December 23, 2016

Reforms to improve business climate in 2016

It is not easy to follow the policy changes in Ukraine.We have asked Reanimation Package of Reforms (RPR) and EasyBusiness, two civil society organisations which follow the reform process closely, what they think are the most important steps taken to improve business climate in 2016 and what they want the government to do in 2017.

New policies are implemented at a fast pace. Ukraine has changed more over the past two years than in the preceding twenty five. Although many challanges are remaining, there has been progress in several areas, such as deregulation of business, anti-corruption, introduction of an electronic and more transparent procurement system and better governance of state own companies. Also in the juducial system, which has proven hard to change, has there been some improvements.

Reanimation Package of Reforms (RPR) and EasyBusiness, have given their view on what they think are the most important steps taken to improve business climate in 2016 and what they want the government to do in 2017. Both organisatons are actively involved in reforming the Ukranian economy. RPR is the largest coalition of non-governmental organisations and experts in Ukraine, which work to implement reforms. EasyBusiness is one of the leading experts on laws and regulations affecting business climate. They work with business and business associations to improve business climate in Ukraine.

Reanimation Package of Reforms
According to Reanimation Package of Reforms the government has taken several important steps towards improving conditions for businesses and a better investment climate. They highlight in particular the following three reforms/packages of laws:

1) Improvement of state control over business activity. The Ukrainian parliament has adopted a series of progressive laws on the reform of state supervision (control) over economic activity. These laws will reduce the opportunity for abuse of powers by supervisory authorities when controlling business activity, liberalize supervisory procedures and create conditions for greater trust between entrepreneurs and the state authorities. This package of laws is a necessary precondition to turn the inspection agencies from punitive into business-friendly ones. Introduction of the presumption of innocence of businesses, development of an integrated public database of checks, adoption of clear rules for applying the risk criteria when planning the checks, and other innovations will contribute to this if properly implemented. By limiting the number and the duration of inspections, businesses will save up to 0.5 billion UAH annually, without considering fines and bribes which they were forced to pay.

2. Simplification of the procedures for the export of services. The Ukrainian parliament has significantly simplified the procedures for export of services from Ukraine by adopting the so called Freelance Law. This was a long-awaited progressive step advocated by small and medium enterprises working with foreign partners. Due to the adoption of this law, banks will not require translation of contractual documents from English to Ukrainian and invoices (including electronically signed) will be accepted as documentation. According to RPR these changes will have a positive impact on Ukrainian service export, which constitute an important and growing part of the Ukrainian economy. Numbers from the State Statistics Service, shows that Ukrainian business exported services for the total amount of USD 9,7 billion in 2015.

3. Streamlining the procedure for connection to electrical grid. This year the National Regulatory Commission on Energy and Utilities adopted new legislation, which will standardize the procedure and price of connection to the electrical grid (under 5MWt). Issues with connections has been mentioned among the key problems for businesses in numerous of surveys. Unclear duration of connection, complicated procedures and opaque prices have created a lot of space for corruption and manipulations.

RPR has made an overview over the reform aschievments since the Maidan Revolution in 2014. This can be found here.

Among the key priorities RPR want to see for 2017, or their New Year wishes, are the following:

1. Improving the corporate governance of limited liability companies and other issues connected to corporate governance and minority protection
2. Improving the institute of avoiding bankruptcy and restoring solvency
3. Resolving the issues with construction permits, procedures and requirements

According to EasyBusiness some of the key successes which influence the quality of doing business in 2016 in Ukraine are:

1. Judicial overhaul: this summer the Ukrainian Parliament ,Verkhovna Rada, adopted long-awaited changes to the Constitution, which foresee cleansing of the judiciary, creation of new specialised courts, partial waiver of judicial immunity, and reformation of the court system. Such changes should ensure more impartial and independent judicial decision-making. It will take time to improve the whole judicial system, but it’s a promising start. Judicial reform is fundamental, because other new laws do not make sense if they cannot be enforced.

2. Introducing a electronic public procurement system: In 2016 Ukraine became one of the world leaders in reforming their public procurement system. They launched a new system of electronic public procurement in 2015 (called “Prozorro“). In 2016 the system beacme mandatory  to use for all state procurements.  Prozorro won an award for being one of the best procurement systems in the world in 2016. It has helped to get rid of the old corrupted schemes and opened the door for new companies to participate in transparent public procurements.

3. The Government are going online: This year the Ministry of Justice and the Ministry of Economic Development and Trade tried to simplify business administration and made some services online. The Ministry of Economy has launched a new portal for administrative services – iGov, developed by volunteers and community activists. Using the portal, citizens have easy access to more than 200 services. The Ministry of Justice has made almost all services related to registration of business entity online.

Easy Business’ wishes for next year are:

1.  More transparent privatisation process
2. Bolder energy reforms aimed to liberalize the energy market and get rid of the monopolistic companies
3. Liberalisation of the land use (steps to cancel moratorium for the sale of agricultural land)

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