The software development market is the only stable export industry in Ukraine, demonstrating an increase of 58% for 2013-16. Exports of software development services in 2016 amounted to US$3.2 billion, which brought the industry to third place in terms of currency revenues and provided 26% of total exports of services. The market creates about 100,000 high-paying jobs and has huge potential for growth.
However, instability of tax regulation and the lack of specialists are essential constraints for the development of the industry. Ways of eliminating these market barrier were discussed by representatives from the authorities, business, the public and expert circles on 19 October during a round table on ‘IT Future Talks: Regulation of the Software Development Market’ held in the framework of the Public Dialogue #PRODialog under the EU4Business FORBIZ project.
The Better Regulation Delivery Office (BRDO), created under FORBIZ, has analysed the regulatory field of the industry and presented its findings in a Green Book. According to the expert assessment, the rapid development of the industry has been facilitated by the lack of specific industry regulation - the norms and requirements for IT companies, their services or products, as well as the ability to work under favorable tax conditions.
Growth potential
"This is a successful example of an efficient self-regulated market, and this should not be changed. The capitalization of the 10 largest Ukrainian IT companies today exceeds US$4 billion, and unlike mineral giants, their value is based on human capital. Provided that the state provides stable business conditions, in particular taxation, as well as addressing several regulatory barriers, the profit of the industry can grow to US$6 billion in 2020," said the head of the IT sector of BRDO, Alexander Kubrakov.
Wages in the IT sector are 5 times higher than the average in the country. At the same time, high wages are not only in the capital, but also in regions where 56% of specialists work, and this is a significant factor of regional development.
"The industry is a powerful economic multiplier: 1 workplace in IT creates 3 more jobs for related professions. But the potential is much bigger, the IT sphere, where Ukraine can well become a global innovator, should go in this direction," said the First Deputy Minister of Economic Development and Trade of Ukraine Maxim Nefyodov.
The acting head of the Trade and Economic Department of the EU Delegation to Ukraine, Joselin Gyuton, agreed that Ukraine had huge potential in the field: "Ukraine is one of the most attractive countries for placing orders in the field of outsourcing business processes and IT. That is, it is not just a potential, it already creates real opportunities, makes a significant contribution to the GDP of the country.”
Priorities to achieve goals
"For Ukraine and the IT industry today there are three clear goals and three ways to achieve them. First, develop things that could grow independently. The IT industry has every chance to return to growth of 25-30% annually. The second goal is the development of the domestic market, because without it, it is difficult to talk about the stable development of the industry in the long run. And thirdly - support for startups, product companies, because they will be able to bring significant investments in the country. The steps in the Green Book will help to achieve these goals: stable tax conditions, qualitative changes in the education system and a clear migration policy," the President of the Association of Information Technologies of Ukraine Yuri Antoniuk summed up.
Funded by the European Union under the EU4Business initiative, the FORBIZ project supports Ukraine’s reform agenda and its economic recovery by proposing a systemic, smart change to a more business-friendly environment with a particular focus on SMEs. The project seeks to steer a shift in policy towards greater recognition of SMEs and the vital role they play in economic recovery, while addressing the challenge of reducing regulatory burden and lessening risk for businesses.
BRDO website http://brdo.com.ua