The development of investments and innovations is very important process for the effective economic development of the state. The successful innovations and implementation of investment projects give the opportunity to increase the intellectual potential of the state, a guarantee of prosperity and strengthening of the Ukrainian economy. However, investment and innovation processes cannot develop independently, the strong state support is needed, namely, effective state regulation mechanisms of these processes. Unfortunately, the legislative framework in this area in Ukraine is hardly airtight, which hinders the effective implementation of investments and innovations in the state.
Currently, the investment and innovation activity of the country has a lack of national economy investments, which enhances the decline of production and results in reduction of investment capacity of business entities and the state. Only a scientifically grounded and effective investment policy of the state will be able to improve this situation in Ukraine.
A lot of scientists were engaged in the study of regulation of investment and innovation processes in Ukraine, in particular, O.M. Volska, A.S. Galchynsky, V.M. Geyets, T.V. Mayorova, A.A. Peresada, S.O. Shostal, and others. However, the studies of state regulation mechanisms of the investment and innovation processes in Ukraine are inadequate and require more detailed consideration.
The purpose of this article is to define the role and substantiate the main ways of improving the state regulation mechanisms of innovation and investment processes in Ukraine.
The investment and innovation activity is one of the components of real investment, which may also be represented only by innovative activities or extensive development investments.
The main factor in economic growth is effective investments in the innovation process. It is they which provide a restructuring of the economy on a new scientific and technological base and contribute to improving its competitiveness. Innovation funding can be provided through variable private investments and inadequate public funds, while the country’s innovative development requires regular investments.
The investment and innovation industry is a very important component in the development of any state. However, this sphere is not able to develop effectively independently without effectively functioning regulatory mechanisms; therefore, the state leverages play an important role, which should provide sufficient opportunities for introducing the innovative processes and implementing the investment processes.
The purpose of state regulation of investment and innovation processes is to ensure the implementation of society’s development programs in the social, economic, scientific and technical spheres, and state protection and support of the investments.
Currently, the effective organizational and economic mechanism of investment and innovation regulation in Ukraine has not yet been formed, and the current one falls short.
The direct state influence on investment and innovation processes in Ukraine manifests itself in the organization of certain activities with the definition of strategic tasks and priorities, development of thought-out bases of investment and innovation policy, introduction of state programs with required funding, etc. The investment and innovation processes in the regions are based on the harmonizing the interests and joining the forces of subjects, such as the state, region and investor.
According to M.M. Petrychko and S.V. Prokhorchuk, “the mechanism of state influence on ensuring the favorable investment and innovative climate and implementation of the technical re-equipment policy consists of three vectors: creation of special financial mechanisms for supporting such activity, formation of corresponding investment and innovation infrastructure, application of indirect methods of support”.
According to Art. 11 of the Law of Ukraine “On investment activity”, “the state investment activity regulation is carried out with a view to implementation of economic, scientific and technical and social policy proceeding from the goals and indicators of economic and social development of Ukraine, state and regional economic development programs, state and local budgets, in particular, the amount of investments stipulated therein”.
The state regulation of investment activity is aimed at managing not only state investments, but also regulating the investment activity implementation conditions and monitoring the actions of all investors and parties in the investment process.
According to the current legislation, the state investment management is carried out directly by the public authorities and includes the process of planning, determining the conditions for the implementation and fulfillment of obligations on investment of budgetary and extrabudgetary funds.
The state regulation mechanism of investment activity in Ukraine is carried out as follows:
– provision of financial assistance in the form of grants, subsidies, subventions, budget loans for the development of individual regions, industries, production;
– state norms and standards;
– measures for the development and protection of economic competition;
– denationalization and privatization of property;
– definition of conditions of use of land, water and other natural resources;
– pricing policy;
– state expert review of investment projects;
– other measures.
The Law of Ukraine “On Innovation Activity” “defines the legal, economic and organizational principles of state innovation activity regulation in Ukraine, establishes the forms of state stimulation of innovation processes and is aimed at supporting the innovation-based growth of Ukrainian economy. The main goal of the state innovation policy is to create socio-economic, organizational and legal conditions for the effective reproduction, development and use of the country’s scientific and technological capacity, ensuring the introduction of modern environmentally friendly, safe, energy- and resource-saving technologies, production and sales of new types of competitive products”.
The state regulation mechanism of innovation activity is carried out by:
– determination and support of innovation activity priority directions;
– formation and implementation of state, industrial, regional and local innovation programs;
– creation of regulatory framework and economic mechanisms to support and stimulate the innovation activities;
– protection of the rights and interests of the innovation activity subjects;
– financial support for implementation of innovation projects;
– stimulation of commercial banks and other credit and financial institutions which credit the implementation of innovation projects;
– establishment of preferential taxation of innovation activity subjects;
– support of the functioning and development of modern innovation infrastructure.
It is implicit in abovementioned state regulation mechanisms of investment and innovation processes that they should flexibly combine all leverages, both economic and administrative. Under certain conditions, depending on the strategic changes, the instruments of state influence should provide for the tactical changes.
Let us turn to statistics in order to fully understand the completeness of the state’s participation in the investment and innovation process. Thus, the main source of financing of capital investments are own financial resources of business entities from which 69.4% of investments was spent in 2016. The share of bank credits and other loans in total investments was 7.1%. 9.4% of capital investments have been completed at the expense of state and local budgets. The share of foreign investors’ funds amounted to 2.9% of all investments, while the share of population for housing construction was 8.9%. Other sources of funding are 2.3% (Fig. 1).
Fig. 1. Distribution of capital investments by sources of financing in 2016, %
Thus, Ukraine remains an investment attractive state, is sufficiently integrated into the world economy, but the loss of macrostability in foreign markets affects the investment and innovation processes in Ukraine.
In order to effectively achieve the goal and fulfill the tasks set to the state in the area of investment and innovation process regulation, we believe that one should use a form of state regulation which makes it possible to combine the interests of all parties to the investment process.
In order to further improve the investment climate in Ukraine, the issue of improvement of the legal and organizational framework for enhancement of the capacity of mechanisms to ensure a favorable investment climate and formation of the basis for maintaining and improving the competitiveness of the domestic economy is currently relevant.
A number of positive steps in this direction have already been made:
- Today, the legal framework for investing and developing the public-private partnership is established in Ukraine. The legislation of Ukraine defines the guarantees of activity for investors, economic and organizational principles of public-private partnership implementation in Ukraine.
- The national regime of investment activity is applied to foreign investors in Ukraine, i.e. they are exposed to the same conditions of activity as the domestic investors have. The foreign investments in Ukraine are not subject to nationalization.
- In order to enhance the protection of foreign investments, the Law of Ukraine dated March 16, 2000 No. 1547 ratified the Washington Convention of 1965 on settlement of investment disputes between the states and foreign persons.
- The intergovernmental agreements on promotion and mutual protection of investments with more than 70 countries of the world are signed and ratified by the Verkhovna Rada of Ukraine.
- In order to simplify the procedure for attracting the foreign investments and preclude manifestation of corruption signs at the moment of their state registration, the Law of Ukraine No. 1390-VIII “On Amendments to Certain Legislative Acts of Ukraine on Abrogation of the Mandatory Nature of State Registration of Foreign Investments” was adopted on 31.05.2016.
In addition, the provisions on the National Investment Council were approved by the decree of the President of Ukraine on August 29, 2016, No. 365/2016. The main tasks of the Council are:
- development of proposals for stimulation and development of investment activity in Ukraine, formation of an attractive investment image of Ukraine, including taking into account the best international practice;
- assistance in formation of the main directions of the state policy for improving the investment climate in Ukraine;
- elaboration of proposals for strategic directions of investment potential development in Ukraine, stimulation of foreign and national investments into the development of the state economy;
- study of initiatives and potential proposals for investment projects, as well as practices of interaction between the investment subjects and state authorities; analysis and generalization of problems impeding the investments into the Ukrainian economy, preparation of proposals on the ways for their preclusion, in particular concerning the measures aimed at protection of investors’ rights;
- participation in the elaboration of draft legislative acts on investment activities.
Funding of significant research investment and innovation processes shall be carried out by the state in order to determine the priority directions of scientific and technological and innovation activity. This is necessary for implementation of particular actions and purposeful policy of the government and for business structures as state’s assistance to business entities in search of the entry of domestic high-tech and high-hume products into the world market. For this purpose, it is necessary to employ the maximum capacities of domestic scientific and technical potential.
Therefore, it is expedient to improve the state regulation mechanism of investment and innovation processes, namely:
- updating of the Concept of scientific and technological and innovative development of Ukraine;
- making of significant amendments to the current legislation of Ukraine concerning the stimulation of investment and innovation activity in accordance with modern economic conditions;
- constant monitoring of existing regulatory acts and projects which have an impact on investment and innovation activities;
- monitoring of the investment and innovation potential elements of all regions of the country;
- creation of a unified information and technological complex on the basis of regional centers of intellectual product markets and region resources monitoring;
- increase in the concessional lending of business entities engaged in the investment activity;
- evaluation of the possibility of effective implementation of projects by reducing the time for preliminary expert reviews and issuing a certificate of scientific feasibility, technical and commercial attractiveness of projects in order to include these projects into the state, regional, municipal and corporate energy-saving programs, as well as conducting of rating researches of the consumer value of projects.
Investment and innovation activity is an important area in the development of any country and Ukraine is not an exception. The existing state regulation mechanisms of the investment and innovation processes are not effective and not sufficiently adapted to the current conditions of management. The main problem in this direction is the lack of public funding for these processes. However, our research demonstrates that the steps are taken in our country to improve the investment climate, they should be more triggered and the institutional conditions for the implementation of investment and innovation projects should be improved.
