Even at the age of 27, Ukraine can hardly be called a “nation of startups”, as neither the president nor the Ministry of Economic Trade and Development have made this a priority.
Regardless, we will reject this pessimism, as real steps are being taken in this direction. In fact, a stratum of IT specialists is forming, which, according to a recent study by experts from the IT Ukraine Association and the Office of Effective Regulation, has ensured that in terms of export, the Ukrainian IT industry takes an important second place.
Ponder this news. IT firms do not export grain, metal, or umbrellas. They sell the result of mental labour, which is something that does not depend on the price of raw materials or any other factors that may experience turbulence.
Compared to the year following the Revolution of Dignity, Ukrainian exports fell like a dead weight, dropping 14% to $54 billion. The year after that, which was probably the hardest year for Ukraine, exports of goods and services decreased by another 30%, accounting for just $38 billion. For context, this is almost half of Google’s revenues in the same year.
By 2016 however, the curve started creeping upwards. And in the first four months of this year, we had already exported $15.5 billion, which is a 13% increase on the same period in 2017. Looking at these figures, IT export volumes were only beaten by the export of steel pipe, and made up more than 20% of Ukrainian exports. Before you tire of these figures, let me add just a couple more examples.
In Ukraine, the “brain economy” accounts for:
• 4.1 billion UAH in taxes in 2014-2017 paid by IT companies. The amount of taxation, according to the State Fiscal Service, has increased annually by 27%, and 2018 will be no exception
• An additional 3.2 billion UAH paid in taxes by IT professionals who work for firms as physical entities; the amount of their taxation increases like yeast, growing by 58.8% annually
In fact, the only question that should be asked after looking at all of the above, is this: “Why is IT export not in first place?” It is easy to show that a greater orientation towards the sale of intellectual services is the path forward, especially where countries are aiming to develop a more secure future. Of course, if the future is clear and there are few hands raised “against”, then the idea of what is “secure” can be deciphered. Like in construction, however, IT and its production are not only difficult to estimate for technical specialists, but for workers of related professions also – designers, accountants, lawyers (which is good to hear), and so on.
In addition, more than a quarter of employees of IT firms have no relation to actual IT. As a result, the following picture emerges: an industry that does not require government incentives, but simply asks that the government does not interfere with their work, bringing the country money, buying it a ticket to a competitive club of advanced societies, and in the process creating a post-industrial state.
As always, business is at the forefront of change. The state simply needs to refrain from plans to squeeze additional juices from this seed of the future. IT will appreciate it, and with it the value of the hryvnia will appreciate too.
Andriy Dovbenko is a Ukrainian legal expert and investor