Digitization is expected to remain among the dominant global trends for the coming decades. Ukraine’s task is to build on the strong foundations of today’s IT industry and ensure that the country is at the forefront of digital change.
Recent developments are encouraging. Earlier this year, Ukraine became the first country to implement equal status for digital passports. Ukrainian MPs also supported the legalization of virtual assets and created one of the most advanced virtual asset laws in the world. Meanwhile, efforts are underway to make Ukraine a leading jurisdiction for the development of the cryptocurrency industry.
In order to secure Ukraine’s place at the forefront of global digitization, we need to create the right conditions for the development of the country’s booming technological sector. Much will depend on the introduction of the Diia City initiative, which aims to create a special legal and fiscal framework for the Ukrainian IT industry.
The basic legislative framework of the city of Diia was passed and approved by the President in August 2021. If successfully implemented, this initiative has the potential to create the most favorable IT environment in Central and Eastern Europe .
The share of the IT industry in the Ukrainian GDP is increasing every year. However, the lack of regulation encourages companies to operate in the shadows. The people behind the Diia City initiative decided to take on this challenge by using carrots rather than sticks. The incentives include tax conditions that compare favorably with those in neighboring countries, as well as enhanced protection of intellectual property rights and simplified access to investment.
This approach will make Ukraine significantly more competitive. Neighboring countries like Poland and the Baltic States are actively seeking to attract Ukrainian IT talent. With Diia City, Ukraine can offer the most attractive fiscal framework in the whole region, while balancing the need for budgetary revenue.
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For the future, Ukraine needs to create an environment capable of attracting more investors from the technology sector.
Technology investments tend to be highly speculative in nature, so there is very little appetite for additional country risk that could arise due to rule of law issues and other climate fundamentals. doing business in Ukraine. These risks are the main reason why so many Ukrainian tech companies are now looking to pack their bags and check in elsewhere if possible. Reversing this trend is a priority.
IT outsourcing companies operating in Ukraine also suffer from transparency issues resulting from the widespread practice of working with large teams which are often mainly engaged as independent contractors. This makes it far from clear how much talent an investor can expect to acquire.
With these issues in mind, the city of Diia seeks to create the right legal conditions, including protections against illegal actions by Ukrainian law enforcement agencies and enhanced protection of intellectual property rights.
Investor rights are further strengthened by the introduction of certain aspects of English law into the Ukrainian legislative framework. The aim is to ensure that investors in the Ukrainian technology sector benefit from the best legal tools available in today’s global IT industry.
Given the appropriate legal and business framework, Ukraine’s IT sector has a range of competitive advantages. The country’s IT industry is experiencing strong and sustained growth but has not yet overheated and offers the prospect of continued good performance.
It is up to the Ukrainian authorities to ensure that the country’s IT product market grows, IT companies stay in Ukraine, and an increasing number of investors enter the market. If Ukraine is serious about joining the club of the world’s most developed economies, it is essential to change the structure of Ukraine’s GDP so that the tech sector plays a much bigger role.
There are a number of relatively modest short-term goals that will move Ukraine’s digitization campaign forward. This includes the development of physical infrastructure, including Internet access to the country’s most remote towns and villages.
It is also essential to increase digital literacy. The whole “state in a smartphone” concept will only work if people are able to use public services once they have been made available online.
For years, the Ukrainian authorities did not pay attention to the quality of the services provided. Endless queues and institutional dysfunction were common features of a system that was often a nightmare for the Ukrainian public. We are currently experiencing a radical transformation in the way services are delivered, and digitization is at the heart of this process.
Ukraine now needs to expand the scope of digitization to cover internal interaction between different government agencies. This should include unifying state registers and improving the flow of information between state bodies. In other words, we need to make sure that someone looking to do a relatively straightforward administrative process doesn’t have to go looking for a hundred different certificates from various different government agencies.
Digitization is also expected to lead to an increasingly paperless future where the tyranny of stamps and documents that once dominated Ukraine’s post-Soviet bureaucracy is replaced by streamlined processes with no queues or other unnecessary inconvenience. .
Ukraine’s great digitization process is already well under way. The pace and intensity of this trend will determine the country’s future trajectory. If optimized, digitization has the potential to radically improve the standard of living of all Ukrainians.
Digitization is also a key part of efforts to transform Ukraine into one of the world’s leading computing powers. Recent changes in legislation and the development of new tools promise to place the Ukrainian IT industry on a solid basis for long-term expansion. It is crucial that the progress of the past few months continues into the years to come.
Yegor Chernev is a Ukrainian deputy from the Servant of the People party. He is Acting Vice-President of the Parliamentary Committee on Digital Transformation and Chairman of the Sub-Committee on Digital Economy, Innovative Development and Electronic Commerce.
Tue Sep 14, 2021
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