On Feb. 12, the Verkhovna Rada adopted a bill - known as the “deregulation bill” - aimed at making it easier to do business in Ukraine. Pavlo Petrenko, Ukraine’s justice minister, said President Petro Poroshenko favors the changes. Petrenko expects the law will come into effect in April.
“The reform of the administrative services will help Ukraine to improve its stance in the ease of doing business rating of the World Bank, in particular in the categories of starting business and registering property,” Petrenko said.
Currently, Ukraine’s rankings in those two categories are 69 and 88, respectively. Overall, in 2014 Ukraine was ranked 112 out of 189 economies.
The Economic Ministry declared earlier that the “implementation of this law will mean savings of Hr 40-60 billion by 2020.”
Businesses will be able to reduce their expenses related to the preparation of documents by as much as Hr 100 billion, while unofficial payments will be at least Hr 150-250 billion less.
“The deregulation law significantly decreases the regulatory burden in a number of directions,” says Andrew Zablotsky, a legal expert at the Sayenko Kharenko law firm. “It abolishes 16 certificates, conclusions, and other forms of state regulation, which definitely will allow businesses to reduce their costs and diminish the corruption component.”
However, Olga Belyakova of the CMS Cameron McKenna law firm says that it’s too early to be euphoric. “It is true that the number of licenses decreased,” she says. “However, in many sectors they were not the main obstacles for business.”
Oleg Matiusha, legal expert at DLA Piper Ukraine, believes the measures taken by the law are too superficial. “In practice, state and local authorities often deliberately make mistakes in adopting decisions,” he says.
Moreover, some experts believe that the title of the bill does not exactly convey its essence. “Deregulation usually implies less interference by public offices into legal business activities, which is not a case in the current situation,” Matiusha says.
“The law indeed comprises certain positive changes,” he adds. “Meanwhile, in general it focuses on the elimination of unnecessary duplication of powers between the state and local authorities.”
Additionally, the bill provides significant changes in agricultural regulation. According to Zablotsky of Sayenko Kharenko, “it stimulates the rational use of agricultural land and the facilitation of land-lease issues.”
The law sets a seven-year minimum duration for agricultural land lease. On the one hand, it stimulates investment. But on the other, the measure is not technically a deregulation, and not all agricultural enterprises are interested in a lease for such a term.
“However, with the adoption of the bill they will be obliged to conclude agreements for seven years, even if it is not beneficial for them from a commercial perspective,” DLA Piper’s Matiusha says.
Moreover, these measures are unlikely to boost the real estate market, as it needs more than technical improvements.
“The real estate market lacks financing,” Matiusha says. “The simplification of the procedure of assignment of rights over state and community land and public access to the cadastral register can change the situation crucially. However, the bill is silent on the matter.”
Experts agree that reforms should be more aggressive and comprehensive if Ukraine wants to revive its economy.
While Belyakova of CMS Cameron McKenna agrees that the ideas and motivation behind the deregulation law are strong, it will take time to adjust the whole regulatory environment. “The implementation of these changes is necessary for every citizen. It is not the International Monetary Fund who needs them.”
