President orders deregulatory measures
ee Tuesday aimed at deregulating the economy and eliminating bureaucratic obstacles to doing business that have stunted the country's development since independence.
The decree empowers a business development committee to limit government interference in the private sector and orders the simplification of customs and licensing procedures that have stymied foreign investors and domestic entrepreneurs alike.
'Deregulation is viewed as one of the main priorities in reforming the state's administration of the economy,' the decree said.
The committee, headed by former Economy Minister Yury Yekhanurov, is charged with controlling the activities of the approximately 30 government agencies that have the authority to check up on private businesses. 'These checks have killed the producers; they are so numerous that when one commission walks out, another one walks in,' said Yekhanurov.
On the same day, a law passed by Parliament went into effect which greatly simplifies the time and money required to register and license new businesses. The law, signed by President Kuchma and published in the newspaper Holos Ukrayiny, said new companies would have to collect only five documents in order to register. The law also reduced the number of types of companies requiring complex permits to 41, down from 112.
Previously, a business had to acquire permits from dozens of different ministries and agencies, a process which often took months and encouraged government workers to demand bribes.
'Technically, [once the five documents are obtained], this law allows for the complete registration of a new business in Kyiv in an hour,' said Yekhanurov.
The total cost of obtaining the five documents would be about Hr 200, Yekhanurov said.
Some businessmen were skeptical, however, that it would be that simple.
'I don't think that the situation will change so radically because the issue [that remains unsolved] is the mafia of lower officials,' said Vasyl Kostytsky, a Parliament deputy and head of a union of small businessmen. 'Small officials are the biggest threat to business,' said Kostytsky. 'I think it will make things easier but I seriously doubt things will change,' said a Western businessman, who asked not to be named. 'Having lived here for a number of years I know how things are done in Ukraine.'
Kuchma's decree orders the committee to review and revise the instructions given to government agencies, eliminating overlapping areas of responsibilities and reducing the size and scope of the government's regulatory apparatus. Pavlo Haidutsky, deputy chief of the presidential administration said the decree is aimed at overcoming 'the stagnation in the development of entrepreneurship, which has developed over the last few years.'
Small businesses in Ukraine currently account for less than 5 percent of the gross domestic product, and they have not significantly increased in number over the last three years, Haidutsky said.
The decree sets an important precedent for Ukraine by subordinating the work of government agencies to a control committee, said Andry Palyanytsya, one of the authors of the decree and an economist from the International Center for Policy Studies.
'Before it, everyone was doing what they wanted, and nobody controlled anybody,' he said.
The committee is also charged with previewing future legislation that has the potential to hinder businesses in Ukraine, Palyanytsya said.
'The minimum this decree should do is work as an effective filter,' he said.
The decree was announced days before an International Monetary Fund (IMF) mission is due to visit Ukraine to review its reform progress and possibly begin talks on a long-term, multi-billion dollar credit.
Parliament also gave preliminary approval last week to a draft law proposing a fixed monthly tax rate for small businesses ranging from Hr 20 to Hr 100, depending on the type of trade. Observers say that law would protect small, family-run businesses and independent retail traders from unnecessary hassles at the hands of tax authorities, who generally require such merchants to keep extremely detailed and time-consuming records of each transaction. American economist Jeffrey Sachs supported the idea of a fixed tax rate for small businesses as a temporary measure to bring enterprises out of the shadow economy. 'But I want to see it extended beyond small family business,' he said.
In the near future, the government is planning for Feb. 10 a seminar for entrepreneurs and officials to meet and discuss the next stages of reforms to aid business. (Information from Reuters was used in this report.)
