The Ukrainian government expects the nation to jump 10 positions in the World Bank’s Doing Business Ranking in 2018, Maksym Nefyodov, first deputy minister of the economic development and trade of Ukraine, said during a press conference on May 30.
Nefyodov said Doing Business is not merely a ranking. Top 10 countries usually get 50 times more foreign direct investments than the last 10 states.
While it is now closer to the top 10 countries than the bottom 10 countries, Ukraine still has a big climb ahead of it.
Ukraine took 80th place among 190 countries in 2017, improving its 81st place showing in 2016. So even rising 10 positions in 2018, if it happens, won’t do a lot to make Ukraine a hot investment destination.
But progress is taking place in several areas. In the starting business index, Ukraine has improved four places to 20th place. In minority investors protection, it stands at 70th place, up 31 slots. In contract enforcement, Ukraine has moved into 81st place, up 12 places.
“The Doing Business ranking is one of the basic waymarks for investors when they decide in which country to invest money. This year we initiated an independent mission’s visit in Ukraine that studied the government’s reforms and their effect,” Nefyodov said.
As of April 2017, cumulative foreign direct investment in Ukraine stood at $38.5 billion since 1991 nationhood, the State Statistic Service has reported. It’s a paltry sum compared to most European nations.
Russia’s ongoing war against Ukraine in the eastern Donbas, Ukraine’s endemic corruption and its Soviet-style bureaucracy are cited as the main reasons why the business environment remains unhealthy for investors.
“World Bank experts didn’t come to Ukraine last year, so we were a little underrated in last years’ ranking. If the experts take all the changes into account, that would bring Ukraine up to 10 positions higher,” Nefyodov added.
The World Bank mission finished its work in Ukraine on May 31 and Ukrainian officials hope the experts will appreciate their efforts in trying to improve the business climate in Ukraine.
Oleksiy Honcharuk, the head of the Better Regulation Delivery Office of Ukraine said during the press conference on May 30 that in 2016–2017 the government has done a lot to improve the investment climate and the easy the doing business process in Ukraine.
According to him, the main improvements were: the penalty for government officials who refuse to accept documents without stamps, simplification of the land plots ownership registration process, and much more.
Less bureaucracy
Ukraine’s tangled, time- and money-consuming bureaucratic procedures have long been breeding grounds for corruption. Ukraine was a leader in the unflattering ranking of the most corrupt countries in the world for business in 2016 compiled by the international consulting agency Ernst&Young.
According to EY, 88 percent of the entrepreneurs who took part in its survey were confident that bribery and corruption are widely spread in Ukraine’s business circles, while 37 respondents were ready to pay bribes for signing or prolonging contracts.
The Better Regulation Delivery Office of Ukraine report on doing business in Ukraine in 2018, reads that the process of registering a new business was made quicker in 2016.
Now an entrepreneur can register his or her business online in one day, instead of the three days that was needed before.
The government also canceled obligatory stamps on the documents. From July 19, an entrepreneur is not obliged to have an official stamp to be considered a “real businessperson” in Ukraine.
“The cancellation of the stamps has destroyed one more bureaucratic procedure, saved one more day and Hr 200 for a businessperson,” said the report, published on May 30.
The unified social tax decreased to 22 percent (instead of 38 percent before).
Easier and more transparent
A good location is also important for a successful business. But when a person in Ukraine wants to start construction of a business center or a residential building, he firsts needs to find the owner of the land plot, then get the dozens of permits and undergo about six inspections by state agencies before building work can even start.
In 2016–2017, the government carried out the expert review and approval of a land plot unnecessary for notarization of a deal between partners. According to the ministry, that saves about ten 10 days and Hr 1,000 for business.
The notaries, who previously used to pay Hr 68 and wait for about 10 days to get a response from the land cadaster of Ukraine, in 2016 got free online access to the land ownership database.
“The information about the landowners is available online. Businesspeople are now obliged to disclose information about the deals that might involve a conflict of interest,” read the ministry’s report.
The government has created the special mechanism to help the entrepreneur legally challenge the actions of public register employees.
Construction permits
Ukraine is still at a low, 140th position in the getting construction permit ranking in the 2017 Doing Business ranking.
However, Lev Partskhaladze, the deputy minister of regional development, construction and housing and the utility sector of Ukraine told the Kyiv Post on June 2 that the government has made several major changes in the construction sector that will improve Ukraine’s performance.
A new bill on improving the conditions of the construction business, which entered into force on May 12, will make getting construction permits easier in Ukraine.
It cancels the procedure for getting the technical requirements of an object from the State Emergency Service of Ukraine for a second time after the construction project has already been approved by it, Partskhaladze said.
To make construction easier, the government made some changes in the legislation. In 2017 the equity contribution a construction company has to contribute to the city budget is to be lessened from 10 percent to two percent.
The ProZorro online system of public procurement has allowed there to be a 1.8 percent decrease in cost for businesses on quality technical control work during construction.
The construction project creator and quality control engineer are obliged to have a higher education.
The time an entrepreneur needs to get the technical documentation was decreased by 11 days, while the procedure of property registration was simplified and decreased in time by six days.
International trade
Ukraine is slowly but steadily moving forward in the international markets. In May, the Netherlands finally ratified the European Union Association Agreement with Ukraine. The treaty came into force in 2016 and allowed Ukraine to export goods to the European Union without paying customs tax.
Ukraine’s State Trade Representative Nataliya Mykolska has said on Facebook, that Ukraine’s export to EU increased by 28 percent in four months of 2017.
Ukraine hoped that the sale of the Odesa Portside Plant would create momentum for its drive to privatize 1,800 state-owned companies. Many of the companies cost the state money becaue they are badly run and fleeced from the inside by their managers and political patrons. However, the attempted sale of the Odesa Portside Plant failed to attract any bidders because it is so encumbered by debt.
On June 2, Canada’s General Governor David Johnston signed the Free Trade Agreement with Ukraine and with that opened up another market for Ukrainian producers.
In August, Ukraine will get the right to trade with Canada and export 98 types of goods tax-free.
Moreover, Ukraine’s Ministry of the Economic Development and Trade initiated changes to the list of dual-use items, decreasing their number, and as the result simplified the work of entrepreneurs. It is expected that this will improve Ukraine’s international trade performance, reads the ministry report published on its official website.
Small business
Oleksii Dorogan, the head of the rolling review of the Better Regulation Delivery Office of Ukraine, told the Kyiv Post on June 6 that the health of smaller businesses is the main indicator of a country’s investment climate. “If they feel confident, that means everybody will feel the same, Dorogan said.
“But while big business usually has money for good lawyers and advisers, small businesses usually feel lost in the market,” Dorogan added.
With the Economy Ministry, the Better Regulation Delivery Office has launched the ProPlatform, a free online resource, that would help new entrepreneurs to orient themselves in Ukraine’s changing business environment.
“After passing a small test, the business person would get step-by-step guidance on how to start and do business in Ukraine,” the expert explained.
“Progress in the (Doing Business) ranking can’t be a goal in itself. It is more like a marker of reform success in the country, that will help to bring foreign investment to Ukraine,” Honcharuk said during a press conference on May 30.
