Association agreement shows strong EU commitment to high tech cooperation; local businesses have mixed reactions

Hopes, fears and expectations are high in Ukraine following the signature of the association agreement with the European Union (EU) in late June. The science, research and innovation sectors, as well as high-tech investment and e-commerce, are no exceptions, since they are directly or indirectly impacted by  important sections of the economic part of the agreement.

“The EU’s willingness to show its commitment is apparently stronger than in previous agreements with other Central and Eastern European (CEE) countries. In the Ukrainian case, commitments are formulated more concretely and precisely, which may help deliver tangible results,” says André Loechel, President of the Paris-based Territories of Tomorrow Foundation, who has a strong knowledge of EU programs in the field of innovation.

“Another good sign is that the agreement was published immediately after signature, which usually is not the case,” Loechel notes.

Ukraine’s innovation potential recognized

Worthy of attention is article 374 of the agreement about “the sharing and pooling of scientific knowledge” in which Loechel sees “an implicit recognition of Ukraine’s high-level potential in the field of innovation.” The integration of Ukraine into Europe’s research space could materialize in several cooperation programs aiming to build common knowledge networks with smart specialization by country.

Article 376 ensures Ukraine’s participation in the next EU framework program for research and innovation “Horizon 2020” – which is another “strong commitment” according to Loechel.  This means, in particular, that Ukrainian scientists with their laboratories and institutes will be able to take part in all tenders; that Europe will contribute to modernizing the organization of Ukraine’s research sector; and that the country’s researchers and specialists will benefit from training through mobility programs.

Also part of the agreement is the building of an “information society” (art. 391), a term that implies initiatives in the fields of e-business, e-government, e-health, e-learning and other online services.

Modernizing Ukraine…

Ukrainian industry players interviewed by UADN have largely expressed a favorable opinion on the agreement. TA Venture’s Viktoria Tigipko, a prominent figure in the Ukrainian high-tech scene, believes that “the agreement will lead to important reforms in entrepreneurship regulations, exports and taxes regimes, standards and social policy, as well as implementation of anti-corruption measures.”

“The latter is a crucial point for Ukraine since business safety was a real problem that needed urgent solutions,” she adds.

Eveline Buchatskiy, a Brazilian businesswoman who heads the Kyiv (Kiev) based EastLabs startup incubator, is enthusiastic about Ukraine’s new European prospects. She expects “immediate implementation of much-needed infrastructure improvements for mass adoption of 3G and broadband Internet, opening the way to a wide range of digital companies that will thrive, generate jobs, boost the economy, and improve the quality of life.”

A positive impact is expected in the field of venture investment. “The inclusion of Ukraine into the EU orbit may put Ukraine on the radar of many EU investment funds and therefore unleash additional investment capital,” believes Yevgen Sysoyev of AVentures Capital, a major local fund.

An important sector in the Ukrainian economy, the IT outsourcing industry could see its attractiveness increase in the eyes of European clients. “Understanding the process, customers will invest without fearing for the  long-term relationship,” expects Andrew Pavliv, the founder of N-IX, an IT outsourcing company in Lviv (Lvov), western Ukraine.

On the other hand, it will be easier for European corporations to open local offices – and “no more need to work with local outsourcing companies”, fears Pavliv.

or filling IT vacancies in Western Europe?

Another risk is seeing qualified workforce leave the country, believes Victor Galasyuk, who heads Bionic Hill, a technopark under construction near Kyiv and is an adviser to Ukraine’s minister of education and science. While recognizing the “promising opportunities” in the field of high-tech, he believes that the agreement will “only foster brain drain” should Ukraine fail to implement strong investment incentives for developping high-tech business locally. “There may be 900,000 unfilled IT vacancies in Europe by 2015,” he notes.

In the field of e-commerce, some Ukrainian players will suffer, predicts Valentin Kalashnik, President of the Ukrainian Direct Marketing Association (UADM). But this will affect essentially small operators who will not be able to withstand the growing competition introduced by market liberalization.

The new rules will force “grey” e-merchants to legalize their activity, while foreign e-retailers will enjoy customs simplification and a growing demand among Ukrainian online shoppers, according to Alexandr Ladyvir of the express delivery company Nova Poshta.

Click here to read full interviews

Topics: Analysis & opinion, International, Legal, Legislation & regulation, News, Policy making, Ukraine-EU
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