On September 26, the National Council of Reforms considered and supported the draft law “On Privatization of State Property” developed by the Government. On October 4, the Committee of the Verkhovna Rada on Economic Policy and Entrepreneurship approved the draft law amended by the Government and recommended it for the first reading.
The main purpose of the Law No.7066 is to ensure fair and transparent sale of state property, which will be a tool for attracting real investors to Ukraine. Investment inflows should give an additional impetus to economic development, help to create new jobs, increase the efficiency of enterprises and overcome corruption. As a result, budget revenues, which the government will transform into improving the lives of Ukrainians, should increase. In addition, privatization is an effective method to overcome corruption in state-owned enterprises.
Before submitting the draft law “On Privatization of State Property” for the government’s consideration, an inventory of state-owned enterprises was carried out for the first time. The central executive bodies own about 3,444 state enterprises with a total assets value of 1.7 trillion hryvnas. For example, such enterprises are 10 times less in Poland.
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The Draft Law No.7066 will:
After assessing the portfolios of state-owned companies, 15 strategic enterprises that should remain in state ownership (Ukrzaliznytsya, Ukrposhta, Naftogaz, the Administration of Seaports, etc.) were identified, 359 facilities were designated for transfer to the concession (forestry facilities, airports, road services), 1,255 non-functioning facilities will be reorganized, liquidated or bankruptcy procedures will be completed. The issues on 559 facilities located in the annexed territories and in the ATO zone will be resolved when Ukraine gets control of the temporarily occupied territories.
The Head of BRDO Oleksiy Honcharuk and the deputy mayor of the Vinnytsya City Council Vladyslav Skalsky signed a memorandum on creating the effective regulation in the city. The parties launched the marathon of cities “The territory of European practices”, committed themselves to creating the favorable business environment and protecting entrepreneurs through the implementation of efficient legislative initiatives.
“The functions are assigned at the local level, but challenges and tasks are also assigned at the local level. We would like to make city authorities and Vinnytsya entrepreneurs more empowered and informed about effective business activities,” the Head of BRDO Oleksiy Honcharuk said.
The BRDO Office and Vinnytsya city authorities will:
The parties also plan to conduct a comprehensive analysis of doing business in Ukraine “Regional Doing Business”, exchange information and jointly develop priority regulatory decisions for the Vinnytsya region.
On November 1, the BRDO presented the PRO Platform in Vinnytsya. Entrepreneurs, authorities and experts discussed the acute issues for Vinnytsya businesses, such as land allocation, connection to electricity networks, change of nature of premises, etc.
“There are three groups of factors that hinder the development of entrepreneurship: poor performance of the antimonopoly committee in the fight against natural monopolies. Ukrainian companies not always have strong positions in competition with foreign companies. And there are also stereotypes in the minds of people. Someone buys a car, but can not refuel it, because gasoline is expensive. Why not to invest these money in a business instead of a car?” the Head of the Vinnitsya Regional Administration Valeriy Koroviy says.
The Deputy Mayor of Vinnytsya Vladyslav Skalsky adds, “Trust is the most important thing, which is lacking in cooperation between the local government and business. Entrepreneurs pretend to pay taxes, while the authorities pretend to perform their functions. It should not be so. The main problem for entrepreneurs is ineffective regulatory rules and the inaccessibility of loans. For my part, I guarantee enough attention for an effective dialogue.”
The business together with BRDO experts discussed 7 regulatory cases related to starting own business, namely, “Energy service company”, “Production of Organic Products”, “Restaurant”, “Internet Service Provider” and others, which were topical or interesting for Vinnytsya and the region.
“Private initiative is a resource that drives the country’s economy forward. A large company will hire a consulting company, order a marketing research. But small business representatives with entrepreneurial skills usually do not have these resources. regulation.gov.ua is a real consulting, step by step instruction on how to establish a restaurant, open a kindergarten or a taxi service here in Vinnytsya,” the Head of the State Regulatory Service of Ukraine Kseniya Lyapina added.
The PRO Platform contains step-by-step instructions for opening your own business, procedures for obtaining permits, instructions for registering cash registers, calculating regulatory costs, etc. From now on entrepreneurs do not need to spend time searching for the necessary information in google or in various agencies. Just answer a few questions on the PRO and get a check-list of necessary steps: what documents to prepare, how long each procedure will take, where to apply, etc. Now it is easier to open a business in Ukraine.
“Ukraine almost does not have simple decisions. Each decision is a balance of interests, each decision should be prepared, well-targeted and effective. We should be pragmatic keeping two steps ahead and everything should be available online for everyone to allow Ukraine having a chance and working it out,” the Head of BRDO Oleksiy Honcharuk said.
The Deputy Chairman of the UkrGasBank Management Board Yevgen Metsher also joined the discussion.
Details on how to open a business at: regulation.gov.ua.
Source: biz.nv.ua.
Traditionally, the results of the Doing Business index are made known on the last day of October.
This year, Ukraine showed quite a good result – a rise of 4 positions, demonstrating a series of six annual rises in a row. Such results are good news, especially given the recent analysis provided by the Financial Times, according to which Ukraine is the global leader in terms of the rates of rise in the Doing Business rating for the last seven years.
Unfortunately, a successful series of wins of our country can be over already next year, but let’s take it in turns.
What is the progress of this year’s rating?
First of all, our this year’s driver – the component “Obtaining construction permits” – is worthy of special mention. In terms of this component, Ukraine has shown the highest rise among all other countries of the world – plus 105 points. Such a stunning success was due to two factors:
Another important reform, which gave Ukraine 41 points in terms of the component “Paying taxes”, was the reduction and unification of the Unified social tax rate. The reform was implemented in 2015, but due to methodological specificities of the rating, it was included only this year.
The implementation of the legal requirement on disclosure of information on related-party transactions by the State Commission for Securities and Stock Market at the level of by-laws was also a win, but not so important. This was not enough to improve the progress of Ukraine in terms of the component “Protecting minority shareholders”, but it allowed to reduce the negative effect of falling other indicators under this component.
In the component “Connecting to electricity networks”, Ukraine demonstrated a slight increase of 2 points due to a decrease in the cost of connecting the electricity-generating equipment to Kyivenergo networks.
Finally, due to the technical adjustment of indicators (without any reforms), the results under the component “Resolving insolvency” were slightly improved, and Ukraine went up 1 position in this component.
All of the above positive results entirely provided Ukraine with a chance to improve its positions with plus 10 points in the total score, but it did not happen because of real (and somewhat unexpected) failures in other components of the rating.
Where did Ukraine lose its positions?
Our country has shown a recession in six (that is, most) components of the rating. The component “Starting a business”, in which we’ve lost 32 points, was the biggest failure. In this context, it should be noted that there were no significant “treasons” in the area of starting a business last year.
Ukraine failed to demonstrate any reforms in such components as “Registering Property”, “International trade”, “Enforcing Contracts” and “Getting Credit”. That is why, in this case, the rule that no reforms mean the falling instead of keeping the status quo, since our competitors do not sleep, worked. Therefore, as a natural result, our country lost 1 point in the component “Registering Property” and “Enforcing Contracts”, 4 points in “International trade” and 9 points in the component “Getting Credit”.
The decrease in several indicators in the component “Protecting minority shareholders” was another unpleasant surprise.
Such disappointing results have significantly reduced the positive effect of construction and taxation reforms.
What does the next year hold for us?
It seems to be hardly likely that we will have even more success (or at least repeat it) in the coming year. The fact that the main success of this year – reducing the rate of the share participation in infrastructure of Kyiv by 2% – was only temporarily. If the Kyiv City Council does not make another decision, this rate will increase to 4%, which will automatically lead to worsening Ukraine’s results in the component “Obtaining Construction Permits”. Similarly, the lack of reforms in terms of other components will also lower most other indicators.
Why then did the government declare its plans for Ukraine to enter the TOP-40 in the Doing Business rating next year?
The answer is simple – such a fantastic result is still possible. The fact is that the government together with the BRDO developed a package of laws on improving the investment climate (#6540, #6541, #6542 and #6543) and submitted it to the parliament. The main of them (#6540) has already received a positive conclusion from the profile committee, but none of the draft laws was adopted by the parliament even in the first reading.
In such a way, the significant breakthrough in the rating panned by the government is possible only if the Verkhovna Rada of Ukraine considers and adopts the aforementioned draft laws as a whole in the shortest possible time. However, just the adoption of the law will not be enough. It takes at least one month (and it would be better to have few months) to implement it. Taking into account the fact that the period of rating assessment will end on May 1 (instead of May 31) the next year, there is almost no time left.
Therefore, if deputies do not demonstrate the magic efficiency, Ukraine will have either nothing or (in an optimistic scenario) a few minor reforms that will not significantly influence the rating and only allow to face with not such a catastrophic falling.
We hope and continue to do everything possible to prevent this from happening and allow Ukraine to continue sending only positive signals to investors and the business community.
There are only 20 self-regulatory organizations in Ukraine. Some of them show no signs of life.
Everyone knows that prevention is better than cure. But in practice, few are involved in prevention: we are accustomed to deal with the consequences instead of eliminating the causes. And when the problem is already staring in the face, we are in a hurry to remedy the situation.
The regulatory activities of the state are carried out in the same way. Ukraine still does not have the standards of shaping public policies. We can not analyze, predict and plan effectively. Instead, we always catch up with the problems and take situational formal decisions, sometimes provoking even more complications. . As a result, consumers complain about producers, while producers complain about the excessive regulation and administrative pressure looking for alternative “cures” in the form of self-regulation. A patient no longer trusts a doctor, moreover – he is afraid of him and, therefore chooses self-treatment.
In civilized conditions, self-regulation as a model of interaction between business, professional community, government and consumers occurs naturally, based on market demand. Market participants set certain rules and standards for community activities, monitor their compliance and punish violations. This is like a preventive tool for the business environment: protects the market from harmful elements while clearing and improving it. That is, the model, when the “patient” independently cared about the state of his body, can be considered the best option for avoiding diseases. Moreover, this principle is one of the most effective methods of reducing government regulation and expenses on it.
In Ukraine, in spite of the lack of a systemic holistic approach to the introduction and implementation of self-regulation, it was partially imposed by the state. Dozens of amendments to the laws, by-laws adopted, many other regulatory documents without a clear purpose – this is the way the self-regulation is carried out in our country. As of today, the creation of self-regulatory organizations is allowed in 15 types of professional and entrepreneurial activities. The principles of their functioning are regulated by 39 legislative acts.
In fact, we have only 20 SROs in 5 types of activities, some of which show no signs of life. In many areas, self-regulation exists only on paper.
As a natural result, there are areas where self-regulation is inappropriate. For example, national security and defense, law enforcement and so on. But in some cases, the state officially “allowed” to implement the self-regulation by providing associations of market participants with the status of self-regulatory organizations. However, in some cases, they are “allowed”, but nobody knows “in what way”.
For example, the tourism industry, where powerful organizations and associations have been operating for more than one year, while being capable of implementing the self-regulation and exercising similar SRO functions, but in fact, can not obtain this status. We only have a provision in a special law, which indirectly states that self-regulation in this area is permitted, and… nothing else.
There are also enough problems in the areas, in which SROs are really functioning. Due to the lack of a reliable and systematic approach to regulating the activities of such organizations, the self-regulation sometimes becomes an instrument to eliminate competitors. In particular, the self-regulation in the construction industry, where exercising the functions delegated by the state to SROs gave a practical effect, is being actively discussed. Here, only the SRO, which, according to numerous complaints, refuses to citizens, who are not members of such an organization contrary to the law, or makes unreasonable demands for professional liability insurance, is entitled to allow carrying out professional activities, while in certain way, forming the “crony market”.
Of course, in such circumstances, the self-regulation can hardly be considered as an achievement, since it has little in common with deregulation or the improvement of the quality of goods/services. In individual cases, it implies that the state refuses to intervene in the market, that is, reducing the administrative pressure. Typically, we have the opposite effect. After all, the state does not analyze areas, in which the self-regulation is necessary, useful, reasonable, and does not monitor the results of its application and does not assess the consequences. Decisions are taken in individual cases, risks and benefits are not calculated and a lack of consistency leads to chaos and complications.
They have tried to adopt a single comprehensive law on self-regulation that would resolve all controversial issues over about a decade, but the initiative has failed every time. Why? Because if you started treating, then try to ask a patient what’s the trouble.
It is necessary to understand at least:
Successful implementation of self-regulation will allow to reduce the cost of state regulation, exercise more professional control over the quality of goods and services and increase the responsibility of market participants. But the case when the next draft law is developed for who knows what and whom, adopted behind the scenes and post-factum introduced in the market can not be successful a priori. We should abandon such games now and for all time.
If we do not develop the standards of disease prevention, then we have a chance to learn how to treat it properly.
Self-regulatory organizations (SROs) in the world are voluntary business associations, the purpose of which is to control the work of members to improve the quality of their professional activities and protect consumer interests. Self-regulation reduces administrative pressure on business and, at the same time, promotes higher standards, competitiveness in the market as well as the protection of business reputation of entrepreneurs. In Ukraine, there are only 20 SROs in 5 of 15 types of activities permitted by law. Dozens of other organizations and associations can not obtain an official status, while there is no holistic approach to self-regulation.
Does Ukraine need the self-regulation? What should it be? Is a lack of a single law a problem or advantage? Why do lawmakers “provide” the self-regulation for some and restrict it for others? How to distinguish between “professional self-regulation” and “professional self-government”?
The government, business and experts will try to find answers during the round table “Self-regulation in Ukraine: balance of business, government and consumer interests” in Kyiv on November 3.
The event will be attended by:
BRDO experts conducted a rolling review of the regulatory framework that regulates SRO activities and analyzed the problems of self-regulation implementation in Ukraine. The results are presented in an analytical study – the Green Paper “Self-regulation in Ukraine”, which will be discussed during the roundtable. Join the dialogue!
Venue: Kyiv, IQ Business Center (13-15, Bolsunovska St.)
Time: 10:00 – 12:00, November 3, 2017
The event’s agenda is available here.
Additional information is available by phone: 063 440 47 07.
Media accreditation at [email protected] or by phone 050 850 96 66.
How to legally open a taxi service in Vinnytsya and not lose to the shadow segment? What are the benefits to the region from the cancellation of share participation? How to open a restaurant by following all the sanitary rules? What will the local government do to make the business environment favorable for entrepreneurs?
#StartBusinessChallenge participants will answer these and many other questions in Vinnytsya on November 1. During the event, the participants will discuss in detail a series of such procedures as land allocation, connection to electricity networks, change of nature of premises, etc. Moreover, they will discuss step by step 7 regulatory cases related to opening own business, namely, “Energy service company”, “Production of Organic Products”, “Restaurant”, “Internet Service Provider” and others.
The event will be attended by:
Details at: http://start.regulation.gov.ua/
Venue: Vinnytsya, Mont Blanc restaurant (34, Soborna St.)
Time: 11:30 – 16:00, November 1, 2017
Media accreditation – till 18:00 on October 31 at [email protected] or [email protected].
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Source: drs.gov.ua.
The State Regulatory Service of Ukraine together with the Ministry of Economic Development and Trade of Ukraine and with the support of the Better Regulation Delivery Office (BRDO) has launched a pilot module for planning state supervision (control) measures – the IAS SSC (http://ias.brdo.com.ua).
With the help of the pilot module, a draft Plan for the implementation of comprehensive state supervision (control) measures for 2018 was automatically created based on proposals from the state supervisory and control bodies.
You can check whether a particular business entity is included to the draft Plan for the implementation of comprehensive state supervision (control) measures for 2018 on the website of the IAS SSC pilot module for planning state supervision (control) measures (http://ias.brdo.com.ua) free of charge and without registration.
The search is available by the name of business entities or their EDRPOU code.
Please note that a business entity has the right to refuse to conduct a comprehensive planned state supervision (control) measure by submitting a written request to the State Regulatory Service of Ukraine. In this case, this business entity will be inspected in accordance with individual annual plans of state supervision (control) bodies.
Planned measures are carried out in accordance with annual plans approved by the state supervisory (control) body no later than December 1 of the year preceding the planned one (the planned period is the year from January 1 to December 31 of the planning year).
If a business entity has separate offices, planned state supervision (control) measures can be carried out simultaneously in all separate offices of this business entity during the period of one planned inspection.
Including the same business entity into plans for the implementation of state supervision (control) measures of different state supervision (control) bodies is the basis for conducting a comprehensive state supervision (control) measure to inspect this business entity.
We remind that according to Article 5 of the Law of Ukraine “On Basic Principles of State Supervision (Control) in the Sphere of Economic Activity”, the state supervision (control) bodies annually establish a list of business entities that are subject to planned state supervision (control) measures during the planned period and enter information on these business entities into the integrated automated system of state supervision (control) (IAS SSC) to automatically identify business entities, which are subject to comprehensive planned state supervision (control) measures, no later than October 15 of the year preceding the planned one. The draft plan for the implementation of comprehensive state supervision (control) measures is being created by the IAS SSC.
Source: delo.ua.
Delo.UA paid attention to the issue of how the state regulates the market of restaurants, whether it is difficult to collect all the necessary documents and how to prevent excessive attention of state controllers.
The previous year was the year of recovery for the restaurant market – in the capital, there were more restaurants opened than the closed ones for the first time since the crisis. This trend continues in 2017. According to the Restaurant Consulting company, about 60 new restaurants have been opened in Kiev for eight months, and their number is expected to be about 100-120 facilities by the end of the year.
Consultants say that there are mainly facilities opened at the middle and low end of the market. The low end of the market for Kyiv is the facilities with an average bill of up to 100 hryvnas, almost always with self-service, and the middle end is about 100-400 hryvnas.
In 2017, the number of visitors to restaurants has grown by about 10-15% compared with 2016. The average bill also increased to 15%. However, experts also suggest less positive forecasts: according to their estimates, about one third of restaurants opened a year or two ago will be closed this year. Some of them – because of high renting costs, and others – because of the unsuccessful facility’s concept.
How to obtain the necessary documents
The BRDO calculated that you would need to go through15-18 procedures and collect about 30-40 documents to open a restaurant in Ukraine. However, experts say that many procedures, starting from the moment of registering a business entity, have been already simplified. For example, you can register with the state registrar via the Internet. But this does not save entrepreneurs from the need to visit a tax office.
It is obvious that you need to understand the model of your future business even at the very first stage of preparation of documents. “Will you be engaged only in cooking borscht or pizza dishes? Or may be, you also intend to sell alcohol, be engaged in serving, organize food delivery or others?” the co-owner of the АRT Éclair cafe Evgen Yelizaryev explains. Indeed, the answers to these questions directly depend on how many procedures you need to go through and how many permits to receive.
It is also important to determine the form of doing business: the company will work as a self-employed individual or as a legal entity. Statistics show that the first form of doing business is much more popular than the other one: about 80-90% of restaurants, cafes and other catering facilities work as self-employed individuals.
The reason is not only that self-employed individuals have a much simpler accounting system. But also it is due to the fact that registrars of self-employed persons have the much lower tax burden. In addition, self-employed individuals paying a single tax, which are included to the first group (up to 200 thousand hryvnas of annual turnover) or the second one (up to 1 million
hryvnas of annual turnover), have another advantage – they do not need to use payment transactions recorders (PTR).
If a facility’s turnover is from 1 to 5 million hryvnas per year, it will still be necessary to register PTRs. But the entrepreneur will get another advantage: only this group can cooperate with clients-legal entities, for example, organize catering services.
You will need to spend not only money but also time to install and maintain cash registers. Actually, BRDO experts say that according to the law, this procedure is complicated: PTRs should be registered in the tax office, sealed by its producer, and then you will also need to keep a cash book and duplicate all transactions per day in it. Both entrepreneurs and state regulators believe that the last requirement is an unnecessary outdated rule.
You can learn more about the full procedure to register and obtain all permitting documents as well as possible reasons for the refusal on the PRO platform for effective regulation.
What you need to know when you open a restaurant
Despite the fact that there is a moratorium on business inspections by the end of 2017 in Ukraine, restaurateurs and state controllers face with a specific situation. The controllers still have the right to inspect companies on the basis of complaints of individuals. BRDO experts say that in the case of restaurant business inspections, control bodies are acting as if nothing had happened. Therefore, experienced restaurateurs pay attention to several key rules that should be followed.
It is necessary to ensure that the premises where the restaurant is located strictly meets the fire regulations. They say, this is not only to satisfy state controllers, but it is also a clear need you can not make savings on. “Even if nothing is burned out, but it is just smoky, you will immediately have all types of inspections,” Evgen Yelizaryev says. “And if they find a non-compliance with fire regulations, you will not be allowed to work further.”
It is important to pay attention to the drains that should be installed through grease removal tanks, as well as to the kitchen’s ventilation. After all, if the smells impact on the neighbors, they will certainly complain, and it threatens with inspections for business. At the same time, there are still outdated requirements for the number of kitchen spaces and their area.
Those facilities, which intend to make food themselves, will have to register also as “operators of food production” and comply with state standards for cooking dishes. The state still defines technological maps for the production of food products, for how they are stored and for the timing of their sale.
However, if the restaurant decides to cook something special, which the state does not envisage, it will have to get the technical conditions for this dish. And as experts on state regulation say, here the problems begin, because it is quite difficult to obtain technical conditions in Ukraine. It is not least because there is the lack of sufficient amount and quality of laboratories that could check the safety of a new product.
Therefore, Ukrainian restaurants are trying to adapt their products to the government’s standards. And whatever unusual dish was not invented by the restaurant, it will be, conventionally, a Kyiv chicken in technological terms.
How much money will you need to start
Entrepreneurs and experts say that the cost of entering the market depends on many factors. First of all, it depends on the cost of rent, the number of staff, repairs and equipment. The opening of the restaurant will cost you at least from $100 to $300 thousand or even more.
Source: epravda.com.ua.
In many Western countries, the issue of monetary measurement of non-material values is the day-to-day work of government bodies. In Ukraine, it’s just the beginning.
Life – 11.8 million hryvnas, escape from disability – 3.5 million hryvnas, prevention of rape in the prison – 208 thousand hryvnas, prevention of terrorist acts on a plane – 1 billion hryvnas.
These prices are neither a price list of a fraud-healer, reflections on the future nor a work of fiction.
This is an indicative example of a price tag, which should be used by every government body in daily activities.
Imagine that some type of production on average causes death of 20 people each year. Measures that will help avoid these deaths will cost the state, enterprises and consumers 100 million hryvnas per year. Should the state make such measures mandatory? Are 20 lives worth 100 million hryvnas? And what if it is 2 billion hryvnas?
Another example is the financing of construction of a cycle path, which will be used, for example, by one hundred people every day. Does a gain in health of this amount of people recompense the investment of 50 million hryvnas? And what if it is 100 million hryvnas?
We will get well-reasoned answers only when we can determine the price of everything that is usually considered to be non-material: life, health, diseases, disability, honor and dignity, air, forest or river purity. Without such a price tag, all management decisions will be taken by intuition.
In many Western countries, the issue of monetary measurement of non-material values is the day-to-day work of government bodies. For the implementation of state regulation, the price of human life in the US is $9 million, in New Zealand – $4.2 million.
The state bodies do not pick this price at random, it is based on how much people themselves are willing to pay for reducing the risk of dying.
For example, if you are ready to pay no more than Y hryvnas for a bicycle helmet, which, conditionally, will save you from the risk of dying in one case out of million, then you estimate the cost of your life in the amount of Y to multiply by 1 million.
You can also calculate the difference in wages of employees having a certain production risk of death, for example, one to 10 thousand, and those employees who do not have such a risk. If their wage is more than $600, then one life will cost $6 million: 600 multiplied by 10 thousand.
The cost of life sometimes includes the cost of damage to health or disability, when, for example, losing a leg will be equated to 0.3 VSL – the indicator of the “value of statistical life”.
Of course, very few people will agree to die for a certain amount of money. In fact, VSL is the statistical cost of mortal risk, and this risk should be insignificant. In other circumstances, this model can not work.
Price of health and environment
Measurement of the price of other values is even a more complicated thing, but it still can be done. You can apply a model based on measuring the difference between the value of different products, for example, the difference in prices of buildings in clean and polluted areas.
You can try to calculate travel expenses: we often spend money on a trip to a holiday resort with the better environmental conditions. The cost of such travels is a monetary value of the purity of environment.
In addition, we spend on preventing the negative consequences: buy filters for water, boil water, pay for preventive medical measures. These expenses also allow to determine the value of certain benefits. It’s even easier to estimate the cost of a disease: it’s the cost of treatment together with time and incomes lost.
Sometimes, for the purpose of estimating the value of benefits, it is calculated how much money are needed to recover them in the case of elimination or creation of an adequate analogy.
The use of such calculations in the United States made it possible to estimate that spending $8.2 million to introduce new rules in prisons would be reasonable if this allowed to reduce the number of rapes in prisons by 55 cases per year.
Some new rules for checking air cargo with a cost of $1.9 billion and $203 million additionally for freight carriages are reasonable, if they allow preventing one terrorist attack per 2.6 years.
Ukrainian realities
In Ukraine, the basic mechanisms for calculating costs and benefits are already in use. When developing a draft regulatory act, each executive body prepares the regulatory impact analysis that should include a description of costs and benefits. However, there is still no scale that would allow to compare non-cash benefits and cash costs.
There are only some acts with hints for monetary valuation of non-material values.
For example, Article 187 of the Criminal Code equates serious bodily injuries with damage in the amount of 200 thousand hryvnas, Article 189 – the same injuries with 480 thousand hryvnas, and Article 194 equates the same 480 thousand hryvnas with the death of people. Why these assessments are so different within the single law is anybody’s guess.
While there are no domestic researches, we can use the foreign ones. One of this year’s foreign analytical materials states that the price of Ukrainian statistical life should be about $454 thousand. What conclusions can be drawn if we take this figure as a basis?
For example, in 2016, as a result of car accidents, 3,410 people died. This means that potential government spending on a successful road safety program can be justified at 1.5 billion annually. If you add a number of non-fatal injuries, this amount may increase at least twice.
The introduction of an effective assessment system will make possible the existence of objective competition between individual reform initiatives. The resources of the state are limited, there are only funds enough for individual projects, therefore they should choose only those initiatives, which will bring the greatest amount of excess of benefits over costs.
This will allow to move away from the practice of choosing first-priority measures by policy makers at the intuitive level or on the basis of reputational or rating consequences.
Not by money alone
Do not you like that money will be the only measure of everything? You are not alone. Many analysts doubt that the monetary equivalent is the most optimal way of comparing the results of state influence.
Their doubts are based on the ability of people to adapt quickly, so increasing or decreasing revenues affects the sense of happiness only for a short period of time.
The indicators of subjective well-being of the people who won the lottery, and indicators of the population of countries, which GDP per capita has grown for several successive years, determined the short-term nature of this effect.
In addition, money is a status. Increasing the status of one person leads to a relative decrease in the status of another person. Therefore, in the case of one person’s enrichment, the overall level of social well-being may remain the same.
However, such criticism has not yet produced any decent competitor of money as a universal equivalent. Because of this, even romantics in state regulation still have to use the pragmatic monetary assessment.
Of course, even the most talented economists will not be able to calculate the value of all the benefits. Sometimes it is difficult to do without alternative methods of calculation: to choose the minimum and maximum limits of the value of the benefit, to calculate quantitative indicators instead of the monetary ones, for example, the number of saved animals instead of their value.
In any case, monetary and quantitative approaches will allow us to move from demagoguery to careful priority ranking and increasing the effectiveness of the state.
The software development market is the only export industry in Ukraine, which is growing steadily while showing an increase of 58% in 2013-2016. The export software development services is amounted to $3.2 billion in 2016, which brought the industry to the third place in terms of total currency earnings and provided 26% of total export of services. The market creates about 100 thousand highly paid jobs and has huge potential for growth.
However, instability of tax regulation and the lack of specialists are significant barriers for the industry’s development. The government, business and market representatives and experts discussed the ways of eliminating barriers in the market during the Roundtable “IT Future Talks: Regulation of the Software Development Market” as part of the Public Dialogue #PRODialog held at the UNIT.City on October 19.
The Better Regulation Delivery Office (BRDO) has analyzed the regulatory framework of the industry and presented the results in the Green Paper. According to the expert opinion, the rapid development of the sector was facilitated by the lack of specific industry regulation – rules and requirements for IT companies, their services or products, as well as the opportunity to work under favorable tax conditions.
“This is a successful example of an efficient self-regulated market, and this should not be changed. The capitalization of the 10 largest Ukrainian IT companies currently exceeds $4 billion, and raw material producing giants, their value is based on human capital. If the state provides the stable business environment, in particular taxation, as well as regulation of several regulatory barriers, industry profits can grow to $6 billion in 2020,” the head of IT sector at BRDO Oleksandr Kubrakov assures.
Wages in the IT sector are 5 times higher than the average in the country. At the same time, high wages remain not only in the capital, but also in regions where 56% of specialists work, and this is a significant factor of regional development.
“The industry is a powerful economic multiplier: 1 job in IT creates additional 3 jobs for related occupations. But the potential is much larger, and since the IT sector is the area, where Ukraine can become a global innovator, we should go safely in this direction,” the First Deputy Minister of Economic Development and Trade of Ukraine Maksim Nefyodov said.
The amount of direct taxes and fees paid by industry representatives has increased by 88% over the past 3 years, reaching 7.1 billion hryvnas in 2016. Given that the vast majority of tax deductions from IT companies are related to paying for work of specialists, the sector is very sensitive to taxation conditions. For example, while companies in the raw material sectors spend on such taxes no more than 3% of their income, IT companies – 19%. Thus, the simplified model of taxation not only allows optimizing the tax burden on businesses, but it is also a factor giving the Ukrainian IT industry a competitive advantage in world markets. At the same time, it should be understood that due to the instability and riskiness of this model, software market companies are limited in the long-term planning and investment attraction, which hinders the development of the industry.
The acting Head of Trade and Economic Section of the EU Delegation to Ukraine Joselin Gyuton also shared this opinion: “Ukraine is one of the most attractive countries for placing orders in the area of outsourcing business processes and IT. That is, it is not just a potential, it already creates real opportunities, makes a significant contribution to the country’s GDP. The lack of regulation is a clear stimulus. The business requires stable predictable conditions for further development in the global IT market.”
Another limiting factor is the labor shortage in the market. The reasons for the personnel shortage include the need to improve industry-specific education, a significant outflow of IT graduates from the country reaching 30%, as well as the difficulties of attracting foreign specialists to the market. In addition, the issue of importing prototypes of equipment for testing and developing software in the country should be resolved.
“Today there are three clear goals for Ukraine and the IT industry and three ways to achieve them. First, to develop the aspect that could grow independently. The IT industry has every chance to return to the growth of 25-30% annually. The second goal is the development of the domestic market, because it is difficult to expect the stable development of the industry in the long term without it. And the third one is the support for startups, product oriented companies, since they can bring significant investments in the country. The steps described in the Green Paper will help to achieve these goals: stable tax conditions, quality changes in the education system and a clear migration policy,” the President of the Association “Information Technologies of Ukraine”, Head of ERAM Ukraine Yuriy Antonyuk said.
The event was attended by the Head of the State Agency for E-Governance of Ukraine Oleksandr Ryzhenko, the Director of the Department for Tax Policy of the Ministry of Finance Viktor Ovcharenko, representatives of IT-business, experts and the public. The Head of Verkhovna Rada Committee for Informatization and Communications Oleksnadr Danchenko and the Vice-Chairman of the Verkhovna Rada Committee on Science and Education Oleksiy Skrypnyk participated by Skype.
The software development market is the only export industry in Ukraine, which is growing steadily while showing an increase of 58% in 2013-2016. The export software development services is amounted to $3.2 billion in 2016, which brought the industry to the third place in terms of total currency earnings and provided 26% of total export of services. The market creates about 100 thousand highly paid jobs and has huge potential for growth.
However, instability of tax regulation and the lack of specialists are significant barriers for the industry’s development. The government, business and market representatives and experts discussed the ways of eliminating barriers in the market during the Roundtable “IT Future Talks: Regulation of the Software Development Market” as part of the Public Dialogue #PRODialog held at the UNIT.City on October 19.
The Better Regulation Delivery Office (BRDO) has analyzed the regulatory framework of the industry and presented the results in the Green Paper. According to the expert opinion, the rapid development of the sector was facilitated by the lack of specific industry regulation – rules and requirements for IT companies, their services or products, as well as the opportunity to work under favorable tax conditions.
“This is a successful example of an efficient self-regulated market, and this should not be changed. The capitalization of the 10 largest Ukrainian IT companies currently exceeds $4 billion, and raw material producing giants, their value is based on human capital. If the state provides the stable business environment, in particular taxation, as well as regulation of several regulatory barriers, industry profits can grow to $6 billion in 2020,” the head of IT sector at BRDO Oleksandr Kubrakov assures.
Wages in the IT sector are 5 times higher than the average in the country. At the same time, high wages remain not only in the capital, but also in regions where 56% of specialists work, and this is a significant factor of regional development.
“The industry is a powerful economic multiplier: 1 job in IT creates additional 3 jobs for related occupations. But the potential is much larger, and since the IT sector is the area, where Ukraine can become a global innovator, we should go safely in this direction,” the First Deputy Minister of Economic Development and Trade of Ukraine Maksim Nefyodov said.
The amount of direct taxes and fees paid by industry representatives has increased by 88% over the past 3 years, reaching 7.1 billion hryvnas in 2016. Given that the vast majority of tax deductions from IT companies are related to paying for work of specialists, the sector is very sensitive to taxation conditions. For example, while companies in the raw material sectors spend on such taxes no more than 3% of their income, IT companies – 19%. Thus, the simplified model of taxation not only allows optimizing the tax burden on businesses, but it is also a factor giving the Ukrainian IT industry a competitive advantage in world markets. At the same time, it should be understood that due to the instability and riskiness of this model, software market companies are limited in the long-term planning and investment attraction, which hinders the development of the industry.
The acting Head of Trade and Economic Section of the EU Delegation to Ukraine Joselin Gyuton also shared this opinion: “Ukraine is one of the most attractive countries for placing orders in the area of outsourcing business processes and IT. That is, it is not just a potential, it already creates real opportunities, makes a significant contribution to the country’s GDP. The lack of regulation is a clear stimulus. The business requires stable predictable conditions for further development in the global IT market.”
Another limiting factor is the labor shortage in the market. The reasons for the personnel shortage include the need to improve industry-specific education, a significant outflow of IT graduates from the country reaching 30%, as well as the difficulties of attracting foreign specialists to the market. In addition, the issue of importing prototypes of equipment for testing and developing software in the country should be resolved.
“Today there are three clear goals for Ukraine and the IT industry and three ways to achieve them. First, to develop the aspect that could grow independently. The IT industry has every chance to return to the growth of 25-30% annually. The second goal is the development of the domestic market, because it is difficult to expect the stable development of the industry in the long term without it. And the third one is the support for startups, product oriented companies, since they can bring significant investments in the country. The steps described in the Green Paper will help to achieve these goals: stable tax conditions, quality changes in the education system and a clear migration policy,” the President of the Association “Information Technologies of Ukraine”, Head of ERAM Ukraine Yuriy Antonyuk said.
The event was attended by the Head of the State Agency for E-Governance of Ukraine Oleksandr Ryzhenko, the Director of the Department for Tax Policy of the Ministry of Finance Viktor Ovcharenko, representatives of IT-business, experts and the public. The Head of Verkhovna Rada Committee for Informatization and Communications Oleksnadr Danchenko and the Vice-Chairman of the Verkhovna Rada Committee on Science and Education Oleksiy Skrypnyk participated by Skype.
On October 20, at the Get Business Festival, the BRDO Head Oleksiy Honcharuk and the Chairman of the Management Board of Oschadbank signed a memorandum on cooperation to implement business projects for small and medium enterprises.
“Today we joined efforts with Oschadbank to form a new stratum of high-quality and fair business, which will become the locomotive of our economy,” the BRDO Head Oleksiy Honcharuk said. “We offer simple answers to complicated issues. Would you like to open a restaurant, a mini bakery, a photo studio or a beauty salon? Visit regulation.gov.ua, select the case and find out how many procedures you will need to go through, how many certificates and permits to obtain. Calculate everything and “Build Your Own”. We will be here with you and do everything to make the state and its services as convenient as possible.”
“The world is changing. Advanced economies are developing on the basis of small and medium-sized enterprises more than ever. The country needs entrepreneurs. At least 2 million genuine, proactive and courageous ones – the Oshchadbank’s team estimated that this number could drastically change the environment in the country’s economy. Oshchadbank combined efforts with the BRDO in order to have such entrepreneurs within the framework of the “Build Your Own” program. Join!” the Chairman of the Management Board of Oschadbank Andriy Pyshnyy said.
The memorandum between the Better Regulation Delivery Office and Oschadbank envisages not only the cooperation and implementation of business projects in the sphere of small and medium-sized enterprises, but also improving the business climate, identifying and overcoming the existing barriers in its development, as well as sharing best practices for SME support, etc.
86 speakers, which are the best businessmen in the country, shared their experience with over three thousand active and prospective entrepreneurs at the Get Business Festival in the very heart of Kyiv.
Source: radiosvoboda.org.
Experts say that the third place in Ukraine’s exports is not the limit to IT industry development. According to the IT specialist Oleksandr Kubrakov, the Ukrainian IT industry can grow to $5-6 billion by 2020. Experts agree that the secret to the success of Ukrainian programmers and other specialists in quality education and simplified taxation.
The BRDO IT Sector Head Oleksandr Kubrakov explains the rapid development of the industry by the fact that it is 99% export-oriented, that is, the specialists of this sector do not depend on economic fluctuations within the country. Kubrakov told in the “Rankova Svoboda” radio program that the IT industry has been existing in Ukraine for 20 years and Ukrainian specialists have already gained a certain reputation in the world market.
“Everyone knows that they taking on the most complicated projects and perform them on a timely basis, and the price/quality ratio is acceptable while being a win-win for everyone. To my mind, Ukrainian companies will develop and gain their market share,” he said.
According to the expert, today exports of the Ukrainian software industry amounted to 3.2 billion dollars.
“Some estimates suggest that if the state guarantees that business conditions will not be changed, the industry may grow to $5-6 billion in 2020,” Kubrakov predicts.
He convinces that Ukrainian IT specialists will be able to compete with foreign specialists, and gives clear examples of their cooperation with global companies. “Self-service kiosks at McDonalds, which are all over the world… they are made in Ukraine by the Global Logic company – from idea to realization,” he says.
He also mentioned the EPAM company, which has developed a billing system for a retailing company in Canada, and the automotive industry: “About 80 automobile producers are developing software for their cars, for navigation systems in Ukraine. There are 3-4 Ukrainian companies that specialize in this area.”
Oleksandr Kubrakov also recognize the significant role of education in the development of the Ukrainian IT industry. At the same time, he assures that an excessive amount of employees in the market is not predicted: “If you look at the number of open vacancies in Ukrainian companies, you will see that there are hundreds of them. Therefore, there will be no overproduction.”
This is also proved by the figures on employment he provides: according to Kubrakov, 70-80% of graduates from the 12 most famous technical universities of Ukraine are working in the IT industry.
In order to fully comply with the requirements of our legislation, collect an incredible amount of certificates, documents, licenses and others, entrepreneurs simply should forget about their business for an indefinite period of time and spend a lot of time to obtain approval documents. And if you think that then this will work as expected – no, they will be still to blame for something. Here is the question of how to do everything in accordance with the law and, at the same time, not go into bankruptcy and not be in arrears. After all, every downtime day in business means a certain risk and losses.
Today starting a business in Ukraine is a real challenge. It is time-consuming, expensive and problematic. We offer clear answers to complicated questions on the PRO platform. Take up this challenge, do your job, build a business. We will be here with you and do everything to make the state and its services as convenient as possible.
It all started with the fact that we had a task to analyze the legislation to improve the rules for business in the framework of the PRO project – the Platform for Effective Regulation that we are implementing. And our goal is not just to prepare a regular report, which will die under the dust on the shelves of one of the Ministries, but to make a really effective platform for those who are just planning to start their business or have long been working on the market and are planning to grow and develop. In addition, the information published on the portal could be updated, supplemented and used in a timely manner.
We have created a unique platform that has no analogues in the world. Anyone who visits our website can obtain clear instructions on how to do a certain business. Today, users can choose any area among 15 cases available on the website: restaurants, beauty salons, sawmills, kindergartens, electric charging stations, etc. We are planning to increase their amount to 30 by the end of the year. Vinnytsia, Mykolaiv and Chernivtsi local authorities and non-governmental organizations have already joined the project.
In parallel with the development of the Platform, analysts of the Better Regulation Delivery Office prepared the ranking “Ease of doing business. Regional doing business” to assess how easy and convenient it is to conduct business activities in the regions of Ukraine. BRDO experts adapted the World Bank’s methodology and interviewed hundreds of domestic entrepreneurs. Four areas of interaction between entrepreneurs and the government were used as the basis, including: paying local taxes, obtaining construction permits, registering land plots for real estate and connecting to electricity networks.
For example, in the Kherson region, it will take on average 147 days to obtain construction permits, while in the Odessa region – only 68 days. Such factors do not create favorable conditions for investments, and sometimes they really transform into a stop sign for entrepreneurs. In order to make life easier for entrepreneurs and create the most comfortable business environment, BRDO experts developed recommendations to resolve both such situations and a number of other issues identified during the study for each region of Ukraine.
I am sure that most of future entrepreneurs who want to open their business, such as a restaurant or bakery, are not always aware of the huge amount of work that they will need to do and all risks they will face with. And it is unlikely that they wake up thinking of what certificate they can get today. This is a minor issue, which ordinary people are not interested in, because most often they imagine a wonderful result they want to have at the end of this process. They are interested in everything taken as a whole.
We have made the first step and standardized the work of our experts. From now on, everyone who visits our portal will be able to see the full list of procedures he/she will need to go through to start a business with minimal expenses and losses. All procedures, licenses, descriptions of these licenses, sanctions and what will happen if you do not obtain a license.
You visit the website, select the appropriate case, for example, “Restaurant”, take a kind of test and get a personalized answer: how many procedures you will need to go through, what documents to obtain and how long it takes.
In such a way, entrepreneurs can protect themselves from “sudden” inspections, stresses and bribes. Because everything will be okay with their business. Moreover, taking into account our recommendations, they will be able to develop own action plans and not to be in arrears.
Would you like to learn more about this? Visit our page regulation.gov.ua