assets value and drastically narrows real sector to extend programs to finance capital allowance.

INFRASTRUCTURE – in 2016 50th spot (2015 rank 48th) – two steps down, basically due to one sub-factor - Technological Infrastructure (from 54th in 2015 to 58th spot in 2016). Scientific Infrastructure (from 43th spot in 2015 up to 41th in 2016), Education (from 33th spot up to 31th spot in 2016). Technological Infrastructure remains very sensitive aria - Public-private partnerships (60th spot), Development and application of technology (61st spot), Funding for technological development (60th spot), Technological regulation (60th spot). Scientific Infrastructure has own points for special treatment - Total expenditure on R&D per capita ($) (52th spot), Researchers and scientists (60th spot), Scientific research legislation (60th spot). Health and Environment traditionally need special attention - Health infrastructure (59th spot), Life expectancy at birth (54th spot), Energy intensity (61th spot), and Quality of life (60th spot).