The head of the Better Regulation Delivery Office Oleksiy Goncharuk told about the principles and terms of major changes in the regulatory environment in Ukraine.

– Why did the government adopt such a decision – to abandon the “deregulation guillotine”?

– In fact, the “guillotine” is nothing more than a marketing name. At different times, different people gave this name to processes of various forms and contents. At some point, this brand was created and became promoted. I would never give any name to the processes that we start. If someone likes the name “guillotine” – all right then. Someone likes another name – the same answer. The name doesn’t change the main point of the reform.

That’s why, I would not say that we completely reject the reform principle chosen before which many people called the “guillotine”. We will improve it.

We need to treat the regulation with caution. It is obvious that unreasonable cancellation of some laws and regulations may lead to regulatory vacuum and chaos in the economy and, first of all, in the areas of food security and exports-imports. We need to calculate the consequences and neutralize the negative effects.

For sure, we are not going to reject the concept of the operational plan on changing the regulatory environment developed by the NGOs, international experts and the government.

– What exactly does this plan include?

– Inventory of regulatory acts, their systematization and prioritization to review, the open and inclusive regulations review process with the help of the technology that allows doing that as quick as possible, systematically and without bias, and improving the institutional filters for adoption of new regulations that hinder the business.

The goal is to create the high quality and meaningful regulation in Ukraine.

I’m sure that you can see the results of our work already by the end of the year.

– Since a year and a half, politicians have been promising business to carry out the effective and complete deregulation, so-called “guillotine”. Now a priority is given to the “reasonable” deregulation, but the result still will be visible in a couple of years. How do you plan to explain such a policy jump for business owners?

– I wouldn’t like to comment on political statements. At the same time, I understand very well that if people have some questions, there is a need to seek answers together.

As you said, the reasonable “deregulation” is the next stage of the reform aimed at improving the regulatory rules, so it can’t be considered separately from the first stage, in terms of which dozens of permitting and other regulatory procedures will be cancelled, simplified or improved already by the end of the year. BRDO is actively involved in this work already now.

I’m sure that you can see the results of our work already by the end of the year and business will be able to take advantage of these results in the first quarter of the next year.

– How do you see the deregulation process now, after the abandonment of the “guillotine”? What stages are involved? 

– I’ll start by saying that now we are focused on four sectors: agriculture and food security, construction, energy, control and supervision. First of all, we make the inventory of regulatory acts in each of these sectors. It is necessary to assess the scope of the work and plan it.

Then we will start to analyze regulations and, according to the results, divide them into three nominal groups: the ones needed to be saved, the ones to be improved and the ones to be removed from the regulatory environment.

With this overall picture, we have to work out a package of proposals to improve regulation in the sectors systematically. Our goal is to create a friendly and supportive regulatory environment for business in Ukraine. This refers to not only deregulation, but also constant monitoring and analysis of new regulations.

This analysis is a continuous process. For the purposes of regulatory policy, the legislation can’t be assessed statistically while analyzing it only at specific point in time. It is necessary to assess it in terms of the dynamic pattern while analyzing the reasons of one or another regulation and assessing its viability.

The task of BRDO is to be a kind of antivirus for business environment, remove existing harmful documents and prevent the adoption of new ones.

The task of BRDO is to be a kind of antivirus for business environment, remove existing harmful documents and prevent the adoption of new ones.

– Did you take into account the international experience when creating the Office, or followed the unique Ukrainian way?

– There is no unified idea on how such a tool should work not only in Ukraine but also in the world. There is a general understanding of its purpose – to improve business climate and rules for creating regulatory environment. The general principle is the following: first, the government formulates and evaluates the problem, then chooses a way to solve it and the necessary instruments, sets the parameters that can be used to assess the viability of a regulation after a certain time. Each country implemented details of this general principle in its own way, but the mechanism of correcting rules is a key condition for quality regulation. I’m sure that we will be able to implement the best practices of creating the regulations in Ukraine.

– What countries have been analyzed? 

– We studied the experience of the Britain, Germany, Poland, the Baltic states, Moldova and the Balkan countries. The idea was to create a standardized process, the quality of which can be estimated and improved in the course of work. Then the already established instrument tested by the Office will be given to the state.

– Nevertheless, the first task is to simplify the business conduct rules, in other words, implement the deregulation. Is there a phased plan of its implementation?

Let me underlined that the first stage of the reform is already coming to its logical conclusion. The Cabinet of Ministers made and approved a special plan of deregulation which has been largely implemented.

As for the Office, we completed the organizational stage (building a core team, creating a work environment, communication with regulators and relations with donors) and, one can say that since 1 November 2015, we started a full working process. Of course, reaching the project capacity is still far away.

The current stage is the inventory. By November 16 we expect to have the first figures for the number of regulatory acts in the sectors, which will allow us to plan further work more accurately. Then there will be analysis and assessment stage. The working title is the Rolling Review. Afterwards, there will be preparation of recommendations and draft amendments based on the analysis results: what should be done to one or another document. As a result, the system of regular refinement and continuous quality control of the regulatory environment should be established.

– What time limit did you set?

– It would be possible to say more specifically how long it will take to analyze all existing regulatory acts only after the inventory of legislation. There has been no clear idea on how many such documents exist in Ukraine therefore, it is impossible to say how long will take their analysis and improvement.

Our goal is to establish such reputation that the government authorities are interested in our cooperation.

– Can you name the criteria for assessing documents?

 – A clearly defined list will be prepared later: now we are working this method from A to Z. I can only say that it will be based on the following criteria: legality, usefulness, existence of corruption risks and compliance with the international obligations of Ukraine.

– Who will assess regulations by these criteria?

– The Better Regulation Delivery Office experts. We are planning to engage the regulatory authority employees and business community representatives.

– Describe the assessment process.

 – It is done according to a clear standardized checklist which will allow to get the most objective analysis results. it will be a clear conclusion, a review, based on which the decision on the importance and role of one or another regulatory act will be taken. This will allow to gain a holistic view: what is the situation in given areas, where the situation is normal and where it is problematic.

– A significant question: how binding will be the conclusions and recommendations of your Office?

– The Office is certainly advisory in its nature. We have a Partner-regulator for each act – either a ministry or a department. Therefore, we will closely cooperate with them, but we still have to work out specific operating procedures. We will either send them a package of analyzed documents and our recommendations roughly once a month or constantly discuss and control the regulatory acts in real time.

– Are there any levers of influence on the Ministries and the Parliament? After all, many regulations are, in fact, a corruption honeypot for officials and they are unlikely to leave it without a fight…

– We are not the bearers of political will, we can’t force anyone to do something. However, we have different levers of influence, for example, to form an opinion of market players, work out a common position, address our views to the country’s top leadership and the Western partners. In each case, we will be guided by the regulator’s opinion. There are different ways to achieve a balance of interests. Our goal is to establish such reputation that the government authorities are interested in our cooperation.

– You mentioned the abstract term “market’s opinion”. How do you plan to build the communication with business, especially with small and medium enterprises that don’t have any representative body?

– Indeed, there are a lot more organizations representing the interests of medium and large enterprises in Ukraine. However, a stated goal of the deregulation reform is to protect the interests of small and medium-sized businesses. At the same time, there are some well-organized small businesses, for example, such as notaries and appraisers. As for the areas, where there is no organized representative body, we will conduct surveys and focus groups and use other indirect methods that will help us understand the challenges and expectations of small businesses.

The Office is a non-governmental organization that is not subordinated to any ministry.

– Who initiated to set up your office? Under the authority of what institution do you remain?

– One of the ideologists of establishing the Better Regulation Delivery Office is the Minister of Economy Aivaras Abromavichus. At the same time, the Office is a non-governmental organization that is not subordinated to any ministry.

– Who provides funding for the Office?

– The technical assistance program of the Canadian Government was a donor at the first stage. At later stages, we expect the European Union’s grant.

– What is the grant’s amount?

– According to my information, the provided funding is about 7 million euros for three years.

– So, you are given three years to build a system of effective regulation, aren’t you?

– Three years are the declared term of the project. It is absolutely enough to show real systematic results, to achieve the climate changes in the regulatory field, to organize the operation of the instrument for building a loyal regulatory environment. We believe that the quality regulation is possible in Ukraine and should be based on trust between the state and business. It only remains to implement it in practice.

The source: LIGA.net 

Using share contributions makes Ukraine less attractive for international investors and one of the most expensive countries in the world in terms of getting permits. The experts gave that opinion during the round table of the Centre for Economic Strategy and the Standing Committee of Kyiv City Council for Urban Development, architecture and land use.

“Taking into consideration that Ukraine joined the free trade zone with the European Union, the investors can consider it as a country for potential placement of different industrial infrastructures for producing goods that can be delivered to the EU. Such a high contribution level (10%) doesn’t allow investors who want to realize commercial property projects to implement a wide range of projects at all”, the Construction Sector Head of the Official BRDO Olena Shuliak says.

According to the economist of the Centre for Economic Strategy Olexander Kashko, the cost of building administration is under 0.5% in Central and Eastern European countries (they are our nearest neighbors and investment competitors). This cost amounts to 15% in Ukraine. “It makes us one of the most expensive countries in the world in terms of getting permits,” he considered.

During the round table, the Adviser to the Minister of Economic Development and Trade Kostjantyn Gnennyj said that as the Better Regulation Delivery Office BRDO found that the abolition of share participation would have a positive impact on business climate and Ukraine’s positions in the World Bank, the MEDT would support this initiative.

For today, there is the registered draft law №3610 of the deputy Petro Sabashuk on amendments to the law “On regulation of urban development”, which has to abolish a share participation in the settlement’s infrastructure development. However, the Parliament hasn’t reviewed it yet.

The abolition of share contributions will allow Ukraine to improve its positions in the World Bank Doing Business Rating. This step is covered by the roadmap approved by the government at the end of December, 2015.

Introducing the optimized procedure of standard connection to electricity supply networks will allow the business to save more than 5,000 hryvnias on every connection procedure. The Head of BRDO Energy sector Oleksiy Orzhel informed about it during the roundtable discussion on legal ways of simplifying procedures of connecting to electricity supply networks.

The total amount for the whole country would be more than 285 million hryvnias. These calculations were held on the basis of the SME-test that helps define the burden on small business. Connections statistics for 2014 and the first half of 2015 were used for them. It was a period of the economic slowdown, when the number of connections to electricity supply networks decreased significantly.

That is why, according to Oleksiy Orzhel, now this cost-cutting for business and citizens will be larger.

“The most important thing for us is to get an effective and functional mechanism of connection to electricity supply networks. We don’t have another way but just to move forward and achieve increased investment prospects of the country and the opportunities for a good quality of life,” Oleksiy Orzhel emphasized.

The BRDO with the Ministry of Economic Development and Trade and the Ministry of Regional Development, Construction, Housing and Communal Services of Ukraine participated in the working group on simplifying procedures of connection to electricity supply networks. The working group prepared its proposals.

Particularly, it is suggested to optimize the connection procedure through introducing a public offer agreement and submitting a package of documents for the connection by email. In addition, the simplification of situational plan requirements and the possibility of submitting open sourced electronic files with site drawing presentation are being provided for standard connections.

Fines for exceeding the period offered for the connection procedure are being introduced.

Besides, it is provided for introducing a new category of connection – integrated standard connection. This is connection from 160 kW to 5 MW. Thereby the principle of procedure simplification and determining a fee for connection services at this power range are being implemented. The introduction of a new connection category will allow to cut business costs (particularly, medium business costs).

It is to be reminded that the small and medium business (SME) access to energy sources is a basis of their existence and development. According to experts, an existing Ukrainian system of connection to electricity supply networks is a large barrier for SMEs because of the complexity and overregulation of procedures, a lack of defined terms and reasonable tariffs for connection.

According to the World Bank Doing Business 2016 rating, Ukraine takes the 137th position (in 2015, Ukraine took the 138th position) in terms of “Connection to electricity supply networks”, the period to connect electricity-generating equipment of consumers is 263 days, and the number of procedures that need to be passed through is 5.

On January 27, the Verkhovna Rada sent the draft Law №2966 “On National Commission for State Regulation of Energy and Public Utilities” for revision to the relevant committee.

Deputies insisted that the draft law needed further revision, and the committee had to prepare it for repeated first reading.

The draft law “On National Commission for State Regulation of Energy and Public Utilities” (№2966) determines the procedure of formation, status and organization of the state regulator activity (NKREKP) and the limits of its competence.

The Better Regulation Delivery Office BRDO examined draft license conditions concerning conducting economic activities on hazardous waste management and dangerous chemicals production prepared by the Ministry of Ecology and Natural Resources of Ukraine.

BRDO experts pay attention to the non-compliance of drafts with requirements of a wide range of regulatory acts.

In spite of requirements of the Law of Ukraine “On Principles of State Supervision (Control) of economic activity”, there are provisions that will lead to the duplication of state supervision (control) mandates included to the drafts.

It is to be reminded, that the Ministry of Natural Resources like any other licensing authority exercises state supervision (control) over the observance of license conditions by license holders. So, if license conditions provisions demand that a license holder, for example, should observe fire safety rules, then the State Emergency Service of Ukraine can check compliance with these requirements.

In addition, draft license conditions provide for the duplication of State Inspectorate of Ukraine on Labor and State Architectural and Construction Inspectorate of Ukraine mandates.

Besides, the drafts require a license applicant to submit some documents copies, which are in public access. Aforementioned requirements don’t conform to the Licensing Law and the Law of Ukraine “On Administrative Services”. One of the draft licensing conditions requires to submit original documents that is directly prohibited by the law on licensing.

One of the drafts contains a provision prohibiting the simultaneous material and technical resources rent by two and more entities conducting business activities on hazardous waste management.

However, this restriction contradicts the Licensing Law principle of economic entities equal rights to freedom of choosing the territory for their activities.

On January 7, 2016, the SRS suspended two paragraphs of the common order of the Interior Ministry of Ukraine and the Ministry of Health as of 31/01/2013 № 65/80 regulating a medical examination procedure for candidates for drivers and drivers.

The corruptive scheme that made drivers spend a lot of money to pass medical examination or get a certificate of health in a certain medical facility was abolished by the SRS Decision of 06/11/15 №4.

“Medical examination for drivers was and will be an obligation according to Article 45 of the Law of Ukraine “On Road Traffic”. It is logical and necessary, but earlier there was a scheme where only certain medical facilities could carry out medical examination of drivers. The SRS abolished this corruptive scheme”, the head of the SRS Ksenia Lyapina said.

According to the State Regulatory Service of Ukraine, every health care facility performs its functions according to the license, and the medical examination of drivers isn’t a separate kind of medical specialization. Therefore, such facilities don’t need getting additional documents for conducting this activity.

From now on, any medical facility will have the right to convene a commission and conduct medical examination of drivers.

 The source: Press Service of the SRS.

The State Regulatory Service sent the draft license conditions on conducting business activities in transportation of passengers, dangerous materials and hazardous waste products by air for analysis of the Better Regulation Delivery Office BRDO. 

As the review process of license conditions is transparent and open, the BRDO opened a special section that will publish the license conditions coming from the State Regulatory Service and the Ministry of Economic Development and Trade on its website.

Any license is a restriction for business. And this restriction should be as concrete and clear as possible for both a regulator, business and the public. That’s why, the BRDO encourages business representatives and the public to get involved in this process and send their proposals at [email protected]. All proposals and comments sent to the Better Regulation Delivery Office BRDO will be taken into account in drawing the conclusions.

 In addition, we would like to remind you that the BRDO experts have already reviewed more than 20 draft license conditions. Based on the results of this review, the draft comments to each of the processed documents have been prepared. Besides, the Guidelines for developing license conditions were worked out together with the State Regulatory Service. This document should provide a unified approach to developing license conditions as well as be a marker for regulators. They should assist in the creation of real performance criteria, the indicators of which can be measured later by conducting a basic research.

The resumption of crediting and risk reduction for business will make Ukraine more attractive to investors. The head of the Better Regulation Delivery Office (BRDO) Oleksiy Honcharuk said that on the air of 5 Kanal TV channel on January 20.

According to him, Ukraine is currently in the process of liberalizing the state policy, favorable conditions for business development are created. However, the country will be able to realize its intellectual and resource investment potential only if there is effective regulation.

“Ukraine has less rules for business than Europe. Therefore, business has more freedom,” he said.

Also there is a transparency process among the positive changes for business: Ukraine opens up a significant amount of non-public information. For example, the information on access to the mineral resources was made public last year. First of all, it is referred to the publication of the report of the Ukrainian Extractive Industries Transparency Initiative (EITI).

However, despite these positive trends, there is still a problem with crediting in Ukraine. Therefore, the BRDO together with the Ministry of Economic Development and Trade of Ukraine is working out a package of draft laws for February, which provided for measures aimed at the resumption of crediting and the risk reduction.

As a reminder, these measures are provided as part of the Doing Business 2016 roadmap.

The abolition of share contributions from real estate developers will make the construction industry more active and improve investment prospects of this sector. The BRDO Construction Sector Head Olena Shulyak said that live on the Radio Kyiv 98 FM.

“The draft law that provides for the abolition of share contributions from real estate developers was registered in the parliament. I fully support this initiative and believe that the adoption of this draft law will make the construction industry more active in Ukraine and improve investment prospects of this sector,” Olena Shulyak said.

According to the expert, a share contribution was a real burden for investors. In particular, a share contribution amount is 4% for construction of residential facilities and 10% of the construction cost – for construction of commercial premises.  Today you will hardly find a country with such high mandatory payments. According to the Doing Business ranking, Ukraine takes the 176^th position among 189 countries in the world in terms of mandatory payments amounts imposed on real estate developers. Therefore, it is not surprising that about 25-30% of investment projects (particularly in the commercial real estate sector) remain unrealized due to this contribution.

“The fact that these share contributions have become a major source of corruption makes matters worse. It is very convenient for local officials. Companies ‘pay’ to corrupt officials about half instead of paying a share contribution that costs about $5-10 / sq. m. for developers (in the case of commercial real estate). Of course, the city treasure receives not a penny from these deductions. Therefore, the implementation of this draft law will be, firs of all, an effective tool to fight corruption,” Olena Shulyak stressed.

She is confident that it is the availability of a corruption component discourages foreign investors and worsens the Ukraine’s position in the Doing Business ranking in terms of the ease of doing business.

“If we don’t abolish share contributions, the state will just lose not least because the management of this type of payments is a troublesome and very difficult task. Only in Kyiv, debts exceed 350 million hryvnias. And this is without counting losses from corruption schemes and millions and billions investments, which the sector has not received,” Olena Shulyak says.

 

Promoting business activities will allow to stop the decline in employment and the rise in unemployment. The number of people, paying a unified social tax , i.e. the officially employed citizens, fell to the minimum since the independence – less than eight million people.

The number of people, paying a unified social tax , i.e. the officially employed citizens, fell to the minimum since the independence – less than eight million people. There were 14 million employed people three years ago. Meanwhile, the number of working-age population is 18 million people and most of them work abroad, live in the occupied territory or just don’t have any job or work in the hidden economy.

Unlike the EU countries, Ukraine can’t afford subsidizing, creating new vacancies and new enterprises. One of a few effective tools of the government is a simplification of conducting the business activities through deregulation, fighting corruption and improving the investment climate. One of the most common mechanisms is to use the methodology of the Doing Business rating. This is a tip for the government on what is necessary to do in order to simplify doing business in the country.

Last week, the Cabinet of Ministers decided for the first time to listen systematically to the advices of the World Bank Group’s experts and adopted the integrated implementation plan for the best practice of effective regulation as reflected in the World Bank Group’s methodology of the Doing Business 2017 rating. This is a document consisted of 57 points, by doing which Ukraine has all chances to be among the first fifty countries in the Ease of Doing Business Ranking.

What lies ahead?

The action plan consists of ten sections according to the number of ranking’s sections, each of which lists what the government should do and what laws the deputies should adopt to improve the investment climate in Ukraine.

Section One. Business registration

Ukraine has the greatest progress by this indicator now – the 30^th place, and our rating increased by forty position for the last year. To start a business in Ukraine it is required to spend on average 7 days and go through four procedures. Our goal is to reduce by half the number of procedures to set up a business which can be done in two days. The biggest problem is the inability of a VAT payer to perform the registration simultaneously with the registration of a legal entity. The government will submit this draft law to the Parliament shortly after the start of the year. In addition, the President has just signed a new version of the law “On state registration of legal entities and individual entrepreneurs and community groups” that will allow to establish a registration service for legal entities via the Internet within 24 hours.

Section Two. Enforcement of contracts

The 98^th position. Ukrainian business spends on average 378 days to ensure the judgment enforcement and its legal costs on average amount for 46% of a claim sum. Our goal is to reduce by half the terms of proceedings, satisfying judgement and legal costs.

The biggest problem is the inefficiency of the state executive service: more than half of judgements are simply not enforced for the moment. There are two draft laws currently in the Verkhovna Rada – “On enforcement proceedings” (#2507 as of 14/08/2015)

 and “On bodies and persons engaged in judgments and other bodies decisions” (#2506a as of 14/08/2015), the adoption of which will allow to create private executive services. Hence, both investors and ordinary citizens will be able to execute judgments quickly and efficiently. Another task for the government is to enhance opportunities for the alternative dispute resolution by increasing the powers of arbitration courts and the mediation mechanism settlement by adopting the law on meditation – voluntary and pre-trial mediation in resolving conflicts.

Section Three. Getting a loan

The 19^th position. Ukraine has the best ratings by this indicator. However, now the loans remain expensive and inaccessible, including because of the transparency problem of operations in pledge of movables and limited enforcement mechanisms.

Our goal is to reduce the cost and increase the availability of loans for business by:

– opening the free online access to the State Register of Encumbrances over Movable Property;

– providing the opportunity of trust transfer of property ownership to a creditor as a way to meet the obligations.

Section Four. Protection of minority shareholders

The 88^th position. Today, the rights of minority shareholders are still not protected because of a lack of effective accountability mechanisms of enterprises’ management and the non-transparency of their administration.

Our goal is to increase the level of protection of minority investors significantly by:

– increasing the responsibility of heads of enterprises and improving the accountability mechanisms;

– simplifying the protection of rights in courts for minority shareholders;

– increasing the transparency of enterprise administration.

The biggest problem is that in Ukraine minority shareholders are not able to fire and don’t have the right to demand in court to hold accountable an involved director/a supervisory board member for losses caused to a company. The draft law “On amendments to the Law of Ukraine “On Joint Stock Companies” (on protecting the rights of minority shareholders)” that will give more rights and opportunities to minority shareholders and assign double responsibility for directors is designed to solve this problem.

Section Five. Resolution of insolvency

 The 141^st position. The bankruptcy procedure takes an average of 2.9 years and its cost is 42% of the debtor’s assets. The creditors receive on average only 8.3% of the total debt that is 4.6 times less than the average index in Europe and Central Asia and 8.7 times less than the index of the Western developed countries.

Our goal is to reduce by half the bankruptcy procedure duration and increase the debt percentage that can be returned to creditors by fourfold.

Other pressing problems include a lack of a database of debtors, which can be available for creditors (mortgage and bankruptcy creditors) through the Internet and would be filled by an insolvency official, and a possibility to sell significant debtor’s assets without a mandatory consent of a creditors’ committee. The draft law “On amendments to some Laws of Ukraine (regarding increasing the efficiency of bankruptcy procedures)” #3132 that is ready for adoption in the first reading will solve this problem.

Section Six. Electricity supply network connection

The 137^th position. The period of connecting to the electricity supply network is 263 days and its cost is 795% of the gross income per capita that is twice as long and expensive than the average index in Europe and Central Asia.

Our goal is to cut the connection cost in half and the terms – by fourfold.

Other problems include a lack of responsibility of the regional power distribution company for the power outage and poor results of the forced outage time and frequency in the country.

The government should prepare and submit the draft law “On amendments to the Law of Ukraine “On electric power industry” (on simplifying the procedure of connecting to electricity supply networks)” to the deputies in order to solve the above-mentioned problems.

Section Seven. Receiving construction permits

The 140^th position. The cost of receiving construction permits amounts to 15.2% of the construction value.

Our goal is to reduce the cost of construction licensing procedures by threefold and their terms – by 30%. Key issues: a real estate developer has to pay the equity participation for maintaining public infrastructure, which is a kind of a construction tax, at the same time an official doesn’t register construction declarations without a bribe. The first problem is solved by adopting the Law “On amendments to certain legislative acts of Ukraine regarding cancellation of share participation in maintaining public infrastructure”, and in order to reduce the corruption in the construction area, it is needed to adopt the Law “On regulation of urban development” regarding cancelling the registration procedure of the construction declaration.

Section Eight. Property registration

The 61^st position. The average registration period for transferring real property ownership is 23 days.

Our goal is to reduce this period threefold. For this purpose, the government should introduce a monetary evaluation of land parcels with the help of Internet-services for one day and implement the Law “On state registration of rights to real estate property and their encumbrances” which was recently signed by the President of Ukraine Petro Poroshenko.

Section Nine. International trade

The 109^th position. The time spent on exports from Ukraine is 122 hours and on imports in Ukraine – 210 hours.

Our goal is to reduce these terms twice (up to 58 and 100 hours respectively). For this purpose, it is necessary to run the system of authorized economic operators, reduce the period for obtaining a certificate of goods origin and introduce the “single window” mechanisms when the goods are crossing the customs border of Ukraine.

Section Ten. Tax payment

The 107^th position. A small enterprise spends 350 hours per year on tax calculations and payments, and the fiscal burden on it reaches 52% of its profits.

Our goal is to reduce the time spent by a third (110 hours) and the fiscal burden – by 15%.

The most ambitious goal is to reduce the Unified Social tax rates to 20%. The government is ready to take this measure and the deputies will support it. In addition, it is necessary to cancel mandatory requisites of primary documents and simplify the tax invoice format in order to improve the rating of Ukraine.

Most of the required 57 regulations are prepared and some of them are under consideration by the Parliament while two laws have been just signed by the President. We have the government’s support and there is an understanding of the need to approve these laws by the deputies. It only remains to go and do it!

The source: “Economichna Pravda”

There are officially 82 types of permitting documents in Ukraine, and their actual number is much higher.

Some of them are unreasonable while being an excessive regulatory burden on business that contributes to bureaucracy and corruption.

The entrepreneurs have to wait for months to obtain some permits and start their work. Often, they have to pay bribes to speed up this procedure.

That’s why the action plan for deregulation approved by the Cabinet of Ministers provides the shortening the permits list by 25%.

The Better Regulation Delivery Office (BRDO) analyzed and improved initiatives of the Ministry of Economic Development and Trade and jointly developed a draft law on amendments to some legislative acts to reduce the number of permits together.

The draft offers to abolish 20 permits, the necessity of which is not explained with the concerns for public health, environmental protection or other critically important public interests.

With regard to the above mentioned, only a half of permits will be abolished. In other cases, the permitting procedure will be replaced with declaration. Hence, the state will obtain necessary information with the declaration and be able to control economic activities without creating bureaucratic barriers to start such activities.

It was planned to optimize almost half of permits at the beginning of the work on the draft law, but large-scale deregulation was impossible due to the need of harmonization of the Ukrainian legislation with the EU norms. Therefore, experts had to limit their plans to ensure the European integration.

 

To illustrate the importance of the draft law, a few examples should be given.

The Ukrainian companies have to obtain a license to provide the tourism services. At the same time, their online competitors – booking.com or airbnb.com providing similar services don’t obtain any permits and the state doesn’t control their activity.

This license turned into a formality long ago and its abolition will significantly simplify the running of business activities for entrepreneurs.

Here is another example. Law allows practicing the traditional medicine and healing, but in what way can a governmental body verify the abilities of a man? What should be the basis to give a permit or deny it? Should the state spend the taxpayers’ money on such a verification?

The state should only make sure that such activities don’t harm the health of citizens. However, this control can be maintained without obtaining a permit to get started with business. The declaration on the traditional medicine start-up will play an informing role in this case.

 

There is a similar situation with permits for alienation of monuments of local importance by their owners. Many buildings in the center of Kyiv are considered to be the monuments of local importance. It is necessary to obtain a permit from a cultural heritage body in order to sell or lease them.

It is important that we talk not about reconstruction, demolition or remodeling, but just about the change of private owners. It is not essential for the state who will be a property owner, the main thing is that a cultural monument is saved. Therefore, there is no sense in this permit.

Instead, the monument owner needs to collect documents, submit them to a competent body, wait for a permit for a month, later conclude a purchase/sale agreement, and then a new owner or tenant will go through bureaucratic procedures to conclude a new protective agreement.

This bureaucratic procedure requires significant time and cost resources. That is why the draft law offers to replace this permit with a declaration and provide an automatic transfer of the rights and duties to a new owner of the cultural monument under the protective agreement.

The reasons to abolish some other permits is harmonizing the legislation in line with other laws that have already improved certain procedures.

 

For example, the operational permits for facilities producing the baby food are canceled due to the introduction of an updated system of operational permits in the law “On general principles and requirements for food safety and quality”, which entered into force on September 20, 2015.

Another example is that the permit to remove the upper layer of soil in a land parcel is now transformed into the process of declaration. The obtaining of this permit was not only extremely bureaucratic and corrupt, but also in contradiction to the law “On the regulation of urban development”.

According to our estimates, adoption of the draft law will annually save for business owners at least 196,762 days of waiting. Cost savings will be even more significant.

We don’t have complete statistics on the costs for permits. The available information gives reasons to believe that the annual burden on business will decrease by 28 million hryvnas of official fees and 193 million hryvnas of unofficial fees.

The source: “Economichna Pravda”

On January 12, the Cabinet of Ministers of Ukraine published an order approving the plan on implementation of the best practices of quality and effective regulation as reflected in the World Bank Group’s methodology of the Doing Business ranking for 2016.

The Better Regulation Delivery Office’s experts together with the Ministry of Economic Development and Trade of Ukraine created this roadmap of changes in the regulatory policy of Ukraine based on the analysis of the methodology of the ease of doing business assessment in the global Doing Business 2017 ranking.

Proposed 57 steps to simplify doing business in Ukraine were combined into 43 positions in the final document. These 43 positions are related to preparing and making amendments to the draft laws on business registration, construction start, connection to electricity supply networks, protection of investors rights, getting loans and other indicators, by which the ease of doing business is measured in the world.

“The Strategy for Sustainable Development “Ukraine 2020” approved by the decree of the President of Ukraine and the Coalition Agreement also provides for the implementation of regular practices within the Doing Business ranking. However, there was no coherent view of necessary reforms before the adoption of the order. The approved order of the Cabinet of Ministers of Ukraine was the first Ukrainian coherent and detailed plan in the ranking’s context,” the Better Regulation Delivery Office’s drafting team leader says.

As the National Reforms Council’s project manager of the deregulation reform Dmytro Romanovych said, “if we perform this, we will enter the TOP 50 already in October of 2015 and in the TOP 20 countries in terms of the ease of doing business according to the World Bank’s methodology – next year.”

The text of the order and the action plan can be found here.

The implementation of these steps will allow Ukraine to enter the top 50 in 2017 and the top 20 countries in the DoingBusiness rating in 2018.

The Cabinet of Ministers approved the Doing Business 2017 roadmap developed by the BRDO experts together with the Ministry of Economic Development and Trade of Ukraine.

On December 16, the government supported the resolution “On approval of the Action Plan for the implementation of best practices of quality and effective regulation as reflected in the DoingBusiness 2017 methodology by the World Bank Group”, but it was at revision for several days.

The Doing Business 2017 roadmap is one of the first results of work of the BRDO.

“This is our agenda that we have to implement. This is a common task of the society, the government and the expert community,” the head of the Better Regulation Delivery Office Oleksiy Honcharuk said.

This plan should be implemented within the next year. It provides for 57 point relating to amendments to the draft laws on business registration, start of construction work, connection to electrical supply networks, protection of investors’ rights, getting credits and other parameters that measure the ease of doing business.

[gview file=”https://en.brdo.com.ua/wp-content/uploads/sites/5/2016/05/Prezentatsiya-Doing-Business_EN.pdf”]

The Deputy Minister of Economic Development and Trade Yuliya Klymenko believes that these changes should improve the business climate. According to the BRDO expert Denis Malyus’ka, the implementation of these steps will allows Ukraine to enter the top 50 in 2017 and the top 20 countries in the DoingBusiness rating in 2018.

 

The Cabinet of Ministers considered and approved the draft law on abolishing 20 permits that has been developed by the Ministry of Economic Development and Trade together with BRDO experts.

BRDO experts estimated that the adoption of this draft law will help entrepreneurs to save at least 196 762 days of waiting every year and reduce the annual burden on the business approximately at 28 million hryvnias of official payments and about 200 million hryvnias of unofficial ones.

The draft law “On Amendments to Certain Legislative Acts of Ukraine regarding reducing the number of permits including by promoting a declarative (registration, application) principle” is aimed at simplifying the conditions for business operation.

Officially, Ukraine has 82 types of permits. According to the BRDO expert Denis Malyuska, the existence of some of them is not justified, essentially being an excessive regulatory burden on business that encourages the bureaucracy and corruption.

That is why, the Plan of deregulation measures, approved by the Cabinet of Ministers of Ukraine has the aim to reduce a list of permits by 25%.

The BRDO and Ministry of Economic Development and Trade of Ukraine’s (MEDT) draft law suggests to optimize 20 different permits, the necessity of getting which is not being justified of people’s health care, environmental or other essential interests of the state.  However, only a half of these permits is abolished. As for the rest of permits, permissive procedures will be replaced with notifications (declarations).

There are licenses for tour operator activities, certificates of assigning a hotel category, permits for activities involving animals, quarantine permits (for import and transit) and others among the abolished permits.

Certificates of assessment activities, approvals for alienation or transfer of monuments of national importance to their owner’s possession, permits for traditional medicine practice, permits for keeping wild animals and others are transformed into declarations.

The head of BRDO Oleksiy Honcharuk is sure that Ukraine in Top-50 of the Doing Business ranking in 2017 and in Top-20 in 2018 is a realistic goal.

For achieving this aim, the dialogue between the state and business must be changed. The state has to become not an enemy but a partner for entrepreneurs. Therefore, the BRDO assignment is to establish this dialogue. He announced that during the live program at 5 Channel.

“We reached an agreement with the State Regulatory Service and the MEDT and will try to prevent introducing every new business rule without open consultations with business,” Honcharuk said. “Next year we will try to make an unprecedented thing – to bring the dialogue about new rules between business and the state on the neutral ground and make it public”.

 That is why BRDO signed a memorandum of cooperation with “Liga.Zakon”

 We can watch online debate about new rules between regulators and competent mediators next year.