The inspection system in Ukraine is transforming towards a risk-oriented approach. From now on, inspection bodies should focus on a transparent assessment of business entities and risk prevention, while business owners will be aware of when and why they are inspected.
As of today, an integrated portal inspections.gov.ua with a number of instruments for transparent and predictable online state-business interaction has already been launched. 26 of 33 inspection agencies have already joined the portal and published information about their inspections. As of October 2018, almost 250 thousand plans and about 48 thousand results of inspections have been published in this single system. New risk criteria are in the process of approval, and this will allow to plan control measures in a more effective way.
On October 17, the Better Regulation Delivery Office (BRDO) with the support of the EU4Business/FORBIZ initiative presented the first reform results and further steps of its implementation at the Inspection Forum #PEREVIROK.NET, which takes place in Kyiv as part of the European Entrepreneurship Week.
“The Government approved a number of decisions needed to launch a new risk management system. Transformation is inevitable, and most regulatory bodies have already understood that. Our goal is to fully implement the risk-oriented system of inspections starting from the beginning of 2019. Therefore, I insist that all inspection bodies should approve the risk criteria in their areas and joined the single portal of inspections by the end of this year,” the Prime Minister of Ukraine Volodymyr Hroisman said, opening the event.
The EU Ambassador to Ukraine, Head of the EU Delegation to Ukraine Hugues Mingarelli stressed the importance of developing a transparent inspection system for further implementation of reforms in Ukraine. “The institutional capacity, including a transparent, effective control system, is a basic component of a favorable business climate. Business is developing when there are clear and predictable rules in the market. In this case, entrepreneurs can better plan their activities, achieve better results, enter international markets and contribute to the development of the country’s economy as a whole,” he said.
In the spring, the Government approved a new risk management methodology, and the task of inspections is to identify a list of hazards for each area of control and develop a combination of criteria for identifying risks and planning inspections efficiently. For the present, the most progress was made by regulatory bodies responsible for fire and technological safety, security activities and tourism.
“The new system should be aimed at risk management, rather than mindless documentation of violations identified today in 99% of inspections. We create the integrated BigData portal with a whole array of data and the possibility of their qualitative analysis. Businesses should have clear and comprehensive information about inspection requirements and the possibility to reduce the risks of their activities. This will significantly reduce opportunities for abuse and make the system more effective and predictable,” the BRDO Head Oleksiy Honcharuk said.
This will allow to rate business entities and facilities in terms of risk points in each area in order to focus on the prevention of hazards for the most risky ones.
Another important task of the new inspection system is a tax payer-oriented approach. With this in view, there will be a “Risk management web room” with a number of instruments on the Inspection Portal:
– calendar of scheduled inspections;
– history of inspections conducted and their results;
– full check-lists – the requirements for entrepreneurs providing self-control possibilities for each potential hazard;
– functionality allowing to assess the quality of inspectors’ work, which will become the basis for the rating of inspections;
– functionality allowing to indicate that some requirements are burdensome and hinder the work. This will be the basis for their review to reduce the regulatory burden on businesses.
The event was also attended by Kseniya Lyapina, Head of the State Regulatory Service, Maksym Nefyodov, First Deputy Minister of Economic Development and Trade of Ukraine, Oleksiy Kudryavtsev, Head of the State Architectural and Construction Inspectorate, Volodymyr Lapa, Head of the State Food Safety and Consumer Protection Service, Roman Chernega, Head of the State Labor Service, Oleksandr Vlasov, Acting Head of the State Fiscal Service, Kateryna Hlazkova, Executive Director of the Union of Ukrainian Entrepreneurs, Anna Derevyanko, Executive Director of the European Business Association, Tetyana Prokopchuk, Vice President at American Chamber of Commerce as well as numerous business representatives and members of the public.
The Inspection Portal instruments are available in the test mode at www.inspections.gov.ua. They will be fully available for use from January 1, 2019. For this purpose, inspection agencies should approve new forms of inspection acts and publish the information on inspections by the end of this year. In November, the Ministry of Economic Development and Trade of Ukraine supported by USAID / UK aid project “Transparency and Accountability in Public Administration and Services / TAPAS” will begin working on upgrades to the Inspection Portal.
These are the results of the “Regional Doing Business. 2018” rating, prepared by the Better Regulation Delivery Office (BRDO) and the Union of Ukrainian Entrepreneurs (SUP) for the second time.
The leaders got the following number of points: Vinnytsya region – 334 points, followed closely by the Frankivsk region – 332 points. The Zhytomyr region ranked third – 313 points.
The regions were assessed using the adapted World Bank’s methodology based on a survey of domestic entrepreneurs. The research was focused on 6 areas of interaction between entrepreneurs and the government, namely: starting a business; paying local taxes; obtaining construction permits; registering a land plot for real estate purposes; connecting to electricity networks and the quality of electronic services. The maximum amount of points that regions could get was 600.
“Honestly speaking, when we presented our first rating a year ago and made recommendations to local authorities regarding improving the conditions for starting and doing business, we did not really believe in progress. But there is one. The Vinnytsya region achieved the greatest progress overall. The Zhytomyr region ranks the first in terms of starting a business, and now it can motivate entrepreneurs to move to them and set up a business there. The Chernihiv region is ready to compete for construction facilities and has progress in land allocation. In turn, Kharkiv and Donetsk regions are the most friendly to business regions in terms of paying taxes,” the Deputy Head of BRDO Denis Malyuska said.
According to Denis Malyuska, this year a new component was also added – electronic services that turned out to be the most interesting and unexpected. When assessing them, we found out three types of behavior of regions.
“The first one is the most popular. It is not to notice the Internet and not to provide own services over the Internet. This is common even for such large cities as Odessa or Kharkiv. The second type is to use the nationwide system of electronic services. That’s how Dnipro and Khmelnytsky that joined the iGov did. The third type of behavior is to reinvent the wheel, that is own services. And here someone succeeded, for example, Lviv with its “Lviv citizen’s personal account” or Ivano-Frankivsk with its CNAP website (center for providing administrative services), while someone was not so successful – “Personal account of the Vinnytsya transparent office” is not so convenient-to-use as the mentioned above. And the personal account at the Kyiv web portal of administrative services was the only one that required to read the instructions to work there, but still these instructions didn’t help to use any of the requested services without a Kyiv citizen’s card,” the BRDO expert said.
“The main SUP’s objectives are to improve the business climate in Ukraine and deregulation. We hope that this year’s Regional Doing Business results will also have a positive impact on creating a comfortable business environment and attracting investments, which are so necessary for Ukraine,” the SUP’s Executive Director Kateryna Hlazkova added.
“In spite of the positive dynamics, Ukrainian regions have two global problems, and unfortunately, the situation is not changed. The first one is to connect to electricity networks. By this criterion, Ukraine ranks 128th in the world. This situation worsened in all regions over the last year. And the second problem is a share participation component that has become corrupt while being a kind of “stopping point” for investments in construction, especially for foreign investors,” the head of the BRDO Construction sector and SUP’s Vice President Olena Shulyal said.
“We compared leaders in the rating with other cities in the world, which are the leaders of the World Bank’s global DOING BUSINESS rating. That’s unexpected, but true for some components. For example, to obtain a construction permit in Zagreb (Croatia), it will take 146 days, in Almaty (Kazakhstan) – 123 days and in Chernihiv – only 67 days. You can start a business in Kosice (Slovakia) in 19.5 days, in Brazil (Portugal) – in 6.5 days and in Zhytomyr – in 7 days. We hope this trend will continue and we are glad to be involved in these changes,” the EU4Business|FORBIZ senior expert Joshua Badakh added.
Key recommendations of 2018 developed by the BRDO Office for regions:
Introducing electronic permits and approvals by joining national systems of electronic services or developing a local analogue;
Ensuring the transparency of urban planning documents by publishing them online;
Joining the #StartBusinessChallenge initiative;
Reducing the infrastructure share participation to 0;
Accelerating the process of registration of land plots for electricity transmission lines.
The presentation of the “Ease of Doing Business. Regional Doing Business” rating:
The rating’s landing is available at http://rdb.brdo.com.ua/
Business and government representatives discussed regulatory issues in the tobacco and telecommunication sectors as well as in the retail industry during a roundtable organized by the Union of Ukrainian Entrepreneurs. Business representatives emphasized the need for a transparent dialogue with the government regarding the adoption of new laws, the prediction of impacts of these laws on business and their rationality that can only be achieved through the dialogue between all interested parties.
The participants also discussed the status and issues of the projects, in which, in particular, BRDO experts are involved: introducing payment transactions recorders, cancelling complaint and suggestion books, a draft law on sanctions for violation of rules of cash turnover regulation.
More information about the event is at sup.org.ua
Source: 24tv.ua
Urban planning documentation is the basis for the development of territories. Its completeness, quality and availability make it possible to effectively implement business plans, attract investments and create a harmonious social environment.
“Urban planners also have strategic tasks, in which they are looking for answers to the challenges of the future,” Jacqueline Vrolijk from the Department of Spatial Planning at the Ministry of the Interior and Kingdom Relations, Netherlands, emphasized at the workshop “Spatial Planning. In a Quality and Transparent Manner”. The expert mentioned minimizing the effects of climate change, ensuring water safety, creating a healthy living space, moving to sustainable development of rural areas and developing the quality of natural landscape as one of the main tasks currently being solved by urban planners in Europe.
Pick up the wind
One of the most urgent tasks is the transition to alternative energy sources. In Ukraine, there are three cities (Zhytomyr, Kamyanets-Podilsky and Chortkiv), which have committed themselves to gradually move their energy systems to renewable energy sources. Zhytomyr even announced the date: the transition should be completed by 2050.
What does the decision to completely move to renewable energy sources mean for urban planners? Jacqueline Vrolijk gave an example: when drafting development plans for territories, it is necessary to take into account where wind power plants will be located; a streets layout should “pick up the wind” to make the best use of it.
Do people in Zhytomyr and Chortkiv, Kyiv and Odessa think about this? Unfortunately, we are still far from solving such tasks of the future on a systematic basis.
Publicly available urban planning documentation – when?
Priority number one for Ukraine is to finally create an open, digitized system of urban planning documents, so that anyone can access it at any time from any gadget.
Last year, the pMAP Open Spatial Planning project was launched, and all government bodies, architects and designer engineers have access to it. This project is implemented by the BRDO Office with the technical assistance of the MATRA project and support of the Ministry of Regional Development, Construction, Housing and Utilities of Ukraine. All existing urban planning documents can be added to the pMAP platform.
We really have a lot of work to do: only three regions are close to the final stage. The Rivne region added 100% of records on urban planning documents in the pMAP, the Dnipropetrovsk region – 98.36% and the Sumy region – 96.62%.
If we assess the process not in terms of completeness, but in terms of openness and quality of information, then there will be other three leaders. The rating of openness and quality is made for the second year in a row, and this year the Dnipropetrovsk region got the highest possible score (6.7 out of 6.9), the Ivano-Frankivsk and Zakarpattia regions got by 6.6 points, respectively.
“It should be noted that all regions improved their results in terms of public disclosure of data during the year. The number of regions, which do not have publicly available urban data documents at all, decreased from 11 to 5. It is Crimea, Zaporizhia, Kyiv, Kirovohrad and Mykolaiv regions,” the Construction Sector Head at the Better Regulation Delivery Office (BRDO) Olena Shuliak said.
How does publicly available urban planning documentation help?
“If these documents are prepared in a quality manner, it minimizes conflict situations and provides an opportunity for improved forecasting while being a prerequisite for sustainable development of territories,” the chief of the Architecture and Urban Planning Department of the Sumy region Oleh Krivtsov says.
“Today, when the civil society is being formed, the public demand and interest to urban planning documents to control the way they are implemented by government bodies and businesses increased significantly. On the other hand, investors also want to get as much information on the possibility to implement their projects on a certain territory as possible to create a comfortable investment climate and improve business forecasting conditions. It is possible to meet this need only by publishing appropriate urban planning documents,” Krivtsov said.
Krivtsov believes that since the urban planning documentation is a platform, where the interests of the state, the public and private businesses coincide, all of them should be taken into account when developing such documents. Keeping the balance of interests of all groups and complying with legal requirements is an indicator of the quality of urban planning documents.
What’s wrong with publicly available urban planning documentation?
The chief architect of the Vinnytsia region Leonid Huzhva outlined the main problems with filling the pMAP platform. The number one problem is the quality and relevance of existing documents.
“All urban planning documents approved prior to 2011 should be revised. In regions, it is a huge amount of documents (more than 80%). There are general plans approved 40-60 years ago and available only in paper form,” he said.
One more point is how to ensure the obligatory publication. Local authorities are responsible for this task. However, there are no mechanisms to stimulate them. “In Vinnytsia region, about 13% of documentation were published, another 30% are prepared, but we have no authority to oblige village councils to publish them, while there are not enough resources at the local level,” Huzhva complained.
How to solve a problem?
The Order of the Ministry of Regional Development No.220 of 15/08/2018 “On Approval of Requirements for the Structure and Format to Publish Data on Urban Planning Documentation in the Internet” recently approved by the Ministry of Justice. From now on, communities with general plans, zoning and detailed plans of territories will be able to make them publicly available in the modern format only.
However, it is still not clear how to stimulate the citied, which are in no hurry to approve modern documentation and make it open. Kyiv living according to the obsolete General Plan 2020 and hindering the approval of the new one is among such backward cities.
But the pMAP team hopes that most of the regions will add all documents to the platform by the end of the year. And then the regions will be able to focus on improving the quality of documentation, reflecting the public demands there and coping with the challenges of the future.
By Tetiana Kovryga, PR Sector Head at BRDO
[gview file=”https://en.brdo.com.ua/wp-content/uploads/sites/5/2018/11/Dajdzhest_August-September_2018.pdf”]
Ukraine ranks 9th in the world in terms of milk production, which is more than a third of gross livestock production. In 2017, the country produced 10.3 million tons of milk, which is 2.5 times less than production volumes in France (24.6 million tons) and 3 times less than in Germany (32 million tons). Today, the capacity of the market of raw milk, which comes to Ukrainian processing enterprises, is 26 billion hryvnias.
At the same time, in Ukraine, the dairy cattle number has decreased by 17% in the last 5 years, and the milk market loses up to 2-3% of production annually. 73% of the total production are privately owned farms and only 27% are agricultural enterprises. However, the dairy industry has significant potential for development and productivity growth.
The government, business and public representatives discussed the ways of solving the market problems during the Roundtable “Milk Market Regulation” in Kyiv on September 25. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue.
“Changes in the milk market are really needed, so we initiated the development of the Draft Order, which should improve the quality of milk. We are interested in quality products; the demand for them is growing, so we provide state support to those farms that are ready for high standards of work and cooperation,” the Deputy Minister of Agricultural Policy and Food Olena Kovaleva said, when opening the event.
BRDO experts conducted a systematic analysis of the regulatory framework and found out that 16 of 57 regulatory acts in the milk production market were irrelevant and 5 regulatory acts were illegal. Most of 17 regulatory instruments have high corruption risks due to undefined and non-transparent procedures.
“The Law On Milk and Dairy Products contains a lot of collisions, and 88% of its provisions are defective and this creates additional barriers for the market and business development. In such a way, we have a huge “gray” area, complicated rules for identifying animals, and problems with the milk quality and safety. The procedures should be simple and clear,” the Agriculture Sector Head at BRDO Andriy Zablotskyi said.
So, for example, the main instrument on the market, which is a cattle certificate introduced to identify animals as well as register and control the milk production, currently contains no clear conditions to calculate the cost of services and no clear implementation procedure while not being a fully valid document confirming the ownership of animals without introducing amendments to the Civil Code.
The Head of the State Food Safety and Consumer Protection Service Volodymyr Lapa agrees that this instrument is inadequate, “The procedure is overloaded, and this is one of the reasons for the existing gray market. We are currently working to improve the animal identification system to make it simple and operating in an electronic format”.
Other instruments aimed at ensuring the traceability of milk production also do not work. Moreover, there is no legal mechanism to regulate ‘producer – intermediary – processor’ relations. As a result, 57% of milk production from privately owned farms is beyond the state control of safety and quality of products.
In accordance with the EU Regulation 1308/2013 establishing a common organisation of the markets in agricultural products, the European practice regulates relations between producers and intermediaries/processors on a clear basis, in particular:
* contracts/written offers precede the delivery of products;
* fixing a solid price or a formula for calculating the price of milk;
* payment terms and conditions;
* the way milk is delivered/collected.
The was also attended by Mykola Moroz, Deputy Director of the Food Safety and Quality Directorate at the Ministry of Agrarian Policy, Serhiy Shupyk, Director of the Agro-Industry Department of the Kyiv Regional State Administration, Andriy Dykun, Chairman of the NGO “All-Ukrainian Agrarian Council”, Vadym Chagarovsky, Chairman of the Board of the Ukrainian Union of Dairy Enterprises, EBA and ACC, business and expert community representatives.
More information is available at www.regulation.gov.ua.
Ukraine has huge reserves of energy resources, but it still depends on imports. Natural gas reserves in Ukrainian subsoils allows to fully meet the country’s needs for 30 years, and oil and condensate reserves – for 15 years. At the same time, 81% of oil needs and 44% of gas needs are met through imports. The state policy in regulation of oil and gas subsoil access does not reach its goals and requires a radical change in approaches.
In Ukraine, the hydrocarbon production is officially carried out by more than 100 entities, but, in fact, the market of strategically important energy resources is monopolized by several state-owned companies. For example, about 80% of gas are produced by the JSC UkrGasVydobuvannya, and 86% of oil – by the PJSC Ukrnafta.
The government, business, public and expert community representatives discussed the market issues during the regional Roundtable “Regulation of oil and gas subsoil access” on September 13. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue.
BRDO experts conducted a systematic market regulation analysis showing that one in four of 83 regulatory acts in this sector has signs of being illegal and/or irrelevant. One-third of regulatory instruments provoke high corruption risks, and the sector operates under non-transparent and discriminatory conditions for the allocation of subsoil use rights.
“In 2017, there was no auction for the sale of special oil and gas subsoil use permits. As a rule, 84% of rights to use them are provided to existing market participants without competitive tendering procedures. Access to geoinformation is artificially blocked by the administrative system, and subsoil users pay huge additional costs, spending 400-800 thousand dollars each year,” the BRDO Energy Sector head Oleksiy Orzhel said, when presenting the research.
The average figure of hydrocarbon production intensity in the world is 6% of the total reserve volume per year, while in Ukraine, it is only 2%. Existing deposits are mostly depleted, and more intensive exploration and production of new deposits requires significant investments and modern technologies, which are not available to existing market participants. At the same time, state regulation controls almost all operations of oil and gas companies, distorting the market model and hindering the promotion of competition.
For example, the procedure for granting a special oil and gas subsoil use permit is very complicated and provokes abuses by government bodies. In particular, for businesses, it means unpredictable expenses on the social infrastructure development, which should be covered at the expense of rent. Its size is an additional factor of destabilization, since it is changed every 2 years.
Another market barrier is non-public, inaccurate and expensive geoinformation. In spite of the lack of direct legislative provisions, subsoils users are required to buy from the state all geological information about a location, for which a special permit was granted. Such expenses amount to 800 thousand dollars every year with 70% of the relevant information being non-digitalized and outdated.
In addition, the current regulation is not harmonized with EU practices, which also hampers the integration of fuel and energy markets and attracting foreign investments in the industry. The relevant Directive 94/22/EU provides for equal access for participants to hydrocarbon exploration and production activities.
According to BRDO, adjusting the state policy regarding oil and gas subsoil access requires comprehensive changes to remove market development barriers:
The event was also attended by Roman Malaniy, the head of the Ivano-Frankivsk Regional State Administration, Andriy Levkovych, the President of the Ivano-Frankivsk Chamber of Commerce and Industry, Valeriy Prokopets, the Director of the Department of Regulatory Policy and Entrepreneurship Development in MEDT, Andriy Pavliv, the representative of the Government UkraineInvest Investment Promotion and Support Office in Western Ukraine, Oleksiy Tyroshko, the representative of the Ministry of Energy and Coal Industry, the State Fiscal Service, oil and gas business and expert community representatives.
For information:
The Ministry of Economic Development and Trade and the State Regulatory Service with the assistance of BRDO are the initiators of the regulatory reform in Ukraine. The project is supported by the EU as part of the EU4Business/FORBIZ initiative.
BRDO is a leading independent expert-analytical center for regulatory policy in Ukraine.
The Public Dialogue between the government and businesses aims to improve the state regulation and the business climate in Ukraine.
The insurance market is the largest one among non-bank financial services markets. As of August 2018, there were 291 insurance companies in the country, while the market volume in 2017 amounted to 40.5 billion UAH. During the past year, compulsory types of insurance amounted for 23% of net insurance premiums of companies with a total volume of 5.8 billion UAH. At the same time, the state has not yet developed an integrated approach, objectives and criteria to apply insurance mechanisms. The current Law of Ukraine “On Insurance” of 1996 doesn’t contain any definition of compulsory insurance (hereinafter – CI), which leads to double interpretation of possible cases of its application.
Article 7 of the Law defines 40 CI types, in addition there are a number of mandatory requirements to provide the insurance specified by other legislative acts. As a result, the area of compulsory insurance is in fact 2.7 times broader than it is provided for by the framework law. At the same time, insurance activities are not carried out in most of its types, and the established insurance tariffs do not adequately reflect the realities.
The government, business, public and expert community representatives discussed the market issues during the Roundtable “Creating an Effective Compulsory Insurance System in Ukraine” on September 6. The event was organized by the BRDO Office with the support of EU4Business/FORBIZ as part of the Public Dialogue #PRODialogue.
“Today, the insurance market operates under a number of legislative contradictions. Creating an effective system is possible only on the basis of complete inventory of this sector and further addressing the problems in a comprehensive manner,” the Head of the State Regulatory Service of Ukraine Kseniya Lyapina said when opening the event.
BRDO experts conducted a systematic analysis of the regulatory environment in the compulsory insurance sector, consisting of 377 acts, and found that it contained numerous conflicts and gaps. For example, 18 out of 40 CI types, or 45% of the total amount, do not have a legal basis: CI procedures or rules, forms of standard contracts, the size of insurance amounts and maximum insurance tariffs have not been approved. This is in particular true with respect to the sectors of health insurance, water transport insurance, liability insurance for entities engaging in tourism and space activities, etc.
At the same time, having established the requirements for compulsory insurance in 40 cases, the state provided for the responsibility for its non-implementation only in 11 cases. In such a way, accountability mechanisms are not applied in 72.5% of CI cases, including the insurance of property risks in the industrial development of oil and gas fields and civil liability for damage that may be caused to third parties as a result of blasting operations. Such a situation invalidates the compulsory insurance concept.
“ The analysis of compulsory insurance regulation indicates the need for radical changes . Legislative requirements are now rather a tool to restrict access of participants to the market , than a mechanism of effective insurance coverage. A new CI model should become a risk management system based on laws to establish common CI requirements and ensure free tariff formation, as stipulated by the EU Directive, and provide effective accountability mechanisms,” the head of the BRDO’s Control and Supervision sector Volodymyr Holovatenko said.
For example, while the European practice implies that compulsory insurance is only requirements for individuals and legal entities regarding their mandatory insurance coverage in certain areas, in Ukrainian realities, it also means additional requirements for insurance companies and the necessity to obtain additional licenses to insure certain types of activity.
The EU-Ukraine Association Agreement provides for the implementation of Directive 2009/138/EC that should change the current approach of the Ukrainian legislator to insurance licensing and CI regulation. The Directive introduces the licensing of insurance companies depending on the chosen class and the risk of activities, and not on insurance forms and types as it is now.
According to the BRDO Office, the new model should include the following purposes of compulsory insurance:
Criteria, in which it is advisable to use the CI:
The event was also attended by Olha Maksymchuk and Oleksandr Zaletov, Members of the National Commission for State Regulation of Financial Services Markets, Oleksandr Filonyuk, President of the League of Insurance Organizations of Ukraine, Halyna Tretyakova, Director General of the Ukrainian Insurance Federation, Yevgen Stepanyuk, Head of the Financial Sector Reform Office at National Bank of Ukraine, Volodymyr Shevchenko, Director General of the Motor (Transport) Insurance Bureau of Ukraine, business and expert community representatives.
On August 29, the Government approved the action plan for the implementation of the Concept of Self-Regulation in Ukraine developed by the Ministry of Economic Development and Trade together with BRDO experts.
24 self-regulatory organizations, many of which are now the fake ones, may lose their status. Instead, dozens of other associations that have sufficient institutional capabilities to become SROs, but do not have relevant provisions in special laws will be able to obtain this status due to the new law.
The new law on self-regulation, the development of which is envisaged by the plan, implies the new rules, according to which the business, the state and consumers will exist.
* Should a self-regulatory organization be formed from scratch? Or can an existing association become a SRO?
* Is it possible to allow only one SRO to be created for a certain type of activity? How many it should be?
* Can there be a self-regulatory organization that does not fulfill market regulation functions delegated by the state?
* How to prevent the transformation of SROs into an alternative center of corruption?
These and other aspects should be explained in the law that is being developed. To ensure that self-regulation does not remain a fiction and has a push for development in modern realities, we invite representatives of business and professional associations to work together on the institutionalization of self-regulation in Ukraine.
In September, the rating of ease of doing business in Ukrainian regions will be published. Which cities are most friendly to investors?
The world is moving by reducing the role of states and increasing the role of cities and agglomerations.
Visionaries say that in 25 years the world will consist not of the countries, but of 500-600 large and influential cities.
The basis for such changes is progress, in particular the development of transport and communications.
Is someone willing to believe that Kyiv, Lviv or Dnipro will be among such political and economic centers as New York and Paris without structural changes?
Not just yet, because our cities are less digitized, their authorities are less flexible and less friendly to investors.
But the struggle for investments is the main battlefield of the world’s economies during the radical change of business approaches. This struggle is even deeper among Eastern Europe countries.
While Estonia gains competitive advantages due to its fantastical technological progress, e-Residency and the actual merging of the state with the activities of IT companies and start-ups, and while Georgia ranks 9th in the world in terms of ease of doing business, in Ukraine, reforms are implemented not as fast as we would hope.
There is no habit of competing
Historically, domestic regions have not yet got used to compete with each other as well as compete with foreign neighbors.
The information that many Hollywood movies are filmed in Canada, but not in the United States, and that producers often film Toronto as New York sounds sensationally, but not for American cinema entrepreneurs.
This is because of privileges and subsidies provided by the northern neighbor for movies that involve Canadian actors.
It is difficult to imagine such a situation in our country, but decentralization will run its course and the most effective and business-oriented cities will start to dominate.
Regional Doing business
In order to establish and standardize the relevant competition process, make it convenient for both regional officials and potential investors, in 2017, the BRDO Office together with the Union of Ukrainian Entrepreneurs (UUE) launched a rating of ease of doing business in Ukrainian regions.
This study was based on the World Bank methodology.
For the first study, five areas of interaction between entrepreneurs and local authorities were selected: paying local taxes; establishing an enterprise; obtaining construction permits; registering a land plot for real property projects; connecting to electricity networks.
The main evaluation criteria were the “money” and “time” spent to complete official procedures as well as a number of appeals to state/local authorities.
Can a potential investor be interested in Kherson, if the procedure for obtaining construction permits takes 147 days here, while in the neighboring Kirovohrad region it is 78 days?
Can entrepreneurs connect to electricity networks quickly and with no hassles here? Unfortunately, they can’t.
In addition to direct results, the relevant administrations also received recommendations to improve the situation.
It should be noted that some local officials and deputies neglected these recommendations, while others promoted the necessary useful initiatives due to them.
For example, Chernihiv, which ranked 22nd last year, reduced a share contribution rate for non-residential premises from 10% to 0.1% that will definitely have a positive impact on the rating, and more importantly, it already has a positive result for the city’s economy.
New criterion is electronic services
What would we do without them? The example of Estonia has already been mentioned, and it should be noted that this Baltic country made good progress. It provides about 4,500 online services on a single portal .
Electronic services are simple and convenient, and because of this, the criterion was included to the rating this year.
Of course, we are far from reaching the Estonia’s level, but not all of our cities trail far behind. Moreover, in this situation, the regional centers should model themselves on the small Drohobych, which is in the Lviv region.
Even today, the city authorities made more than 200 sets of data and dozens of online services publicly accessible on a single portal, which is what we want for every Ukrainian city!
Already in mid-September, we will publish the rating of 2018 together with conclusions and showcases for progress/regress made over the last year!
We hope that this will be a great motivator to attract experts and entrepreneurs to interact with local authorities and will allow us to build an investment-attractive country!
Source: “Економічна Правда“.
Are you forced to climb the highest mountain to call your mom from the Carpathians? Does your mobile operator charge from your balance without prior notice? Are you not happy with the phone call quality anymore? Sometimes there are situations when we want to change the operator, but save the phone number.
This service is known as MNP (Mobile number portability), and in Ukraine, it is envisaged by the amendments to the Law “On Telecommunications” adopted on July 1, 2010. The Law provided for 6 months to adopt the necessary regulatory acts by executive authorities. Only in 2013, the National Commission for the State Regulation of Communications and Informatization (NCCIR) approved the “Regulation on mobile number portability services” and selected the Central Database Administrator for personal numbers and transferred subscriber numbers. However, due to non-transparent corruption schemes, one of the mobile operators appealed this Regulation to the court.
In 2015, the NCCIR developed a new procedure to provide subscriber number portability services and assigned the functions of the central MNP database administrator to the state enterprise “Ukrainian State Center of Radio Frequencies” (UCRF). The UCRF announced a tender for the purchase of number portability services that resulted in court proceedings and, eventually ended with a final settlement agreement between tender participants in June 2018. Finally, the NCCIR promises to implement the MNP on May 1, 2019. Subscribers will be able to change operators without losing their phone numbers. We hope that this time there will be no additional delays, because in addition to subscribers, European partners also expect that this problem will be solved in accordance with the Directive No.2002/22/EC.
[gview file=”https://en.brdo.com.ua/wp-content/uploads/sites/5/2018/08/Dajdzhest_July_2018-1.pdf”]
Source: dt.ua
Ukraine has been looking for a role model for many years. Back in the 90’s, Leonid Kuchma said his famous words, “Tell me what to build, and I will do it”. I do not know if he liked any suggestion, but he made something at random just like his successors. There is no unanimity even now. Someone wants to follow China or Singapore, while others like more the experience of Eastern European countries or draw analogies with Israel.
This is not the worst approach, but it can not help catch up with economic leaders. With this approach, we will be doomed to fail, like Achilles in the famous Zeno’s paradoxes, to constantly run after a turtle without the chance to catch it one day.
We need to come after those who are more efficient than our competitors. Those who have demonstrated breathtaking growth. These are Google, Apple, Amazon and other companies that quickly moved from garage businesses by using whatever was available to corporations, which budgets are the same as many states have, and the number of service users is similar in size of the populations in large countries. At the same time, the effectiveness of such corporations can not be compared with the state apparatus.
Is that even possible, and what’s the difference between a large corporation and a state?
“How can you judge what you do not know?”
One of the key differences between the state apparatus and the corporation is their decision-making procedure. Government authorities poorly understand the consequences of their management decisions. In the most optimistic scenario, when facing with a problem, a government agency will do the following: analyzing the problem; searching all possible ways to solve it; then – choosing the most appropriate option; and, finally, there will be development, approval and decision-making. This procedure is too bureaucratic, slow, complicated and resource-intensive.
However, this is the optimistic scenario, in most cases, the reality is even more disappointing. Usually, government bodies choose a solution to the problem at random, and then just imitate the analysis process covering it with a crowd of unnecessary papers.
The problem here is not only the reluctance of officials to analyze problems or their inability to do so. In most cases, the problem is the lack of data to make a really informed decision.
And this is not the worst thing. The trouble is that the potential consequences are somehow analyzed, but there are already no resources to analyze the consequences that really happened.
Imagine that you decided to participate in a football pool. You spent your time to analyze the tournament situation, the composition of teams, conditions of key players and the statistics of the results of games played by opponents, then – the time and money to place your bets. And, in the end, you were not even interested to know the results of the game.
Sounds incredible? But this is exactly the case with management decisions. Their actual performance, unlike their planning, is almost never analyzed.
How can the private sector experience be helpful to us? It is very simple. The businesses also face with the problem of forecasting. But for business, one of the ways to solve this problem is design thinking, or simply experiments.
This model is simple: you try – make an assessment – change – repeat. If you watched the comedy “Groundhog Day” with Bill Murray, that’s it. The organization that makes a decision doesn’t pretend to choose the only viable solution that will be used forever. Quite the opposite. Problems are articulated, then different approaches to their solution are tested simultaneously, and they choose the most appropriate option based on practical results. Facebook, Google, and others carry out thousands of experiments on us every day. However, we are simply unware of the large majority of such experiments.
Both the media and politics adopted the experiment practice: what photo will attract the voter’s attention? What article heading will be clicked on more often? The answers are received with no hassles: they offer different options, monitor the respond of online users and then choose the most popular option. In other words, the standard of truth is practice.
That is why experiments will be the perfect choice for public administration. It allows not to be afraid to make a decision without having any information or time to collect it. Moreover, many interesting and innovative solutions are blocked now, because one or another influential government official is twice shy and overestimates the risks. Sometimes it’s false, and sometimes they do it with a clear conscience.
Which reform figures faced with a wake-up call provided by the experienced bureaucratic guards? “You did not build it to break!”. “As soon as you do that, there will be a collapse!”. “Nobody has done this before, and it’s not for nothing!”. It is not possible to persuade them or remove such a barrier at once.
An experiment carried out properly will allow to implement a huge array of innovative approaches, which nobody dared or allowed to apply for personal gain.
Ukraine is also experimenting to a certain extent. The government authorities managed to approve acts on the implementation of “pilot projects” at their own risk. Today there are dozens of such projects. For example, the Ministry of Justice introduced a marriage registration service per day in its “pilot”, despite the legal requirement of the need for a one-month waiting period.
Although the practice of such “pilot projects” is highly commendable, it has many disadvantages. First, all these “pilots” are illegal. The current Constitution does not allow government regulators to be creative, while there is no law providing for the possibility of experiments.
Secondly, all “pilots” are just remotely remind of the design-thinking model. A proper government experiment should match several key characteristics:
– to be carried out on a limited and a small number of subjects;
– the number of such subjects is chosen randomly;
– before the experiment begins, the criteria for a quantitative comparison of results shall be defined;
– the experiment shall be evaluated by an independent body;
– the experiment is limited in time.
In this case, the experiment should not be used as a substitute for a well-considered calculation and analysis. The analysis of the problem and the selection of alternative ways to solve it will be a prerequisite for carrying out the experiment. And the key prerequisites for the experiment are the lack of data to choose a single behavior model and the possibility to collect such data after the end of the experiment.
By the way, it is unlikely that we will completely refrain from following the experience of some country. According to some experts, the model of experiments and flexibility is precisely the key to the success of China, which implemented different economic policies in different regions and in different years. However, it did it not as quickly as corporations do.
However, it is not enough to make correct decisions. They need to be implemented in an effective way.
“If everyone is treated according to his/her deserts, who will escape the sticks?”
Another feature of the state is that it is extremely conservative when it comes to choosing the tools it works with. Most levers of influence used are banal varieties of an archaic “stick”: prohibitions, permits or inspection visits.
Only recently, the state began to use the “carrot” methods: various privileges, increased tariffs and so on.
All this is a stone age toolkit in comparison with business activities. The state uses police and electronic ankle bracelets to enforce home arrests. Instead, Internet giants keep us at home near the computer or smartphone screens without any apparent coercion.
The state maintains a huge staff of employees who try (not very well) to collect taxes. Internet giants get our money in such a way that we do not even notice it.
Would you agree to spend a few hours a day to do some work for several months for a reward in the form of an electronic image of a sword or crown at the request of an official? Probably not. But online game developers do it with no hassles.
The principle here is simple: the behavior, which is desirable for a manipulator (or a regulator) should be comfortable and pleasant, and the undesirable behavior – inconvenient or unpleasant.
One example of this approach is nudge – a concept, the co-author of which (Richard Thaler) won the Nobel Prize for Economics. It is quite simple: though a person has the option to choose his/her behavior, another person (the so-called “choice architect” who can be represented by both a private company and a state) can encourage him/her to choose the desired behavior.
Businesses like to use all these factors, such as too large shopping trolleys in supermarkets, which encourage us to buy more, a special arrangement of goods on shelves promoting one goods over the others, the restricted daylight in the gambling halls, so that those present have no sense of the time.
One of the most common nudge options is to set a rule that works by default (that is, until we give a signal that we do not agree with this rule). A lot of researches along with a real practice showed that we tend to agree with the conditions, stepping back from which requires at least minimal efforts. For example, you do not check all your smartphone settings selected by default, do you?
The nudge option is sometimes used in public administration. For example, the rule that property acquired by a married couple during marriage is common. The couple, of course, can make a different decision, but are many of us doing or discussing it?
The nudge advantages are that it allows to change the behavior of people without any official restriction of their freedom. The extraordinary efficiency of the nudge concept together with its formal liberalization makes this mechanism quite dangerous, which makes it necessary to develop and adhere to the basic ethical principles of its application. Although, on the other hand, the business tests this tool on us without any restrictions.
“All the world is a game”
Another interesting way to influence the human behavior, which is effectively applied in business, is gamification, that is, the use of elements of the game to stimulate the desired behavior. Do you have a personal account in a social network and want to get as many likes as possible? Congratulations, you are in the game. Other gamification varieties include rewarding with special stripes or status awards, competitions, creating a possibility to collect something, etc.
Gamification is not a new phenomenon. Many people still remember the Stakhanovism, when the authorities organized socialist competitions to increase labor productivity in the Soviet era. Groups of workers produced the largest amount of cast iron, mines and miners who extracted the most coal were awarded the winner’s stripes. Similarly, now the state awards and medals or various ratings serve as good examples of gaming incentives.
However, this approach has a much greater potential. For example, in Stockholm experimentally, a model when drivers who achieved a certain point of control without breaking the speed automatically participated in the lottery was used. In this case, the money prizes of such a lottery were made at the expense of drivers who oversped at such a point.
Another real example is the state lottery by the number of cash receipts, which encourages consumers to require the official processing of payments by entrepreneurs.
Keep-it-in-the-family
The methods described above are definitely effective. However, they are not enough for our needs.
The root of our current problems is in our attitude to the state and the society we live in. And this is not just good words, but a very specific scientific fact.
To explain this, you need to immerse yourself in cognitive linguistics for a moment. Our psyche perceives the environment extremely subjectively. One of the important mechanisms that help understand the world around us is metaphors. Metaphors are not just a poetic expression of our emotions. This is a mechanism of our perception of the world and thinking. The terms and concepts, which are new to us, are not placed in our brain in isolation from others, while being included into one of the groups, which contains terms that seem to us related. For example, we perceive life or love through the metaphor of “movement” (we went beyond the mark, relations came to a full stop, we need to step back). Height is a metaphorical measure of dignity (high feelings, lowly intentions, professional growth, spiritual ups and downs, be on a high, etc.).
Business uses visual and verbal metaphors in a very effective way. For example, Volkswagen tries to associate its products with freedom and travels, and therefore binds the names to the winds (Golf, Jetta, Passat, Bora), wild animals (Tiguan) or tribes (Tuareg). The metaphor works even better, if it is well known and often used in everyday life. Well, for example, an apple.
There is a theory that US citizens associate the state with the “family”. Citizens perceive the president, authorities, elections, laws and policies with the help of this metaphor. Under such conditions, the political struggle comes just to the choice of the family type: whether it will be careful or strict. The “family” metaphor is actively used by political technologists. Trump is usually photographed surrounded by children and people of all ages to formalize his visual image of “father”.
The topic of metaphors is very interesting from the standpoint of elections and party programs and slogans, but let’s turn our attention on other aspect. If people unconsciously perceive the state as a family, their behavior will be formed in a completely different way than if they perceive the state through, for example, the metaphor of “resources”.
If the state is a family, it is the psychologically optimal behavior to pay taxes, respect the laws, speak the truth in court. If the state is a resource, then the situation is exactly the opposite. If you have no power (“resources” are in someone else’s hands), then there is no ideological argument for paying taxes, respecting property or laws. If you have some power (“resources” are in your hands), then there are no barriers to use it to your own advantage, except for the fear of losing such a resource.
The step-by-step change in our ideas about the state and its metaphors is a key stage, without which other efforts will be ineffective. We have already some grounds to start: Ukraine is our “Mother” (“Nenka”) and “Motherhood”. As soon as we realize that we are a family (and not the Kaydash’s one), we will be just a step away from Silicon Valley.
Source: biz.nv.ua
The transformation of the country is not about fast food changes on the run, but about “cooking slowly with constant stirring”. It is not about a sudden shower that brings relief and heavy yields immediately, but about slow and inevitable changes in the business climate.
And this provides much more optimism than illusive quick wins, which can turn into treasons as rapidly as they appeared.
During its term, the Government held six sessions dedicated exclusively to deregulation: it resulted in hundreds of abolished obsolete acts, about 30 resolutions aimed at improving the business climate developed by the BRDO Office together with ministries and business representatives. This Wednesday, the Government increased favorableness of the business climate in the country by 5 degrees having adopted 5 important decisions for entrepreneurship. So, with regard to the latter.
Firstly, everyone finally remembered that we lived in the 21st century, and it was impossible to develop without connecting to the Internet. Today in Ukraine, there are about 5 million connections to the broadband Internet: the one that powers desktop computers and laptops. It is not a large number for the country with about several tens of millions of people. Business is ready to help: telecommunication operators can provide remote and rural areas with the Internet. but for this purpose, business owners are required a simplified access to the infrastructure: electricity generation facilities; transport facilities; home distribution networks and construction facilities. Nowadays, there are about 156 thousand apartment buildings in Ukraine, and to this day, the developers set discriminatory conditions for granting access to infrastructure elements of construction facilities. Therefore, the resolution adopted by the Cabinet of Ministers is urgently needed, since it will remove unfair and non-transparent conditions that hampered the telecommunications market development. This decision could potentially increase the number of broadband Internet connections by almost 14 million users – from 5 to 19 million. Accordingly, the barriers to introduce telemedicine health care services identified by the President as a priority as well as e-learning, e-health, e-commerce and other areas that will affect the living standards of citizens in the regions will be removed.
This is a long-awaited and very “requested” decision. The rules for access to infrastructure elements were developed by BRDO experts and coordinated with leading associations (Telas, the Internet Association of Ukraine, the Telecommunication Chamber of Ukraine, the Association of Rights Holders and Content Providers and the Ukrainian League of Industrialists and Entrepreneurs) ) a year ago, but the Cabinet of Ministers approved them just now.
However, it is too early to pop the champagne. The rules will fully work only when the Ministry of Energy, the Ministry of Transport and the Ministry of Regional Development approve the Methodology to calculate the infrastructure access cost. The draft methodology was also developed by BRDO experts, agreed with the relevant associations and sent to the ministries more than a year ago. Immediately after the Cabinet of Ministers voted, we received a public Volodymyr Omelyan’s promise in social networks to develop the ministry’s methodology by the end of the month. We look forward to the respond of the two other ministries and believe in common sense.
The next decision was more “prosaic”, but it is also about modern technologies while being important for the business climate and positive for every citizen. We are talking about the geocadastre. The urgent problem for entrepreneurs is a large number of refusals to register in the StateGeoCadastre, which could easily be avoided. For example, in 2016, the number of refusals to register land plots amounted to 135 thousand. Moreover, when refusing, cadastral registrars were not bothered to explain the reasons. conclusions on refusals could contain a brief reference that “documents do not comply with the land cadastre law” or that electronic documents “are not valid”. In other words, you were politely told to go screw without explaining the reasons and indicating how to change the situation. As a result of changes approved by the Cabinet of Ministers this week, registrars will be obliged to indicate the provisions of the regulatory act violated or the name of the electronic document’s elements containing mistakes. This will reduce the number of unreasonable refusals to register land plots. In other words, it is the elementary improvement of communication that will save time and money for businesses.
The next improvement in this resolution is an opportunity to submit documents for the state registration of land plots online. Just imagine these amazing technologies in Ukraine! Unfortunately, the draft amendments did not contain provisions that would include a preliminary examination of electronic documents on land plots. However, it is planned to introduce this examination procedure when updating the electronic service for online registration of land plots.
Another useful improvement is monitoring of the application processing in the land cadastre. If it is now possible to check the status of a limited number of application types envisaged by the Procedure for the State Land Cadastre, in the future, it will be possible for types of applications as well as it will be possible to review analytics on the number of such applications by regions. The big data as it is.
These changes will reduce the number of refusals to register in the StateGeoCadastre from 135 thousand times to 100 thousand, that is, up to 2% of the total amount per year, smoothly and inevitably. Such a “mitigation” of the business climate will provide 56.6 million UAH of business savings per year. It is not bad for the resolution, and +1 degree to the ease of doing business.
The next landmark decision supported by the Cabinet of ministers is related to the human resources, which, as you know, are the most important factor. From now on, foreign specialists will be able to obtain employment in Ukraine in a simplified manner. It is just about highly paid specialists. This procedure has been very complicated for a long time: to obtain a residence permit, State Migration Service (SMS) officers required from foreign specialists to leave Ukraine and return after obtaining a work permit. It was possible to leave and return through the territory of any country without obtaining any additional documents. What has changed: the possibility to refuse issuing a residence permit for a foreigner on the grounds that the date of entry into Ukraine is prior to the date of obtaining a work permit is canceled. Obviously, besides the inflow of qualified specialists in various areas, this will also reduce the burden on the State Migration Service significantly.
In addition, there is a related decision that also deals with more comfortable employment – from now on, the representative offices of foreign legal entities will be able register and maintain work record cards of their representatives by their own. This is weird, but previously, the Directorate General for Rendering Services to Diplomatic Missions had to do this. Probably, a person who was responsible for this sector liked Orwell very much. Fortunately, things will change now, and foreign establishments will save time and money. It is +1 point for the Government. We just have to update work record cards one way or the other, but it is quite a different story.
In addition, 22 obsolete and irrelevant acts were abolished. These are types of economic activity, which are not subject to licensing in accordance with the Laws on Licensing. This will reduce the regulatory pressure on businesses and abuses by government officials as well as improve the investment climate in Ukraine.
All these decisions are inevitable changes, it’s about cooking slowly with constant stirring. The country is gradually but inevitably changing!
On July 18, the Cabinet of Ministers approved a number of important decisions to simplify the business environment developed by the MEDT together with the BRDO Office as part of the “deregulation day”.
One of the main decisions approved is aimed at facilitating access to infrastructure for telecom operators. Pursuant to its decision, the Cabinet of Ministers removed discriminatory and non-transparent conditions that hampered the development of the telecommunications market. Due to this, millions of Ukrainians will be able to connect to the broadband Internet. It’s about 14 million users – from 5 to 19 million.
” We are in the 21st century, and Internet coverage is critically important for the country . Living in an analogue world today is the same as lighting with a kerosene lamp or taking a horse to work. Our IT and Telecom sector together with professional associations developed rules for granting access to the infrastructure of electricity generation facilities, transport facilities, home distribution networks and construction facilities. We thank the Cabinet of Ministers for their support ,” the BRDO Head Oleksiy Honcharuk said.
Another important decision was to create conditions to reduce the number of refusals for registering in the StateGeoCadastre. Earlier, the number of refusals to register in the State Land Cadastre amounted to 197.5 thousand, including 134.5 thousand refusals to register land plots in the State Land Cadastre, during the year. The solution offered by the BRDO Office and supported by the Government is:
This will reduce the number of refusals by 100 thousand, up to 2% of the total amount per year. and it will provide 56.6 million UAH of business savings per year. From now on, every citizen of Ukraine will be able to get extracts from the State Land Cadastre online.
The ministers also supported the simplification of the employment procedure for foreigners. Previously, to obtain a residence permit, State Migration Service officers required from foreigners to leave Ukraine and return after obtaining a work permit. In this case, it was possible to leave and return through the territory of any country, and there was no need to obtain any additional documents. From now on, the possibility to refuse issuing a residence permit on the grounds that the date of entry into Ukraine is prior to the date of obtaining a work permit is canceled. Ukraine will become more open to skilled foreign specialists, and the burden on the State Migration Service will be reduced.
Moreover, the Government canceled the requirement to keep work record cards for representatives of foreign legal entities. Now companies will be able register and maintain work record cards of their representatives by their own. This will allow them to save money, while employees of their representative offices will have immediate access to their work record cards.
In addition, 22 obsolete and irrelevant acts were abolished. These are types of economic activity, which are not subject to licensing in accordance with the Laws on Licensing. This will reduce the regulatory pressure on businesses and abuses by government officials as well as improve the investment climate in Ukraine.