Ukrainian IT industry

How has it helped companies?

In the first three months of 2022, according to the data of the National Bank on the balance of payments, the IT industry managed to increase export revenues to the country. Thus, in the first quarter, the industry exported services worth $2 billion, which is 38% more than in the same period of 2021 ($1.4 billion).

That is, even during a full-scale war on the territory of Ukraine, IT is able to maintain the country’s economic security by generating foreign exchange revenue and paying all taxes. And even in advance, which has become a common practice among many companies.

Is there a “but” in this situation?

Obviously. It is not worth hoping that the IT industry is reliably protected and will continue to grow actively in the future. After all, it is no secret that the vast majority (95%+) of IT products and services are exported abroad.

That is, the industry is almost completely export-oriented and depends on foreign orders. And taking into account the large-scale war on the territory of our country, customers are already beginning to actively analyze other countries, where the quality of the product may be, and the price is higher, but where there is predictability.

In this context, an important element for improving Ukraine’s position is direct negotiations with clients, which are important to conduct live, face-to-face.

However, despite the fact that the mechanism of reservation of critical specialists from mobilization is currently functioning, according to the companies themselves, it is not very effective: the review of applications takes a long time, the list of professions that cannot be reserved is quite extensive, and, in the end, most applications returned unsigned.

As a result, certain important specialists are not able to go abroad on a short-term business trip, subject to the mandatory return to Ukraine in accordance with the current legislation.

What could be the consequences of this situation?

According to the IT experts of the Association Committee, the situation regarding the growth of the IT industry in Ukraine may change dramatically in the near future. After all, at the moment, the opportunity for key specialists to go to meetings and negotiations is being reduced.

And, unfortunately, international partners are unlikely to be able to wait for us for a long time, or “get into position” – business is business. Therefore, if we declare the need to restore economic activity, we must also understand such features.

At the same time, it is obvious that the need for business trips also applies to other industries, for which it is important to have physical contact – for negotiations, conclusion of contracts, construction of routes, planning, etc.

The IT industry will help Ukraine survive the war: a survey of the biggest players
In addition, recent changes made to the NBU resolution have complicated the situation around export-oriented sectors of the economy, in particular IT.

According to the document, there is currently a need to sell currency through banks. So, for example, IT specialists, receiving dollar income, can sell currency only at the official exchange rate – UAH 29.25, losing up to 30% of income. In fact, this is a problematic issue not only for IT, but for other businesses as well.

The situation that has developed has a rather vulnerable impact on the activities of enterprises and limits their ability to materially stimulate and support employees and their families during martial law, which reduces revenues to the budget of Ukraine in the form of taxes and fees due to a decrease in the wage fund.

Exporters clearly understand that the state performs a protective function. However, restrictive methods are unlikely to stimulate the economy. We hope that the situation will be resolved soon.

What can be done?

First, it is necessary to work out the option with the possible departure of critically important employees abroad on short-term business trips with a mandatory return.

In this case, it is worth applying a number of safeguards so that specialists can do their work and return without fail. For example, to establish fines or a deposit in case such a specialist does not return from a business trip.

Secondly, to make a strategic decision on the issue of currency restrictions. After all, currently the difference between the official rate and the market rate varies too much, which negatively affects the potential of the entire export industry of Ukraine, including IT.

Experts of the European Business Association understand the situation that has arisen on the foreign exchange market and the colossal pressure on the country’s foreign exchange reserves. However, it is important to find the “golden mean” in which exports, as well as the Ukrainian banking system, will not suffer.

The association is always ready to be the necessary platform for finding a compromise. After all, only through close cooperation and active dialogue between the state and business will it be possible to resist the common enemy, protect and rebuild an even more progressive country.