Following the signature of the EU-Ukraine association agreement in late June, six figures of the Ukrainian high tech industry – EastLabs CEO Eveline Butchaskiy, Bionic Hill CEO Victor Galasyuk, Alexandr Ladyvir of Nova Poshta, UADM President Valentin Kalashnik, N-IX founder Andrew Pavliv, AVentures Capital’s Yevgen Sysoyev and TA Venture’s Viktoriya Tigipko – have shared with Ukraine Digital News their views on the potential consequences of the agreement.
- Eveline Buchatskiy, General Manager, EastLabs startup incubator
“The association agreement shall have a tremendously positive impact for the ICT sector in Ukraine, both in the short and long term. One can expect 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 for Ukrainians. There is a high level of excitement around G2C (government-to-citizen) possibilities. Ukraine carries the technical legacy and now the political will to leapfrog into one the most digitized public sectors in Europe. With a large base of 45 million citizens, Ukraine can reach a whole new level if it mirrors the successful e-government examples of Estonia and Georgia.
“Changes in the regulatory and institutional environment shall lay the foundation for increased foreign investment appeal by working both ways: deregulating when it makes sense (removing license requirements that are completely outdated) and at times regulating (increasing IP protection and investor rights). We already feel the openness of the new government very strongly and have been actively cooperating with them to speed up the transformation of Ukraine. Overall, it is very refreshing!”
- Victor Galasyuk, PhD, Bionic Hill CEO, Adviser to the Minister of Education and Science
“This agreement brings a lot of promising opportunities in high-tech development. But if we do not create strong investment incentives for high-tech business in Ukraine (such as reduced tax rates and social security contributions, loans, grants, infrastructure), we will only foster brain drain. In case of a passive and non-professional state policy on R&D, Ukraine risks turning into a “world university”, feeding other countries’ high-tech industries. According to the Council of Europe, there may be 900,000 unfilled IT vacancies in Europe by 2015.”
- Valentin Kalashnik, President of the Ukrainian Direct Marketing Association (UADM)
“On the Ukrainian e-commerce scene, some companies still work within the grey economy. Overall market liberalization and the creation of normal legislative conditions will allow companies to adapt to new market regulations and conduct business legitimately.
“The agreement may be a threat to small players through increased competition in the market. For large stable companies, there are no obvious negatives.
“With regard to the cross-border sector, there will not be any quick changes, even after ratification to the agreement. This decision will have a positive effect on the Ukrainian e-commerce market in the long term, as it will make it possible to harmonize customs legislation between countries, provide a boost to the development of Ukrainian companies and attract foreign e-commerce players to the Ukrainian market.”
- Alexandr Ladyvir, Director of International Development, express delivery company Nova Poshta
“The agreement will have an unambiguously positive influence on the e-commerce, express delivery and postal logistics markets. A free-trade market with the EU implies not only freeing the trade, but generally freeing, emancipating and liberalizing a variety of economic and other ties with the EU in general. These changes will lead to a gradual simplification and unification of all customs legislation, which, in turn, will lead to an increase in the quantity of purchases by Ukrainian consumers – of which there are many – from European online retailers. It is no secret that Ukrainian customs law is not friendly to the domestic consumer, or to business as a whole. It is European-style in essence, but for the most part it is not followed and therefore creates artificial barriers.
“As for postal operators, a special directive was passed by the EU at the beginning of the 2000s that was intended to gradually liberalize postal markets. There is that component in the agreement as well. Therefore, Ukraine’s entry into closer cooperation with the EU will also mean, in one way or another, liberalization of domestic postal services. This is a threat for state operator Ukrpochta. If it does not change its development strategy, it will be in for very hard times. As for the small commercial operators that will be unable to compete, they will either be absorbed/acquired by larger parties – including foreign ones – or they will disappear from the market altogether.”
- Andrew Pavliv, co-founder of the IT outsourcing company N-IX
“This agreement will definitely increase the attractiveness of Ukraine and its companies for their European clients. Understanding the process, they will invest without fearing for the long-term relationship. This is particularly important for us, as N-iX operates on a close level with investors. Besides, the agreement impacts the investment climate in general, so the capitalization of IT and tech companies will grow, which is also a positive point.
“But further integration with the EU might have its side effects on Ukrainian outsourcing companies, potentially increasing brain drain. Moreover, some European corporations could open their offices directly here and therefore will not need to work with local outsourcing companies. Integration could also increase operational costs due to changes in labor market conditions so, ultimately, we might have to compete on the same level with European outsourcers.”
- Yevgen Sysoyev, Managing Partner, AVentures Capital
“Many European investment funds have a mandate to invest in the EU, either directly (PE and VC funds) or indirectly (fund of funds). The inclusion of Ukraine into the EU orbit might unleash additional investment capital and put Ukraine on the radar of many EU investment funds. However, it might take some time before we see this effect in place.”
- Viktoriya Tigipko, Managing Director, TA Venture
“The agreement is a big and welcome move for the Ukrainian business in general and IT in particular. First of all, 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.
“Cooperation in science and tech also play an important role in the agreement. This may improve important basic conditions for the unhindered functioning and development of Internet-based businesses. The agreement will also favor the development of broadband infrastructure, the improvement of network security and the introduction online services such as e-business, e-government, e-health and e-learning. And we will certainly take advantage of joining the common European market, which holds some of the world’s leading economies.
“Europe, on its side, will also benefit from Ukrainian tech know-how and its highly skilled IT workforce. Central and Eastern Europe, especially Ukraine, is a sleeping IT tiger, as we highlight every year at the IDCEE conference.”