Draft Law On Government Support of Investment Projects with Sizable Investments
On 21 July Parliament passed Draft Law No. 3760 On Government Support of Investment Projects with Sizable Investments.
What exactly is included in the Draft and how attractive is it for investors? Read in the commentary by EVERLEGAL partner Vsevolod Volkov for "The Ukrainian Journal of Business Law" below or at the link
In July 2020 Parliament began considering draft legislation aimed at improving the image of Ukraine in terms of making it more attractive for significant foreign investments. These drafts have been prepared because of the “investment nanny” initiative by the President of Ukraine, announced at the 2020 World Economic Forum in Davos.
Initially, the investment “nanny” was perceived with humor and as a sort of government plenipotentiary, or business ombudsman, for particularly large investments called to help investors get through different hurdles of Ukrainian inefficient bureaucracy and attempts at corruption. However, the draft legislation is not about it. It is about how the Ukrainian government can participate financially in helping these investments projects to proceed.
Under the draft legislation, the Ukrainian government offers qualifying investors indirect financial support of 30% in their investment. The qualifying investment, among other requirements, must be in such industries where indirect financial support may be either through financing construction of outside infrastructure, necessary for the investment project or through tax benefits. To qualify, the investment must be in areas like processing, infrastructure, logistics, home waste treatment, tourism, health care, education, and sports. The investments must be to the tune of EUR 30 million or more and they shall provide at least 150 new jobs each year for a 5-year period.
To be eligible for the benefits under the drafts, investors must firstly pass a special admission procedure, culminating in a decision adopted by the Cabinet of Ministers of Ukraine. Preparations to pass the procedure and the procedure itself, may be costly and time-consuming. Unfortunately, the functions of the investment “nanny”, a state authority designated to consider applications for benefits under the draft legislation, are limited to preliminary consideration of the investors’ submissions and not in helping investors to prepare for it or pass through it. Neither does the draft legislation deal with how the investment “nanny” can help investors to navigate through hurdles of inefficient Ukrainian bureaucracy and attempts at corruption once the investment project has started.
Although the ideas in the draft are very welcome it seems, nevertheless, to have very limited effect in terms of raising the “attractiveness” of Ukraine for investors. The draft fails to provide solutions on how to deal with the hurdles of inefficient bureaucracy and attempts at corruption.