A foresight session “Small and Medium-Sized Businesses in the Process of European Integration” was held on 5 October 2023 with the support of the European Union.
The goal of the session was to explore the key factors and possible scenarios for the development of SMEs in Ukraine in the process of European integration and to form the main strategic steps to be taken to ensure the success, efficiency, and speed of this process.
Foresight is a methodology for actively researching the future by people who take direct responsibility for creating that future. This kind of research usually becomes the first step towards its formation, as those who do not have their own project for the future become only a resource for those who do. The foresight session brought together 82 participants from small and medium-sized businesses, as well as government officials, industry experts, and representatives of civil society organizations. Among them were economists, sociologists, political scientists, lawyers, diplomats, culturologists, media professionals, ecologists, etc.
The research was conducted for a time frame of 7 years. By 2030, all current processes should lead to specific results, and we will see what the path of Ukraine to the European Union has become, what the economy has become as a whole, and what the small and medium-sized enterprises have achieved. In total, 8 different scenarios were described.
The structure of this document is as follows:
- Key trends.
- Metaphors of the present and the future.
- Scenario space.
- Detailed descriptions of scenarios.
- Tasks for the subjects of European integration.
1. KEY TRENDS
The foresight session began with a study of the key trends and factors shaping the process of Ukrainian integration into the EU over the next 10 years. Seven expert groups discussed several dozens of such factors. Below is a list of them.
Policy, institutions, security
- Uncertainty about the duration of the war and its end.
- Vulnerability, occupation, mine danger.
- Demographic crisis.
- The spread of populism.
- Value disorientation (what is profitable becomes a value).
- Lack of ability of international institutions and international law.
- Centralization of power in Ukraine, strengthening the role of the president.
- Lack of trust in institutions, lack of trust in society.
- Increased trust in the Armed Forces of Ukraine, the Security Service of Ukraine, the National Guard of Ukraine, the National Police of Ukraine, the State Emergency Service, and volunteers.
- “Ukraine fatigue”: the world is tired of the war in Ukraine, the internal fatigue of Ukrainian society.
- The loss of value orientations by the world elites.
- The Ukrainian soldier is the best “marathon runner” in the world.
- European integration as a civilizational choice.
Economy, markets, finance
Global trends:
- Integration into the global market
- Global recession
- Development of artificial intelligence technologies
- Changes in supply chains
- Increased protectionism
- Urbanization
- Robotization of production
- Increased remote work
- Militarization of economies
- Green energy/circular economy, European Green Deal
- Increased e-commerce
- Improved quality of life
Ukrainian trends:
- Simplifying access to financing
- Increased investments
- Labour force shortage
- Development of the processing sector
- Growth of the raw materials sector
- Population decline, structural changes (age, gender)
- Increased uncertainty in taxation
- Relocation (internal and external)
- Increased social burden
- Corruption
- Integration of Ukrainian business into the EU market (loss of the Russian market)
- Lack of the rule of law
- Increase in craft production
Society, standards, culture
- Return of citizens who fled from the war
- Return of military from the war
- Social responsibility of business
- Gray economy
- Crisis of trust in the state, institutions, and other people
- Consolidation “against”, not “for”
- The gap between society and the state
- Localization of consumption
- Rational consumption
- Globalization of markets
- Disappearance of the middle class
- Psychological trauma of entrepreneurs (entrepreneurs go into wage labour)
- Increase in the number of women entrepreneurs
- Uncertainty
- Negative impact of donor projects
- Interest in Ukrainian traditions (ethno)
- Increased standards (targeting external consumers)
- Concentration of business around military needs
- Fatigue of society
- Need to reduce aggression of everyone toward everyone
Technology and information
- Automation and ERP implementation
- Circular economy (sharing/sustainable)
- Reduction of the number of people in production
- Energy efficiency
- Biotechnology/beauty tech
- Blockchain
- New logistics
- Agriculture/food/health technologies
- E-commerce, fintech
- Cybersecurity
- Military technologies
- Urbanized farming
- Digitization
- Online learning
- IoT
- Space tech
- Technology transfer
- VR/AR/Metaverse
- Cybersecurity
- New materials
- Energy and resource sustainability
- Artificial intelligence/machine learning
- Circular economy (recycling, sharing, sustainability, evolutionary economy, clustering)
- Internet of Things (automation, robotics, digitization)
- Artificial and augmented reality/Metaverse
- Online learning – edtech
- 3D printing
- Social technologies
Protection of environment, climate, and energy
- Reduction of emissions
- Cleaning emissions
- Compliance with environmental standards
- Energy efficiency
- Alternative sources of energy
- Circular economy, waste recycling
- Sustainable consumption/resource efficiency
- Urban development based on the principles of sustainable development
- Development of the green economy
- Waste management
- Environmental management
- Transition from a raw materials economy to a high value-added economy
- War pollution and demining
People, education, healthcare
- Veteran entrepreneurs
- Development of micro skills
- Demand for education (formal and informal)
- Learning foreign languages
- High anxiety due to uncertainty
- Aggravation of chronic diseases
- Increased life expectancy (value of life)
- Women’s leadership
- The presence of people with Western education and experience in Ukraine
- Demand for personal brands
- Transition from ownership to rent
- Mobility
- Attention to existential questions
- More global thinking (working at Google is just a job now)
- Decreased sense of inferiority and increased dignity
- Taking care of oneself (quality consumption, hedonism)
- Crowdfunding and toloka (volunteering)
- The value of the cost of time
- Increased involvement of civil society in processes
- Harmonization of online and offline
- Inclusive thinking (respect for diversity)
- Growing interest in Ukrainian and world content
- Increased weight of family ties
- Rethinking religion
Law, regulatory sphere
- European integration (rule of law, adaptability)
- Deregulation
- Decentralization
- Digitization (including artificial intelligence)
- Self-regulation of business
- War and recovery
- Risk-orientation
- State as a service (liberalization, administrative services laboratory)
- Security orientation
- Anti-corruption and rule of law
- Green transition
- Inclusion
- National protectionism
- Export orientation
2. METAPHORS OF THE PRESENT AND THE FUTURE
The foresight involves combining analytical work with personal emotional engagement and analysis of feelings, dreams, and hopes that can create colourful metaphors. Foresight participants suggest the following metaphors for a better understanding of the processes of Ukraine’s European integration.
Present (2023)
- Marathon in the jungle: The distance is unknown, there are predators on the track, the finish line is nowhere to be found, runners help and hinder each other, and everyone wants to have more information.
- Sea turtles just hatched, moving somewhere, part of the way is dangerous, but they are already on their way.
- A source in the desert. It can dry up if not replenished, and predators and victims drink together.
- Cinderella at noon: nothing is ready.
Future (2030)
- European accelerator – we take the best and transfer, and promote this value in Europe.
- Ukrainians are fresh blood, challengers who burst into Europe and are engaged in the development.
- Turtles have become ninjas and surpassed the teacher.
- A team at European competitions; there is already a goal, and that is to win.
3. SCENARIO SPACE
After studying the trends, participants moved on to outlining scenarios for the development of SMEs in the process of European integration of Ukraine. To form a scenario space, it is necessary to identify the most important variable factors and trends, that is, those that are subject to influence, or the nature of whose action is undefined or may change (while inevitable trends do not depend on the actions of any subjects).
The following were identified as the most important variable factors and trends (the list is provided in order of decreasing number of points they received in the voting):
- Rule of law (27)
- Deregulation, liberalism (19)
- Labour force shortage (17)
- Trust in institutions, trust in society (10)
- How the war ends, uncertainty (8)
- European integration (6)
- Access to financing (4)
- Social technologies (4)
- People’s return (3)
- Inclusivity, cultural diversity, and acceptance of cultures (3)
- Anxiety caused by uncertainty (will people adapt or not) (2)
- People with Western education and experience (2)
- Crowdfunding, toloka, communities (2)
- АІ, machine learning, control (2)
- Circular economy (2)
The three variable trends that are far ahead were selected to outline the scenario space of European integration of Ukraine.
- Rule of law
- Deregulation and liberalisation
- Labour force shortage
The scenario space, which includes 23 = 8 scenarios, is presented in a table, which indicates the metaphorical names of the scenarios and examples of countries in which similar scenarios were implemented at some point.
The rule of law is regarded as the key to successful European integration, meaning that the top four scenarios represent successful European integration, and the bottom four represent the failure of this process. The “Tiger in Vyshyvanka” is considered the most desirable scenario, and “Tied Marathon Runner” is the backup scenario. At the same time, “The Wild West” is considered an inertial scenario.
4. DETAILED DESCRIPTIONS OF SCENARIOS
“Tied Marathon Runner” Scenario (backup, second best)
Rule of law
Deregulation, liberalisation
Increased labour force shortage
Key features
- Access to finance and markets
- Trust in the state
- Population affected by war
- Increased investments and growth of SMEs
Key events (movement trajectory)
- War ended in Ukraine’s victory
- Ukraine joins EU
- Judicial reform completed
- Refugees don’t return
- Tax reform
Key stakeholders
- SMEs, civil society, European institutions, international financial organizations, veteran community, army, and immigrants
Who wins
- Technology business
- Society
- Immigrants and emigrants
- Working class, workers
- Pensioners
Who loses
- Employers
- Those dependent on labour resources
What we need to do
- Automated production
- Improvement of conditions to motivate return of people
- Retraining
- Involvement of foreigners
- Promotion of multiculturalism, inclusivity
- Use of AI
Breakpoint indicators (how do we know that it has happened)
- High average wages
- Number of jobs exceeding the number of job seekers
- Accession to the EU
- Ranking in the top 10 in the Corruption Perception Index
- Ranking in the top 10 in the Rule of Law Index
- Top 10 in Doing Business
Metaphor
- A marathon runner with tied legs, 10 meters from the finish line, the task is to jump over the finish line
Examples
- Baltic countries
“The Old Europe” Scenario
Rule of law
No deregulation
Increased labour force shortage
Key features
- Effective legal system
- Low level of corruption
- Functioning laws, accountability enforced
- Trust in public institutions
- Protection of private property
- Regulated economy, significant administrative and regulatory burden on businesses and other players
Key events (movement trajectory)
- Dominance of large businesses that find it more convenient to operate in a regulated environment
- Slowed economic activity, lack of new businesses being created
- Tendency to use old technologies
- Shortage of skilled labour, including skilled workers
- Increase in production costs due to regulation
Key stakeholders
- State, large businesses, transnational companies, corporations, business associations, international organizations (such as the ILO), trade unions, employers, consumers
Who wins
- State and related state institutions (bureaucracy)
Who loses
- All businesses, especially SMEs
- Population, especially the youth (harder to enter the job market)
What we need to do
- Economic deregulation
- Increased access to education and modernization of the education system, with an emphasis on vocational and technical training
- Liberalization of foreign employment
- Tax reform, reducing the tax burden on labour costs
- Ensuring social inclusion
Breakpoint indicators (how do we know that it has happened)
- High score of business freedom
- Openness of the country (migration, investments, capital movement), the ability to realize oneself in Ukraine
- Increased trust in public institutions due to deregulation
- Growth in the share of medium-sized businesses in the economy, growth of small businesses to medium-sized
- Growth in innovation
- Increase in the share of people with specialized vocational training
Metaphor
- Old Europe
Examples
- Western European countries
The “Tiger in Vyshyvanka” Scenario
Rule of law
Deregulation, liberalisation
Insignificant labour force shortage
Key features
- Growing demand for innovation, increasing competitiveness
- Increase in competition
- Multiculturalism
- Development of self-government
- Self-regulation
- Growth of business associations that begin to regulate situations in various sectors of the economy
- Attractiveness for investments
- Openness to labour migration, return of refugees
- Education regulated by businesses participating in its funding
Key events (movement trajectory)
- Ukraine becomes a parliamentary republic, conditions for political competition
- Accession to the EU and NATO
- Opening of representations of world universities in Ukraine
Key stakeholders
- Multinational corporations, SMEs, corporations, civil society, public-private partnerships
- Ukrainian state
- Business associations
- Civil society
- EU
- Media and public intellectuals
- USA
- IFIs
- Universities
Who wins
- SMEs, especially those with a focus on innovation
Who loses
- Traditional businesses that benefited from preferential treatment
What we need to do
- Presence of responsible citizens for the emergence of “Enlightenment 2.0”
- Judiciary system reboot
- Change in the political structure
- Education reform
- Emphasis on enhancing the role of leadership and individual business development trajectories
Breakpoint indicators (how do we know that it has happened)
- A large number of court cases and their rapid resolution demonstrate results to society
- Rapid growth in construction, industrial, and urban development
- Increase in foreign direct investment
- Population growth, although the share of ethnic Ukrainians may decrease
Metaphor
- Economic tiger in an embroidered shirt
Examples
- USA after World War II
The “Licenced Heaven” Scenario
Rule of law
No deregulation
Insignificant labour force shortage
Key features
- Businesses easily find labour resources
- Businesses can defend themselves in courts
- No pressure on business, no raids
- Complex regulatory rules, the need for consultants
- Victory in the war
Key events (movement trajectory)
- Judicial reform and reform of law enforcement agencies completed
- People who fled the war return
- Increasing investments, productivity growth, banks providing loans
- Education reform (adult education, especially for veterans)
Key stakeholders
- Government, businesses (SMEs), financial institutions, population, civil society, international partners
Who wins
- Business gains predictability and protection, the population gets jobs and stability, financial institutions, international partners
Who loses
- Micro and small businesses that cannot withstand strict regulation
- Population faces high prices due to reduced competition and increased monopolization
What we need to do
- Government: implement reforms, select judges, introduce measures for migration and demographic policies, reform education
- Business: lobby for reforms (judicial, law enforcement), work through associations, transition into power
- NGOs: advocate for reforms
- International institutions: funding through international financial institutions, provide insurance for war risks, offer financial support to the budget
Breakpoint indicators (how do we know that it has happened)
- Trust in judges and law enforcement agencies increases (more than 70%)
- Reduction in skill mismatch in employment
- Decrease in the time to replace employees
- Labour force shortage is not an obstacle to business development
Metaphor
- Licenced heaven
Examples
- Japan
The “Wild West” Scenario (inertial)
No rule of law
Deregulation, liberalisation
Increased labour force shortage
Key features
- Shadow economy
- Illegal migration
- Weak institutions (instability), weak and controlled courts
- Situational or absent economic growth
- Security challenges
- The budget is not being fulfilled (shortage of proceeds)
Key events (movement trajectory)
- New market redistribution – the appearance of new monopolies
- Negotiations with the European Union continue, but are dragging on, leading to new “grain crises” with EU member countries
- Tension with the EU – investors leave the country
- Youth emigrates, capital outflow occurs, population leaves in search of better living standards and education through shadow migration
Key stakeholders
Who wins
- Agricultural corporations, raw material businesses, small companies operating in the shadows, security structures that can “solve” problems
Who loses
- Start-ups, innovative product businesses, SMEs, consumers, government institutions, foreign investors, socially vulnerable groups, culture, education
What we need to do
- Bring citizens back with a focus on a new career
- Protect property rights
- Seek inevitability of punishment for offenders
- Restore the legal structure of the state
- Judicial reform
- Institutionalize initiatives that demonstrate more capability and ethics
- Overhaul bodies responsible for business control
Breakpoint indicators (how do we know that it has happened)
- Easy to start a business but difficult to sustain
- Ease of doing business due to deregulation
- Selective enforcement of legislation
- The budget is not being fulfilled (shortage of proceeds)
- People are not receiving social benefits
- Decrease in the number of businesses, businesses are folding
Metaphor
- Wild West
- Damn breaking
Examples
- Argentina
The “Fahrenheit 451” Scenario
No rule of law
No deregulation
Increased labour force shortage
Key features
- Corruption increases
- SME development slows down
- Monopolization increases
- Oligarchization is increasing
- Raider attacks are spreading
- Freedom of speech is decreasing
- State encapsulation is taking place
Key events (movement trajectory)
- Cancellation of the visa-free regime
- Termination of the agreement with the EU / a change of the course of European integration
- Introduction of a presidential or presidential-parliamentary republic
- Loss of global markets, international trade, and currency inflows
Key stakeholders
- Oligarchs, corporations, state apparatus, “decorative” trade unions (ineffective)
Who wins
- Oligarchs, corporations, the government
Who loses
- SMEs, the general population
What we need to do
- Consolidation of SMEs for resistance
- Seek foreign grants
- Enlightenment
- Promotion of the national idea (self-identification)
- Opening up immigration policy
Breakpoint indicators (how do we know that it has happened)
- Return of state-owned media
- Creation of private military corporations
- Increase in crime
- Establishment of a “police state”
- Decline in the economic freedom index
- Increase in censorship
Metaphor
- Fahrenheit 451
Examples
- North Korea
The “Wild 1990s” Scenario
No rule of law
Deregulation, liberalisation
Insignificant labour force shortage
Key features
- There are “principles” (unofficial laws of life), “princes in their principalities”, a return to the 1990s.
- Corruption, nepotism, and populism flourish.
- Insufficient taxes, shadow business grows, crime increases, local officials become the elite.
- Gangsters, local officials-feudal lords, law enforcement.
Key events (movement trajectory)
Key stakeholders
Who wins
- Shadow business
- Oligarchs
- Criminals
- Law enforcement
Who loses
- “Clean” (legal) business
- State, budget
- Officials
- SMEs (without a proactive position)
What we need to do
- Maximum flexibility (operate in the shadows to survive)
- Learn to negotiate
- Take business abroad
- Emigrate
- Unite, create communities to lobby for legality
- Protest actions, Maidan
- Learn self-defence
Breakpoint indicators (how do we know that it has happened)
- Courts are not functioning
- Budget decreases
- Decline in social infrastructure
- Alcoholism
- Failure to integrate into the EU
- Increased financial dependence on donor funds
Metaphor
- The Wild 1990s, Alpha males
Examples
- Ukraine in the early 1990s
The “Yanukovych 2.0” Scenario
No rule of law
No deregulation
Insignificant labour force shortage
Key features
- Corruption is like in 2012, at a survival level
- It seems like we are moving towards the EU, but corruption hinders the processes
- Regulation
- Stronger oligarchs
- European integration and Euro-Atlantic integration are slowing down.
- SMEs are weakly developing.
Key events (movement trajectory)
- Rollback of judicial reform (High Anti-Corruption Court, Supreme Court)
- Political appointments to NABU and SAPO
- Centralization of power, possible abandonment of elections after the end of the war
Key stakeholders
- Oligarchs
- Political elite
- Russia
Who wins
- Oligarchs, political elite
Who loses
- SMEs, Ukrainian Armed Forces, civil society, Western partners
What we need to do
- Activation
- Maidan
- Emigration
Breakpoint indicators (how do we know that it has happened)
- Weak SMEs, weak society
- Return to 2012
Metaphor
- Yanukovych 2.0
Examples
- Belarus
5. TASKS FOR THE SUBJECTS OF EUROPEAN INTEGRATION
Analysis of the scenarios proves that European integration is not necessarily going to happen, and if it does, it is not necessarily going to be successful. Therefore, the foresight concluded with the search for answers to the question of what small and medium-sized enterprises, the Ukrainian state, civil society, European institutions, and other stakeholders should do to ensure successful European integration.
Tasks for the state
1. Reform of the courts and law enforcement agencies:
- Increase accountability and inevitability of punishment.
- Implementation of electronic courts (digitization).
- Creation of a new judicial system.
- Outsourcing the judicial system during the period of changes.
- Introduction of preliminary arbitration and mediation.
- Establishment of a qualification enhancement institution for the integrity commission of judges.
2. Ensuring security:
- Creating conditions and providing opportunities to purchase housing (affordable mortgage).
- Simplifying conditions for starting a business and providing grant support.
- Introduction of targeted programmes for affected groups.
- Communication on behalf of the state regarding the return of Ukrainians.
- Introduction of digital citizenship to facilitate business opening in Ukraine.
- Simplification of taxation, introduction of robust corporate law.
Tasks for SMEs
1. Deregulation:
- Identify and join business associations.
- Formulate clear tasks and requests for deregulation.
- Monitor government agencies, and demand service.
- Collaborate with amalgamated communities.
2. Workforce – improvement of working conditions:
- Improve safety conditions.
- Ensure legal and stable salaries.
- Raise prices for goods and services.
- Promote education improvement.
- Introduce flexible schedules and remote work options.
- Create infrastructure in areas with available labour.
- Introduce collaborative social packages.
3. Rule of law:
- Zero tolerance for corruption.
- Lobby for business associations to have the opportunity to control budgetary funds.
Tasks for the European Union
- Military support.
- Acceleration of judicial reform efforts.
- Enhancing the fight against corruption.
- Introduction of effective insurance programs against military risks for investors and motivation for investment.
- Integration of Ukrainian businesses into European supply chains through clusters, increased sanctions against Belarus and Russia.
- Exchange of expertise, introduction of European technologies.
- Postponement and gradual implementation of some EU norms in Ukraine (fundamentals before harmonization).
- Funding for international communication by NGOs in the USA to amplify support for Ukraine, keep Ukrainian issues on the agenda.
- Demand for the establishment of strong institutions, judicial reform, state institutions, and the rule of law.
- Taking responsibility for the salaries of public servants.
- Change in approach to international technical assistance – working with NGOs, developing NGOs.
- Maintain open borders for Ukraine’s trade with the EU.
- Move the MDCP headquarters from Brussels to Kyiv.
- Confiscate Russian assets and transfer them to Ukraine.
- Macro-financial assistance if U.S. support is suspended (Front load MFA)
- The EU should take responsibility for the salaries of government officials
- Develop innovation in Ukraine, including through international technical assistance.
- Reforms in exchange for funds.
Tasks for the USA
- Security guarantees (NATO accession, joint security architecture).
- Economic incentives through reforms.
- Communicate the economic regional potential.
- Initiate constructive communication with new elites, support new NGOs, and initiatives.
- Investments and financing of the real sector, as well as investment insurance against military risks.
Tasks for civil society
- Holding events to shape post-war development goals.
- Continued active support for the Armed Forces of Ukraine.
- Ensure communication.
- Educate Ukrainians about democracy (enlightenment).
- Ensure oversight of the government, civil governance.
- Projects for the socialization and rehabilitation of veterans.
- Establishment of advisory bodies and youth advisory bodies.
- Projects for the development of tolerance and inclusion.
- Lobbying, advocacy for reforms.
- Establishment of advisory bodies for entrepreneurs under the Ministry of Social Policy.
- Empowering the Chamber of Commerce and Industry, business councils.
Tasks for mass media
- Half education, half propaganda.
- People + law (protecting journalists, own security services, promoting legal knowledge, investigative shows, coverage of judicial reforms, exposing corruption).
- Economic education.
- Strengthening regional media/bloggers so that people know what is happening locally.
- Create a tradition of “come back home” and “keep building” in local communities.
- Parade of positive cases.
- Promotion of natality.
- “Happy-end” shows.
- Investments in cinema
- “We have better” shows
- Success stories of businesses, freedom of information
- Supplementing state communication
Tasks for universities
- Gain freedom and status.
- Achieve full institutional autonomy.
- Work on increasing the prestige of science and education.
- Integrate into the European research field.
- Ensure academic mobility.
- Become hubs for international universities.
- Implement dual degree programmes.
- Restore real research.
- Facilitate technology transfer.
- Introduce academic entrepreneurship (start-ups).
- Create innovation parks.
- Be generators of ideas and trends.
- Open up to the world.
- Establish alumni and endowments.
- Facilitate collaboration between formal and informal education.
- Become brain centres and offer consultancy-expert services for other stakeholders.
- Initiate collaboration between universities and municipalities.
- Update teaching methods.
- Become centres of the intellectual elite.