UKRAINIAN BUSINESS CLIMATE

BUSINESS CLIMATE: Doing Business Index 2018: How business-friendly is Ukraine?

Ukraine is making steady if unspectacular progress in the World Bank’s annual Doing Business rating but there remains huge scope for further improvements

BUSINESS CLIMATE: Doing Business Index 2018: How business-friendly is Ukraine?
About the author: Andy Hunder is the President of the American Chamber of Commerce in Ukraine
Andy Hunder
Monday, 18 December 2017 22:03

The annual Doing Business rating is a debatable study, with zealous critics and devoted fans alike. Every year the World Bank publishes its Doing Business rating, one of the key ratings for investors all over the world that characterizes ease of doing business and influences decisions where to invest. The report is above all, a benchmark study of regulation. Doing Business serves as a tutorial for world governments as well. It explains what needs to be done in a particular country to ensure a favorable business environment for companies’ operating in that jurisdiction. Ukraine has found it challenging over the years to show impressive results in the rating, but over the past four years, it has shown stable progress, striving to be perceived as a more business-friendly country.

 

76th out of 190 – can do better

In Doing Business 2018, Ukraine is ranked 76th among 190 countries, rising in four positions compared to its 80th place rank in 2017. Over the past year, the Ukrainian government, together with the business community has been working on implementation of much-needed reforms, which have contributed to the overall rise in the rating. The fact that Ukraine notched up four spots in the World Bank’s 2018 Ease of Doing Business Index is a sign of a slow but sure step forward.

In assessing progress based on ten criteria, the World Bank has acknowledged that during 2017 Ukraine implemented positive reforms in three areas, in particular, in dealing with construction permits making it easier by reducing fees, and protecting minority investors by requiring detailed immediate public disclosure of related-party transactions. The main breakthrough of this year is the “paying taxes” indicator, where Ukraine jumped up by 41 positions. Ukraine made paying taxes easier by reducing the rate for the single social contribution tax.

Still, the country performs poorly in such indicators as connecting to the electricity grid, trading across borders, and resolving insolvency. To boost these low rankings, it is essential to simplify procedures, reduce the time and cost of getting electricity, increase effectiveness of the single window at customs, and ensure the rule of law through implementation of full-scale judicial reform.

 

20 positions up in three years

Since 2015, Ukraine has improved its position considerably, climbing from 96th place in 2015 to 76th in 2018. Ukraine is progressing at an unhurried pace. The most significant improvements have been in the “paying taxes” indicator, with an improvement of 65 positions up in four years, followed by an increase of 57 positions in “getting electricity”. The situation with “trading across borders” and “dealing with construction permits” has also improved significantly. According to these indicators, Ukraine has risen by 35 positions in the past four years.

Ultimately, investors expect not only the increase of Ukraine’s position in Doing Business rating, but an improvement of the overall business environment, growth of business activity in the country, and new Foreign Direct Investment. Ukraine continues to offer opportunities in a broad range of sectors. In the words of Bill Gates: “It is fine to celebrate success but it is more important to heed the lessons of failure”. The lessons are clear – the business community and Ukraine’s Government have to further join efforts, as a lot still needs to be done to make Ukraine’s regulatory environment more business friendly. Nevertheless, the country seems to be on the right track.

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