The Concept for reforming secondary education in Ukraine provides for the introduction of a modern educational environment, but technical and regulatory barriers hamper the process. In particular, this is a lack of proper access of educational institutions to the Internet.
Starting July 1, a new electricity market should start working. This can trigger uncontrolled price increases actually leaving consumers without electricity. Soon, the newly elected president will take the oath of office. And in a month, he will face with a serious “challenge”.
(more…)
News about the demolition of illegal constructions initiated in Lviv have given rise to many disputes. The demolition of illegal Lviv “buildings” is the first serious precedent in Ukraine. The local authorities in Kyiv, which is not only a leader in construction, but also a leader in illegal construction, should take a closer look at this case.
Ukraine has officially launched a process of opening the market of pork exports to the EU. This procedure will not be quick and may take several years due to high requirements and standards for exporting countries. (more…)
Broadband Internet access (BBA) is needed to build a modern economy. At the same time, there is one issue related to infrastructure access that has been hindering the development of fixed BBA in Ukraine for many years. BRDO IT&Telecom experts have developed 7 of 10 regulatory acts necessary to ensure free access of operators and providers to infrastructural facilities and implement the Law No.1834-VIII adopted two years ago. (more…)
One of the world’s most popular tools for analyzing the economy is the construction of new housing. In the United States, there is even a special index recording the number of permits for new construction granted by the Government for 50 consecutive years. In February 2019, they granted 1.3 million of such permits.
We cannot even dream about this. And not only because Ukraine is much smaller. The problem is different. It is the state’s ability to start such a construction. Our statistics on granting construction permits showing that each other investor who is a real estate developer has their request denied just confirms this fact.
For example, in the last few months of last year, 554 document packages were submitted to the State Architectural and Construction Inspection as the agency dealing with permitting procedures for the beginning of construction. However, only 51% (that is 282 projects) obtained permits. For some reason, 72 applications were withdrawn by applicants themselves, and 200 documents were refused.
Residential construction projects obtained the largest number of refusals (75 refusals). Permits for construction of 52 fuel filling stations and gas filling stations were also refused. Another 40 permits were not granted for industrial and commercial construction projects. Kyiv and Lviv regions are the leading regions according to the refusal statistics (58 and 23 respectively). They are closely followed by Kyiv with 20 refused applications.
And we have these statistics despite the simplification of a number of procedures related to construction works, including granting permits. That is, in most cases, an honest investor cannot obtain a permit without going through all “circles of bureaucratic hell” despite the nominal simplification of procedures. But as a rule, “trouble-shooters and related persons” get permits very quickly. That’s why it’s difficult to build a facility for IKEA in Ukraine, but you can build a “monster on the Podil” with no hassles.
The procedure for granting construction permits is in fact not easy for all parties, but it is the most difficult for investors. Its cost, duration and simplicity affects any serious investment project. It is necessary to build or reconstruct for any facility. Investor expenses can reach 10-15% of the total construction project cost before construction works, and this is only official expenses, which increase multi-fold when dealing with Ukrainian licensing realities due to non-official (in other words, corrupt) “incentives and thanks”.
Additionally, when waiting for obtaining a permit, investors should pay employees and spend their money on filing documents exclusively in Kyiv, because large projects usually imply the construction of high consequence class facilities (CC3), construction permits for which are granted only by the State Architectural and Construction Inspection (DABI) in the capital.
But, it’s not even clear that an investor will receive a permit even having a package of necessary documents. In our country, the procedure for obtaining permits is carried out in such a way that in most cases, there is a subjective factor to grant or refuse involving “manual” influence on decision making.
We analyzed the refusal statistics in obtaining construction permits, in particular, to build high consequence class facilities, and found a number of patterns and, in fact, sad statistics.
In general, all refusals received a total of 1,780 comments, almost half of which (880) were for documents to obtain a residential construction permit. 92.5% of applications received a conclusion on a lack of project documentation, and 65% – on non-compliance with the DSTU “Basic requirements for design and working documents”.
The most numerous comments also include the conclusion on a lack of output data (37.5%), improperly issued or no expert opinion (28.5%), applications that do not meet the required format (24%), etc. Also, 1 residential complex project received comments about the non-compliance of a helicopter landing site on the roof with the requirements.
In addition to statistical observations, our expert analysis of refusals to grant construction permits included practical communication with investors. Sometimes, formal comments such as “design documents do not meet the requirements” are based on the banal absence of the facility address in the project name (although the address is specified separately in the next line of the same document).
But, the cherry on the cake was the fact that all investors, whether they are from any region or from another country, should personally submit documents to the DABI, that is to go to Kyiv. Therefore, any clarifications and updates mean significant time and financial costs.
A special attention should be paid to the comments on project documents. In fact, in accordance with the procedure, all packages of documentation are examined and received some conclusions before being submitted. Conclusions on the project compliance are provided by an expert organization accredited by the state (or rather, by the Ministry of Regional Development). That is, the ministry as a representative of state interests confirms the qualification of this organization and authorizes it to provide expert conclusions.
The cost of such expertise is high. Therefore, most investors who are real estate developers hope that this expertise is a certain guarantee of obtaining a positive expert opinion. However, 1,780 comments and 36% of refusals show a different picture. They show the ineffectiveness of the procedure, under which investors do not have any guarantee on the quality of project documents despite the paid expertise. And this is just one example.
Business owners are increasingly rejecting business trips and travels. Video and Skype conferences are a new practice no more. Electronic document circulation not only saves hundreds of hectares of forests and reduces the amount of garbage. It saves time and money. And the circulation of open data increases the effectiveness of control over the activities of state bodies. And electronic administrative services remove the element of direct interaction between a business and an official, significantly reducing corruption risks.
It is a pity that this is not available for granting permits procedures yet. But a highly publicized “Transparent DABI” does not have the necessary functionality being just a fake. We had a chance to learn this through our own experience of working with investors.
That is why BRDO experts together with the Ministry of Regional Development developed a concept of a unified information system in construction activities providing for the creation of an information complex that will unite many unrelated stages and procedures within a single information environment. The relevant working group is already working at the Ministry of Regional Development. The experts finish the development of amendments to the draft law on the introduction of a Register of construction documents, electronic personal accounts of back and front offices, a portal for obtaining open information about the construction industry in general and its licensing system in particular. It is the first time when we got a chance to create a system in construction that will become a real tool for effective interaction.
For example, it is planned to implement the interaction between the expert organization and construction owners within a single information space. And then the expertise process has all the chances to become not a formal line in a cost sheet, but a real tool to prepare for construction works. And this is just the beginning.
I hope that the introduction of such a system will allow to avoid tripping investors up, and we will be able to engage in competition in terms of the number of construction permits granted. Even not with American ratings, but with our previous statistics.
Olena Shuliak, the BRDO Board Member and Construction Sector Head
Source: Livy Bereg
The Guide of the International Federation of Consulting Engineers (FIDIC) is a practical guidance for construction industry specialists to develop and implement investment projects. It was prepared by the Interstate Consultants Engineers Guild together with a group of experts.
BRDO, with the support of the Union of Ukrainian Entrepreneurs, is starting to collect data to form a rating of ease of doing business in regions – Regional Doing Business 2019.
This year’s rating will be the third study defining whether the five most demanding business procedures are carried out in a friendly manner. (more…)
Oleksiy Honcharuk participated in the presentation of the program and speakers of the International Economic Humanitarian Forum Ukrainian ID and told what the BRDO Office would present at the event on June 7-8.
“Over the past 2-3 years, much has been done to help the state of Ukraine become more conscious and more friendly to businesses. Of course, we are still on the way, but there is something to boast about. During the forum, we will talk about new opportunities available to businesses and show why in 2020, it will be more comfortable for entrepreneurs to create a business in Ukraine than now.
At the UKRAINIAN ID Forum, we will present the first cluster of step-by-step online business startup instructions that we develop on the Start Business Challenge platform. It will be a tourist cluster that includes about 30 types of business – from a sightseeing tour agency to bicycle rentals. After all, Kaniv, where the forum will be held, and other Ukrainian cities have the huge tourist potential, and we only need to start working with it. And the first step should be taken towards the business support.
I believe that the Ukraine civilization project has a great future, and what it will be depends on each of us. For this purpose, we need to join our efforts, and joining efforts begins with communication and interaction. This is our goal during the forum,” the BRDO Head said.
The International Economic and Humanitarian Forum Ukrainian ID will be held in Kaniv on June 7-8. Oleksiy Honcharuk will participate in the panel discussion “Economy ID: The Newest Concept of Ukraine’s Economic Development”.
You can register to take part in the Forum at https://ukr-id.com/uk/registration/
The health care reform implementation involves changing the system of access to the medical profession and introducing fundamentally new rules along with regulatory control.
On April 11, the first public consultation on the introduction of licensing of doctors was held in Kyiv. More than 40 doctors, representatives of professional associations and administrators of health care facilities participated in the discussion. Such an honest discussion of changes proposed for implementation was positively received by the professional community.
In June 2018, the Ministry of Health of Ukraine proposed a draft Concept of professional licensing of doctors in Ukraine for public discussion. The proposed solutions involve replacing subjective and bureaucratic components of professional certification of doctors with a transparent licensing system. Instead of numerous corruption risks and abuses of administrative resources, there should be a clear and simple system based on compliance with the requirements for continuous professional development, good medical practice standards and patient rights.
Public consultation participants supported the proposal that the principles of access to the medical profession should be established at the legislative level. The selection of a Licensing Board as a body that will decide to grant, extend or revoke licenses, was extensively discussed.
Proposals and comments on key issues related to the introduction of professional licensing of doctors received during public consultations will be taken into account when drafting the relevant law.
The next public consultation will be held in Lviv on April 23. It is also planned to hold consultations in Uzhhorod, Rivne, Vinnytsia, Sumy, Kharkiv, Dnipro, Cherkassy and Odessa. Physicians from all villages, settlements, cities and communities of Ukraine can participate in discussions.
More detailed information on consultations is available at https://bit.ly/2WRH6gz
Public consultations are conducted by the Ministry of Health of Ukraine together with the Better Regulation Delivery Office with the assistance of the NDI Ukraine and the Institute “Respublica” and supported by the Government of the United Kingdom and the Good Governance Fund (GGF).
The Regional Doing Business 2019 preparation process officially started. And we would like to share the best last year’s practices, which we strongly recommend to use in the cities, to start with no hassles!
So, one of the rating components is electronic services that measure whether the regions keep up with developments and provide their services to businesses online.
And here, the overall situation for the country is deplorable. Most cities didn’t even understand that in the digital era, working through the usual channels of interaction with entrepreneurs is a waste of time for both parties.
However, there are good exceptions. One of them is a ‘Lviv citizen’s personal account’, which user-friendly interface and volume of electronic services are impressive. https://egov.city-adm.lviv.ua/sts/login.aspx?ReturnUrl=%2fsts%2f
An Ivano-Frankivsk CNAP’s e-services portal http://www.cnap.if.ua/einfo and a Vinnytsya transparent office http://transparent.vmr.gov.ua/default.aspx are somewhat less advanced, but also very good
Dnipro and Khmelnytsky did not spend money on the development of their own individual portals and chose the portal i.gov to host their e-services, and this is also acceptable.
While there are so impressive regional leaders, a Kyiv citizen’s personal account at https://my.kyivcity.gov.ua is a real come-down. This portal was the only one that required to read special instructions to use it. In addition, the only possible way of identification was a Kyiv citizen’s card, which not every Kyiv citizen has. Not to mention potential investors who could develop their businesses in the capital.
This year, Kharkiv with its https://e-kharkiv.org/ and https://dozvil.kh.ua portals should be mentioned among the newcomers, which can offer competition for last year’s leaders. The functionality of these resources for the business audience is still very limited, but that’s a good start.
500 commitments, 17 section and 77 pages. This forms an agreement on the coalition of deputy factions “European Ukraine” that was signed by the Verkhovna Rada in 2014. This was a historic moment as the Verkhovna Rada entered into a series of commitments for the first time in the history of independent Ukraine.
What has changed over these five years? What progress has Ukraine made in the declared reforms? Has the situation for businesses improved because of deregulation processes?
We assessed the conformity of positions specified in the Agreement, since more than 90% of the term of the current Parliament has expired, and there is a small chance that most of draft laws, including those we initiated, will be adopted, so we should revise a number of positions.
So, when analyzing the agreement, in addition to the obvious “yes” and “no” marks, we also used the “partially” and “in process” marks. “Yes” means the full compliance of the obligation at least by the Parliament itself (if the paragraph does not include the implementation).
“No” means non-fulfillment and no promising attempts (for example, revoked draft laws).
“Partially” means that only one of several paragraph components is performed or only for a certain number of cases.
“In process” means that the work is really progressing (there is a draft law included in the current session agenda).
In general, more than half of paragraphs were fully implemented (mainly) or at least partially. Almost one fifth of paragraphs are in the process of implementation, so some of them still have chances. Finally, a little more than a quarter of paragraphs were not implemented at all (and they are unlikely to be implemented by the end of the current parliamentary session).
In such a way, TOP-10 “victories” are:
| Scope | Obligation |
| Regime renewal and anti-corruption reform | Establishing the National Anti-Corruption Bureau of Ukraine (NABU) |
| Introducing Open Data Standards | |
| Decentralization | Providing proper resourcing of local self-government |
| Public Administration Reform | Introducing a public e-procurement system (Prozorro) |
| Modernization of the privatization mechanism | |
| Improving the corporate governance in state-owned enterprises | |
| Financial Sector Reform | Liberalization of currency regulation and currency control |
| Energy Reform and Energy Independence | Separating natural gas transportation and distribution from other types of activities |
| Changing the functioning of the electricity market | |
| Health Care System Reform | Ensuring the implementation of the principle of patients’ free choice of physician |
However, the situation is even more complicated. Only two of the top-level legislative innovations are implemented more or less properly. It is “Prosorzo” and open data initiatives. The implementation of the NABU activity, privatization, corporate governance in state-owned enterprises and “Naftogaz” unbundling is slowed down. The medical reform has been carried just recently and is not yet fully operational. The currency liberalization took effect not so long ago, and the launch of a new model of the electricity market is still ahead.
The attempt to improve the business environment in Ukraine at the legislative level (according to the Doing Business rating) also failed.
TOP-10 “betrayals”
| Scope | Obligation |
| Electoral Legislation Reform | Introducing a proportional electoral system of elections to the Verkhovna Rada (majority-vote component cancellation) |
| Decentralization | Providing local government bodies with a basic level of real authorities |
| Regulatory Policy | Improving the business environment in Ukraine (according to the Doing Business rating) |
| Adopting a new Labor Code | |
| Financial Sector Reform | Strengthening the quality of the financial sector regulation to ensure more balanced consolidated prudential control |
| Agriculture Reform | Completion of agricultural land inventory and demarcation (preparation for the moratorium cancellation) |
| Energy Reform and Energy Independence | Codification of subsoil use regulatory framework |
| Infrastructure and Transport | Separating the railway infrastructure and locomotives from transportation (Ukrzaliznytsia unbundling) |
| Environmental Management Reform | Implementing the ‘polluters pays’ principle and increased producer responsibility |
| National Security System Reform | Amended Law “On Security Service of Ukraine” |
Source: Economichna Pravda
Officials should not allocate subsoil resources. There is an easier and more efficient tool – an auction.
In early March, the Derzhgeonadra (State Service of Geology and Subsoil) held first electronic oil and gas field auctions in the ProZorro.Sale system.
We could call this a milestone event.
In 2013-2017, auctions were legally defined as the main tool to sell subsoil use rights, but 84% of land plots were allocated without auctions.
In 2018, the first auctions were held in the fall. The government set a number of limitations in subordinate acts. This led to the fact that most of permits were sold through tenders and production sharing agreements in a non-transparent way.
The greatest advantage of auctions is that the market received a signal about the launch of a procedure that provides fait subsoil access for all participants in the process.
It was a signal for investors that the rules would likely continue to be respected. The Derzhgeonadra has already announced the following electronic auctions: it will sell another 16 oil and gas zones in May and June.
In addition to the transparency of the process, auctions also demonstrated their economic benefits. The aggregate price of subsoil areas sold is three times higher than the starting price. 140 million hryvnias is a small amount at the national level, but such an increase is a very significant fact.
In addition, auctions are applied in economic practice not only to obtain the maximum amount of money, but also to find out the real asset value.
If we continue this practice, we will have the market in the future and understand the real value of mineral rights in Ukraine. Investors will have guidelines for making decisions on how to engage in mineral production.
When the assets are sold at a price determined by some official, it is absolutely senseless to plan something. The starting lot price is now determined by some kind of monstrous formula. Its main problem is the unjustified complexity.
It implies not only the need to assess mineral reserves in the depth of the area being evaluated. It is still possible to make this resource assessment, although there are high manipulation risks both in terms of price increase and lowering.
The need to calculate how much profit a company will get during its licensing period is the cherry on top. The economic analysis geniuses from the Derzhgeonadra try to calculate the profitability of this business for 20 years ahead and include 2% of that profit into the lot price. It is science fiction in the Ukrainian reality.
Having analyzed the effectiveness of this tool, the experts of the Better Regulation Delivery Office concluded that it would be more reasonable to set the token starting price of lots of 1 UAH for further auctioning.
Of course, it is subject to a certain warranty payment, for example, 1 million hryvnias, which a winner will lose if they do not want to pay for the purchased asset.
If an auction is properly organized (informing potential participants in advance, open and easy auction registration), market participants will raise the lot price from this 1 hryvnia to the market price anyway.
The second option is to choose another objective criterion for lot assessment, for example, the plot area. A land plot is easier to estimate, and the received value can be adjusted for the multiplying coefficient, for example, by being multiplied by ten.
This will significantly reduce the time and cost to determine the starting price. If the auctioned starting lot price is less, the percentage of successful sales and interest will be higher.
Of course, this is not the only problem. The fact that buyers participated only in three of ten land plot auctions is a negative signal. It also points to the quality of the assets offered to the market. There is a suspicion that they will try to allocate the most desirable land plots by using old schemes through some tenders with specific criteria.
Selling subsoil use rights through tenders is a normal world practice, but only countries with a developed market and strong public institutions can afford it. When the market is only being developed, applying any criteria other than the price is associated with additional corruption risks.
Currently, the government is planning to sell another 12 land plots under a production sharing agreement (PSA). This is a non-transparent procedure that was discredited.
The experience of selling land plots under the PSA scheme to Shell and Chevron companies showed that both agreements contained a corrupt component at the level of 10% of the transaction amount (the SPK-Heoservis company, which was associated with Eduard Stavytsky, was involved in both projects). In fact, these tenders are a threat to return to the old regime.
In order to eliminate the possibility of a corrupt component, the BRDO Office proposes to define clear criteria when land plots are put up for a tender instead of an auction on an exceptional basis. This does not require legislative intervention. Only the political will of the Cabinet of Ministers will be enough to make the market more transparent.
The BRDO Office sees two criteria, by which an asset can be sold through a tender. The first one is if a land plot was not sold at electronic auctions for three times. The second criterion is as an exception when it comes to extraction of mineral resources in inaccessible areas by using unique technologies or as offers for strategic investors.
There are another two aspects that should be resolved.
The first one is the unpredictability of auctions frequency. The Derzhgeonadra should develop a schedule of auctions. Its lack complicates the monitoring of the market of subsoil use rights for potential participants and reduces their interest in the process.
The second aspect is the need to remove the barriers to foreign investors’ participation. Today, gas companies should have a registered company in Ukraine to participate in auctions. We propose to replace this rule with the auction winner right to create a legal entity in Ukraine in two months after the auction is over.
When the market is only emerging, it is necessary to use simple and effective subsoil allocation tools. We should achieve the ideal model when the Derzhgeonadra concentrates on the geological component being removed from the allocation process, and the assets are allocated externally through auctions.
The state receives an economic effect in the form of increased mineral production and budget revenues, and businesses will have transparent and clear production license terms.
On April 4, the Ministry of Economic Development launched an official web portal for international technical assistance (ITA) coordination (ProAID) in Ukraine. The web resource contains full and updated information on current international assistance projects in Ukraine, their goals, donors and implementation status. (more…)
On March 27, 2019, the Government approved a number of decisions for business developed by the BRDO Office with the support of the MEDT, the Ministry of Justice, the Ministry of Regional Development and business associations. (more…)