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Andriy Dlihach: "Only two per cent of Ukrainian enterprises consider their financial and economic situation to be good"

Today, only 2% of Ukrainian companies consider their financial and economic condition to be good. Before the large-scale aggression, this figure reached 80%, says Andriy Dlihach, founder and CEO of Advanter Group and international business community Board. During the discussion panel "Economic Recovery: what the state should do to make it work" as part of the joint project of and EFI Group "New Country", he voiced the main problems of Ukrainian business (with figures), explained why business does not trust the government and how to change it. Here are the theses from Andriy Dlihach's speech.


Andriy Dlihach, founder and CEO of Advanter Group and international business community Board
Photo: Oleh Pereverzyev
Andriy Dlihach, founder and CEO of Advanter Group and international business community Board

Key business challengies

According to Andriy Dlihach, military risks for business are in the first place today. But they share it with the unpredictability of the state's actions.

"A state that business itself does not believe in is, in my opinion, the key problem. What kind of business or investment climate can we talk about when business does not trust its own state?" says the founder and CEO of Advanter Group and the international business community Board.

The third problem, which, according to the entrepreneur, is catching up with the previous two in terms of prevalence, is the lack of people.

"At the moment, the vacancy rate in business is 75%. That is, 25% is a shortage of staff. This means that staff recruitment is becoming extremely important for business," says Dlihach.

Lack of financial resources was ranked fourth. According to the entrepreneur, businesses currently lack about UAH 300 billion. And if we talk about the recovery and realisation of further prospects, it is $60 billion.

The next place is occupied by low capacity utilisation: 45%, meaning that entrepreneurs are working at half the capacity they could.

Another 25% of businessmen point to logistical problems, and "in early April, they went up again."

"And now the key point. Over the past three months, since the National Security and Defence Council lifted the moratorium on tax audits of businesses, 47% of entrepreneurs have faced some form of pressure from law enforcement agencies in Ukraine. 47 %. Half," emphasises Andriy Dlihach.

"A significant part of it is blocking of tax invoices, but not just blocking. It is absolutely clear that not improving the system, but cleaning up the SMKOR system (a monitoring system designed to track questionable transactions of a taxpayer that could potentially be aimed at artificially reducing VAT liabilities - Ed. is the only solution we can make.

Similarly, business does not believe in the BES reboot without changes to the Criminal Procedure Code, without radical changes, without the introduction of the presumption of innocence of business and the removal of economic investigation in most bodies. Therefore, only a systemic reform is needed," the businessman said.

About the Council for Entrepreneurship Support

At the beginning of the year, President of Ukraine Volodymyr Zelenskyy created the Council for Entrepreneurship Support, which includes owners of Ukraine's largest companies and well-known businessmen. This body is supposed to deal with safe business. Before the joint statement was signed, there was a ‘terrible discussion’ in the business community about the advisability of participating in the government's initiative, says Andriy Dlihach. ‘We heard the phrases “We don't believe it”, “We shouldn't do it”, “The government will deceive us once again”.

"But why did we do it? For us, it was a symbolic action to demonstrate that we know who we can work with in the government and hope that positive practices can be spread," the businessman explains. However, he adds:

"We are afraid that all these councils are created rather for point decisions, for tactics and to say: we like Pulse as a tool (the Pulse service accepts appeals about illegal actions or inaction of tax authorities - Ed.), but we are convinced that this is a way to divert attention. That is why business continues to insist on systemic solutions."

During the discussion
Photo: Oleh Pereverzyev
During the discussion
He notes that Ukrainian business is more consolidated than ever and is unanimous in its key demands to the state.

"I don't know whether an even greater form of business consolidation is possible when there is a coalition that unites everyone. When we, together with think tanks, have created economic policies that are 99% supported by business. There are no points where we disagree. There is no fundamental disagreement on tax reform, except immediately after the victory or with some kind of extension. Otherwise, we agree on most of the points. Moreover, we agree with Yuliya Anatoliyivna (Svyrydenko, Minister of Economy - Ed.) and the team of the Ministry of Economy. We agree on 95% of what needs to be done," says Andriy Dlihach.

"Four states"

The problem of interaction between the government and business, according to the founder of the international business community Board, is that our country exists in four dimensions in parallel:

● The state that leads the way in politics - the state of the security forces.

● A liberal state. "It's poor, and I really want to help it."

● The state of bureaucrats. "Not the greatest evil, really. What they call the deep state in America is just a bureaucratic part of the state," says the businessman.

The communicative, populist part of the state, "which is trying to strike a balance".

"And when we are fighting against an abstract state, we keep running into the same people - we are forced to communicate with the liberal part, the pleasant part. And where is the other part?" the businessman appeals.

And as a result, business and society agree to superficial rather than substantive reforms, says Andriy Dlihach.

What changes are needed

The businessman considers the following to be essential reforms:

- introduction of total protection of property rights. "Hernando de Soto, The Riddles of Capital: at the heart of everything is the inviolability of private property, intellectual property, any kind of property. This is the "'Lord's Prayer'. Protection at the level of everything and every institution in the country."

- economic freedoms. "Do we have them? We don't have them. This includes total privatisation - and this is our constant conversation about an effective Antimonopoly Committee, total deregulation, tax reform, radical customs reform, and working public procurement."

- a new social contract. So that we don't blame each other, saying that business is bad, the people are bad, and the government is bad, everyone is bad. The state needs to be reprogrammed, the businessman believes;

- stop lying to international partners and become clear to them.

These four solutions, according to Andriy Dlihach, will make a breakthrough.

Andriy Dlihach during the discussion
Photo: Oleh Pereverzyev
Andriy Dlihach during the discussion

Because the corruption rent alone in the country reaches more than UAH 600 billion. This is what the state budget does not receive. Economic booking, the entrepreneur believes, would bring in another 160 billion hryvnias.

"But the issue is not moving. Why? And here I think about the thesis of trust. The Ministry of Economy has shown both the best and the worst examples of inclusiveness. There are many good examples - 99% of them. For example, the development of a strategy for small and medium-sized businesses is an absolutely inclusive process. The inclusive process is the magic wand that is about trust. It is only through cooperation that trust is generated.

And the draft law on BES, which both business associations and think tanks tell the Ministry of Economy is not suitable, it does not take into account anything, is not. But we understand that this is not a draft law of the Ministry of Economy, it is forced to do so. And so we are in a constant stretch. The government and business will always have this problem of trust,"the businessman believes.

And without trust, he believes, there will be no real economic breakthrough in Ukraine.

"A breakthrough is when we talk about an entrepreneur as a person who wants to develop, invest, pay taxes, and who will be the main person in the state, untouchable and protected. When the KPI for a tax officer or any official is economic growth. When the National Bank's priority is not inflation targeting but economic growth. And this can only be done through trust. Trust means cooperation and inclusiveness, in particular through absolute protection of property rights and entrepreneurs' rights," the founder of the international business community believes.

Andriy Dlihach and Yuliya Svyrydenko
Photo: Oleh Pereverzyev
Andriy Dlihach and Yuliya Svyrydenko

And finally, Andriy Dlihach mentioned another, in his opinion, urgent problem that Ukrainians will face after the war, and this is not corruption, but a lack of understanding of what is next.

"Lack of confidence in the country and the state that represents it. I am afraid that in the absence of this point of confidence in the state, we will have a new wave of emigration, a new wave of transferring business activities outside Ukraine.

We have calculated that 12% of added value was lost in 2022 due to the relocation of business outside Ukraine. Now, investment outside Ukraine is growing. As a business, we continue to buy plants and build plants, but unfortunately, not in Ukraine. Yes, we are doing this. For example, my businesses paid less taxes than they donated to the Armed Forces. I think this is a very good indicator that our business is responsible, united and progressive. But it expects something else from the state - a step forward," the businessman summed up.

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