On August 30, the Ministry of Regional Development, Construction and Housing and Communal Services of Ukraine started a systematic review of regulations. The first meeting of the working group on this issue with the participation of the First Deputy Minister Vyacheslav Nehoda marked the beginning of this process.
The Head of the Better Regulation Delivery Office (BRDO) Oleksiy Honcharuk and the head of Construction sector Olena Shulyak who actually is a member of the working group attended this event.
Oleksiy Honcharuk introduced the participants to the general principles of the methodology of systematic assessment of the regulatory environment developed by the BRDO – Rolling Review that experts adopted from the British model by simplifying and adapting it to the Ukrainian context. These practices of BRDO experts became the basis of Guidelines to provide the first stage of the systematic review of regulatory acts – the inventory – approved by the Ministry of Economic Development and the State Regulatory Service.
“According to preliminary estimates of our experts, just the construction sector is regulated by nearly 1,000 legal acts with signs of having a regulatory ground. A comprehensive inventory, in which not only the representatives of the Ministry and the SRS of Ukraine but also our experts will be directly involved, will allow to create grounds to reform the regulatory framework of the construction sector and move to the second stage – directly to the implementation of the new standard of effective regulation by taking into account business interests,” Olena Shulyak summed up the results of the working group.
The working group on the systematic review of regulations established under the Ministry of Regional Development, Construction and Housing Services of Ukraine is one of the five groups established at line ministries by order of the First Vice-Prime Minister of Ukraine Stepan Kubiv to conduct the objective assessment of the regulatory environment, the inventory and cleaning it in the future. This order was the result of the BRDO initiative to the Ministry of Economic Development and Trade of Ukraine regarding conducting the systematic review of regulatory legal acts.
After the inventory process is completed, a public plan of systematic review of regulatory acts in the related economy sectors will be approved. The process will take place with the active participation of businesses and the public.
The Better Regulation Delivery Office (BRDO) is an independent analytical center funded by the European Union under the FORBIZ project and as part of the EU4Business Initiative.
The views expressed in the publication do not necessarily reflect the opinions of the European Commission.
The Vice-Prime Minister of Ukraine Stepan Kubiv and the Head of State Regulatory Service Ksenia Lyapina approved the Methodological recommendations on the providing the first stage of systemic review of regulatory acts that take into account the best international practices and previous domestic experience.
According to the Methodological recommendations, the first stage of review will provide the inventory of regulatory framework. Particularly, the review of acts, tasks, tools and markets in every sector. It will allow to form a list of regulations that don’t comply with principles of the regulatory policy for their further quality assessment and efficiency measurement.
After the inventory process is completed, the public plan of systemic review of regulations in the related economic spheres will be approved. The process will take place with the active participation of businesses and the public.
Systemic review is an element of the Concept of effective regulation which was approved yesterday at the meeting of the National Council of Reforms.
The Head of the State Regulatory Service of Ukraine announced that at the National Reform Council’s meeting that took place today. According to her, there are two methods to create the better regulation, which are needed to be currently used in an integrated manner. A jet method is an adoption of the Action Plan concerning the deregulation of the economic activity consisting of business appeals, and proactive method – a review of the regulation system in the certain spheres of the economic management. The second method is directed at the review of the regulatory and legal framework to regulate entire markets. So, firstly it is necessary to define the markets, regulation affecting on it and then the whole system of this regulation is being analyzed according to its compliance with the regulatory policy principles.
“The accelerated review of the legal framework of regulatory acts has already taken place in 2005 and 2010. Then some thousands of excessive regulatory acts were abolished, but the business did not feel any positive consequences. If nowadays we complexly come to the creation of quality regulatory environment taking into consideration the previous experience then we will be able to create the better regulatory framework for the business in all spheres,” Ksenia Lyapina said.
Source: the press service of the State Regulatory Service.
The First Vice-Prime Minister Stepan Kubiv and the Deputy Minister of Economic Development Maksim Nefyodov presented the concept along with the plans on deregulation reform at the National Council of Reforms.
“Today we focus on building the effective regulation. It is necessary to abandon the illusion that you can just abolish everything. We need to create a regulatory framework that, on the one hand, does not burden the business, but on the other hand, allows ensuring the necessary level of security and creating equal competitive positions,” Stepan Kubiv believes.
According to him, the efficient work with the Parliament should be the basis for building the effective regulation. “Today, there are 39 draft laws prepared as a part of the Deregulation Plan and the Doing Business Plan in the Verkhovna Rada. After the opening a new session, the Parliament should consider at least 5 deregulation laws per week. I ask the Chairman of the Verkhovna Rada Andriy Parubiy to organize the so-called economic units during each session week. Only in this case we will consider and adopt these 39 laws by the end of 2016,” he said.
Kubiv also said that the Ministry of Economic Development together with the Better Regulation Delivery Office (BRDO) started a comprehensive review of the regulatory framework. At this moment, there are working groups created at 4 ministries. The key objective of these working groups is to review existing regulations, identify the inefficient regulation and develop proposals on amendments.
Maksim Nefyodov emphasized the need for the state supervision (control) reform: “In spite of a significantly reduced number of inspections at enterprises in recent years, there are still too many inspections conducted. It is expected that more than 200,000 scheduled and unscheduled inspections will be conducted in 2016. However, the effectiveness of these inspections is very questionable. The business practice demonstrates that the result of almost every inspection is some payment, while the official statistics show that only 5% of inspections are resulted in official regulations. We have prepared a package of draft laws that should significantly change the situation in this area and turn inspections into service organizations.”
All proposals of the Ministry of Economic Development, including the concept of Effective Regulation were approved and priority laws proposed for consideration in the first weeks of the new session of the Verkhovna Rada of Ukraine gained support.
Source: the press service of the Ministry of Economic Development
Today the head of the Better Regulation Delivery Office (BRDO) Oleksiy Honcharuk participated in the first meeting of a working group on the rolling review of regulations at the Ministry of Infrastructure of Ukraine. The meeting was held under the chairmanship of the Deputy Minister Dmytro Romensky.
Opening the meeting, the Deputy Minister stressed that this process was very important to build a comfortable business environment in the country and improve the efficiency of regulatory environment.
“We should review all regulatory acts systematically and globally and identify those acts that prevent the business development requiring to be revised, simplified and improved,” Dmytro Romensky said and added that this process would take place in close cooperation between the Ministry and the Better Regulation Delivery Office, the State Regulatory Service and the business directly.
Oleksiy Honcharuk, in his turn, said that the main purpose of the rolling review is to assess the essence of the decisions made and their efficiency as all European countries have done.
“This will allow us not only to synchronize with the European practice, but also start creating a new standard of regulations and rules as well as increase the level of trust between businesses and the state,” he stressed.
The BRDO head said that the review was based on the Office’s Rolling Review method adopted from the British model while being simplified and adapted to the Ukrainian context. Currently, this method is refined with the help of the Ministry of Economic Development and Trade and the State Regulatory Service and the relevant guidelines will be prepared the next week.
He also informed that the rolling review process would have three main tasks – the cleaning up of the regulatory environment from “litter”, which is more than 35% now, the quality assessment of regulatory acts and increasing the level of business involvement in the process. The rolling review will be started with the inventory, based on the results of which the public plan for the rolling review of regulations will be developed. Then there will be the assessment, the reporting and drafting amendments to improve the regulation.
Oleksiy Honcharuk assured that the BRDO Office would provide the methodological and expert assistance in the review process. The BRDO experts were included to the working group at the Ministry of Infrastructure as well as to all working groups, which is being established by other ministries.
For reference
The rolling review of all regulatory acts will be conducted in accordance with the order of the First Vice-Prime Minister of Ukraine Stepan Kubiv. The rolling review will cover the following sectors: agriculture and food, construction, energy, transport and infrastructure, IT and telecommunications.
For the purpose of the rolling review, the line ministries established working groups that will report the results this September. The Ministry of Economic Development will coordinate this activity.
*The photo of the press service of the Ministry of Infrastructure of Ukraine
The Government started to put state regulatory acts to the rights. The First Vice-Prime Minister of Ukraine Stepan Kubiv signed an order to conduct a system review of regulations. Website “24” journalists found out how it would happen and what benefits it would bring.
The regulatory environment in Ukraine is “littered”: it has a lot of illegal, irrelevant and ineffective acts – there are more than 35% of them now. It complicates the work of business and repels investors.
Having commented the Government’s intentions to conduct the planned inventory for the website “24”, the Head of Better Regulation Delivery Office (BRDO) Oleksiy Honcharuk compared the government machine with the computer: laws, norms and documents are like files. And just as it is periodically needed to launch an antivirus to ensure the computer system working properly, it is also necessary to launch such regulatory framework system cleaning in the state every few years – firstly, to throw out all the “garbage”, secondly, everything that would remain could be measured in terms of its efficiency.
“The trouble of Ukraine is that the efficiency of the decisions is not measured. For example, some permit or inspection is being implemented – all these things affect the business, limit it in some way. And we cannot say exactly whether the use of these tools for achieving goals would be efficient, whether we would obtain expected results or whether this document provides something – as a rule, there is no such estimation,” Honcharuk said.
In civilized countries, the decisions are made in such a manner: the problem is defined, a problem solution changing the problem indicators most adequately, is chosen from the possible options, after the decision was implemented they collect the information about consequences of this decision, and after the analysis of this information, they make a conclusion about the reconsidering the problem. This “problem-solution-information collection-analysis-reconsidering the decision” cycle is actually called the Deming Cycle, and it is a classics model of making decisions in the world. It allows countries to see an efficiency of decisions they make in the perspective and improve this efficiency. The necessity to improve the decisions and mechanisms appears as a result of a system approach.
In Ukraine, it happens on a chance basis.
“Someone stumbled upon an idea to reduce the amount of licenses – they were reduced. It seems like the pressure on businesses decreased. However, in fact, sometimes it is even increased, because if there is no official procedure, officials usually start to create their own schemes at the local level,” the expert explained.
That is why the idea of the regulatory acts review, Honcharuk says, is to analyze the quality of decisions made in 5 important sectors of the economy (agriculture, construction, energy, transport and infrastructure and IT). And as a result, some documents will be removed if they are not needed, or predicted in terms of their expected efficiency and can be reviewed again, for example, in a year. Then we can speak about the improvement of the regulation.
Who will check
The First Vice Prime Minister Stepan Kubiv instructed relevant ministries to organize this work. Kubiv and the Ministry of Economy will coordinate it. So, the review will be organized at the highest level.
In the ministries, working groups will be created by August 16. Their task is the next: to define the framework to be cleaned. Every ministry has to determine that it is responsible for 28 markets nominally, where 54 regulatory tools are used. This is being regulated, for example, by 400 documents.
“These cases of applying regulatory acts to the markets must be reviewed. An idea for the beginning is to understand how many such “stuff” we have, what we have to work with,” Honcharuk stated.
Preliminary analysis
The Better Regulation Delivery Office (BRDO) specialists made preliminary system review of regulatory acts. According to their preliminary estimates, about a third of regulations must be removed.
“This analysis process has no sense without the ministries and business involvement, as in this case the process itself is a value. It is really important to use it for creating a new standard of a conversation between business and state to increase the level of trust between them. It is also important not to “flounder” to estimation of the documents on formal grounds because it is important not only to estimate the quality of the documents, but the quality of regulatory decisions as well,” Honcharuk stated.
For example, if we take a decision to use a licensing of concrete market, then it is necessary to estimate the decision on the tool use but not the efficiency of the document had been implemented it. Then we can make a conclusion whether we chose and used the tool adequately, whether we used it in time or what result it led to.
Time limits
According to Better Regulation Delivery Office (BRDO) specialists, one year will be enough to conduct the analysis of the state regulatory framework.
“But we will see. We can complete “a five-year industrial plan/pyatiletka” during the year, but there is a question of quality. Such large-scale analysis will be held in Ukraine first time. And this estimation must pass not just for the “tick” near the every regulatory act, but to reinstall the rules of doing business in many markets. It is important because real people, real businesses will make these decisions and this is what the economy consists of,” Honcharuk explained.
According to expert, interim results of the planned review will be known in some months, because it will be completed for different markets in different time. So, we can learn about it soon.
The air transport market has shown good results for the last seven months. Our airports have 15% of growth, and national air companies have about 23%.
The development of international transfer carriages by the UIA air company through the Boryspil Airport and the increase of charter programs mainly to Turkey are two engines of growth.
However, this positive tendency has potential risks. Almost 70% of all Ukrainian airline companies is accounted for by one transporter – the UIA. Both the business competition and the operation stability of the airports, which is practically tied up of one transporter, are suffering in this case. These problems are being discussed periodically, but the regulator doesn’t have the common strategic vision yet.
However, it is should be noted that much has been done to promote the Ukrainian air transportation market. Particularly, the existing airport infrastructure allows serving much bigger amount of flights than it is presently. Also, the motivation program for airline companies to open new routes approved by the Government has started to work.
At the same time we must remember that any measures of additional promotion are expenses from the state budget, which possibilities are very, very limited. Here it is important to set priorities adequately.
It is needed to understand that air transportation in Ukraine is not a segment that requires active artificial promotion. The main priority is an urban public transport and suburban rail transportation. We need to concentrate upon the renewal of electrical trains rolling equipment, service stations and platforms. The parks of urban buses, trolleybuses and trams also need the renewal and improvement.
It is that massive social segment providing Ukrainian citizens with the billions of trips per year. Even, if it is mainly “at work – from work”. While about 2 % of population uses the air transport.
This article was published on the Dzerkalo Tyzhnya website
Imagine a serious football game without any rules and referees. Normal game will continue till the first hard collision or serious violation. What’s next? The strongest will win…
Business is the same sport but with much more complicated rules. State is a referee in this game. However, it is not only a monopolist on the use of legal abuse at a playing field, but also a regulator – a creator, a source and guarantor of observance of rules. Avoiding these functions means that you agree with the law of jungles that doesn’t imply the favorable investment climate and economic growth.
Therefore, we need not to abolish the rules, but improve them to create a comfortable regulatory environment for business in Ukraine. Below you will find 12 system defects, the removal of which will fundamentally change the quality of regulation in Ukraine.
Almost every institutional body has its own procedure for interaction with businesses in Ukraine. Quite frequently it is provided only by internal documents of this body. Some of them accept the documents by mail, while others – only by using a self-made wooden box. In some cases, it is possible to track the documents and, may be, improve them, but in other cases, documents can be returned by mail within 30 days because of misplaced commas.
Some of them invite you to working bodies’ meetings, while others even don’t notify about the discussion time and place. As a result, we got hundreds of procedures, traditions, nuances and features.
This mess actually gives each unprincipled head of public body a possibility to create unfair procedures for his own goals. The lack of standards for communication between the state and business is the first of the main prerequisites for corruption at the lowest level of the state apparatus. This problem can be eliminated by formalizing a civilized administrative procedure in legislation that would guarantee:
А) standard access to information for business;
B) business participation in making decisions affecting its interests;
C) the right to an administrative appeal.
Now there is an adequate draft law “On Administrative Procedure” developed by the Ministry of Justice of Ukraine. It can be adopted this autumn after some improvements. This will significantly reduce the possibility to manipulate in the regulation and the creation of corrupt schemes.
Tools, by which the state regulates businesses, are divided into standard (provided by an appropriate functional law and used in a variety of cases) and non-standard (created specifically to regulate one case or a narrow circle of cases) tools. Officials in Ukraine are traditionally aiming at inventing non-standard regulation tools to have a monopoly on their use. As a result, the existence of hundreds of exotic pieces of paper gives a great space for manipulation and corruption.
The solution to this problem is to create a “panel” of modern standard tools for state regulation of business, each of which will have a clear procedure for their use provided by law. For this purpose, it is needed to amend the Law of Ukraine “On Principles of the State Regulatory Policy” by adding the chapter “Regulatory means, methods and tools” and bring Art.12-18 of the Commercial Code of Ukraine in line with this chapter.
Organizing a range of tools will simplify the regulation, make it easier to understand and more predictable for businesses and reduce the negative side effects of their use significantly. This will reduce the corruption and increase confidence in the state as a regulator.
In addition to regulator’s functions (creating rules), the state acts as an owner (management of common resources). Awkward integration in implementing these functions creates a natural conflict of interests, which results in inefficiency and corruption. As a consequence, a lack of an adequate system of the common resource management – amber, sand, forest and other fevers. In fact, it is an open robbery of shared resources.
The solution lies in the self-awareness of the state as a civilized owner. This model doesn’t include “permits”, “orders” or “decisions” on access to common resources. Instead, a competitive procedure of the rational asset management based on civil-law contracts, where the state is an equal party of relations, is an organic model.
The implementation of the state function of being the owner should be built in such a way that independent of each other entities will 1) register and control used assets; 2) plan their rational management (including the creation of lots) and 3) ensure the management procedure. This requires adopting a special law that would establish general rules for the rational use of limited shared resources as soon as possible, combining inventories and databases on limited common resources and reforming the State Property Fund.
This will allow to reduce the corruption level significantly, which is particularly important considering our resource-based economy.
Ukraine has retained the total control mind of the state-owner since Soviet times. If you look at the Constitution that guarantees us the state control over the quality and safety of products and ALL kinds of services and activities, you will find out this fact. Therefore, control and supervision are synonyms in Ukraine.
However, these functions should be divided. The control should be used only in cases, where the state acts as an owner or take a real responsibility for things it confirms as a result of this control. In all other cases, the supervision should be exercised.
At the same time, it is necessary to prohibit the integration of control/prosecution (tax police) functions; control/administrative services (Gosgeonedra); control/asset management (Gosgeokadastr) functions within one government body. It is also important to stop exercising the control functions by structures, which are not government bodies.
All these and a number of other important tasks can be solved by adopting the law on inspection activities. This will save businesses from unnecessary pressure in the areas, which could be just supervised, allow the state to save on its activity and reduce corruption among inspection bodies.
In Ukraine, dozens of sanctions to be applied to businesses are included in more than 100 documents of different levels. Also, there is a mess in responsibilities (the criminal responsibility is already used in relation to legal persons, and the administrative one – not yet, but there are special types of responsibility (financial and economic). It creates different procedures for their use. Some penalties are not recognized as sanctions at all (for example, the authorization document cancellation or termination), although they are the sanctions by their nature.
To restore order, all the negative consequences used by the state in relation to businesses for violations (except criminal and civil law cases) should be identified as sanctions and listed in a single document – the Code of Administrative Violations. Application of serious sanctions (which can lead to breaking or causing a significant harm to business activities) should be carried out exclusively by court.
This approach will greatly reduce the corruption component in bringing the businesses to responsibility and simplify the protection of their rights.
“While making the Lenin’s ideas of building a communist society a reality…”. This is not a quote from the Stalin’s or Trotsky’s works, but the text from the legal act, which is still in force in Ukraine regulating the life of every Ukrainian citizen – the Housing Code of Ukraine adopted long ago in 1993. It is not the only one document of this type. There are hundreds of Soviet documents, which have been being in force for 25 years and containing still working rules for businesses.
Decommunization of the regulatory environment seems to be just in time. It was expected that Soviet acts had been valid only until the adoption of national ones regulating the same relations. In practice, the national documents do not normally specify the Soviet documents they replace when being adopted. This leads to the existence of thousands of documents, the legal status of which can’t be determined (valid/invalid/when no longer valid).
We’ve had a lot of opportunities to adopt all the important rules, so the principle should be completely reversed: only documents specifically kept by the decision of the authorized body are valid. This approach was included to the draft law on amendments to the Law of Ukraine “On legal succession of Ukraine” regarding the revocation of USSR acts on the territory of Ukraine, which has been already submitted to the Parliament by a group of people’s deputies.
The adoption of this law will allow to clear the regulatory environment from thousands of documents with unclear status and increase the legal certainty and, therefore, reduce risks for businesses.
Ukraine is a parliamentary-presidential republic. This power model, among other things, provides a clear logic of the state apparatus operation: the parliamentary coalition forms the Government – the Government implements the coalition program (implements reforms) – coalition supports the Government’s policy in Parliament. There are at least 3 centers of reforms, which are competing with each other for success, in Ukraine. As a result, the Government submitted only 7% of draft laws registered in the parliament, and more than 90% is the work of the deputies themselves (although a large number of them is prepared by certain ministries). It is unclear how the Government can be responsible for implementing reforms under such conditions and why it is needed with this “active” coalition at all.
Under normal conditions, the deputies, who are members of the coalition, would have to understand that consideration of Government’s draft laws should be a priority and focus on their processing. At the same time, the deputies of opposition factions should primarily perform the function of controlling the Government’s activity and preparing alternative draft laws.
To improve this situation, the Prime Minister would have to not allow the ministers a practice to register draft laws “through the deputies”, and make the process of independent registration of draft laws more complicated for deputies (at least for those who are members of the coalition). For example, one might amend the Procedure, Rules and Regulations of the Verkhovna Rada of Ukraine that would prohibit the registration of draft laws by a group of less than 10 deputies and introduce the preparation of documents describing the effects of the adoption of a certain draft law, their public presentation and public discussion as a mandatory condition for registration. This approach will allow to lessen the burden of unsystematic work for the Parliament and provide the Government with an opportunity to implement reforms in a more efficient way.
By the way, some NGOs and civil activists should be more responsible regarding organizing campaigns to promote their initiatives for the Verkhovna Rada and not offer documents without coordinating with the Government.
The Minister and his deputies sign, on average, about hundreds of documents a day. Eventually, this huge amount of documents turns into arrears, in which there is almost no time to think, plan and make decisions. The meaning is lost, and ministers often do not remember what documents they signed and they are very surprised when learning about the consequences of their own decisions.
At the same time, even when ministries prepare a good draft law, they does not always run the risk of ‘submitting’ this document to the Cabinet of Ministers because of a complex and extremely senseless procedure of text approval. The reason for both these problems is the documentary orientation of the decision-making system in Ukraine.
Any civilized policy-making system should focus not on a document but on a regulatory case – a case of applying a regulation tool to a group of permanent legal relations (the market, the process) by the state in order to solve a particular problem. Just this case but not a document text should be a topic of discussion of politicians. Actually, just the documents that contain political decisions should be agreed by ministries, experts, the public, businesses and approved by the Government together with a technical requirement for lawyers to develop draft normative documents. The final text of documents should be prepared directly in a special department of the Government with the assistance of necessary specialists from ministries, the expert and the business environment.
It is possible to implement the mentioned changes by adopting the new Procedure, Rules and Regulations of the Cabinet of Ministers of Ukraine. This will not only enhance the effectiveness of the Cabinet of Ministers (the quantity and quality of made decisions), but also will allow to release resources to build an adequate system of preparing political decisions.
The regulatory system of Ukraine is sick of chronic tachycardia: the processes in the body are accelerated each time and the “body” is getting worse and worse. While constantly wanting to have “quick wins” here and now, they often forget that the business can not properly plan and is under constant stress facing with permanent reforms and thus, the unstable and unpredctable rules.
Businesses need predictability and the regulatory system needs a new treatment along with periodic rest. It is possible to achieve this goal by introducing the regulatory cyclicality:
– from 1.02 to 31.06 – a “season of reforms”. It is time for new rules that will start working next year.
– from 1.07 to 31.10 – Implementation of the adopted rules.
– from 1.11 to 31.01 (of the new year) – Analysis of implementation and preparation for a new season of reforms.
After the end of the first half of the year, no new rules will be adopted any more and the ones that have been approved will take into effect from the January 1 of the following year (i.e. in six months). Similar provisions exist in many countries, for example, in accordance with The Code of Federal Regulations of the United States of America, the horizon of planning regulatory acts is 60 months for the federal governments, in fact, it means five years.
This approach can be implemented by amending the Procedure, Rules and Regulations of the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine. It will allow the state transform from a risk factor into a factor of stability, and this will lead to cheaper resources and the increased economic growth.
The state should set the rules and limitations for business only in the cases when it is really important. Now the regulatory framework in Ukraine is strongly littered by illegal, irrelevant and properly not working documents and regulations. According to Better Regulation Delivery Office (BRDO) estimates, there are about 35% of these types. This increases business costs on regulatory activities, increases risks and reduces their legal certainty.
We need an unbiased (based on specific criteria), systematic (implemented under a clear procedure) and inclusive (implemented by the state and businesses supported by independent experts) process of reviewing the existing regulatory acts (Rolling Review). The model for building such a process could be a model used in the United States at the initiative of Barack Obama – Retrospective Review of Regulations. Based on review results, the decisions to keep, remove or improve should be taken for each document.
A draft instruction on conducting a system review of regulations is currently submitted for signature by the Prime Minister. If it is signed, the process can be started even before the end of the summer.
In civilized countries, the regulatory reform starts with the identification of the problem and predicts the clear criteria for evaluation of the results of the decision. The process is cyclical.
Ukraine made an attempt to create a similar system in 2003 with the adoption of the relevant Law “On Principles of the State Regulatory Policy”. This attempt was rather a cargo cult ritual, which gave rise to an absolutely fake system, where documents are multiplied for documents. As a result, the efficiency of about 97% of regulations can not be measured.
In order to find at least some measurability, they have found the “deregulation” receipt, the end goal of which was to reduce the number of documents (less frequently – “the barriers”). That is why the success of regulatory reforms is still measured by the amount of abolished acts and other parameters creating the illusion of changes, but not demonstrating the qualitative state of business regulations.
It is high time for Ukraine to come to reasonable regulation based on a system of measuring its effectiveness. To do this, the Government needs to change not only its rhetoric, but also, without any exaggeration, its working ideology. In the context of new ideology, every document to be saved as a result of the system review should be assessed in terms of expecting some results from its existence or abolished if these results are not achieved. The World Bank’s Worldwide Governance Indicators methodology can be taken as a basis, although there are interesting domestic projects.
Such approach will give a possibility to gather experience, see the real weaknesses of regulation, make right conclusions and improve oneself. As a bonus, it will open opportunities to use “fine-tuning methods” of the regulatory system such as the exotic “one in two out” (when a document introducing a new rule should abolish some other equivalent rule) and “sunset clause” (when a document is adopted for a certain period of time and continues its effect only if its effectiveness is proved).
Ukrainian state is the enforcement-based state apparatus. In the modern world, the state is the relationship based on favorable interaction. This fundamental difference characterizes the climate difference between the system of civilized rules and our realities. The manipulation of information and even outright lies to justify own position is widely practiced by both the business and the state in our country. This destroys trust.
The restoration of confidence should begin with the creation of a common information space with a fundamentally new standard of communication on the rules – with systematic accumulation of information not only concerning the nature of decisions taken by the state, but also the reasons for their adoption and productivity. This step requires a comfortable platform with a coordinate system, which is clear for both the state and businesses, and where motives, interests and intentions of the parties would be clearly defined understood.
This extremely complicated task requires the existence of an open information-analytical system (such as the REFIT platform, which is being created in the European Union), which is currently designed and developed by the Better Regulation Delivery Office. The system has a working title of “PROSTIR” and will be launched in the test mode this September. Its main task is to build and systematize information on the regulation in such a way that it will be convenient for both officials, experts and ordinary public figures to work with it. We are confident that the use of this tool will change Ukraine forever while starting an era of effective regulation.
The BRDO team is working now to implement these main ideas.
As part of the initiative of outdoor advertising market participants on changing the format to place advertising materials in Kyiv, the Better Regulation Delivery Office (BRDO) conducted the SME-test for proposed changes. According to the test results, the new regulation impact on small and medium businesses was estimated in terms of quantitative indicators.
Thus, in the case of making proposed amendments to the current Concept of outdoor advertising development in Kyiv, just the one operator will need to spend 10.3 million UAH for the first year and 11.2 million UAH in total for the period of implementing changes.
According to the head of the Control and Supervision sector Volodymyr Holovatenko, such volumes of “forced” investments are unacceptable, especially for small and micro enterprises. In his opinion, the unreasonable change of rules threatens their activities and can lead to bankruptcy of a number of business entities.
“We sent the SME-test results to the regulator and the Association of Outdoor Advertising Operators in order to enable them to foresee the practical impact of changes, which are currently initiated,” the BRDO expert said.
More details on the SME-test results can be found below.
Ukraine’s national regulatory framework is seriously littered with unnecessary, illegal and simply non-working documents. The Better Regulation Delivery Office estimates that there are about 35% of such documents. This creates additional barriers to the development of the investment environment and increases business costs to work in the regulatory field.
In order to objectively assess the regulatory field, conduct an inventory and clean it out, the BRDO proposed the Ministry of Economic Development and Trade of Ukraine to conduct a systematic review of regulatory legal acts. The First Vice-Prime minister of Ukraine Stepan Kubiv supported this initiative by signing the relevant order.
The systematic review of regulatory acts will cover agriculture and food security, construction, energy, transport and infrastructure, IT and telecommunications. It is planned to establish working groups that will start to review existing regulations soon in order to organize the review process in relevant ministries.
Working groups will report the results this September. Further decisions on regulations that require to be amended, recognized as invalid or abolished will be taken in accordance with established procedure. The Ministry of Economic Development will be responsible for coordination.
The Better Regulation Delivery Office is convinced that this step will allow to move to the creation of a fundamentally new regulatory environment, which will be focused on the best practices and have the effective measurability, in the country by joint efforts of the authorities, experts and all stakeholders.
For reference
The Better Regulation Delivery Office (BRDO) has developed a unique method of regular reviews of regulatory acts – Rolling Review. The world’s best regulatory practices have been taken into account while developing the methodology that allowed to get the latest results.
In general, the analysis of the regulatory environment by using the Rolling Review method is conducted in five sectors: agriculture and food security, construction, energy, transport and communication, control and supervision.
All regulatory acts are reviewed by a number of criteria, among which there are legality, necessity, corruption risks, impact on businesses, regulation costs and efficiency.
More details on the methodology and results of the acts review conducted by the BRDO experts can be found here.
The Better Regulation Delivery Office (BRDO) will analyze draft license conditions concerning business activities in centralized water supply and sanitation and heating supply areas this week.
Since the review of licensing conditions is a transparent and open process, a special section, where the licensing conditions and other draft legal acts are published, was launched within our website.
Any license is a restriction for businesses. So, this restriction should be as specific and clear for both regulators, businesses and the public as possible.
The BRDO encourages business and public representatives to participate in this process and send their proposals to [email protected].
All proposals and comments coming to the BRDO email will be taken into account when preparing expert conclusions.
The Market Surveillance Sector Head of the Better Regulation Delivery Office (BRDO) Volodymyr Holovatenko took part in the work of the roundtable “The roadmap of Kyiv virtual space modernization: results and perspectives”.
The roundtable was a continuation of sector’s initiatives on outdoor advertisement market in the capital city. In spring 2016, the Association of Outdoor Advertising Operators proposed a roadmap of Kyiv visual space improvement, which particularly includes a plan of practical reforming of outdoor advertisements in Kyiv.
The Head of the Association of Outdoor Advertising Operators Oksana Polishchuk noted at the beginning of the discussion that the city and business had a common aim to regulate advertisement and visual image of our capital, and the business has already taken a range of efficient steps towards its realization. Particularly, in July, the members of the Association of Outdoor Advertising Operators implemented a pilot project of outdoor advertisement modernization in the Klovsky Uzviz and Mechnikov streets. These real qualitative changes resulted in the decreased total volume of advertising space up to 65% at these streets. The volume of advertising operators’ direct investments in the improvement of streets appearances was 4.5 million UAH.
Commenting this event, Volodymyr Holovatenko mentioned that the reform of outdoor advertising sector was a long escalated issue. In that context, the initiation of the market members’ concrete steps was a progressive motive force. However, according to the expert, the regulation of that sector should be started not from the review, but from the implementation of the entirely new rules.
Volodymyr Holovatenko said during his speech that the BRDO was working on the calculation of costs to change format zones of advertising vehicles placement, the results of which would be soon presented to market participants. He also said that the authors of the project did not focus on any calculations of costs for every regulation, which were very important for the market.
“This approach is not correct as the market participants will not actually understand how much the implementation of new rules will cost. Regulatory impact calculation is one of the key process components, which is actually not available. The BRDO experts are ready to join this process and provide their support in developing the efficient regulatory framework for the outdoor advertising sector,” the Sector Head said.
Better Regulation Delivery Office (BRDO) experts together with the Ukrainian Building Community held a working meeting with the Adviser of the Minister of Energy and Coal Mining of Ukraine Serhiy Chekh. The problem issues and proposals for developing the concept of connecting to electricity supply networks made by the working group under the Verkhovna Rada Committee on Fuel and Energy Complex involving the regulator, experts, market members, people’s deputies and BRDO experts has been discussed during the meeting.
The participants noted that this Concept was a step forward in terms of optimization and simplification of the procedure of connecting to electricity supply networks, but it required to be improved. Particularly, concerning the possibility of providing the companies-developers with the compensation for expenses to create a linear component of the electricity supply networks connection.
Serhiy Chekh in his turn said that the discussing of the proposed Concept of connecting was critically important as it was a possibility to put new priorities, which could satisfy the interests of all parties.
The participants agreed to continue the work on developing the Concept to initiate its approval as soon as possible through the implementation to the existing legislation.
On July 19, 2016, the Better Regulation Delivery Office (BRDO) in cooperation with the Ukrainian Building Community held a meeting “Optimization of the procedure of connecting to electricity supply networks: concrete steps to find an agreed solution for energy transmission organizations and real estate developers”.
The Concept of connecting to electricity supply networks developed by the working group under the Verkhovna Rada Committee on Fuel and Energy Complex involving the regulator, experts, market members, people’s deputies and BRDO experts has been presented during the meeting,. According to the discussion results, working meeting participants reached a consensus concerning a compromise position, which would be aimed to avoid the abuse by monopolists, provide the simplification and optimize the procedure of connecting to electricity supply networks from the perspective of all parties.
While presenting the Concept, the BRDO Energy Sector Head Oleksii Orzhel noted that it did not solve all the problems, but its adoption was a key for small and medium business development. “Today the issue of connecting to electricity supply networks is very urgent for this business segment, and sometimes it becomes a factor that influences the failure of the plans’ implementation. Speaking about the unified rates, in particular, under the Doing Business Index, the term of connecting takes 263 days and almost 10 procedures are needed to be passed”, he noted and added that the Concept implied clear and precise rules.
Particularly, this Concept proposes two alternative options. The first one is a regional power distribution company’s regulate services upon the connecting to electricity supply networks with clearly defined terms and cost. The second one is at the initiative of the customer; he can get technical specifications for linear component (the network infrastructure from the customer’s electrical point to the regional power distribution company’s network) and implement the engineering works. Then, the cost of the respective works of electrical point creation can be adjusted by tender (customer also can participate) and a contractor’s choice on a competitive basis that will give a possibility to reduce the cost of linear component,” Oleksii Orzhel said.
Experts generally supported the presented Concept. The representative of the USAID “Leadership in the economic governance” (USAID LEV) program and the executive director of the Center for social and economic research – CASE Ukraine Dmytro Boyarchuk stated that nowadays the connection problem is painful not only for Ukrainian business, but also for the foreign one, especially for that planning to come into Ukraine.
“Our common aim is to reach a consensus in this issue and make a step towards opening investment opportunities. In this context, we support the proposals announced today and hope that it will be adopted soon,” he stressed.
Builders and investors representatives also supported the necessity to solve this problem and focused on issues of cost rates calculation and connection infrastructure.
“Creating the connection infrastructure and building the networks at the investors’ cost is nonsense. Especially taking into account that investors do not get the compensation of expenses for that. Reforming this component is a step our market has been long waiting for,” the member of the Ukrainian Building Community’s board, Director for Business Development of the real estate development “Interregional Service Company” Serhiy Petrov said.
“The situation when you pay and build 100% of all infrastructure and then transfer it to the regional power distribution company asset list is unacceptable. It is a capitalization of natural monopolies at the investor’s cost,” the member of Ukrainian Building Community, the U-TURN founding partner Serhiy Ovchinnikov said.
Generally, meeting participants were unanimous in the opinion that the current situation concerning the connection to the networks taints the state image and revolts potential investors while contributing to the non-transparent schemes. That is why the participants expressed the readiness to develop a range of initiatives regarding reforming the procedure of connecting to electricity supply networks based on the presented Concept by common business and experts efforts to solve the problem.
Next week it is planned to present the common position to other participants of the process.
The year of the moratorium on timber export was meaningless. Experts said that all the problems remained unsolved. It is necessary to look for alternative ways to stop the illegal forest felling and implement the system of timber export registration and control. The Better Regulation Delivery Office (BRDO) leading analyst Ihor Lavrynenko said more on this issue and others in details in the exclusive interview to Agro.Polit.com.
― Are you for or against imposing the moratorium on timber export?
― Imposing the moratorium is an emotional and unprofessional response to the abuses in the forestry sector. The moratorium was imposed to provide national woodworking suppliers with a greater access to the timber. However, these expectations remained incomplete.
To fight the corruption in the wood sector, it is necessary not to impose new bans, but to arrest corrupt officials and introduce clear procedures of timber selling.
The year of the moratorium showed that the amount of abuses has not declined, and the scandals amount has increased. The volumes of illegal forest felling are impressive, the situation hasn’t improved with the moratorium.
To my mind, moratorium should be abolished, as it is inefficient, and instead of it transparent and clear rules of timber selling should be introduced.
Particularly, there should be the rules, which provide for the abolition of direct transactions, while all the timber volumes should be put up to auction to enable anyone who wants to buy the wood.
We will not solve the problem by prohibiting the sanitation cutting – it is necessary to prohibit timber selling in circumvention of auction.
― Will the moratorium on sanitary forests cutting be introduced?
― Sanitary cutting problem appeared because all deputies have been fighting the corruption mainly in paper for last 20 years. If there were 20% of sanitary cuttings 20 years ago, now it is 50%. The reason is simple: the timber harvested during sanitary cuttings can be sold by direct contracts in circumvention of exchange. That is why everything that can be cut under the guise of sanitary cuttings is being cut exactly in such a way. We will not solve the problem by prohibiting the sanitation cutting – it is necessary to prohibit timber selling in circumvention of auction. Now they want to auction all types of wood, but forestry enterprises reserve the right to sell the sawn wood products on agreements and not put them up for auction. So, the problems with timber selling will appear in a year or two.
― Is it necessary to put sawn wood products up for auction as well?
― It is an alternative option, but forestry enterprises are not ready for this. Now industrial wood is being exported as firewood, now they want to abolish firewood export. If they will do it, then industrial wood will be exported under the guise of stubs or logging wastes. Our people always invent something new.
If “grey” and industrial wood is being sold as firewood for Ukrainian timber exports, the cuttings in the Carpathians are completely “black”.
― How should we solve the dilemma in order not to make the Carpathians “bold” and let the state to get the revenue?
― The Carpathians is a third problem. The moratorium was imposed there 15 years ago. If the Ukrainian timber export is “grey” and industrial wood is sold like firewoods, then cutting in the Carpathians are completely black. If there were no moratorium in the Carpathians, the forest had existed because there were legal cutting obligations to conduct reforestation and plant new forest after the cuttings. There is legal cutting in the Polesia, so there is a lot of young forest. People cut forest in the Carpathians illegally and, of course, they plant nothing there. That is why it is necessary to abolish the moratorium on industrial cutting in the Carpathians, but our deputies do not understand it.
― How can we solve the problem of illegal cuttings?
― There are two comprehensive ways to solve this problem. The first one is to introduce the European approach for timber control. In Europe, the forest is being tagged at the place, it is possible to know where and when the tree was cut with the help of the code.
Municipal forestry enterprises take care of two businesses: sell the timber and issue “fake” documents to export the stolen timber for Hutsuls.
It is necessary to introduce a technology and a system of wood flow registration and control for all forest users. It will not solve all the problems, but will significantly reduce the amount of abuses.
There is a separate kind of “black” timber earnings – giving “fake” documents for timber. Why does this market exist? It is because of the mandatory tagging only for state forests. Municipal forestry enterprises take care of two businesses: sell the timber and issue “fake” documents to export the stolen timber for Hutsuls. People on the customs cannot distinguish the oak from the fir tree. It is necessary to tag all cut timber to prevent selling the stolen timber documents by fraudsters, but wherefrom the deputies will live later?
― Is there the guarantee that the certificates of raw materials origin will be effective?
― The amount of risks will decrease. It will be easier for policemen and customs officers to check the information on whether the concrete timber batch was cut down legally or illegally.
The main opponents of introducing the cut timber tag are the Regional Council Heads because it is their business.
― How soon will this system be able to work?
― Nearly six months are needed. The main opponents of introducing the cut timber tag are the Regional Council Heads because it is their business.
― How many people were punished for illegal timber cuttings?
― One from the hundred can be punished at best. Most of people committing such violations are officially disabled or parents with many children who cannot be fined, or they are the unemployed – what can you get from them?
― Maybe it necessary to abolish these privileges for parents with many children?
― And then we will see a whole series of stories how a poor father who had stolen a stub to warm freezing children in winter was punished on television. It is necessary to approach systematically for such topic and prepare a new Code of administrative violations.
― How to reveal the people running this corruption?
― The approach is very simple: a person is released from the liability, if he says who had persuaded him to do it.
Now there are small timber supplies to Russia.
― Does Ukraine export timber to the aggressor country?
― There is no timber export to Russia. First, it is economically inefficient. Secondly, Russia is the biggest exporter. We used to be one of the biggest Russian timber importers: up to 15 million cubic meters have been delivered from Russia and sawed in our country during the Soviet times, and then sold to Europe. Now there are small timber supplies to Russia.
About the business with timber exports to the occupied East.
― Are there any supplies to the occupied ATO zone territory?
― There are dozens of criminal cases. This is a very good business.
― Are all the supplies illegal?
― In fact, they are, all the supplies are registered as army aids, the supplies for defense needs, and then they are resold to the enemy. All the timber to Crimea is a real contraband.
― Why does the Ukrainian timber lose its value?
― The position of the State Forest Resources Agency Head have been sold during the last ten years. The cost of this position is $5-10 million.
The timber is being exported at $200 million per year; the half of this amount is a result of “grey” export.
― Tell about the shadow cutting volumes in Ukraine, which regions has the biggest problem with that?
― The shadow cutting volume in Ukraine is 10-15%, legal cutting is 16 million cubic meters, so the illegal is 2 million cubic meters. The timber is being exported at $200 million per year; the half of this amount is a result of “grey” export.
― What countries are the biggest customers now?
― There are three main customers, they are Europe, Turkey and China.
― Why does it happen? Are there any legislative restrictions?
― Current standards do not allow it because they are soviet. New ones were proposed in 2005, but ten years passed, and they are still have not been implemented yet.
One of the options to minimize the abuses is to move to the Europe standards.
Another problem is a lack of effective domestic added-value wood conversion market. Forestry enterprises have to look for the foreign ones because of a lack of the Ukrainian customers.
― Why is Ukrainian timber being sold at a low price?
― It cannot be sold at high prices. The Law demands an advance payment for a timber, it is impossible to sell raw materials at high prices in such circumstances.
― Has something changed in the framework of the FTA with the EU?
― This agreement doesn’t contain any special aspects for the forest industry. But it is not a critical problem, there is a potential for the cut timber export increase.
It is needed to adopt a combined document on enhancing the liability for forest sector violations.
― What legislative steps should be done to establish the order?
― The Cabmin should hold a transparent and open competition to fill the vacancies of the sector Head and his deputies. If the sector sees that it is led by the professional with the normal team fulfilling their responsibilities clearly, than it will solve the half of problems. The Cabmin should approve a resolution on the introduction of timber registration and control system, the implementation of compulsory timber sale by auction.
The Parliament must amend a budget, allocate the funds for fire prevention in the South and East forests, and abolish the moratorium on timber export. It is needed to adopt a combined document on enhancing the liability for forest sector violations.
― How do you think, what punishment should be included there?
― They must be adequate to the current situation. There is no need to arrest someone, there are alternatives making people behave in a normal way. For example, there is an option not to let companies buying stolen timber to participate at the timber purchase auctions.
― Why do the deputies not approve these draft laws? Do they get into the act?
― Not all, but some of them get into the act.