Ukrainian businesses daily face numerous challenges, among which regulatory pressure is perhaps the most painful. The BRDO team, together with the Centre for Innovation Development, commissioned by the Ministry of Economy within the framework of the EU4Business: SME Policies and Institutions Support (SMEPIS) implemented by Ecorys in a consortium with GIZ, BRDO and Civitta with the financial support of the European Union, conducted a research to assess how existing regulations affect entrepreneurs and what changes are needed to create a comfortable business environment.
The survey involved representatives of 86% of the main sectors of the economy, such as construction, IT, agriculture, logistics, technical consulting, and others. According to the geographical distribution of business, 14.5% of respondents operate all over Ukraine, and 11% operate in Kyiv.
What are the main findings of the research?
- 70.8% of the surveyed entrepreneurs expect a greater effect from deregulation policy.
- Sole proprietors have to comply with an average of 76 state regulatory requirements, while legal entities have to comply with as many as 159. Many of these requirements are not related to the main business activity, but are mandatory.
- The weighted average cost of regulatory compliance can exceed UAH 1 million, depending on the size of the company. The largest costs are associated with the purchase of equipment to meet regulatory requirements, personnel certification, transportation costs, and administrative support.
- On average, up to 20% of the working time of one full-time employee is spent on regulatory compliance every month.
What are the main challenges and obstacles faced by businesses?
- Blocking of tax invoices – 49.6%.
- Delays in logistics at the border (queues at customs points) – 26.4%.
- Government officials’ abuse of regulatory norms – 24.9%.
- Unfair decisions during the tender procedure – 20.6%.
- Inspections of business by other authorities – 17.4%.
- Demanding a bribe from business by a representative of the authorities, municipal or state-owned enterprises – 14.2%.
Why is it important?
Deregulation is not only a simplification of procedures, but also a strategic step that will allow:
- Reduce financial and administrative pressure on business.
- Stimulate entrepreneurial activity.
- Increase investment attractiveness and create conditions for innovation.
The research showed that many regulations do not meet the current needs of business and significantly limit its potential, creating artificial barriers to growth and competition in the market. Reducing this regulatory pressure will not only facilitate the work of entrepreneurs, but will also boost economic development.
To view the presentation of the survey results, please follow the link.