Directions for the development of e-business in Ukraine in the context of the war with the Russian Federation

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Directions for the development of e-business in Ukraine in the context of the war with the Russian Federation

Kulyk Viktoriia, Doctor Candidate of Economic Sciences, Full Professor University of South Bohemia in Ceske Budejovice

Before the military invasion of Ukraine by the Russian Federation, Ukrainian business was developing rapidly. As a result of the hostilities, the industry's infrastructure was destroyed, logistics chains were severed, and a significant number of specialists fled Ukraine or joined the Armed Forces of Ukraine to defend the country. Nevertheless, in 2022, IT revenues as the main part of e-business grew by 7%, compared to annual growth of 20-30% in the pre-war period. The study examines the most important areas of e-business development in Ukraine through wartime in the context of such economic models as G2B (Government-to-Business), B2G (Business-to-Government), and B2E (Business-to- Employees). The findings of the study can be used to complement the strategy of Ukraine's economic recovery in the postwar period.

Key words: didgitalization, e-business, renovation, taxation, Ukraine.

Кулик В.А., Південночеський університет

До початку військового вторгнення в Україну з боку Російської Федерації український бізнес стрімко розвивався. Внаслідок бойових дій інфраструктура галузі була зруйнована, логістичні ланцюги розірвані, а значна кількість фахівців опинилася за межами України або захищає її у складі Збройних Сил України. Тим не менш, у 2022 році доходи ІТ-індустрії як основної' частини електронного бізнесу зросли на 7%, порівняно зі щорічним зростанням на 20-30% у довоєнний період. У дослідженні розглядаються найважливіші напрямки розвитку електронного бізнесу в Україні у воєнний час у контексті таких економічних моделей, як G2B (Government-to- Business), B2G (Business-to-Government) та B2E (Business-to-Employees). Метою дослідження є підтвердження або спростування трьох гіпотез. Перша гіпотеза ґрунтується на тому, що подальший розвиток електронного бізнесу в Україні та його функціонування в європейському економічному просторі вимагає готовності українського суспільства до цього. Друга гіпотеза пов'язана з твердженням, що відновлення економіки України та розвиток електронного бізнесу можливий лише за умови впровадження інформаційно-комунікаційних технологій в усі сектори економіки, в тому числі шляхом підвищення цифрової грамотності населення. Третя гіпотеза розглядає вплив держави на розвиток ринку праці в ІТ та, як наслідок, на розвиток електронного бізнесу в майбутньому.

Висновки щодо підтвердження чи непідтвердження визначених гіпотез були зроблені на основі аналізу результатів опитування. За результатами дослідження підтвердилася перша гіпотеза, оскільки було виявлено, що існують достатні передумови для успішної інтеграції українців у західне суспільство. Друга гіпотеза підтверджується тим, що рівень медіаграмотності більшості українців дозволяє їм бути активними споживачами товарів і послуг, які пропонують підприємства електронного бізнесу в Інтернеті. Третя гіпотеза вважається непідтвердженою. Результати дослідження можуть бути використані для доповнення стратегії повоєнної' економічної' відбудови України.

Ключові слова: діджиталізація, є-бізнес, реновація, оподаткування, Україна.

Setting problems

Electronic business (e-business) emerged in the second half of the twentieth century. Since then, it has been increasing its share constantly in the world economy. Every year the growth rate of e-business is accelerating. In the nearest future, every inhabitant of our planet will be directly or indirectly involved in e-business as an owner, co-owner, manager, employee, or consumer. The constant development and improvement of technology on a global scale, and the access to the number of goods and services that the inhabitants of the planet have now - make buying and selling online easier than ever before. More and more businesses are moving from the "physical" to the "virtual" world [2; 3].

According to preliminary estimates, an additional USD 13 billion will be added to global GDP by 2030 through the use of digitalization, automation, and artificial intelligence, as these technologies create new business opportunities and efficient product chains. In Ukraine, most IT companies are e-business enterprises, as almost all business processes arecarried out using information and communication technologies. Russia's large-scale military aggression in Ukraine has had severe consequences for the Ukrainian economy. As of the beginning of September 2022, the Ministry of Communities and Territories Development of Ukraine, together with the World Bank, has verified $326 billion in losses caused by Russia. In the first quarter of 2022, Ukraine's GDP decreased by 15.1% compared to the same period in 2021, in the second quarter of 2022, the National Bank of Ukraine estimates a drop in GDP at 39.3% compared to the same period of the previous year [1].

The industries most affected by the war were metallurgy, machine building, agriculture, and construction. At the same time, e-business enterprises adapted to new challenges much faster. According to the results of the 1st half of 2022, these enterprises showed an increase in the volume of activities and expanded the list of vacancies. To determine the reaction of Ukrainian businesses to the war, Forbes Ukraine conducted a survey among one hundred and fifty private Ukrainian companies and banks on key performance indicators for the first seven months of the war. They calculated a list of company resilience, taking into account such indicators as the number of employees, physical production volumes, taxes paid, network development dynamics, etc. The list of analyzed companies includes IT companies with more than 2500 employees, banks with assets of more than UAH 10 billion, and enterprises of other industries with estimated or actual revenue for the first half of 2022 exceeding UAH 2 billion. As a result of the survey, a rating of 30 companies that proved to be the most stable during the war period was determined.

Given the difficult economic situation in Ukraine due to the war and the ability of e-business enterprises to function and grow under uncertainty, the development of e-business can become one of the drivers of economic recovery in the post-war period.

Analysis of recent research and publications

The peculiarities of the creation and operation of e-business enterprises, their common and distinctive features with e-commerce, the impact on economic development in the international context and the global labor market are considered in D. Chaffey[2], J. Humphrey, R. Mansell, D. Pare, H. Schmitz[3], M. McConnell, B. Schninger [4], D. Rotman [5], V. D. Soni [6], P. Weill, M.R. Vitale [8].

Objectives of the article

The research is based on hypotheses: H1. The restoration of Ukraine will take place in the direction of its integration with Western civilization. H2. The restoration of Ukraine and its further development is possible only with the introduction of information and communication technologies in all spheres of the economy, including by increasing the digital literacy of the population. Reconstruction of the Ukrainian economy according to the previous ("resource") type is inefficient and will not have positive consequences. H3. Creating effective conditions at the state level for the development of e-business, including providing the labor market with IT specialists. This will allow realizing the ambitious goal of Ukraine "31 (from 3 to 1)", which means the transformation of Ukraine from a third-world country into a country with a strong economy through the use of modern knowledge and technology, bypassing the 2nd phase - industrial economy. The purpose of the study is to confirm or refute the given hypotheses.

Presenting main material

E-business is a business that uses information and communication technologies at all stages of economic activity. E-business includes buying and selling, inventory, customer service, payment transactions, product management and control, interaction with business partners and employees, search and hiring of new employees, etc. [8].

Depending on which participants are involved in the process of business communication and what issues are solved with its help, different models of e-business are distinguished. Parties to business communications can be enterprises (B), consumers (C), the state (G), and employees (E). Separate e-business models are digital platforms and e-services. In this study, we focused on such business models as G2B, B2B, and B2E. Within the framework of this study, an analysis of the current legislation of Ukraine regulating e-business in Ukraine was carried out. The analysis of the provisions of the current legislation of Ukraine, which are directly or indirectly related to e-business in Ukraine, allowed us to specify and systematize the results obtained and determine the ways of further transformations in Ukraine. Information on the performance of enterprises in Ukraine is currently not made public. Data on economic indicators were obtained from the official websites of state bodies (the Cabinet of Ministers of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Digital Transformation of Ukraine, the Ministry for Development of Economy, Trade, and Agriculture of Ukraine), analytical reports of social institutions (Kyiv School of Economics, Ukrainian Institute for the Future), specialized publications (Forbes Ukraine, AIN.Business, NV Business). A survey was conducted to determine the level of readiness of society for further transformations.

The data used in this study were obtained as a result of the survey. The questionnaire was composed using different types of questions that helped to determine the position of the respondent. Of the 85 questionnaires sent, 67 were filled out in full and were deemed to be usable for the study. Only adult citizens of Ukraine participated in the survey, regardless of gender, age, education, and current employment. The questionnaire offered for completion contained 15 closed questions, which can be divided into three blocks: 1) the first block defines the demographic characteristics of the respondents; 2) the questions of the second block are devoted to the experience of the consumer of goods and services of e-business enterprises; 3) the third block contains questions that help to determine the respondent's desire or unwillingness to work in the IT sphere. Data analysis was carried out using statistical methods and included survey data obtained from open official sources.

According to various estimates, Ukraine's GDP in 2022 will decrease by 35-50%, every second enterprise may be closed. Based on this, it is clear that in the coming years Ukraine will be a subsidized state, where the state will be the main investor for a certain period. The priorities set by the state will determine how long Ukraine will overcome the crisis. The main indicators of the Ukrainian economy for 2021-2023 are shown in Fig. 1.

The information in Fig. 1 shows that Ukraine is dependent on external borrowings, which allow the economy to function and reduce the need for additional emissions of national currency. Among other donor assistance that Ukraine received from partner countries was the Digital Europe project. To support Ukrainian businesses affected by the military aggression of the Russian Federation, the EU has assisted the possibility of Ukrainian companies' participation in the Digital Europe project in the amount of 7.5 billion euros in 2022-2027.

Figure 1. Macroeconomic indicators of Ukraine for 2021-2023 (forecast)

The priority areas to be funded by the EU are high-performance computing; artificial intelligence; data, cloud services and cybersecurity; digital skills; use of digital technologies in the economy and society. This funding will be aimed at accelerating economic recovery, shaping the digital transformation of European society and economy. Among the priority areas of the post-war recovery of Ukraine, we will name those that are directly or indirectly related to e-business: increasing exports of goods and services; attraction of private investments; state orders for e-business enterprises; combating unemployment and loss of specialists; growth of science intensity of the economy.

Most of Ukraine's e-business enterprises are IT companies. Before the war, Ukraine's IT industry grew by 25-30% annually and in 2021 it became a key category in the export of services: the share of IT in the export of all services was 37%. Ukraine was one of the largest exporters of IT services in Europe. In 2021, Ukraine exported $6.8 billion worth of IT products, which is $1.8 billion more than in 2020. In 2020, the IT industry generated twice as much export revenue as the gas transmission system and 1.5 times more than mechanical engineering. The main market for computer services from Ukraine is the United States (40% of exports). In second place is the United Kingdom (10% of IT exports). Until February 24, 2022, the IT industry was the most dynamic sector of the Ukrainian economy, with the number of employees growing by tens of thousands every year. At the beginning of 2022, 285 thousand of specialists worked in IT in Ukraine. During the year, the number of employees in the industry increased by 40 thousand people. In 2020, the IT industry paid UAH 17.2 billion in taxes and fees [7]. Currently, e-business in Ukraine needs support for further development. Let us consider potential directions of e-business development in Ukraine in the context of different business models (G2B, B2G, B2E).

G2В (Government-to-Business). The Law of Ukraine "On Stimulating the Development of the Digital Economy in Ukraine" was adopted to stimulate the development of the digital economy in Ukraine by creating favorable conditions for innovative business, building digital infrastructure, attracting investments, as well talented specialists. It regulates the creation of a special legal regime for IT companies in Diia. City. Diia.City residents can be companies that carry out their activities in the following areas: software development and testing, including the publication of computer games; publishing and distribution of software, including SaaS; e-sports; computer literacy training, programming, testing, and technical support of software; cybersecurity; R&D in the field of IT and telecom; digital marketing and ads using software developed with the participation of residents; supply of services related to the circulation of virtual assets; work with virtual assets; and other services.

Existing companies must meet the following conditions: average remuneration equivalent to EUR 1200; 90% of revenues from qualified activities; the number of employees/GIG specialists for the reporting period, not less than 9 people. Startups must meet the following conditions: the amount of annual income does not exceed UAH 7.5 million; 90% of income from qualified activities; registered not earlier than 24 months before the date of application for residence. According to the Ministry of Digital Transformation, as a result of the launch of Diia City, the IT market in Ukraine will grow from $6+ billion to $12 billion per year. By 2025, the number of jobs in the industry will increase to 450,000. This will have a positive impact on the economy as a whole, as well as on the development of related industries.

B2G (Business-to-Government). The war economy involves close interaction between businesses and the state. Ukrainian IT companies have confirmed their patriotism and professionalism through their actions. Ajax System specialists invested $200,000 in the Air Alert application, which is in general use and has been downloaded by 10.5 million Ukrainians. In addition, IT companies have developed software for the army on a paid and pro bono basis (Table 1).

Table 1 Software developed by Ukrainian IT companies for defense needs