Improving

the Business
Climate

“Second Opinions and the Institutionalization

of Public Consultation in the Policy Development Process
in Ukraine” project
This handbook was prepared as part of the “Second Opinions and the
Institutionalization of Public Consultation in the Policy Development Process in
Ukraine” Project, a joint initiative of the Secretariat of the Cabinet of Ministers, the
Ministry of Economy and European Integration and the International Centre for
Policy Studies implemented under the Policy Advice for Reform (PAR) Project of
the Canadian Bureau for International Education (CBIE) with the financial support
of the Canadian International Development Agency (CIDA).

Ideas and ideological management by Vira Nanivska.

This paper was prepared by specialists Vitaliy Bigdai, Ildar Gazizullin,

Oleksandr Tatarevskiy.

Canadian advisors who provided their experience in policy analysis and organizing
the public consultation process were Paul Brown, Bohdan Krawchenko and
Larissa Lozowchuk.

External experts who provided commentary and recommendations for this paper
were Olena Adamovych, Larysa Bezdudna, Viacheslav Bykovets,
Svitlana Khodakova, Valeriy Kokot’, Yuriy Paperniy, Volodymyr Prytula,
Maya Rudenko, and Yuriy Sosedko.

The component on institutionalizing public consultation was implemented by

Natalia Dniprenko, Viktoria Horshkova, Tetiana Markina, and Andriy Shpychko.

The directors of regional partners who organized consultations in their respective

regions were Serhiy Knurenko, Yusuf Kurkchi, Oleh Levchenko, and Vitaliy Zeliuk.

Texts were translated and edited by Oleksiy Blinov, Oleksandra Boliachevska,

Nadia Tsisyk and L.A. Wolanskyj.

A number of other specialists and analysts took part in preparing this document,
organizing the consultation process and coordinating the project: Yevhenia Akhtyrko,
Andriy Beha, Tetiana Beha, Andriy Blinov, Daria Hlushchenko, Volodymyr Hnat,
Natalia Hnydiuk, Viktoria Humeniuk, Liudmyla Kotusenko, Natalia Martynenko,
Vira Nanivska, Volodymyr Nikitin, Oksana Remiga, Ihor Shevliakov, Yevhen Shulha,
Olha Shumylo, Yegor Sobolev, and Ostap Stasiuk.

Printed in Ukraine by Kyivska Typografia Publishing House.

©2004 International Centre for Policy Studies

 Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improving the business climate as a government policy priority . . . . . . . . . . . . . . . . . . .
Indicators of a healthy business climate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The business climate in Ukraine today: a diagnosis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Regulatory and bureaucratic barriers to market entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Difficult access to resources and business infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . .
Lack of protection of property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Absence of clear and fair rules of the game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unfair distribution of incomes through taxation
and mandatory social payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The consequences of current problems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why is Ukraine’s business climate sick? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What causes barriers to business start$ups? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What prevents access to resources? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why are property rights not adequately protected? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
What’s missing in the regulatory environment? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Why is the system of mandatory contributions so unbalanced? . . . . . . . . . . . . . . . . . . . .
The main aims of reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Priorities: The first steps to fixing the business climate . . . . . . . . . . . . . . . . . . . . . . . . .
Improving the regulatory environment (legislation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reforming the tax and social contributions systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reforming the system of public administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Protecting property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The next steps in reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional ways of instituting regulatory policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Greater reduction of payroll pressures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decentralization, optimization and increased government
accountability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A better court system to protect property rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stronger state guarantees and fewer property rights violations . . . . . . . . . . . . . . . . . . . . .

Appendix . About this project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appendix . How the project’s public hearings were organized . . . . . . . . . . . . . . . . . .
Appendix . Responses to first round of public debates . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix . List of stakeholders in first round of public debates . . . . . . . . . . . . . . . . .
Appendix . Responses to second round of public debates . . . . . . . . . . . . . . . . . . . . . . .
Appendix . List of stakeholders in second round of public debates . . . . . . . . . . . . . .
Introduction
Open government and public participation
in the policy$making process in between
elections are important elements of demo$
cratic governance. After the transition from
a totalitarian to a democratic system of
administration, the Government of Ukraine
was faced with the need to develop skills in
making and implementing decisions under
conditions where there are differing opin$
ions of government policies within the soci$
ety. In developing the skills and procedures
to engage the public and take various opin$
ions and interests into account is the
Government’s main task in order to
strengthen democracy and improve the
quality of government policy in Ukraine.
The “Second Opinions and the Institutio$
nalization of Public Consultation in the
Policy Development Process in Ukraine”
project, which includes the development of
this paper, is aimed at helping the Govern$
ment improve the quality of public involve$
ment in the policy$making process. During
the implementation period, public policy
processes were applied for the first time in
Ukraine under the project: a series of con$
sultations with stakeholders on public policy
priorities using the rules and procedures of
Governments in developed democracies.
The project looked into such government
policy priorities as drawing personal
incomes out of the shadows, improving the
business climate, and reforming the system
of privileges. Under the project, policies in
each of these areas were analyzed, along with
various possible options, the positions of all
stakeholders were heard as to these prob$
lems, their root causes and possible options,
and recommendations were put together for
further Government actions to improve the
situation.
As a result of the project, a paper was devel$
oped that analyzed international and
 improving the business climate
domestic experience in public consultations
and provided recommendations on how to
improve this process. The project experts
also prepared guidelines for civil servants to
organize an effective consultation process
and thus to improve the quality of govern$
ment decision$making.
The project was implemented with the con$
sultative support of Canadian advisors with
extensive practical experience in policy
analysis and public consultations for the
Canadian Government: Paul Brown (profes$
sor, School of Public Administration,
Dalhousie University, Halifax), Bohdan
Krawchenko (Vice Rector, National Aca$
demy of Public Administration, Office of
the President of Ukraine), and Larissa
Lozowchuk (Deputy Government Secretary,
Saskatchewan).
The key distinction of this project compared
to other technical assistance projects is that
all outputs were developed by Ukrainian
experts: the international advisors only pro$
vided consultations and transferred their
know$how. In our opinion, such an
approach is most effective in terms of the
goal of the project—passing on experience
and developing capacities for analyzing pol$
icy and organizing consultations in Ukraine.
This publication presents one of the analyti$
cal reports developed under the project.
“Improving the Business Climate” identifies
key problems in this area and provides rec$
ommendations for further Government
activities in terms of instituting new, qualita$
tive transformations and achieving a level of
social wellbeing similar to that of EU coun$
tries. The appendices contain a description
of the consultative process that accompa$
nied the development of this paper and pro$
vide the responses to consultations and a list
of participants.
Improving the business climate
as a government policy priority
Ukraine’s economy has been growing at a
solid pace for several years now. The last few
years saw reforms launched with regard to
the tax regime and some significant improve$
ments were introduced in regulating proper$
ty and the financial sector. Nevertheless,
improving the business climate has to
remain a top priority in government policy.
Why?
Despite the number of positive changes in
the business environment in Ukraine, with$
out new qualitative transformations the coun$
try, its economy and the welfare of its citizens
will not reach the levels seen today in the EU
and leading countries around the world.
The speedy growth of Ukraine’s economy in
– should not lull anyone. Even tak$
ing into account the current acceleration of
the economy, the level of GDP at the end of
 was only about % of GDP for .
Unless Ukrainians remove barriers to com$
mercial activity, increase the rate of invest$
ment and raise the efficiency of industrial
capacity utilization, it will be a long time
before they reaches the level of prosperity of
EU countries.
Chart . Per capita GDP (PPP), 
,
,
,
Czech Slovakia Poland
()
improving the business climate
This conclusion is supported by many exam$
ples.
In , Ukraine saw a record influx of
investment, and the GDP share of invest$
ment reached .%. It would seem that this
is a considerable achievement. Still, when
these numbers are examined more closely, a
different picture emerges: even if the GDP
share of investment stays at % every year,
it will take for Ukraine  years to reach the
average indicator for per capita GDP in
OECD countries.
Today, Ukraine’s per capita GDP is lower
than the per capita GDP for most its nearest
neighbors. (See CHART )
The high level of pessimism among the
general population testifies to the fact that
the business environment in Ukraine has
not managed to eliminate some of its worst
drawbacks. Despite the fact that the
Consumer Confidence Index has been
steadily rising and reached . in Q’,
it has not yet broken the record set in
December , when the CCI was .
points. Economic expectations have tend$
ed to improve the most among poorer
,
,
,
Hungary Russia Ukraine
()
Sources: National statistical agencies; calculations: ICPS.

Ukrainians, who generally do not antici$
pate starting up their own businesses.
Negative economic expectations have actu$
ally been growing among rural residents
and those with higher$than$average
incomes.
It is well known that obstacles to doing
business are most keenly felt by small and
medium enterprises (SMEs). This means
that the state of development of this busi$
ness sector is a good illustration of the state
of health of a country’s business environ$
ment. In Ukraine, SMEs have an extremely
small share of GDP. In , it was %,
whereas in some other countries this indi$
cator ranges as high as %. These kinds of
figures clearly point to significant prob$
lems that interfere in doing business.
The acceleration of Ukraine’s economy
over the last few years has set the basis for
an economic breakthrough for Ukraine
and established positive conditions for the
liberalization of the business environment.
The drivers behind further economic
growth should be domestic and foreign
investment. Given that internal investment
resources are fairly limited right now,
Ukraine needs to provide the necessary
Chart . FDI in selected Eurasian countries, as of  end, bn USD











Poland Czech Hungary

consumer confidence report #, July , prepared by GfK–USM and ICPS.
 improving the business climate
conditions for attracting external invest$
ment into its economy. The example of
Ukraine’s neighbors shows persuasively
that this can contribute fundamentally to
the improvement of the domestic economy
and of the wellbeing of the country’s citi$
zens.
Results for  show that Ukraine attract$
ed a cumulative US $.bn in foreign direct
investment (FDI). By comparison,
Ukraine’s neighbor, Poland, had attracted
that much by . As a result, the annual
average per capita GDP for Poland at cur$
rent exchange rate is US $,, whereas in
Ukraine it is barely US $, although the
two countries started at about the same
level (US $, per capita). (See CHART )
A look at the experience of Ukraine’s more
successful neighbors makes it possible to
conclude that attracting the necessary capi$
tal investment to raise the country’s econo$
my further can be done provided that
investor rights are guaranteed and there is
a positive investment climate for both for$
eign and domestic businesses.
For this reason, it is important to actively
tackle the problems facing businesses in
Ukraine.
Russia Kazakhstan Croatia Ukraine
Sources: National statistical agencies; calculations: ICPS.
And such problems are plenty. Multilateral
consultations with both businesses and the
general public have made it possible to
numerate more than  serious obstacles to
those who are trying to do business in
Ukraine. These obstacles can be grouped
into five key areas where the Government
needs to start more actively working to
resolve problems:
• regulatory and administrative barriers to
market entry and the introduction of
new products;
• complicated access to resources and
infrastructure, which hampers the
growth of business by lowering produc$
tivity and competitiveness;
• the absence of guarantees for ownership
rights, which greatly increases invest$
ment risk in Ukraine;
• the lack of clear and fair rules of the game,
which is one of the main reasons for the
high level of corruption in Ukraine;
• unfair distribution of incomes through
the system of taxation and mandatory
contributions, which lowers the prof$
itability of business in Ukraine. This, in
turn, reduces its attractiveness for poten$
tial investors.
The presence of such problems causes con$
siderable damage to Ukraine’s economy
and leads to many negative consequences.
The main one is corruption.
The Index of Perceived Corruption for 
placed Ukraine th among  countries.
(See TABLE )
A business survey showed that more than
% were forced to pay bribes of one kind or
another in the course of the previous year.
According to business owners themselves,
corruption is the second biggest burden after
taxes that puts pressure on businesses and
hampers their development. Corruption
forces businesses to launder huge sums of
money, which stimulates the shadow econo$
my. By the most pessimistic counts, the cost of

Table . The Index of Perceived Corruption in Ukraine and elsewhere 

Сountry Rank among Index of Perceived
 countries Corruption

Finland  .
Slovenia  .
Hungary  .
China  .
Russia  .
Ukraine  .
Libya  .
Nigeria  .


Transparency International, http://www.transparency.org, .

The higher the index, the lower the level of corruption in the country (maximum  points).

Excerpted from a speech by President Kuchma at an All$Ukrainian Council on problems in combat$
ing organized crime and corruption and the protection of human rights,  January .

improving the business climate 

corruption is about US $.bn annually for
Ukraine, which is about % of all Budget
revenues planned for . This is money
that could otherwise have been invested in
Ukraine’s economy—and which the economy
desperately needs. And these are the num$
bers that scare off potential investors, espe$
cially foreign ones.
The link between corruption and its root
causes is two$way. On one hand, an imper$
fect regulatory environment provides incen$
tives for corruption and bribery by making it
possible to resolve problems and obstacles
hampering business activity on the spot. On
the other, corruption encourages even
deeper inefficiency in both administrative
regulation and market mechanisms. Thus,
corruption fails to resolve the evident prob$
lems and fails to remove barriers to doing
business. All it does is ease them temporari$
ly. In the long run, corruption leads to a
more extensive shadow economy, low$quali$
ty public services, and a situation where it
becomes impossible to predict the impact of
specific government policies.
In tackling the task of improving the busi$
ness environment, Ukraine will also facili$
tate a lowering in corruption levels.


Data from the All$Ukrainian conference – October  called “How to ensure transparency in
the regulation of SMEs.”

 improving the business climate

Indicators of a healthy
business climate
Improving the business environment mostly
means putting effort into eliminating those
obstacles that most effect businesses today.
Still, these kinds of problems were, are, and
will continue to be for the foreseeable
future. All that can be done is to reduce
their negative impact on business and socie$
ty over time. For this reason, it is critical to
understand that a society can never resolve
all these problems, nor is this the main pur$
pose of reforms launched by the
Government.
Yet, it’s important not to get caught up in
patching holes but to direct all efforts at
building an effective, transparent business
environment and resolving the worst prob$
lems. For this, the most important point is to
understand to what kind of environment is
desirable for businesses to operate effective$
ly and to determine indicators of a healthy
business environment.
With the help of such indicators, it becomes
possible to assess to how close the business
environment in Ukraine is to the desired
state and to understand what specific
actions need to be taken to make this envi$
ronment more attractive to potential
investors. In this way, it becomes possible to
clearly define those issues in doing business
whose resolution is essential to reaching the
ultimate goal. Moreover, if it is understood
what the business environment in Ukraine
should look like, it becomes possible to
clearly determine the approach of govern$
ment policy, to steadily move in a constant
direction, and to resolve old problems with$
out giving birth to new ones.

Consultations with the general public have shown that properly defining a problem is a very difficult
challenge. The number of problems raised by people was in the dozens. Of course, many of them over$
lap or repeat each other, and some of them are actually consequences rather than root causes. See
APPENDICES  and .
improving the business climate
The basis for determining the indicators
inherent in a healthy business environment
was a series of public hearings on govern$
ment policy directed at improving the busi$
ness environment in Ukraine. Based on the
research carried out and public opinion,
there are five elements that are the most crit$
ical to doing business in Ukraine.
Easy market entry and exit
This means that it is easy to start up a business,
easy and not prohibitively costly to enter new
markets—both goods markets in terms of
launching new products and regional mar$
kets—, and easy to shut down a particular com$
mercial enterprise and keep earned profits.
Easy access to resources and
business infrastructure
After deciding to start a new business or to
expand an existing one, entrepreneurs run
into the problem of accessing necessary
resources. This primarily means financial
resources to organize start$up capital, infra$
structure necessary to operate and commu$
nicate (transport, communications, water,
electricity and so on), to launch production
and organize its sale. In addition, of course,
there are human resources and information.
Protection of private property
rights
For investors to put their capital into a busi$
ness, they need to be certain that their prop$

erty rights are secure. Owners need to be
confident that no one will be able to illegal$
ly take their business away from them, that
their rights to utilize their property in the
pursuit of profits will not be restricted, and
that they will be able to use the profits that
are returned in whatever way they deem
appropriate. Finally, for business owners it is
particularly important that the state guaran$
tees that any property disputes will be han$
dled in a timely manner and reviewed in an
unbiased manner, that violations of proper$
ty rights will be resolved or rights restored in
the case of illegal restrictions, and that the
owner will have the possibility to ask for
compensation for losses resulting from any
violation of property rights.
This is all firstly requires the necessary guar$
antees and enforcement mechanisms to be
enshrined in law and, secondly, that an
effective system be established for protect$
ing property rights against violations.
Clear and fair rules of the game
Everybody understands that business is a
game with certain rules that are set by the
state. Entrepreneurs agree to play the game
when they are certain that these rules are
clear, that they are fair, that is, that the state
doesn’t hand advantages to other players.
An important element for any business is
planning, so entrepreneurs need to be con$
 improving the business climate
fident that the rules under which they chose
to enter the market will not change for the
worse down the line, that they will change in
a transparent manner, and that the govern$
ment will make clear, consistent and pre$
dictable moves. This requires that the
Government clearly define its policies in dif$
ferent areas and act within the limits of these
policies.
A fair distribution of revenues
through taxes and mandatory
contributions
Business is an activity aimed at gaining prof$
its. Part of this profit should be redistributed
to the benefit of the state, in the form of
taxes and mandatory contributions. This is a
kind of payment to the state for carrying out
its functions, including providing a number
of administrative and social services.
It’s understood that commercial activities
become attractive only when this distribu$
tion is fair and does not seriously reduce the
profitability of businesses. In addition, it’s
important that tax rates and other mandato$
ry contributions be reflected in the quality
of the services provided by the state.
When all these elements can be seen in a
country, it is possible to say that that country
has established a positive business environ$
ment.
The business climate in Ukraine
today: a diagnosis
An analysis of the current situation in reflect the elements discussed earlier. Those
Ukraine and discussions with the general who are engaged in commercial activities
public have led to the conclusion that the run in to numberless problems.
business environment does not, in fact,

Regulatory and bureaucratic barriers to market entry

Regulatory and bureaucratic barriers can be
seen in:
• complicated registration procedures;
• a poorly regulated system of licenses and
permits;
• ineffective regulation of rates.
Evidence of the difficulty of entering
Ukrainian markets can be seen in a slew of
symptoms.
To start up a business, today entrepreneurs
in Ukraine need to go through registration
and post$registration processes involving
no less than six government agencies.
Because these various agencies do not have
an effective system of sharing information
among them, the fact that the “one$stop
shop” registration system has not yet been
implemented means that business have to
themselves visit each of these bureaucra$
cies with virtually the same set of docu$
ments, which takes up enormous amounts
of time.
On average, a business will spend an esti$
mated  days in order to go through all
the necessary red tape to get the company
up and running from the moment they
apply to register with the state to when they
have a bank account and company stamp.
In most developed countries, this indicator
is from  to  times lower. (See CHART )
That the process of registering a business is
too protracted and bureaucratized can also
be seen in the fact that most entrepreneurs
try to speed up the process by using unoffi$
cial “voluntary contributions to business
development.” According to data collected
by BIZPRO, a USAID project, in ,
nearly % of all individuals and % of
legal entities did so.
Still, even having gone through the regis$
tration process, businesses typically cannot
start their commercial activities right away.
Now they have to overcome a number of
barriers created by a burdensome licens$
ing and permits system, collecting a large
number of documents without which their
activities will be considered illegal. This
includes:
• permits to start operations from such
bodies as the Fire, Health and Sanitation
Departments, permits to set up points of
sale, approval from anti$monopoly bod$
ies, and so on;


Registration procedures for the most part mean state registration of business entities and post$regis$
tration processes such as: registering with the Tax Administration, the Pension Fund, the three manda$
tory universal social insurance funds, and state statistics bodies.

World Bank “Doing Business” Indicators, . See http://rru.worldbank.org/DoingBusiness/TopicReports/.

improving the business climate 

Chart . Number of days needed to start up a business in different
countries

Canada US France Italy UK Poland Ukraine Russia

Source: World Bank “Doing Business” Indicators, . See http://rru.worldbank.org/DoingBusiness/TopicReports/

• operating licenses, which are required kind of approval requires  signatures,

for more than  kinds of activities; which take on average six weeks to obtain.

• certifications in order to be able to Another example is getting approval for

legally use or sell a variety of products
and services;
• licenses to confirm that the company
has the right to engage in retail sales,
personal services, and running gaming
establishments.
There are an estimated , different
approvals required in Ukraine.
A single example of how burdensome and
wrapped in red tape the system of approvals
is in Ukraine is the process of getting
approval to set up a small booth or kiosk.
Based on surveys carried out among busi$
nesses in various regions of Ukraine, this
extraction. Because licensing is so poorly
regulated, today the granting of extraction
licenses and extensions of such licenses has,
for all intents and purposes, ground to a
halt. The queue for such licenses is more
than  applications long, and the cost to
the state has reached UAH bn at this
point.
The system of approvals is a major barrier
for those who would like to invest their cap$
ital in new markets and new products, as it:
• Absorbs considerable financial resour9
ces (most approvals have to be paid
for). Solely from handing out licenses
in , the Government expects to col$


Henceforth, the word “approval” is used in the broad sense to include licenses, operating licenses,
certificates and so on.

Materials from an internet conference on the topic, “Ways to reform the system of getting approvals
in Ukraine.” See http://www.vlasnasprava.info.

Excerpted from a speech by President Kuchma, op. cit.

This can include payments to both government agencies (such as for licensing fees) and non$govern$
ment agencies (such as laboratory testing to have a product certified).

 improving the business climate

 lect nearly UAH mn. Getting back
to the example of the kiosk, the cost for
placing such an architectural object
ranges from UAH  to ,.
• Costs companies a “time penalty.” This
is the time that is wasted to deal with the
red tape necessary to get approvals. This
“penalty” amounted to .% of work
time in  and grew to % in .
• Strengthens the administrative leve9
rage of various overseeing agencies over
businesses. The more approvals a compa$
ny needs, the more the government con$
trols it. Today in Ukraine, the average
company is inspected  times a year.
A regional survey has shown that the most
aggravation (%) comes from inspec$
tions arising in the process of gaining
approval (such as inspections to make
sure the terms of a license are being main$
tained, fire inspections and so on).
Regulatory restrictions include regulation
of rates. The current regulatory system for
rates and prices is simultaneously aimed at
“social” objectives, at ensuring fair compe$
tition, and at ensuring administrative
order; as a result, it reaches none of these
aims. Actual rates are a compromise
between approximations of the production
cost (value) and current political restric$
tions.
This ineffective regulation is a significant
obstacle for the development of business in
specific markets. Distorted rates remove
incentives for market players to improve
and expand.
One example of this is the telecommunica$
tions branch. Ineffective rate$setting is one
of the main factors that hampers the devel$
opment of local land lines. Because rates
are not optimized, revenues from a local
land line were only US $ in , com$
pared to nearly US $ in . As a result,
the share of local telephone communica$
tions in overall telecoms services continues
to decline, dropping from % in  to
.% in .

Difficult access to resources and business

infrastructure
Certain key aspects of this problem stand • limited access to financial resources;
out in Ukraine:
• underdeveloped industrial infrastruc$
• not enough government support for ture.
business start$ups;
It’s worth taking a closer look at the symp$
• inadequate informational support for toms that testify to the existence of these
businesses; problems.


Law №$IV on the  State Budget, dated  November .

Results of a quarterly enterprise survey in Ukraine by the Institute of Economic Research and Political
Consulting. See http://www.ier.kiev.ua/English/qes6eng.cgi.

Certain rates (for instance, residential services rates and transit fares) reflect political aims rather than
economic realities.

By industrial infrastructure is meant the interlinkage of companies and organizations that provide
businesses with basic resources and services: telecommunications, transportation, electricity, water sup$
plies, and so on.

improving the business climate 

The lack of serious support for business start$
ups can be seen in the tiny amount of fund$
ing set aside for this purpose by the govern$
ment. Despite the fact that the development
and support of the business environment
have been declared priorities in state policy
priorities for a number of years now, financ$
ing for the Business Support Fund in 
was a mere .% of Budget revenues. By
comparison, the state plans to collect ten
times more in fines than it intends to direct
at fostering business start$ups.
This kind of approach is ill$considered. Far
more resources and funding need to be
directed at supporting business. According
to the Business Support Fund, every hryvnia
invested in a business project makes it possi$
ble to bring in UAH  of product and
UAH  in sales, and increases Budget rev$
enues at all levels by UAH ..
Yet, even this low level of state support is very
ineffectively applied. The main reason for
this is the result of poorly devised informa$
tional support for the business environment
on the part of both national and local gov$
ernment agencies. The lack of necessary
information leads to a situation where busi$
nesses cannot turn anywhere for support.
Thus, in some regions, financing that had
been allocated for SME development purpos$
es (for instance in ), was never even
used. As a result, such funding was actually
cut back in .
Inadequate informational support has other
implications as well. In particular, local gov$
ernment agencies do not disseminate infor$
mation about idle production facilities that
are communal property and could easily be
used for business purposes. Nor do they pro$
mote the priority business development
areas that are being supported by local
funds or changes in the simplified tax rate.
Today it is clear that the level of education
among entrepreneurs, particularly legal deg$

Statistical Pocket Guide of the European Central Bank, http://www.ecb.int/stats.
 improving the business climate
rees, is at a very low level—especially among
small businesses. The lack of information and
knowledge about legal requirements, estab$
lished procedures and restrictions leads to
unwitting violations of various regulations. As
a result, the number of fines that are collected
from businesses every year is on the rise. In
, businesses paid out UAH mn,
UAH mn in , and in  the
Government expects to collect UAH mn.
Lack of state funding for business develop$
ment would be acceptable if conditions were
laid down that would enable these business$
es to have access to cheap and long$term
commercial financial resources. However, to
date the Government has not done anything
to make this possible. This can be seen in the
high interest rates for loans for investing into
production and for starting up a business.
Thus, the average rate for micro credits from
a commercial bank in  was, depending
on the source of the money, from a mini$
mum of % to as high as .% in hard cur$
rency (usually USD). By comparison, in EU
countries, businesses can borrow at –%.
Yet, even at such high interest rates, it’s fair$
ly hard to borrow money. Borrowers are
expected to provide collateral worth
–% the value of any loan. Such
restrictions on access to financial resources
are one of the main barriers to greater
investment in the Ukrainian economy. In
, the weighted value of borrowed
money in overall investment by companies
into their fixed assets was only %, whereas
in leading developed countries, this indica$
tor is around %.
In addition to problems with borrowing
money, opportunities to attract additional
investment capital are limited by the under$
development of the securities market and
mortgage lending, the low level of develop$
ment and use of financial instruments that
are needed to hedge risks and simplify the
process of borrowing money.
Last, but not least, the slow pace of invest$
ment in production development is tied
into the lack of a developed industrial infra$
structure. This unsatisfactory state can be
seen in:
) The practice of cross9subsidizing. In
contrast to EU countries, rates for gas,
water and electricity for industrial users
in Ukraine are typically two times higher
than for residential users.

) Depreciated physical networks in the ) The lack of telecommunications land

vast majority of infrastructure areas.
For instance, by the end of , trans$
port and communications assets had
depreciated by .%, while the overall
rate for domestic industries was .%.
lines or transport links in the re9
gions, especially rural areas. The den$
sity of roads and telecoms lines in
Ukraine is among the lowest in Central
and Eastern Europe.

Lack of protection of property rights

A quarterly survey of businesses showed putting money into business enterprises
that, in , % of business managers felt need to be certain of the transparency of the
that property rights were not protected but company’s operations and of the opportuni$
systematically violated. ty to take part in the making of key decisions.

For one thing, the state allocates an unac$
ceptably low amount of money to finance the
court system, which should be the main
means of defending property rights. In ,
for example, the State Budget allocated a
mere UAH mn to cover the entire branch.
By comparison, the Tax Administration,
whom businesses see as the main violator of
their rights, was allocated UAH .bn.
Not surprisingly, businesses have little faith
in the courts. Only .% of respondents
felt that the legal system was capable of
enforcing their commercial contracts, and
another .% that the courts were capable
of effectively protecting both their business$
es and their persons from wrongdoing.
One important aspect that guarantees prop$
erty rights is regulating issues around corpo$
rate governance. After all, investors who are
Today, Ukrainian businesses are feeling ever
more sharply the need to increase share cap$
ital since: () positive conditions on external
markets are spurring the use of expanded
investment opportunities and () the com$
panies’ own resources and expensive credits
are limiting the capacity to expand capital
investment. However, the unregulated cor$
porate environment makes it impossible to
expand share capital and to involve minori$
ty shareholders.
According to a report by the EBRD, the level
of corporate governance in Ukraine is “very
low” and the development of legislation in
this area is considerably removed from actu$
al business practice. This is a serious prob$
lem, as it is generally agreed that the value of
a business (its investment attractiveness)
depends not least from the quality of its cor$
porate governance.


According to data from Derzhkomzviazok, the state communications and informatization committee,
there were only  telephones per  residents of Ukraine at the end of , which is about . times
lower than the average for Europe ().

Institute of Economic Research and Political Consultation. See http://www.ier.kiev.ua/English/qes6eng.cgi.

Ibid.

Based on information from Context, a business information service. See http://www.context6ua.com.

improving the business climate 

Absence of clear and fair rules of the game
Research and consultations with the public
have made it possible to say that business
activity in Ukraine continues to be a highly
risky affair, one whose outcomes are hard to
predict. This is primarily tied into the fact
that there is an absence of clearly defined
and fair rules of play. This can be seen in:
• inconsistency, opacity and lack of coordi$
nation in government policy in different
areas of business regulation;
• flawed legislation and regulation;
• unequal conditions on many markets
and for many businesses;
• unregulated relations between business
and the state, especially with oversight
bodies.
Today, government policy aims change as
the external situation changes. Decisions
are made without the input of public dialog.
Only % of draft regulatory bills are publi$
cized for the purpose of getting feedback
and propositions from the general public
and private business. The process of devel$
oping government policy remains ineffec$
tive because state bodies ignore the require$
ments and principles of regulatory policy.
This can be seen, among others, in the fact
that only % of regulatory bills drafted by
government organs are accompanied by
appropriate analyses of the impact of the
regulations, and the little analysis that is pro$
vided is unacceptably poor in quality: only
% of authors bothered to review alternative
options to dealing with the given problem;
% calculated the benefits and losses of the
proposed alternative; and only % attempt$
ed to predict the consequences of the pro$

Data from the State Entrepreneurship Committee.

Quarterly Enterprise Survey of the Institute of Economic Research and Political Consultations, №,
February . See http://pigra.kiev.ua/ier/qes/qes_eng.pdf.
 improving the business climate
posed reform using socio$economic indica$
tors.
All of these have a negative impact on the
quality of the legislative and regulatory
environment. When norms and regulations
are frequently changed, businesses have to
pay constant attention to them and adjust
their activities accordingly. The survey of
businesses indicated that, compared to
, legislative unpredictability as an
obstacle to the production process grew in
. The portion of entrepreneurs who
thought the regulatory climate was the
main hurdle to doing business grew from
.% in  to .% in . This indi$
cator grew mostly as a result of components
that reflect growing unpredictability and
inconsistency in legislative changes. The
number of respondents who thought that
legislation was unpredictable doubled in
 over .
An additional complication is the fact that
the consistency of new norms in relation to
the norms established by existing legislation
is not always checked, leading to conflicts
and divergent interpretations. This conclu$
sion is confirmed by the huge number of
conflicts—more than —between such fun$
damental business laws as the Civil and
Commercial Codes.
In addition, business people note that legal
directives are far too generalized: when
reading the law, entrepreneurs are unable to
extract a template for running a business in
practice. Between the Civil and Commercial
Codes, a business person will find some
, provisions that make reference to
norms in other current legislation. This
forces them to turn to lawyers for consulta$
tions and commentary, which distracts
entrepreneurs from their business.
No less painful an issue for businesses is the
absence of fair (even) conditions for all play$
ers in a specific market, especially the lack
of de facto protection of competitiveness,
and unfair (distorted) distribution of vari$
ous breaks.
The latter is confirmed by the high level of
concentration on certain markets: start$ups
and small businesses who are already market
players are being either taken over or driven
out. Anti$Monopoly Committee data shows
that the GDP share of the monopolist sector
is almost %, which leads to high con$
sumer prices.
This tendency towards monopolization can
be seen in many sectors of the domestic
economy, even in such areas as retail trade.
Half of the country’s wholesale turnover is
currently controlled by only  business
entities.
The problem with distorted privileges and
tax breaks is that manufacturers who don’t
have such breaks become unable to com$
pete with those who do. Moreover, large
companies are able to reduce their tax bur$
den through such breaks, which increases it
for SMEs, since the state then tries to com$
pensate its revenue losses through them. For
example, three large oil refiners who were
granted ill$considered breaks were able,
between them, to reduce their tax obliga$
tions by nearly UAH mn.
Unfair distribution of incomes through taxation and
mandatory social payments
The tax regime and mandatory contribu$
tions system should reflect a balance of
interests between the state and the private
sector. On one hand, social needs need to

Excerpted from President Kuchma’s speech, op. cit.
improving the business climate
The last aspect of the problem worth exam$
ining is the unregulated state of relations
between businesses and the state, especially
oversight bodies. Without doubt, a govern$
ment needs to carry out a certain amount of
oversight, as this is one way of ensuring the
law is upheld. However, this kind of control
shouldn’t become a burden to business or
increase the risk factor in undertaking com$
mercial activities. Today, these conditions
are not being met. Existing legislation does
not provide entrepreneurs with a clear
answer to the question, “Who has the right
to carry out inspections; when and how, and
what are the restrictions on and obligations
of inspectors and those whom they
inspect?”
These conclusions are supported by the fact
that the costs to business of undergoing
state inspections rises with every year. The
total number of inspecting agencies in
Ukraine has grown to more than , while
the  Budget anticipates picking up rev$
enues from “planned” violations of legisla$
tion—that is, income from fines and finan$
cial penalties—to the tune of UAH mn.
This is % more than in .
Based on  figures, the most money is
expected to come from full$scale inspections
of the energos, domestic power utilities
( businesses to pay UAH .mn, making
the average “price” for such a review over
UAH mn) and the heavy machinery sector
(, companies to bring in UAH .mn,
for an average of UAH , per com$
pany).
be financed in the appropriate measure
and, on the other, the ongoing development
of business should not be stifled by cutting
deeply into profits.

Today, it is possible to state that this kind of
balance does not yet exist in Ukraine. The
redistribution of corporate revenues is
quite unfair. The extent of payments that
the state collects in the form of taxes and
mandatory contributions does not corre$
spond to either the quantity or the quality
of public services provided (administrative,
social and so on).
The main harm to business in terms of taxa$
tion continues to be:
• social payment pressure;
• multiple taxes;
• unstable tax regulations.
The current system of social security in
Ukraine is too burdensome for businesses.
The extent of the contributions that compa$
nies have to make based on wages and
salaries and transfer to the basic Social
Funds, is at least .% of payroll. In
addition to these mandatory social contri$
butions, employers are obliged to withhold
from their employees’ salaries about .%
to the payroll fund.
When personal income taxes are added
(% as of ), it becomes clear that, for
every hryvnia paid into the hands of an
employee, a company has to pay out an addi$
tional approximate UAH . in the form of
taxes and social contributions.
As a result, either the production cost of the
goods (services) rises or the shadow econo$
my grows. Obviously, in order to minimize
their payroll costs, employers are forced to
pay at least part of their salaries and wages
under the table. This increases the risk of
social insecurity for hired workers, because
the tiny official income they receive makes
them ineligible for significant social services
(pensions, unemployment or maternity ben$
efits, and so on).
In addition to the burden of social payments
for businesses, there is the tax burden itself.
Tax reforms made it possible to reduce the
corporate burden somewhat. Still, although
the current tax rate and number of taxes are
comparable to those in other European
countries, discussions with the community
have shown that entrepreneurs still find them
too high. The problem seems to be not the
number or size of the taxes, but such points
as:
) When the demand for financial assets is
high, paying taxes means a reduction in
liquidity of circulating capital for com$
panies;
) When the tax administration system is in
disorder, businesses spend a lot of extra
time dealing with it. This means that
companies show losses on paper. In prac$
tice, nearly , enterprises reported
losses last year. According to the Accoun$
ting Chamber, these (mostly artificial)


In this paper, the word “taxes” is used to mean the combination of all taxes, fees and universal manda$
tory contributions.

These include the Pension Fund, the Social Welfare Fund for those who are temporarily unable to
work, the Universal Unemployment Fund for those who are out of work, and the Workers’
Compensation Fund to cover those who have been in an accident.

Contributions to the various funds are: % for pensions, .% for welfare, .% unemployment
insurance rate and .% (minimum) for universal workers’ compensation insurance without counting
discounted rates.

Of this, % goes to the Pension Fund (the most common rate), % to insurance against temporary
inability to work, and .% to the Unemployment Insurance Fund.

 improving the business climate

 losses mean that, in , the Budget
lost UAH .bn.
At the same time, the tax system still does not
ensure a stable level of Budget revenues,
which leads to endless short$term adjust$
ments and changes to tax laws. As a result,

Biznes newspaper № –,  May .
improving the business climate
tax legislation is unsystematic and unstable.
This can easily be seen in the fact that from
 to , the Law on the VAT was
amended more than  times, the Law on
Corporate Profit Tax more than  times,
and the Law on Personal Incomes, more
than  times.

The consequences of current
problems
The problems with Ukraine’s business envi$
ronment require consistent and well$
thought$out decisions, as they have a nega$
tive impact on business activities and thus
hamper economic growth.
The lack of transparency of the business
environment makes it difficult to carry out
commercial activity at all stages of a business
initiative—from the conditions for register$
ing and finding capital to the earning of
profits—and is one of the main sources of
corruption. To lower the level of corruption
is an urgent task, as corruption is both the
consequence of an imperfect regulatory
environment and a condition for its contin$
uing growth. Corruption gets in the way of
carrying out a commercial initiative on the
basis of fair and equal terms. It also leads to
a slew of economic, social and political con$
sequences, including:
• failure to take advantage of investment
opportunities;
• baselessly high costs for doing business;
• the movement of commercial activity
into the shadow economy.
Ukraine was th among  countries in
the  Corruption Perception Index.
This high level of corruption leads to an
opaque business environment and thus to
higher risk for doing business. This slows the
flow of investment into the Ukrainian econo$
my. In fact, the main investors in Ukraine
today are businesses themselves and the level
of lending remains low, while foreign

By comparison, Russia was th. See http://www.transparency.org.

Excerpted from President Kuchma’s speech, op. cit.

All$Ukrainian conference, op. cit.
 improving the business climate
investors lack confidence in the protection of
property rights and thus do not bring their
capital to Ukraine. Ukraine had accumulated
only US $.bn in FDI by the end of ,
while its neighbor Poland had already
received that much in .
The business survey showed that more than
% felt forced to give bribes during the
previous year. Entrepreneurs themselves
estimated that corruption was the second
key factor—after taxes—that puts pressure on
businesses and hampers their develop$
ment. The very existence of corruption
forces business people to “launder” enor$
mous sums of money, which stimulates the
shadow economy. Losses from bribes alone,
according to the most pessimistic estimates,
amount to US $.bn annually, which is
nearly % of Budget revenues planned for
. This kind of illegal payment reduces
the operating capital of a company, which
could otherwise go to the expansion of the
company’s activities.
According to official statements by the coun$
try’s leaders, the share of the shadow econo$
my is just about as big as the official econo$
my in Ukraine, nearing %. For this rea$
son, despite record post$independence
growth in the current year, , the coun$
try still has a monthly GDP of only UAH 
per person, less than US $.
Under such conditions, even the most ideal
legislative initiative won’t make any differ$
ence, since it is being ignored by both those
in power and those in business. It has
become inconvenient to work legally, since a
company’s shadow$sector competitors get
away with paying no taxes and ignoring regu$
latory restrictions and are thus more com$
petitive, while the entire tax burden falls
squarely on the shoulders of legal businesses.
Analysis of the business environment in
Ukraine shows that, although quantitatively
Ukraine is drawing closer to European stan$
dards, qualitatively it is not. This is particu$
larly true of the SME structure, which shows
a number of discouraging features:
) Share of workers employed at SMEs.
) Number of SMEs per , residents.
In , Ukraine had  registered SMEs
for every , citizens. This indicator is
close to EU levels (:,), but the
structure of SMEs is such that small
enterprises amount to only % of this
figure. The remaining % are sole pro$
prietors, that is, physical entities
engaged in commercial activities. The
ineffectiveness of such a structure of
business testifies to the fact that sole pro$
prietors are mostly engaged in trade,
and hence do not generate any added
value. As a result, the level of GDP per
person in Ukraine is extremely low.
) Weighted value of SMEs in the GDP.
According to the Tax Administration,
most small businesses report gross rev$
enues below UAH , per annum,
while data from the business survey indi$
cates that only % of businesses in retail
trade (about % of all registered SMEs)
who started operations – years ago
have been able to accumulate capital
worth US $–,. As a consequen$
ce, the GDP share of SMEs in  was
only %, whereas in OECD countries,
this indicator is as high as %.
According to BIZPRO estimates,
–% of Ukraine’s population are able
to engage in commercial activities, or
about ,, people. Employment in
small businesses has stayed largely flat in
recent years and in  it was, on aver$
age, . workers for one registered busi$
ness physical entity (payers of the flat
tax). In this way, Ukraine’s SME sector
currently engages three times fewer
entrepreneurs than the potential that is
there. Globally, SMEs are traditionally
the backbone of the middle class in a
society, whose existence lowers income
gaps and poverty. This means that if the
number of people working in SMEs can
be increased, this will improve the well$
being and stability of Ukrainian society.


Official site of the State Tax Administration of Ukraine at http://www.sta.gov.ua/english/index.php.

Data from the Akademia think$tank at http://www.academia.org.ua.

Explanatory brief to the Bill on amending certain Laws of Ukraine regulating commercial activities.
See http://www.parliament.org.ua.

“Ukraine and Russia: State policy regarding SMEs,” Institute of Competitive Society, .

Akademia, op. cit.

improving the business climate 

Why is Ukraine’s
business climate sick?
In order to make Ukraine’s business climate
a healthier one, the reasons for the prob$
lems listed here need to be understood and
examined. That will make clear where treat$
ment needs to start. An analysis of the rea$
What causes barriers to business start$ups?
Analysis and public opinion both point to a
number of reasons for barriers to entry on
Ukrainian markets:
• Low level of cooperation between busi9
ness and the government. Lines of com$
munication between the private sector,
the general public and the government
are not effectively established to take
business interests into account when the
rules of registration are worked out and
to prevent procedures from being so
long and tangled.
• Lack of effective informational sup9
port on the part of the government to
support businesses. Government agen$
cies do little to disseminate information
about the proper pre$ and post$registra$
What prevents access to resources?
For entrepreneurs who have already started
up their business, an urgent issue is finding
capital and access to a developed infrastruc$
ture. A number of factors get in the way of
access to financial resources:
• Limited supplies of long9term loans.
Because of the high level of risk and the
need to create huge reserves, the collat$
eral demanded by Ukrainian banks for
 improving the business climate
sons for so many obstacles to business activi$
ty in Ukraine has been prepared for each of
the main criteria necessary for a healthy
business environment.
tion procedures that are needed to start
up a business, including approvals and
the tax regimes governing specific forms
of commercial activity in different
regions (such as in a SEZ or a Priority
Development Territory). Government
officials are uninterested in providing
high$quality public services.
• Unregulated procedural issues with
regard to administrative services.
Many issues related to administrative
services, in particular in terms of
approvals, are not appropriately regulat$
ed. This creates points where the
process of issuing documents can be
delayed, groundlessly increasing compa$
ny costs and allowing for abuse by civil
servants.
long$term loans is too high for most
businesses. Moreover, the lack of ade$
quate resources in the commercial bank$
ing system (low capitalization of banks)
means Ukrainian banks and non$bank
financial institutions are unable to
ensure the provision of enough long$
term credits. All this reduces the possi$
bilities for acquiring and updating pro$
duction facilities.
• Inadequate level of mortgage lending.
Legal initiatives in this area need some
time to become effective. Regulating
mortgages has been hampered by a
number of issues that have not been reg$
ulated legally in terms of mortgaged
securities and non$government pension
funds.
In addition to financial and informational
resources, businesses also need access to
production infrastructure. But the ineffec9
tive regulation of natural monopolies gets
in the way.
Why are property rights not adequately protected?
Once business owners have invested some
capital, they want to be assured that their
rights to assets and to any profit they make
on those assets will remain theirs to dispose.
But such guarantees are not adequate in
Ukraine for a number of reasons:
• Flawed court system. Businesses have
no guarantees that their rights will be
upheld in an unregulated court system.
Decisions at various levels in the same
case can be quite different and depend
more than anything on the effectiveness
of the lobbying and bribes provided by
the parties involved in the case. In addi$
tion, the enforcement of court decisions
is uncontrolled or avoided altogether.
• Ineffective extra9judicial protection of
property rights. Mechanisms for the
extra$judicial protection of property
rights are not widely spread, since they
remain inadequately regulated today on
the legislative level.

The Law on Mortgages has already been approved and a State Registry of Mortgages has been set up
to protect creditors. One and the same mortgaged property can be used as collateral for several credi$
tors, so the highest priority is given to the creditor who first registered the loan contract.
improving the business climate
Services in the infrastructure sectors are gen$
erally in the hands of monopolists that are
state$owned. For businesses, it’s important to
be certain that infrastructural services will be
given at predictable rates, since they have a
large weighted value in the production cost
of any manufactured goods. Yet rate$setting
in the infrastructure sectors is often deter$
mined on the basis of political expediency
and the interests of specific enterprises.
Another aspect that hampers business activ$
ity is the unevenness and low quality of
infrastructure development, especially in
rural areas.
• Lack of corporate culture in business
dealings and effective legislation in this
area. Company shareholders remain
unprotected, which holds people from
investing in commercial ventures in an
opaque business environment where
property rights are not guaranteed effec$
tively. Stock companies only came into
being in Ukraine after independence and
thus standards of corporate governance
are still not fully formed. This means that
relations among shareholders and com$
pany management remain unregulated.
Because corporate culture has not been
ingrained yet, it becomes particularly
important that existing rules of corporate
governance be upheld. But the low level
of legal culture among entrepreneurs and
the lack of strict control over compliance
mean that standards of corporate gover$
nance are largely ignored.

What’s missing in the regulatory environment?
The effectiveness of a business depends a
good deal on certainty about the rules of
the game. But in Ukraine many obstacles
get in the way of this:
• Norms and regulations are seen as a
tool for promoting business and polit9
ical interests rather than as a broad9
based policy. Ukraine’s financial$indus$
trial groups (FIGs), which have enor$
mous advantages of scale because of
both vertical and horizontal integration,
have both economic and political clout.
Because of their solid financial support,
they are able to lobby government poli$
cies. Many entrepreneurs in fact become
politicians, only nominally leaving their
businesses but in fact promoting public
policy that benefits those branches and
interests that are theirs.
• Lack of analysis of the impact of intro9
ducing specific legislative changes.
Regulatory restrictions are necessary for
both society and business, but in
Ukraine they can sometimes be exces$
sive. Before introducing or changing
the rules of the game in business, gov$
ernment bodies do not bother to thor$
oughly analyze the impact of such
changes or to adapt the experience of
other countries to Ukrainian business
realities.
Why is the system of mandatory contributions so
unbalanced?
Since the state fulfills a social function as
well as ensuring the stability of the regulato$
ry environment, businesses agree to pay for
these services. Still, given the low quality of
public services and ineffective Budget allo$
cations, businesses have additional incen$
tives to consider even the lowest tax rates
burdensome. The main obstacles that the
 improving the business climate
• Lack of accountability on the part of
the Government. The rules for develop$
ing Government policy are acknowl$
edged, but not enforced, as there is no
mechanism that would hold politicians
accountable for this. As a result, legisla$
tive changes and additions appear almost
at the same time as the main law. Then, in
the mid$term, what is worked on is not
the mechanism for introducing the law at
hand but the development of a new and
entirely unworkable law. Government
bodies take little responsibility for their
uncontrolled interference in business
activities. As to oversight bodies, there
are no legislative norms at all to regulate
which particular oversight bodies can
inspect specific kinds of businesses, with
what frequency, and to what extent.
There are also no mechanisms that would
give businesses the chance to take an
oversight body to court when necessary.
• A poorly regulated environment suits
government officials. When the busi$
ness environment is complicated and
opaque, illegal payments become more
convenient than the official ones. For
this reason, the lack of regulating proce$
dural issues tied with providing public
services and their deliberately low quali$
ty spurs business owners to simply pay
bribes to cut through the red tape.
current system of mandatory contributions
places before businesses are:
• Responsibility for social services
passed onto businesses and social wel9
fare ineffectively managed. Since the
Government is supposed to guarantee the
provision of social benefits but uses the
 revenues it collects ineffectively, the
financing of these services is through
Social Funds that collect money by increa$
singly pressuring businesses for contribu$
tions.
• Inconsistent and unsystematic regula9
tion of the tax system. Short$term policy
aims outweigh long$term strategy in the
tax system. In focusing on filling the
Budget, fiscal policy fails to take into
account the cost to business of continual$
ly adapting to changes in tax rules and
administrative procedures.
• Ineffective Budget allocation policy.
Unrationalized allocations of Budget
funds lead to a situation where the state is
unable to fully finance spending on social
improving the business climate
services. This means that the state has to
find additional financial resources, which
means more tax pressure on businesses. In
addition, the ill$planned policy of distri$
bution of revenues between Kyiv and local
budgets fails to provide local governments
enough incentive to support business.
• Tax breaks. Excessive interference by the
state leads to distortion of market condi$
tions for running businesses not just in
subsidized branches, but throughout the
economy. In fostering one sector or mar$
ket, the state destabilizes others. For the
Budget to collect the necessary revenues,
the tax burden is shifted to profitable sec$
tors, which end up unable to fully take
advantage of positive investment oppor$
tunities.

The main aims of reform
The business environment is a complex sys$
tem containing many components. Its effec$
tive functioning depends on many factors
and is hampered by many problems.
Moreover, the problems affecting the busi$
ness environment and the reasons why they
arise are diverse.
Today, it’s critical to define the main aims
that will ensure an improvement in
Ukraine’s business climate and to concen$
trate government efforts and existing
resources on reaching them.
Given the key problems of the business envi$
ronment in Ukraine, four main objectives
can be formulated for its improvement:
. Improve the regulatory
environment
Regulations are one of the main instru$
ments that the government uses to influ$
ence the business environment. For this
reason, improving the regulatory environ$
ment, that is, the legislative base in
Ukraine, could ensure:
• the elimination (or at least reduction) of
regulatory and bureaucratic barriers;
• the establishment clear, understand$
able and fair rules of the game for busi$
ness.
. Reform the tax and social
contributions systems
It’s critical to continue with reforming the
tax system and the system of mandatory uni$
versal social contributions in order to
ensure:
 improving the business climate
• a fair distribution of the tax burden
among different players in the business
environment—business and individuals;
• the lowering of tax pressures to a level
that reflects a balance between the inter$
ests of the state and business and
responds to the quality of administrative
and social services provided by the state.
. Reform the system of public
governance
The government bureaucracy which is the
main regulator is also the main source of the
most obvious obstacles to business in
Ukraine. Bureaucratic and regulatory barri$
ers to doing business as well as complicated
access to resources and infrastructure are
the consequences of ineffective actions and
lack of accountability on the part of govern$
ment bodies.
Thus, reforming the system of government
administration must be one of the main pri$
orities in order to improve the business cli$
mate. Reaching this goal should ensure:
• an expansion in opportunities for busi$
ness to have access to resources and
infrastructure;
• a reduction in administrative and regula$
tory costs.
. Protect property rights
By guaranteeing property rights, the risks to
potential investors are reduced and the busi$
ness environment becomes much more
attractive. In addition, effective protection of
the rights of owners reduces unproductive
business costs while increasing trust in the
government and in the measures that it takes.
Priorities: The first steps to fixing
the business climate
Each of the main goals for improving the
business climate listed in this paper can be
reached by more than one road. And each
of these paths has its strengths and weak$
nesses, requiring the definition and insti$
tution of a different set of instruments and
mechanisms. In a situation where resources
are limited, it is obvious that any attempt to
go down all the roads at once will only lead
to none of them being followed to the end.
This means the choices have to be priori$
tized.
Based on a series of public hearings, a num$
ber of tasks have been defined whose resolu$
tion is a top priority, and a number of instru$
ments and mechanisms that need to be
introduced in the shortest order.

Improving the regulatory environment (legislation)

One of the main headaches of the business
environment in Ukraine is the lack of clear
and fair rules of the game for business, par$
ticularly the flawed set of norms and laws.
According to participants in the public hear$
ings, complaints about current legislation
boil down to two main aspects:
• lack of effectiveness;
• poor quality.
The effectiveness of legislation means
that state interference is purposeful, ade$
quate (the minimum necessary) and the
positive effect on society is greater than the
costs of introducing or enforcing it.
Ineffective legislation leads to the creation
of many regulatory barriers (restrictions) for
businesses.
The quality of legislation means that their
wording is understandable, mutually agreed,
free of contradictions, consistent, and stable.
This kind of quality ensures simplicity in car$
rying out the law and reduces the risk
attached to enforcing/not enforcing differ$
ent prescriptions in the law. This kind of risk
arises when it is possible to interpret the pro$
visions of a regulation in more than one way.

Given the reported responses of the general public, it is possible to note four reasons why
current legislation is flawed:

• norms and regulations are seen as instruments for satisfying specific business or politcal
interests and not as a way to effectuate government policy;

• no effective informational support is given to businesses by the government;

• there is no analysis of the effectiveness of introducing changes to legislation;

• government bureaucracies find it convenient to operate in a flawed legal environment.


Henceforth, this text uses the term “norms and regulations” synonymously as legislation and regula$
tions.

improving the business climate 

In determining ways of improving the regu$
latory environment, the orientation has to
be on improving both the effectiveness and
the quality of regulations, since both aspects
are equally important. The related problems
can be removed and this goal achieved by
moving in two directions:
. Introducing regulatory policy
while involving the general
public as an equal
participant in the process
This option means that part of the burden of
introducing regulatory policy is shared by
the community. Engaging the general public
in the process of developing public policy
should become a mandatory requirement of
government bodies at all levels. It is critical
to also concretize and enshrine the mecha$
nisms for involving the public, for two$way
feedback, and so on, in legislation.
In addition, this option means creation of
transparent system of access to the informa$
tion about government bodies’ regulatory
activities. The public can be an equal partic$
ipant of regulatory policy implementation
process only when it has access to the com$
plete regulatory information.
This would make it possible to raise the
effectiveness of legislation. But this does not
guarantee the quality of such legislation, in
the sense noted here. This is largely con$
nected to the fact that the Law establishing
the basis for regulatory policy in commercial
activities largely does not define the neces$
sary instruments for this purpose. In addi$
tion, the requirements of state policy do not
include all types of regulations and all sub$
jects of regulatory activity, such as elected
deputies.
To improve the regulatory process, it is nec$
essary to take some steps in a different direc$
tion:
 improving the business climate
. Providing incentives for
regulatory bodies to improve
the quality of regulation
Earlier it was noted that regulatory bodies
find it convenient to work in a flawed regu$
latory environment, as any weaknesses in
legislation can be used to their advantage.
For this reason, they have no incentive what$
soever to put together regulatory provisions
in such a way that would be accessible and
unambiguous for those who are supposed to
introduce or apply the provisions of such
regulations.
Another approach to the situation would be
to interpret all ambiguities in the law in favor
of the private sector, which would protect
businesses from the abuse of government
bodies in the application of specific provi$
sions of their regulations. In this situation,
government bodies will have an incentive to
improve the quality of their regulations.
Given this, it makes sense to concentrate
efforts on protecting subjects of commer9
cial activity from the negative impact of
any inherent flaws in legislation.
This option makes it possible to set up a sys$
tem whereby any flaws in legislation do not
create additional risk for business and,
more importantly, will be interpreted to the
benefit of entrepreneurs, not government
bodies at the central or local level. To
achieve this, it is necessary to:
• establish clear rules to determine “effec$
tive norms” in legislation (indicating
which piece of legislation, among sever$
al, takes precedence) in terms of deter$
mining approvals, sphere of regulation
and so on, depending on the body that
approved or passed that legislation;
• set clear rules for applying legislation
(particularly by the courts) when differ$
ent pieces are in conflict with each other,
overstep their legitimate authority, or do
 not conform to overall government poli$
cy in a particular sphere, and so on;
• extend the notion of “conflict of inter$
ests” to all legal areas, so that when a
commercial entity protests any wrongdo$
ing, penalties cannot be applied until
such time as the conflict between the
government agency and the business
entity are resolved either administrative$
ly or judicially.

Reforming the tax and social contributions systems

On one hand, taxes and mandatory univer$
sal contributions to Social Funds create a
considerable burden for businesses, but on
the other they are a source of financing
government expenditures. Given this, the
issue of reforming the tax system and the
system of social insurance contributions
need to be examined comprehensively in a
unified manner. For this reason, taxes and
mandatory universal contributions to so$
cial Funds will be collectively be referred to
as “mandatory contributions” in this dis$
cussion.
Despite significant movement in terms of
reforming the tax system and the system of
mandatory social insurance contributions,
flaws in this sphere remain one of the main
obstacles to the further development of
business, according to those surveyed.

Further improvements in quality will have to be connected to eliminating reasons other

than high mandatory contributions that cause problems in the business environment:

• tax breaks that lead to an uneven distribution of tax pressure and reduces opportunities
for reducing tax rates across the board;

• ineffective Budget allocation policy, which leads to unrationalized use of government

funds, limits the opportunities to reduce tax pressure, and fails to stimulate government
officials to support business, especially at the local level;

• inconsistent and unsystematic regulation of the tax system, which makes it opaque,
increases business risk, and raises the unproductive costs of doing business;

• passing on the burden for the state’s social function to business, and ineffective man$
agement in this area.


For instance, today, changes to tax legislation are often in violation of the Law on the tax system and
the Budget Code. It is critical to determine that, when such conflicts arise, business entities have a right
to refuse to comply with new requirements as long as these conflicts have not been resolved.

Based on this principle, when a legal norm or other regulatory act or the norms of different pieces of
legislation or different regulations allow for ambiguous or multiple interpretations of the rights and
responsibilities of business entities or government agencies, allowing for a decision to be taken in favor
of both the business entity and the government agency, then the decision shall be made in favor of the
business entity.

This means the Pension Fund, the Social Welfare Fund (temporary incapacity to work), the
Unemployment Fund (loss of work), and Workers’ Compensation Fund (loss of work through on$the$
job accidents).

improving the business climate 

Unfortunately, the reduction of mandatory
contribution rates is not accompanied by
the elimination of the deeper reasons for
existing problems. Moreover, this resource
is fairly limited, that is, reducing mandatory
payments, since it has to ultimately ensure at
least a minimal level of government expen$
ditures. Thus, it is important to look for
other options to reforming the system of tax
and social contributions.
In order to resolve the issue of lowering tax
pressure, the state also needs to keep in
mind the need to collect enough revenues
in the Budget to adequately finance all its
expenditures. In the first phase of reducing
tax rates, the main source of compensation
of Budget losses has to be the legitimization
of the shadow economy and the resulting
expansion of the tax base as a result of grow$
ing reported revenues among commercial
entities. But this resource is also limited. To
further reduce tax rates will require using
proactive measures to increase the country’s
financial options. Among such steps, one
takes priority:
. Reviewing and reducing tax
breaks
The system of tax breaks means that the bur$
den of paying taxes is not evenly distributed
across all businesses. Most existing tax
breaks are groundless, economically ineffec$
tive, and only satisfy specific interests among
influential business groups. These holidays
need to be immediately eliminated.
In some instances, tax breaks can be
replaced by direct, targeted subsidies.
Eliminating tax breaks will make it possible
to increase revenues to the Budget and at
the same time set up a reserve that will even$
tually allow tax rates to be further reduced.
In addition to lowering tax pressure on busi$
ness, the pressure of having to pay into
 improving the business climate
Social Funds also needs to be altered by
redistributing the social burden among
three groups: business, the state and indi$
vidual citizens. This has to be done in such a
way so that, on one hand, social spending is
fully covered and, on the other, conditions
are established to increase business rev$
enues and draw salaries out of the shadow
economy, which will expand the base for col$
lecting social payments.
The Ukrainian Government finances its
social commitments through the social con$
tributions of businesses. Another source of
funding is the Budget itself. The simplest
way to reduce the burden on businesses is to
increase the share of financing of social
spending that comes directly from the
Budget. However, this step cannot be taken
at the same time as tax reforms.
Thus, the current task facing the Govern$
ment is to concentrate efforts on other,
alternative options, among which key is:
. Consolidating Social Funds
to minimize unproductive
costs to business
A large portion of the funding that finds its
way into the various Social Funds is spent
not on social benefits but on administering
these funds. In addition, the complicated
bureaucratic system increases unproductive
costs for businesses (for reporting, account$
ing, paying fines and bribes, and so on).
Consolidating all the Social Funds would
make it possible to:
• firstly, reduce administrative costs in the
budgets of the Social Funds and thus
increase the level of actual social spend$
ing;
• secondly, reduce the rates of contribu$
tions and thus lower pressure on busi$
nesses. The reduction in receipts from
businesses would be partly compensat$
 ed by a reduction in administrative over$ • thirdly, indirectly reduce the pressure of
heads; social payments on businesses by reduc$
ing their unproductive costs.

Reforming the system of public administration

In terms of developing the business environ$
ment, the main purpose of reforming the
system of public administration has to be to
build a system of mutuality between govern$
ment agencies and business that would:
• minimize unproductive costs to busi$
nesses;
• minimize the opportunities for govern$
ment officials to look for “rents,” that is,
to use their office to satisfy personal
interests rather than the interests of busi$
ness or Ukrainian society.
There are four criteria that the system of
government administration should fully sat$
isfy. Specifically, the system of public gover$
nance should adhere to these principles:
• Efficiency, that is, to provide the nec$
essary public services in the fastest and
best way, involving the minimum of
time and costs. This will allow business$
es to more easily and less expensively
get their approvals, permits, licenses
and so on.
• Accessibility and transparency, that is,
the mechanisms of government work
should be transparent and clearly de$
fined. It will help to avoid corruption,
make decision$making process more
accountable and decisions more pre$
dictable.
• Relegation, that is, the government
should perform only those functions
that absolutely cannot be handled at a
lower level (regional/local government,
NGOs, business). Government services
should be maximally oriented on the
needs of business.
• Responsibility, that is, the government
should be answerable for any violations
of the law and for any damage that results
from its ineffective or illegal actions. The
responsibility of government and busi$
ness should be even (symmetrical).

Reforming the system of government administration should ensure that certain key obsta$
cles in the business environment are removed:

• lack of accountability on the part of the government;

• unregulated procedural issues around the services that the government provides;

• inadequate level of cooperation among business, the government and NGOs.


This primarily refers to costs related to obtaining government services such as licenses and permits,
certification, registration and so on. And among these costs, of course, time has to be included, such as
how long it takes a company to go through a particular process.

improving the business climate 

Ensuring informational
transparency and openness
At this stage, the main instrument of
reforming public governance should be
ensuring informational transparency and
topenness. Informational openness on the
part of the Government means setting up
conditions for business to have easy access
to the process of approving government
decisions, especially regulatory ones.
• Introduce regulatory monitoring,
assessing and reporting on the part of
government bodies about their activities
and plans. It is important to clearly deter$
mine who reports about what, when, and
how the Government and the communi$
ty can make use of these reports. Free
public access to this information needs to
be ensured, as well as the level and mech$
anisms of legal leverage in those situa$
tions when this condition is not met.

If this alternative is brought into play, busi$
ness will be assured real access to informa$
tion about the activities of government
agencies, their right to interfere in the
activities of commercial entities, the form
that any kind of interference should take,
and so on, as well as information about
what kinds of decisions government bodies
can take, in what timeframe and in what
order.
Moreover, informational openness is im$
possible unless the Government continually
reports about its activities. The Govern$
ment has to show the consequences of its
interference and its effectiveness. To achieve
this stage, four steps are needed:
• Establish and enshrine in law simpli9
fied procedures for providing govern$
ment services and approving decisions
that affect the business community.
• Oblige government bodies to regularly
disseminate information about their
functions, rights and obligations, and the
rights and obligations of citizens and busi$
ness. It also makes sense to obligate such
bodies to explain the procedures for pro$
viding public services and to ensure the
necessary financing.
• Clearly assess the value of government
services, indicating the methods used to
calculate this, and ensure the dissemina$
tion of this information.

Protecting property rights

Doing business means to undertake some$
thing at your own risk in order to earn a prof$
it. That is why the owner who starts up a busi$
ness or invests in one begins by assessing the
potential risks and benefits. In Ukraine
today, the risk of losing control of assets is
all$too$often greater than the profits that can
be made by investing in a business.
Establishing an effective
extra6judicial system to protect
property rights
The main instrument to ensure an improve$
ment in this situation with property rights is
an effective extra$judical system. It is critical


An example of such openness might be national bodies regulating the power sector and telecoms.
The procedures for approving key decisions by these two bodies allow businesses the right to express
their positions, to present their arguments, and to suggest other options.

Here the issue is not only control of assets, but also the right to dispose or utilize assets in order to
earn a profit. The problem today is not only a matter that owners are illegally (groundlessly) deprived
of their property, but that government bodies use their position to set obstacles that make it impossible
for business owners to effectively use their assets to earn those profits.

 improving the business climate

Thus, reducing the risk to owners is one of the main conditions that would make Ukraine’s
economy more attractive to investors. Based on public opinion, four reasons appear to
underlie the lack of protection of property rights in Ukraine:

• the absence of accountability on the part of the government and guaranteed rights for
commercial entities;

• the ineffectiveness of the non$court system in protecting property rights;

• a flawed court system;

• the lack of corporate culture in doing business and effective legislation in this area.

to ensure the option of handling some
kinds of disputes in the business communi$
ty on a non$judiciary basis, that is, directly
among the disputing parties without
recourse to government institutions. This
requires effective procedures for arbitrat$
ing disputes outside the court system as well
as new institutions that would review busi$
ness disputes.
The main advantage such a system has over
the judiciary is that decisions are taken more
quickly and are less costly, especially in
terms of cash outlays. To achieve this goal,
the government needs to:
• Develop community institutions that
can take on themselves some part of
disputes that are currently undertaken
by state institutions. This means basically
a system of arbitration panels. However,
key to their effective functioning is that
their decisions must be binding.
Another important task is to inform the
general public and businesses of the ben$
efits of this form of dispute settlement.
• Expand the system of administrative
suits (challenges to the decisions of gov$
ernment bodies) and pre9trial settle9
ments (disputes among commercial
entities). Along with this, the objectivity
of such mechanisms has to be very high,
which means, among others, ensuring
that there is broader representation of
stakeholders (business, NGOs, and so
on) in such dispute settlement commis$
sions.

improving the business climate 

The next steps in reform
Additional ways of instituting regulatory policy
The law on regulatory policy with regard to
commercial activities and subsidiary legisla$
tion clearly describe the instruments that
are intended to be used to institute regula$
tory policy. However, the law is not working
in full force today. Government bodies lack
the necessary resources, and they don’t
know—and sometimes don’t want to know—
how to carry out its provisions.
The next steps to ensure that regulatory pol$
icy is properly carried out include:
. Eliminating the possibility
of ignoring or not following
the law
Firstly, this means that all existing regula$
tions that contradict this law need to be
“automatically” declared void. This requires
a procedure for canceling an existing regu$
lation administratively, that is, canceling the
state registration of the given act at the
Ministry of Justice and sending it back to be
improved, as it has definite flaws.
In addition, it is necessary to introduce a
simplified system for recognizing regulatory
acts as invalid through the courts. Violations
or the avoidance of mandatory procedures
required according to regulatory policy
should become sufficient grounds for
declaring a regulatory act invalid.
At the same time, this option anticipates
determining the responsibility (from
administrative to criminal) of government
officials who failed to ensure the fulfillment
of all mandatory procedures provided by the
above law when the regulation was passed.
. Ensuring that government
bodies have the necessary
resources
The lack of resources is one of the main bar$
riers to carrying out the requirements of this
law. Thus, allocating enough funding in the
Budget, training civil servants at these vari$
ous bodies, and supplying staff with meth$
ods handbooks and other support could
become a decisive instrument for instituting
regulatory policy.
. Standardizing legislation and
the process of developing it
This option involves establishing clear stan$
dards (requirements) for the texts of nor$
mative and legislative acts (especially as
regards laws) and the procedures for devel$
oping them.
The enforcement of these standards should
become a mandatory element of regulatory
policy. In this way, government bodies will


Today, to cancel the state registration of a regulatory act is possible only on the initiative of a special
authorized body that lacks the necessary resources to study the enforcement of a particular law in all
areas and at all levels of government. Moreover, this can be done only after an appropriate review by
judiciary bodies, which is not always carried out as both resources and political will are often lacking.

For example, clearly defining legal norms, forbidding abstract references, mandatory conformity of
the text with other legislation or the introduction of necessary changes, including clear penalties for vio$
lating these conditions, and so on.

 improving the business climate

have some clout in terms of ensuring that lations will then become the basis for the
the requirements of these regulations are properly authorized regulatory agency to
adhered to. The fact of ignoring such regu$ turn down an application.

Greater reduction of payroll pressures

. Reforming budgetary
relations
In order to increase funding for priority
Budget expenditures (healthcare, social
security and so on) while reducing tax pres$
sure on businesses, it is critical to use
Budget funds efficiently and effectively and
to use other financial resources (such as pri$
vatization revenues). This means the
Government must:
• raise the effectiveness and transparency
of the Budget process and make the cal$
culations of different Budget items,
especially expenditures, available to the
general public;
• introduce penalties for violating Budget
discipline and improper use of Budget
monies;
• improve the system for evaluating the
effectiveness and appropriateness of
Budget spending in order to optimize it
in the future.
In addition, reforming budgetary relations
should aim at decentralizing Budget flows.
It is critical to gradually increase the share of
funds that remains in local budgets as local
governments become more responsible for
their actions. This will provide incentive for
local officials to develop the business envi$
ronment in their regions.
By raising the effectiveness of Budget spend$
ing, it will be possible to ensure coverage for
all state spending using fewer funds. Thus,
there will be more opportunities to reduce
basic tax rates.
. Moving some of the burden
from employers to employees
A fair distribution of the burden from
employers to employees should not result
in any substantial drop in the Social Funds.
Nor will the average worker feel a significant
loss. For one thing, part of the deduction will
be compensated by the significant lowering
of individual tax rates in . For another,
this will provide incentive to companies to
bring their payrolls out of the shadows,
which will improve the level of social securi$
ty provided to their workers. Thirdly, as com$
pany revenues increase somewhat, this
should spur employers to increase the pay of
their employees.
. Developing alternative forms
of social and pension
insurance
This means firstly setting up a system of
non$state pension funds and expanding vol$
untary social security. Once these different
forms come into being, the state will be
relieved of part of the responsibility to pro$


For instance, reducing employer contributions by –% and increasing deductions from employees
by the same amount.

In , the reform of the pension system of Ukraine was launched. Specifically, a law about universal
mandatory pension insurance was passed, and one on non$state pension funds. These laws should ensure
the establishing of a three$pillar pension system. One pillar will, in fact, be private pension insurance.

improving the business climate 

vide social security to its citizens. It will then
finance only the minimal level of social
benefits.
This option is convenient not just for the
state, but also for the society at large and for
Decentralization, optimization and increased
government accountability
To decentralize and optimize government
requires radical reform of the system of pub$
lic administration in Ukraine, including:
• reviewing functions and moving towards
organizing government according to
functions after determining the effec$
tiveness of carrying out specific func$
tions;
• determining which functions can be rel$
egated to lower levels, such as local gov$
ernments and NGOs;
• setting up transparent mechanisms for
financing government bodies;
• introducing institutional transforma$
tions in the system of government bodies.
Strengthening government accountability
requires:
A better court system to protect property rights
The task here is to set up the kinds of condi$
tions that would assure owners that they can
swiftly restore property rights that have been
violated, resolve disputes over rights in a
neutral environment, and feel assured that
relevant losses will be compensated in full.
To resolve this task, court procedures need
to be simplified and made more transparent

Today, for instance, government bodies are not obligated to pay fees when they appeal to the courts.
This encourages them to launch suits in the most hopeless situations, which overloads the court system.
 improving the business climate
business. For business, the burden of social
contributions is lowered as rates go down.
For individuals, the quality of social security
and the size of social benefits should
improve.
• clearly determining the forms and
extent of accountability of government
bodies and their officials for violating
the requirements of the law, in terms of
established procedures and rules, and
for making decisions that harm busi$
ness;
• developing and introducing mecha$
nisms for overseeing the activities of the
Government. The most effective step in
this direction would be establishing a sys$
tem of civil oversight that would provide
outside monitoring;
• simplifying the procedure for holding
government officials at all levels respon$
sible;
• enshrining in law mechanisms for com$
pensation of losses caused by the actions
of government bodies and their officials.
in order to guarantee equal opportunity to
all parties in the judicial process.
On the other hand, the independence of
the judiciary, including financial independ$
ence, needs to be shored up, as does the
professionalism of judges and other as$
pects.
If this option can be carried through, judges
should begin to apply the law equally in all
cases. An important task here is to increase
trust in the judiciary, which will happen
mostly once there is swift and complete
enforcement of court decisions.
To improve the judiciary, it is necessary to
take four key steps:
• Review procedural regulations in the
light of current requirements and ensure
that, among other things, court proceed$
ings are simplified and more clearly reg$
ulated, that access to the courts is simpli$
fied, and so on.
• Ensure that the rights of the state and
business are equal in the legal process.
To carry out this task, administrative
judicial procedures need to be intro$
duced.
• Increase the level of financial and mate$
rial support for courts. There are a num$
ber of options for resolving this task.
Firstly, this can be done by increasing
Budget allocations. Secondly, it can be
done by raising court fees. The third
option is to refuse to give government
bodies free judicial services. The most
acceptable of these, today, is the third
option, which should be accompanied
by a steady increase in Budget alloca$
tions to the judiciary.
• Ensure the enforcement of court deci$
sions, especially those that involve gov$
ernment bodies. This can be done if the
procedures for compensating damages
from the Budget are simplified, if the
logistical and legal support for the exec$
utive service is improved, and if respon$
sibility for non$compliance with court
decisions is increased.

Stronger state guarantees and fewer property rights

violations
Potential investors need to be confident that
the state guarantees the protection of their
property rights and a swift and unprejudiced
return of assets when these rights have been
violated. An indicator of this kind of guaran$
tee could be a clearly$defined and strict lia$
bility on the part of government bodies for
illegal actions against owners of assets.
In addition, the number of property rights
violations can be reduced if legislation in
this area is improved. After all, the violation
of ownership rights can happen not only
between business and the government. They
are equally often violated in business$to$
business relations. This is connected, not
least, to the fact that the government has
still not created transparent rules for rela$
tions among owners of assets. Because of
this, businesses understand their rights and
obligations in different ways and take advan$
tage of flaws in the legal system to maximize
their interests. All too often, this leads to vio$
lations of the property rights of others.


Today it is very common to see different judges hand down completely contradictory decisions in one
and the same case.

This means, above all, reducing administrative pressure on the part of government bodies on the
courts and judges to an absolute minimum.

This means court fees and the costs of informational and technical support.

Most of all, this refers to the responsibility of the executive service and government officials.

improving the business climate 

Appendix 
About this project
The “Second Opinions and the Institutio$
nalization of Public Consultation in the
Policy Development Process in Ukraine”
project was initiated, developed and imple$
mented by the International Centre for
Policy Studies (ICPS) jointly with the
Secretariat of the Cabinet of Ministers of
Ukraine and the Ministry of Economy and
European Integration of Ukraine. The proj$
ect was implemented under the Policy
Advice for Reforms (PAR) project of the
Canadian Bureau of International Educa$
tion (CBIE) and financed by the Canadian
International Development Agency (CIDA).
The project was implemented during 
months, from December  through
November .
The project’s goals are to help promote
reforms in Ukraine by institutionalizing
Government consultations with the public
on policy$making and to raise the capacity of
civil society to formulate public opinion on
the most pressing issues in reform.
Correspondingly, the first goal envisaged
two components: conducting a full cycle of
consultations with stakeholders on three
Government policy priorities and preparing
policy briefs in order to help improve con$
sultations on Government activities. The
second goal was to be achieved through the
educational component. All three compo$
nents were based on studying, applying and
transferring the experience of developed
democracies.
Three Canadian advisors involved in the
project shared practical know$how on poli$
cy analysis and consultations with stake$
holders:
• M. Paul Brown, Professor, School of Pub$
lic Administration, Dalhousie University,
Halifax, Canada;
 improving the business climate
• Bohdan A. Krawchenko, Vice Rector,
National Academy of Public Administ$
ration, Office of the President, Kyiv,
Ukraine;
• Larissa Y. Lozowchuk, Deputy Govern$
ment Secretary, Saskatchewan, Canada;
To implement this project, ICPS formed a
working group, which coordinated the proj$
ect and organized and coordinated events in
Kyiv. ICPS partners in this project were
NGOs in four regions of Ukraine, each of
which appointed a regional coordinator:
• Oleh Levchenko, Podillia Center of
Social Technologies, Vinnytsia;
• Vitaliy Zeliuk, Center for Social Studies,
Poltava;
• Nina Ponomarenko, Chernihiv Regional
Development Agency, Chernihiv;
• Arsen Osmanov, Institute of Social
Studies, Simferopol, the Autonomous
Republic of Crimea.
The project’s Ukrainian specialists intro$
duced a public consultation mechanism by
studying stakeholder opinions on three
important Government policy areas in
Ukraine:
• reforming the system of privileges;
• improving the business climate;
• legitimizing personal incomes.
These three Government policy priorities
were identified in advance, based on ICPS
consultations with representatives of central
executive bodies and independent analysts,
and on recommendations developed by
ICPS analysts.
Within this project, the first component,
the consultation process, was developed
and implemented following the recom$
mendations of the Canadian advisors.
These recommendations represent public
consultation procedures widely used by
developed democracies and known to be
effective in practice. In particular, the pro$
ject used certain key public policy
approaches:
• developing Green and White Papers for
the discussion on each of the priorities.
Green Papers identify problems and
review options, while White Papers con$
centrate on recommendations;
• holding two rounds of public discussions
based on the policy papers with an iden$
tified circle of outside specialists;
• holding two rounds of public hearings
on each of the priorities with the partici$
pation of stakeholders;
• analyzing the results of the public con$
sultations and revising the Papers based
on the input received.
More information about the methodology
and implementation of the consultation
process is in APPENDICES –.
Final versions of the White Papers include
detailed and well$reasoned presentations of
problems in relevant areas and recommen$
dations for tackling these problems, sup$
ported by key interest groups in the society.
Project participants expressed the hope that
such papers would become powerful tools
for debating government policy in Ukraine.
In addition to the practical implementation
of public policy approaches, in particular
consultations on Government policy priori$
ties, the project’s second component aimed
at helping the Ukrainian Government devel$
improving the business climate
op a mechanism for consulting with stake$
holders as a built$in part of the policy$mak$
ing process. To implement this component,
a Government working group was set up with
four participants:
• Natalya Dniprenko, Deputy Director of
the Public Relations Department,
Secretariat of the Cabinet of Ministers of
Ukraine;
• Tetiana Markina, Deputy Director of the
Media and Public Affairs Department,
Ministry of Economy and European
Integration of Ukraine;
• Viktoria Horshkova, Chief Specialist of
the Media and Public Affairs
Department, Ministry of Economy and
European Integration of Ukraine;
• Andriy Shpychko, Chief Specialist of the
Development Strategy Department,
Ministry of Economy and European
Integration of Ukraine.
This component had three objectives:
• two papers on consultations with stake$
holders to be prepared and published
jointly with Government representatives:
a policy brief on public consultations
and a handbook on organizing public
consultations;
• Government consultations when prepar$
ing and adopting key legislative and nor$
mative acts that regulate public partici$
pation in shaping and implementing
government policy in Ukraine;
• the participation of the Government
representatives in public hearings in the
regions.
Two documents were developed: a policy
brief called “Improving Consultations with
Stakeholders in the Activity of the Ukrainian
Government” and a “Handbook on How to
Hold Public Consultations.”

In addition, the Government consulted
project participants during the drafting
of:
• a Cabinet Resolution “On the mecha$
nism for public participation in shaping
and instituting government policy by
central and local executive bodies;”
• a Presidential Decree “On ensuring con$
ditions for broader public participation
in shaping and instituting government
policy;”
• a Procedure for holding public consulta$
tions in shaping and instituting govern$
ment policy;
• a Provision on the Public Council under
the Cabinet of Ministers of Ukraine;
• a Standard Provision on the Public
Council under executive bodies.
 improving the business climate
Some of the resulting comments, proposals
and remarks were taken into account and
included in the draft legislative and regula$
tory acts, which have since adopted and
come into force.
The third component of the project is edu$
cational. Here, the project’s Canadian advi$
sors held two educational seminars on
“Conducting Public Consultations” (ICPS,
Kyiv,  December ) and “Policy
Advocacy” (ICPS, Kyiv,  February ).
Representatives of NGOs from Kyiv and
other Ukrainian cities and government staff
took part in these seminars. In addition,
ICPS specialists made a presentation on
European Union standards for public con$
sultations at an educational seminar organ$
ized by the Public Relations Department
under the Secretariat of the Cabinet of
Ministers. This seminar was attended by rep$
resentatives of PR departments from all
national executive bodies.
Appendix 
How the project’s public hearings were organized
A key component of the “Second Opinions
and the Institutionalization of Public
Consultation in the Policy Development
Process in Ukraine” project was conducting
public discussion on “Improving the
Business Climate” using public policy proce$
dures and approaches. The goal of public
discussion is to determine the opinions of
various stakeholders on problems impeding
the development of a healthy business cli$
mate in Ukraine, the roots of these prob$
lems, and priority Government tasks to tack$
le these problems. Part of this goal included
carrying out pilot applications of public pol$
icy approaches at both the central and
regional levels in Ukraine.
The International Centre for Policy Studies
has developed methods for public discus$
sion based on recommendations from the
project’s Canadian advisors and on ICPS
experience. These methods are based on
public policy approaches such as:
. Discussions must involve representatives
of all stakeholders, i.e. those groups of
the population the most affected by
problems in the particular area and by
any changes to the government policy
under discussion. Such a definition of
the target audience gives grounds to
hope that the issues under discussion
will reflect the real situation in the coun$
try in terms of appropriate government
policies.
. Discussions with stakeholders are based
on a Green Paper on each subject that
provides a thorough study and summary
of the various problems and their possi$
ble solutions. In this project, policy
papers for the first and second rounds of
public discussions were developed by
ICPS specialists jointly with specialists
improving the business climate
from all five cities. ICPS experts drafted
the initial version of each document and
formulated questions for the outside spe$
cialists. The questions were then submit$
ted to the regional specialists, who pro$
vided written comments and submitted
them to ICPS. ICPS experts then revised
the policy papers and presented them for
discussion. The stakeholders who were
invited to the hearings received a copy of
the relevant policy paper in advance, so
that they could study it and be prepared
for a meaningful discussion.
. Each discussion with stakeholders was
structured around the specific issues for$
mulated by ICPS experts and submitted
to the invited stakeholders in advance.
. Each discussion took the form of brain$
storming: all participants were able to
express their opinions on each issue; all
these opinions were registered (written
down) in an exhaustive list; these lists
were then submitted to ICPS experts for
analysis and inclusion during the revi$
sion of the policy paper.
. ICPS held two rounds of discussions.
The first round was devoted to dis$
cussing issues which, according to the
classic policy analysis procedure, make
up a Green Paper: identifying goals of
the government policy; current prob$
lems, their symptoms, their roots; analyz$
ing government efforts to handle these
problems; identifying key stakeholders
and possible options for further activi$
ties. These issues were covered by policy
documents designed for the first round
of public discussions.
The second round was devoted to debat$
ing issues that constitute White Papers:

 analyzing specific recommendations for
further action, their advantages and
drawbacks, the risks and obstacles to car$
rying them out. Participants also
assessed the policy papers as a tool for
organizing discussions. These issues
were covered by policy papers designed
for the second round of public discus$
sions, essentially revisions of the first$
round documents. They took into
account the results of the first round of
discussions and included new chapters.
This means that the procedure for devel$
oping policy briefs was somewhat differ$
ent from the classic one, when Green
and White Papers are two different
papers. During the course of the project,
it became clear that most participants in
the discussions, like the regional special$
ists, were not entirely prepared to com$
pletely understand, absorb and apply the
classic public policy process. In the opin$
ion of ICPS specialists, this slight devia$
tion from the standard approach provid$
ed an opportunity to better reach the
project’s goal. The current publication
presents a wrap$up policy paper devel$
oped as part of this process.
The public policy process for consultations
with stakeholders is described in greater
detail further in this Appendix.
At the beginning of the project, a timetable
was developed for the project and the ICPS
working group was formed.
The project concept involved organizing
hearings in five Ukrainian cities, including
Kyiv. After consultations with the Canadian
advisors, a decision was made to identify
four other cities on the basis of a competi$
tion among civic organizations from oblast
centers in northern, central and southern
Ukraine. This kind of approach to choosing
cities was based on the fact that these
regions lag behind western and eastern
Ukraine in terms of the development of civil
 improving the business climate
society and the project was positioned to
help improve this situation.
The organizers determined conditions and
procedures, held the competition, chose
four partners, and appointed a local coordi$
nator in each city (see APPENDIX ). The
results later confirmed that the choice had
been a successful one in each case.
In the meantime, ICPS experts developed
the policy papers. Consultations with the
Canadian advisors helped structure a tem$
plate for the documents, and the experts
filled it with relevant content. ICPS and the
project’s local partners chose the outside
specialists: two for each topic in each city.
The outside specialists received initial drafts
of the policy papers through local partners
and their task was to reply to the questions
and provide comments. Later, the partners
collected their replies and comments and
submitted them to ICPS. The ICPS special$
ists revised their policy papers based on
these comments and the results of the dis$
cussions that took place later. This same
cycle of steps was undergone twice.
The local partners had three key objectives:
to organize the work of the outside special$
ists; to organize and provide logistical sup$
port for the public hearings; and to arrange
cooperation with stakeholders in the chosen
cities, especially their participation in the
public discussions. ICPS provided the part$
ners with the methodology and organiza$
tional support: it prepared the complete set
of sample documents for organizing and
holding public discussions, and a clear
description of methods for conducting pub$
lic discussions and logistical requirements;
suggestions for identifying stakeholders,
contacting them and working with them
within the project. ICPS was responsible for
organizing the discussions in Kyiv.
Two rounds of public hearings were held on
the topic “Improving the Business Climate”
in five Ukrainian cities where the project
Тable . Dates, venues and number of participants
City Date of the first Date of the Participants in Participants in
round second round the first round the second
round

Vinnytsia  March   July   

Poltava  March   July   
Chernihiv  April   July   
Simferopol  April   July   
Kyiv  April   June   

was being implemented. The first round . Coffee break ( minutes).
took place in March and April, the second
in June and July . . Group discussions (– minutes).

The hearings in every city followed the same
pattern. In fact, discussions on “Improving
the Business Climate” and the two other top$
ics—“Reforming the System of Privileges”
and “Bringing Personal Incomes out of the
Shadows”—were organized as a single event
consisting of three parts. This event took one
entire day for discussions on two topics and
the morning of the next day to discussion
the third topic. Each topic was given three
hours: :–: or :–:. All the
discussions took place on weekdays. The dis$
cussions all followed standard rules of order.
Each discussion had the same structure:
. Welcome and introductory speech by the
presenter (– minutes).
. Report by ICPS specialist on the results
of research presented in the policy brief
(– minutes).
. Co$report by a local specialist on the dis$
cussion topic (– minutes).
. Division of participants into working
groups (– groups with – partici$
pants each), announcement of the com$
position of each group and guidelines
for group work ( minutes).
. Presentation of the results of group dis$
cussions (– minutes).
. Wrap$up discussion and closing com$
ments (– minutes).
During the first and second rounds of pub$
lic discussions, ICPS specialists Ildar Gazi$
zullin, Oleksandr Tatarevskiy and Natalia
Tychuk delivered the reports.
Five questions were formulated for the first
round of discussions on “Improving the
Business Climate.” During the discussion in
the first city, the ICPS specialists noted that
the responses of the participants did not
fully correspond to the goal of the discus$
sion. As a result, the questions were refor$
mulated without changing their essence for
discussions in other cities, as follows:
• What are the policy goals for develop$
ing the business environment in Ukrai$
ne?
• What key problems hamper the business
environment?
• What are the roots of these problems in
the development of the business envi$
ronment?

improving the business climate 

• What are possible solutions to these
problems with the business environ$
ment?
• Which of these possible solutions are a
priority?
During the second round of discussions on
“Improving the Business Climate,” partici$
pants discussed this set of questions:
• What key problems hamper the business
environment?
• What are the priority goals for improving
the business environment?
• What are the most effective ways to
achieve these goals?
• What obstacles might get in the way of
resolving current problems?
• How does the proposed White Paper
help explain and justify the necessary
changes in government policy to
improve the business environment?
For the purpose of discussion, participants
were divided into groups of –. Each of
these working groups was led by a facilita$
tor who directed the discussion, encour$
aged participants to speak out, and wrote
down their statements. The facilitators
were representatives of partner organiza$
tions as well as local specialists.
The list of participants’ comments on all
the issues raised during the first round of
 improving the business climate
discussions is in APPENDIX  and the com$
ment list for the second round of discus$
sions is in APPENDIX .
The list of stakeholders (organizations,
institutions and companies) who partici$
pated in the public discussions in each of
the five cities during the first round of dis$
cussions is in APPENDIX , and the list for
the second round of discussions is in
APPENDIX .
ICPS representatives were present at each
discussion in all five cities. A day before the
hearing, one or two project coordinators
and the local partner organizations jointly
checked the preparation on$site, provided
any further advice and assistance both dur$
ing the preparation and during the discus$
sions, and instructed and briefed the facili$
tators. ICPS Project Coordinator Ihor
Shevliakov was the moderator at all the dis$
cussions, except in Simferopol. In Simfe$
ropol, Ildar Gazizullin was the moderator
on behalf of ICPS at the first discussion and
Andriy Bega at the second discussion.
In the opinion of all the participants—stake$
holders, local partner organizations and
ICPS specialists—, the piloted methods for
conducting public discussions on key gov$
ernment policies proved very effective. The
process was positively accepted by all partic$
ipants in the discussions and it enabled the
free expression of alternative opinions
while ensuring that the discussion remai$
ned on track with regard to the topic of
each discussion.
Appendix 
Responses to first round of public debates
Question . What are the policy goals for developing the business
environment?
Vinnytsia • Improving monetary policy;
• Resolving socio$economic problems; • Improving the level of education among
officials.
• Reducing monopolies and encouraging
competition;
• Protecting property rights; Poltava
• Creating new jobs and reducing • Establishing an environment for
unemployment; successful business;
• Providing social security for employees; • Establishing stable rules of the game;
• Lowering tax pressure and simplifying • Lowering costs for entering the market;
tax policy;
• Establishing fair and equal conditions for
• Lowering financial limits for launching the regions and for SMEs;
a new business;
• Protecting small businesses against
• Simplifying the post$registration process monopolies;
for entering a market;
• Ensuring transparency in Government
• Legitimizing shadow business; decision$making;
• Establishing optimal conditions for the • Improving the investment climate;
development of private initiatives;
• Legitimizing shadow businesses;
• Improving conditions for the
• Developing partnerships;
development of medium business;
• Continuously improving small business
• Improving legislation for the
as a flexible economic building block to
development of SMEs;
develop the Ukrainian economy and
• Fostering investments; form a middle class.
• Filling the Budget;

Question . What key problems hamper the business environment?

Vinnytsia • Excessive tax pressure;
• Imperfect and unstable legislation; • Unregulated interference in business
activity;
• Changeable tax policy;
• High risks, insufficient communication
• A complicated business start$up process;
between the state and the public;
• Lack of a government lending policy;
• Corruption and abuse among government
• Limited access to material resources, officials;
underdeveloped leasing and mortgage
• An unstable political situation;
markets;
• No opportunities for business to affect
• Poor control over adherence to existing
government decisions;
legislation;

improving the business climate 

• Low level of education among business
owners and officials.
Kyiv
• Low level of education among
entrepreneurs and employees;
• Complicated regulatory environment;
• A high social payment and tax burden;
• Complicated access to financial resources;
• Unprotected ownership rights;
• Low awareness and significance among
NGOs;
• Inconsistent and unaccountable
government;
• Underdeveloped infrastructure;
• Poor informational resources;
• No financial support for business
start$ups;
• Lack of public$private dialog;
• Legislation ignored or selectively adhered
to;
• Ineffective state bureaucracy;
• Inconsistency among programs that
promote business.
Poltava
• Tax pressure;
• Inefficient regulation of monopolies;
• Shadow economy;
• Insufficient, unstable legislation which is
not always adhered to;
• Complicated system of licensing;
• Tax law interpreted in favor of the state;
• Social problems are tackled at the expense
of SMEs;
• Lack of openness and transparency;
• Lack of corporate culture;
• Lack of a middle class;
• Excess of legislation regulating business
development;
 improving the business climate
• Underdeveloped system of public
informational resources for businesses;
• Flawed licensing and simplified tax
systems;
• Insufficient micro$financing.
Simferopol
• Complicated regulatory and licensing
systems;
• Lack of lending mechanisms;
• Ever$changing legislation;
• Flawed pricing mechanisms;
• Government pressure (political) on
business;
• Weak influence of NGOs on government
policy;
• Corrupt government;
• Outdated technologies;
• Lack of guarantees for investments;
• Lack of an independent judiciary.
Chernihiv
• Poor awareness of changes to laws among
businesses;
• Lack of adaptation to local conditions
among business development programs;
• Burdensome taxes;
• Negative public opinion of business owners;
• Inadequate business support
infrastructure;
• Poor access to loans;
• Lack of incentives for doing business;
• Over$bureaucratized reporting
requirements;
• Lack of a single licensing bureau for
businesses;
• Complicated system for registering and
re$registering businesses, costly services;
• Lack of coordination among various
government bodies;
• Contradictory by$laws.
Question . What are the roots of these problems in the development
of the business environment?
Vinnytsia • Inconsistent regulatory policy;
• Conflicting interests between the public • Lack of business support among
and private sectors; government policy priorities;
• Corrupt government; • Imperfect judicial system.
• Lack of transparency in government
decision$making;
Poltava
• Lack of general informedness;
• Complicated reporting requirements;
• Bureaucratic red tape;
• Baggage from the past;
• Inconsistent policy and implementation
• Old soviet mentality;
approaches;
• Lack of patriotism;
• No analysis of business environment
impact; • Lack of trust across the board;
• Flawed legislation; • Unfair competition, lobbying,
corruption;
• Shadow sector;
• Lack of national strategic and tactical
• Unqualified civil servants;
business development plan;
• Information kept from business owners;
• Underdeveloped positive image
• No government oversight and of business people;
accountability;
• Underdeveloped mechanism for the
• Dependency of media on the public to help shape economic policy.
government;
• Low education among entrepreneurs;
Simferopol
• Public unprepared for market relations.
• Baggage from the past;
• Lack of human resources;
Kyiv
• Old mentality;
• Baggage from the past;
• Lack of a new elite;
• Corrupt and unaccountable government;
• Flawed legislation;
• Lack of state support, especially
• Outside influences;
in education;
• Not enough time for changes
• Lack of a legal culture;
to take root;
• Underdeveloped civil society;
• Lack of public trust;
• Lack of administrative, institutional and
• Corrupt government;
judicial reforms;
• Apathy among the general public;
• Lack of clear regulatory policy;
• Unreformed government;
• Flawed legislation;
• Informational wasteland;
• Impact of private/ corporate interests on
government decisions; • Double standards;
• Flawed inter$budgetary relations; • Closed, opaque government.

improving the business climate 

Chernihiv
• Chaotic approach to business regulation;
• Unqualified specialists in government
bodies;
• Ineffective legislation;
• Lack of state lending policy for business;
• Lack of business traditions;
• No specialists with business experience
in government bodies;
• Lack of qualified consulting services;
Question . What are the possible sollutions to these problems
with the business environment?
Vinnytsia
• Forming a clear government policy and
finding a way to implement it;
• Improving tax policy;
• Separating business from the executive
(arms$length approach);
• Cutting red tape;
• Removing criminal liability from those
who pay bribes demanded by officials;
• Increasing the accountability
of government officials;
• Open and transparent government;
• Designing new programs to develop
depressed territories;
• Tax reform;
• Providing ongoing targeted information
for businesses;
• Forming new views and opinions
in society;
• Improving the work of media;
• Developing a mechanism for supporting
business;
• Consolidating all funds;
• Changing from a post$socialist to a
post$industrial (democratic) political
system;
• Lowering tax pressure: lobby the
necessary legislation;
• Lobbying necessary legislation;
 improving the business climate
• Inability of business owners to cooperate
with the government;
• No system for applying successful
business practices;
• Opaque system of Budget revenues and
expenditures;
• Inconsistent laws;
• Red tape, corruption, distrust of the
state;
• No suitable education for entrepreneurs;
• Complicated lending system.
• Setting up a mechanism for government
oversight and accountability;
Kyiv
• Setting up a mechanism to implement
administrative and regulatory policies;
• Improving universal education;
• Facilitating cooperation between
government and business associations to
implement the Law on regulatory policy
regarding business activity;
• Setting up a union of business association
to lobby for business interests;
• Easing access to information;
• Carrying out the civil society
development program;
• Training media through business
associations;
• Ensuring consistency among government
programs;
• Introducing public reporting among
government;
• Carrying out administrative reform;
• Reforming statistical tracking,
in particular, at the SME level;
• Introducing targeted Budget support
(national and local) for priority projects;
• Improving micro$lending legislation;
• Raising the level of adherence
to legislative standards;
• Reforming the judiciary;
• Reforming tax administration;
• Developing and instituting state support
mechanisms for business.
Poltava
• Involving business people in government
bodies;
• Transferring some powers to business
associations;
• Training business people;
• Offering social security
for entrepreneurs;
• Setting up effective lobbies;
• Optimizing the tax burden;
• Consolidating legislation;
• Using foreign know$how;
• Forming a positive image of business;
• Identifying priority manufacturing areas
for business to get involved in;
• Training entrepreneurs and re$training in
new professions at post$secondary
institutions;
• Setting up equal conditions for all
business entities.
Simferopol
• Strengthening oversight
of accountability;
• Setting up a mechanism for public
oversight;
• Developing a new human resource policy;
• Making government agencies financially
independent;
• Doing PR for the civil service;
• Developing local government;
• Decentralizing government;
• Establishing real mechanisms for
cooperation between government and
NGOs;
• Reforming residential services;
• Developing the stock market;
• Reforming the banking system;
improving the business climate
• Developing business infrastructure;
• Reforming and stabilizing tax policy.
Chernihiv
• Setting up government services centers;
• Setting up regional development
agencies for state procurement;
• Involving the public in discussing and
making decisions at all levels;
• Forming a positive image of business;
• Forming a state business education
program;
• Developing business support
infrastructure;
• Investing state funds into educating
business people;
• Providing legal support for developing
companies;
• Setting up a transparent tax system;
• Providing cheaper loans;
• Providing tax breaks only for start$ups;
• Reviewing tax legislation;
• Regulating the consumer rights
protection system;
• Regulating relations between employers
and employees;
• Arranging a feedback system for the VR,
the Administration and the Cabinet;
• Reducing the number of oversight
agencies;
• Providing appropriate personnel
training;
• Disseminating best practice;
• Improving the image and professionalism
of civil servants;
• Overcoming psychological barriers to
doing business;
• Depoliticizing economic issues;
• Establishing conditions to attract FDI
and protect investor rights;
• Educating entrepreneurs;
• Studying domestic and foreign
cutting$edge know$how and training
qualified personnel.

Question . Which of these possible solutions are a priority?
Kyiv Chernihiv
• Introducing regulatory policy; • Introducing state procurement for social
needs;
• Providing educational and informational
support; • Engaging the public;
• Providing financial support; • Establishing accountability for ineffective
work in the government;
• Improving legislation in under$regulated
areas; • Providing equal treatment for all
business entities;
• Introducing targeted Budget support
(both national and local) for priority • Providing a realistic education for
projects. business owners;
• Opening up access to lending.
Simferopol
• Introducing mechanisms for public
oversight;
• Developing business infrastructure.

 improving the business climate

Appendix 
List of stakeholders in first round of public debates
Outside project specialists
Vinnytsia
• Leonid Kravchuk, Co$Director, Vinnytsia
oblast office of the Prosvita All$Ukrainian
Taras Shevchenko Association;
• Svitlana Khodakova, Director,
Club of Entrepreneurs, an oblast civic
organization.
Kyiv
• Viacheslav Bykovets, President, Union of
Small, Medium and Privatized
Enterprises of Ukraine.
Poltava
• Larysa Bezdudna, Director, Vash Uspikh
[Your Success], a private center for
training technologies; also member of
Poltava Oblast Union of Entrepreneurs;
• Liudmyla Zakrevska, Chair, Poltava
Business Incubator, a civic organization.
Simferopol
• Volodymyr Prytula, Chair, Committee for
Monitoring Freedom of the Press in
Crimea;
• Yuriy Sosedko, consultant, Center for the
Support of Reforms, a civic organization.
Chernihiv
• Valeriy Kokot, Deputy Head, External
Relations and Foreign Economic Activity
Department, Chernihiv Oblast State
Administration, Institute of Chernihiv
Oblast Local Development;
• Yuriy Paperniy, political correspondent,
Noviy Chernihiv  [New Chernihiv]
Company, Chernihiv Office, Committee
of Voters of Ukraine.
improving the business climate
Institutions and organizations
Vinnytsia
• Economic Department, Executive
Committee, Vinnytsia City Council;
• Information Policy Department,
Executive Committee, Vinnytsia City
Council;
• City Community Club, a Vinnytsia
municipal civic organization;
• Business Center, a Vinnytsia oblast civic
organization;
• Club of Entrepreneurs, a Vinnytsia oblast
civic organization;
• Podillia Center of Social Technologies,
Vinnytsia oblast civic organization;
• Main Economic Department, Vinnytsia
Oblast State Administration;
• Prosvita All$Ukrainian Shevchenko
Association, Vinnytsia oblast office;
• Ternopil Academy of Economy, Vinnytsia
campus;
• Interregional Management Academy,
Vinnytsia Institute;
• Vinnytsia City Union of Industrialists
and Entrepreneurs;
• Plyn, a civic organization;
• Vinnytsia Oblast State Tax
Administration;
• ZAT Podillia;
• Vinnytsia private businesses;
• Advisor to the Mayor of Vinnytsia;
• TOV RemTekhSilMash;
• Registration Chamber of Vinnytsia City
Council;
• TOV Stantsiya Nasinnyevykh Kultur
[The Station of Seed Crops];
• Center for Scientific and Research
Information.

Kyiv
• US Agency for International
Development (USAID);
• Academy, a think$tank;
• State Regulatory Policy and
Entrepreneurship Committee;
• Dnipropetrovsk Oblast State
Administration;
• Ministry of Economy and European
Integration;
• BIZPRO, a USAID project;
• “Improving the SME Environment,”
a European Union project;
• Council for Studying Productive Forces,
National Academy of Sciences;
• Association of Leaseholders and
Entrepreneurs;
• Union of Small, Medium and Privatized
Enterprises.
Poltava
• POLARR, a regional development
agency;
• VAT PapirTorg;
• Kolo [Circle], a newspaper;
• Zoria Poltvashchyny [Poltava Star],
a newspaper;
• The Newspaper for Entrepreneurs and
Accountants;
• Poltava Business Incubator, a civic
organization;
• Consultants and advisors to Poltava City
Council;
• League of Business and Professional
Women;
• Main Economic Department, Poltava
Oblast State Administration;
• Tezys Communal R&D Facility;
• Poltava Chamber of Commerce and
Industry;
• Poltava branch, VAT Nadra Bank
• Poltava Office of the Ukrainian State
Fund for Supporting Village Farms;
• Poltava Youth Euro$Club;
 improving the business climate
• State Regulatory Policy and
Entrepreneurship Committee, Poltava
oblast representative office;
• Horodok, a private company ;
• PIK, a private company;
• Vash Uspikh [Your Success], a private
center for training technologies;
• Poltava private businesses;
• BIZPRO Project;
• UNIAN regional department;
• Poltava Consulting, a regional consulting
center;
• Union of Poltava Oblast Entrepreneurs;
• Ltava Broadcasting Company;
• Svitlo Luks Company;
• Center for Social Studies.
Simferopol
• Makhuldur Association;
• Association of Simferopol Taxpayers;
• Public Board of Crimean Entrepreneurs;
• Center for Support of Reforms, a civic
organization;
• Kyivskiy District State Administration in
Simferopol;
• Committee for Monitoring Freedom of
the Press in Crimea;
• Crimean Academy for Environmental
and Resort Construction;
• Ministry of Economy of the Autonomous
Republic of Crimea;
• Advisor to the Speaker of the Rada of
Crimea;
• Institute for Social Studies, Simferopol
city civic organization;
• Crimean Association of Scholars;
• Crimea territorial department of the
Anti$Monopoly Committee of Ukraine.
Chernihiv
• Perekhrestia [Crossroads], an agency;
• Diya [Action], an association of SMEs;
• Noviy Chernihiv  [New Chernihiv]
Company;
• Teachers from Chernihiv secondary
schools;
• ARATTA, a civic organization;
• Nova Ukraina [New Ukraine], a civic
organization;
• Deputies of Chernihiv City Council;
• State Regulatory Policy and
Entrepreneurship Committee;
• Individual Income Tax Department,
Chernihiv Oblast State Tax
Administration;
• Institute of Chernihiv Oblast Local
Development;
• Ministry of Economy and European
Integration;
• Chernihiv private business;
• Students of Chernihiv post$secondary
institutions;
• Center for Supporting Women’s
Business;
• East$Ukrainian Regional Development
Fund;
• Department for the Development of
Entrepreneurship and Introduction of
improving the business climate
Regulatory Policy, Chernihiv Oblast State
Administration;
• Molod XXI Stolittya [Youth of the
st Century], Chernihiv city youth
organization;
• Chernihiv Regional Development
Agency;
• Chernihivskiy Visnyk [Chernihiv
Newsletter], the Chernihiv oblast
newspaper;
• External Relations and Foreign
Economic Activity Department,
Chernihiv Oblast State Administration;
• Economic Department, Chernihiv Oblast
State Administration;
• Kontekst$Media, the Chernihiv office of
the news agency;
• Chernihiv oblast office of the Voter
Committee of Ukraine;
• Chernihiv office of ASKA, an insurance
company;
• Chernihiv State Technological University;
• Chernihiv Youth Business Center;
• Chernihiv Reform Press Club.

Appendix 
Responses to second round of public debates
Question . What key problems hamper the business environment?
Vinnytsia • Underdeveloped banking system;
• Inconsistent legislation; • Weak legislation;
• Lack of instructions (lawyers interpret • Taxation, tax administration;
differently);
• Regulatory and administrative hurdles;
• Complicated and costly standardization
• Low professional level among civil
and certification system;
servants and businesses;
• Ukrainian standards not in line with
• Lack of access to resources (financing,
European/World ISO –
rented space, fixed assets) and
standards;
information (no informational base);
• Lack of financial instruments for
• Accountability and reporting procedures
start$ups (loans, credits, own capital,
not clearly defined;
breaks);
• Flawed system of permits and oversight;
• Flawed tax system;
• Lack of regulations for the flat tax
• Red tape;
system;
• Uneven business playing field;
• Ineffective state administration and
• Monopolies; process of providing and running public
services;
• Unstable socio$economic and socio$
political environment; • Selective application of the law;
• Over$bureaucratized local governments; • Corruption;
• Corruption, bribery; • No new law on joint stock companies;
• Unprofessional governments; • Poor enforcement of court rulings,
ineffective judiciary;
• A passive citizenry;
• Land ownership unregulated;
• Limited access to information for the
general public; • Low level of informedness among
entrepreneurs;
• Covert boycotting of government
decisions; • High interest rates and huge collateral
requirements for loans;
• Limited access to resources;
• Time and financial burden on handling
• Unstable basic legislation;
social payments.
• Tax pressure.

Chernihiv
Kyiv
• Producers unprotected;
• Lack of business education in Ukraine;
• Burdensome and unsystematic taxes;
• Traditional mentality;
• Inconsistency between financial and tax
• Lack of clear and fair rules of the game reporting;
(business$government$oversight);
• Burdensome tax pressure on employers;
• Complicated permit system;

 improving the business climate

• Unformulated state support;
• Unregulated (tax and financial)
accounting for commercial activity;
• Corruption;
• Complicated post$registration process,
especially the permit system;
• Lack of specialists to carry out regulatory
policy, lack of material resources;
• Insufficient financing, lack of regional
business development programs;
• Inefficient and economically unsound
business development programs;
Question . What are the priority goals for improving the business
environment?
Vinnytsia
• State support for business;
• Micro$lending to cover more businesses;
• Attracting foreign investment (need
mechanism to provide owner
guarantees);
• Improving regulatory environment and
legal base;
• Raising standard of living and social
standards;
• Creating new jobs;
• Protecting property rights;
• Strengthening the fundamentals of
statehood;
• Alleviating poverty;
• Reviving the economy;
• Improving social policy;
• Attracting investors;
• Employment.
Kyiv
• Adopting the Tax Code ($year change
moratorium), which would cancel tax
breaks and lower tax rates;
• Innovative business development;
• Reforming system of statistical research;
• Improving the regulatory environment;
improving the business climate
• Underdeveloped stock market;
• Limited access to financing;
• Inconsistent tax rules;
• Many economically unsound breaks for
specific companies;
• Conflict of interests between the state
and businesses in interpreting tax
legislation;
• Low level of business education;
• Low technological base, lack
of manufacturers;
• Lack of suitable human resources.
• Increasing transparency in local
governance;
• Regulating the tax system;
• Raising professionalism among civil
servants and entrepreneurs;
• Strengthening the role of regional and
local governments;
• Setting up public access to information
about laws and regulations;
• Participants agreed with the goals
proposed in the ICPS Green Paper.
Poltava
• Prioritizing state support for small
business as a government policy;
• Introducing tax breaks for women who
are entrepreneurs and college graduates;
• Informing civil servants, businesses and
the third sector;
• Opening dialog and three$way
cooperation (government, private sector,
the public);
• Setting a single standard for small
business (no breaks for specific
individuals);
• Introducing the concept of small
business development;
• Developing a business support
infrastructure;

• Transparency and openness in tax
administration;
• Reinforcing the fight against corruption;
• Establishing fair conditions for the
regions, small and big business.
Simferopol
• Making the work of the Verkhovna Rada
more effective;
• Improving public management (local
government);
• Organizing a financial support system;
• Canceling “optional” deductions;
• Lowering tax pressure;
• Setting clear and fair rules;
• Reforming state administration;
• Optimizing legislation;
• Establishing a system of accountability
for decision$making;
• Adjusting national legislation to EU
standards.
Chernihiv
• Reorganizing tax legislation;
• Establishing a clear, transparent system
of taxes, fees and other payments;
• Reorganizing public administration to
eliminate corruption;
• Facilitating the process for foreign
commercial activity;
• Improving trust in the government;
• Introducing necessary new bills;
• Ensuring general well$being;
• Developing regional policy program;
• Reforming the tax system;
• Increasing Budget revenues by
legitimizing the shadow economy;
• Eliminating irregular exports;
• Attracting revenues through tax
amnesties;
• Developing green tourism in this oblast.

Question . What are the most effective ways to achieve these goals?
Vinnytsia • Strengthening government
accountability through public oversight
• Facilitating cheaper loans;
and independent media scrutiny;
• Raising the effectiveness of legislation;
• Developing small business, educational
• Lowering tax pressure for start$ups within campaigns;
the first three years;
• Making the legislative base effective and
• Promoting the development of lending stable;
environment (credit unions);
• Developing professional government;
• Improving current legislation on
• Ensuring stability in the legislative base
micro$lending;
and informational sources;
• Improving land legislation;
• Creating new jobs (SMEs), access
• Targeting privileges by type of activity to material and technological resources.
and by territory;
• Reducing the cost of licensing,
Kyiv
certification, permits, notarial services;
• Increasing the role of business centers
• Conforming regulatory acts to
and incubators in business development
ISO standards;
innovations;
• Improving the legal base;
• Bringing order to legislation intended to
• New leaders who can effect change; establish a transparent regulatory envi$
ronment;
• Making policy$making transparent;

 improving the business climate

• Setting up an educational program on
regulatory policy;
• Continuing working on the draft Tax
Code;
• Increasing the effectiveness of business
development coordinating councils;
• Consulting with all stakeholders on
adopting regulations;
• Identifying a clear mechanism for
ensuring the implementation of the Law
on regulatory policy;
• Lowering tax pressure: regulate the small
business flat tax system, introduce a sin$
gle social contribution;
• Regulating and simplifying registration
and permit procedures;
• Providing professional development for
civil servants;
• Involving the public in developing
legislation and regulations;
• Providing norms and regulations to set
up an informational environment;
To make the regulatory environment
transparent and consistent:
• Overseeing the accountability bodies
authorized to institute regulatory policy;
• Reforming the system of permits, in
particular, by improving existing
regulations or introducing new ones;
• Adopting a law on oversight agencies;
• Allocating funds to institute regulations;
• Regulating the process of setting norms
and standards;
To balance the system of taxes and social
payments:
• Adopting the Law on the flat tax
system;
• Introducing the single social tax of
–% (either combining all four social
funds into one, or keeping only the
Pension Fund separate);
• Establishing a fair competitive environ$
ment;
improving the business climate
• Bringing order to tax breaks, including
VAT$exemptions, Priority Development
Areas, unequal conditions for domestic
and foreign investors;
To ensure an effective system of public
administration:
• Instituting administrative reform
(adopting the Laws on the Cabinet
of Ministers and the civil service);
• Raising the image of the civil service;
• Adopting the Administrative and
Administrative Procedural Codes;
• Introducing a system of administrative
courts;
To protect property rights:
• Adopting the Law on joint stock
companies and protecting minority
shareholder rights;
• Enhancing the independence of the
judiciary, reforming the court system;
• Improving the funding of courts;
• Harmonizing the Commercial and
Civil Codes.
Poltava
• Directing tax revenues towards small
business development;
• Offering tax breaks for start$ups
(to women and young people);
• Reactivating local and regional business
support funds;
• Using funds from the universal Social
Insurance Fund on developing small
business infrastructure;
• Providing ongoing financial support
to NGOs that provide professional
support to small businesses (Business
Support Centers, business incubators);
• Attracting foreign investments;
• Studying international know$how;
• Raising civil service salaries, freeing
businesses from having to support
government officials.

Simferopol
• Developing a procedure for recalling
deputies for ineffectiveness;
• Setting up professional development
programs;
• Adopting laws that include a regulatory
mechanism;
• Lowering taxes;
• Reducing the government bureaucracy;
• Improving legislation on the judiciary;
• Implementing world practice;
• Increasing the competence of the
Verkhovna Rada and all government
bodies;
• Involving business owners in the policy$
making process;
• Supporting business associations;
• Using EU resources;
• Taking advantage of the experience of
the EU and other developed countries;
• Establishing educational and business
exchange programs;
• Developing business associations;
• Providing legal support;
Question . What obstacles might get in the way of resolving current
problems?
Poltava
• Ever$changing legislation;
• Frequent government shuffles;
• Low level of general competence; the
role and significance of small business
are poorly understood;
• Prejudiced attitude towards business in
the society;
• Lack of dialog and cooperation among
the public, private and third sectors;
• Lack of institutions to protect business;
• Inability and unwillingness of officials to
think and work in new ways;
• Corruption;
• Old soviet mentality;
• Lack of patriotism;
 improving the business climate
• Attracting capital;
• Developing the franchise system.
Chernihiv
• Introducing specialized education and
training for business and society;
• Strengthening public accountability;
• Systematizing legislation and making
frequent changes impossible;
• Developing regional policy programs
with the help of scholars, specialists and
the community;
• Financing programs;
• Reforming tax system by reducing the
number of economically unjustified
privileges, taxes and duties; stabilizing
legislation; banning amendments to tax
legislation during the current year;
• Increasing Budget revenues: lower
payroll taxes to reduce illegal wages,
refund the VAT only to manufacturers,
reduce tax rates;
• Developing green tourism: develop
infrastructure, adopt regulations,
provide funding to reconstruct historical
monuments.
• Lack of trust across the board;
• Unfair competition, lobbies and
corruption.
Simferopol
• Corruption;
• Lack of state and regional development
concepts;
• Absence of strategic planning;
• Absence of a property market;
• Ever$changing legislation;
• EU standards might not work in Ukraine;
• Resistance of government bureaucracy;
• Laws not enforced;
• Poorly qualified civil servants;
• Business mentality; • Legal and economic ignorance among
business owners.
• Convoluted and corrupted bureaucracy;

Question . How does the proposed White Paper help explain and
justify the changes needed in government policy
to improve the business environment?
Vinnytsia • No mechanisms for carrying out the
identified tasks and no list of sources.
• Clearly and specifically identifies
priorities;
• Covers all pressing issues regarding the Poltava
business environment and property
• Contains fairly clear explanations and
rights;
justifications for the necessary changes in
• Provides in$depth and qualitative government policy to improve the busi$
analysis; ness environment in Ukraine.
• Easy to understand;
• The information provided is necessary, Simferopol
but not complete;
• Needs more practical recommendations;
• Too theoretical;
• No discussion of regional peculiarities;
• Materials should have been distributed
earlier to give participants time to study
them; Chernihiv
• Provides few specific examples of small • Needs simpler presentation;
business development.
• Needs examples;
• Needs illustrative materials;
Kyiv
• One$sided (business is good, government
• Should support government policy and is bad);
accelerate reforms of specific
• Problems with registration and
government policies identified in the
regulation are fictitious and exaggerated;
analytical report;
• Calculations of the business tax burden
• Well$structured, but references to sources
contain inaccuracies;
should be more precise;
• Proposals to reform inter$budget
• Proposal to set up an out$of$court system
transfers are already underway;
for protecting property rights is not
convincing; • Too emotional.

improving the business climate 

Appendix 
List of stakeholders in second round of public
debates
Outside project specialists
Vinnytsia
• Leonid Kravchuk, Co$Director, Vinnytsia
oblast office of the Prosvita All$Ukrainian
Taras Shevchenko Association;
• Svitlana Khodakova, Director, Club
of Entrepreneurs, an oblast civic
organization.
Kyiv
• Viacheslav Bykovets, President, Union of
Small, Medium and Privatized
Enterprises of Ukraine.
Poltava
• Larysa Bezdudna, Director, Vash Uspikh
[Your Success], a private center for
training technologies; also member of
Poltava Oblast Union of Entrepreneurs;
• Liudmyla Zakrevska, Chair, Poltava
Business Incubator, a civic organization.
Simferopol
• Volodymyr Prytula, Chair, Committee for
Monitoring Freedom of the Press in
Crimea;
• Yuriy Sosedko, consultant, Center for the
Support of Reforms, a civic organization.
Chernihiv
• Valeriy Kokot, Deputy Head, External
Relations and Foreign Economic Activity
Department, Chernihiv Oblast State
Administration, Institute of Chernihiv
Oblast Local Development;
• Maya Rudenko, Deputy Editor, Slavutych
newspaper, ARATTA, a civic
organization.
 improving the business climate
Institutions and organizations
Vinnytsia
• Economic Department, Executive
Committee, Vinnytsia City Council;
• Foreign Economic Relations
Department, Executive Committee,
Vinnytsia City Council;
• Alisa, a manufacturing and retail firm;
• Club of Entrepreneurs, Vinnytsia oblast
civic organization;
• Podillia Center of Social Technologies,
Vinnytsia oblast civic organization;
• Main Economic Department, Vinnytsia
Oblast State Administration;
• Prosvita All$Ukrainian Taras Shevchenko
Association, Vinnytsia oblast office;
• Ternopil Academy of Economy, Vinnytsia
campus;
• Vinnytsia Business Development Agency;
• State Regulatory Policy and
Entrepreneurship Committee, Vinnytsia
office;
• Prosvita, an oblast association;
• Interregional Management Academy,
Vinnytsia Institute;
• Vinnytsia National Technical University;
• Ivan Bohun Cossack Regiment of
Vinnytsia;
• Pani Vsesvit [Ms. Universe], a civic
organization;
• Plyn, a civic organization;
• The Association of Lawyers;
• Vinnytsia Oblast State Tax
Administration;
• Initiative, a Zhmerynka municipal youth
organization;
• Krok, a credit union;
• I. Kulmatytskiy Credit Union;
• Vinnytsia private businesses;
• Advisor to the Mayor of Vinnytsia.
Kyiv
• UkrPartInform, an agency;
• Zolote Pereveslo [Golden Yoke],
an association;
• UkrConsulting, an association;
• World Service of UkrTeleRadio;
• Den, a newspaper;
• Ukraina Business, a newspaper;
• State Tax Administration of Ukraine;
• State Regulatory Policy and
Entrepreneurship Committee;
• Institute for Economic Research and
Policy Consulting;
• Main Business Department, Kyiv City
State Administration;
• Main Media and Public Affairs
Department, Kyiv City State
Administration;
• Ministry of Economy and European
Integration;
• Ministry of Finance;
• Polish Embassy to Ukraine;
• BIZPRO, a USAID project;
• Department for Strategy and Reform of
Ownership Relations and Regulatory
Policy, Secretariat, Cabinet of Ministers;
• Association of Leaseholders and
Entrepreneurs;
• Union of Small, Medium and Privatized
Enterprises of Ukraine;
• Ukrainian Agrarian Confederation;
• Ukrainian Center for Independent
Political Research.
Poltava
• POLARR, a regional development
agency;
• VAT PapirTorg;
• Kolo [Circle], a newspaper;
improving the business climate
• Zoria Poltvashchyny [Poltava Star],
a newspaper;
• The Newspaper for Entrepreneurs and
Accountants;
• Poltava Business Incubator, a civic
organization;
• Consultants and advisors to Poltava City
Council;
• League of Business and Professional
Women;
• Tezys Communal R&D Facility;
• Main Economic Department, Poltava
Oblast State Administration;
• Poltava Chamber of Commerce and
Industry;
• Poltava branch, VAT Nadra Bank;
• Poltava Office of the Ukrainian State
Fund to Support Farms;
• Poltava Youth Euro$Club;
• State Regulatory Policy and
Entrepreneurship Committee, Poltava
oblast office;
• Horodok, a private company;
• PIK, a private company;
• Vash Uspikh [Your Success], a private
center for training technologies;
• Poltava private businesses;
• BIZPRO, a USAID project;
• Regional bureau of UNIAN, a news
agency;
• Poltava Consulting, a regional consulting
center;
• Union of Poltava Oblast Entrepreneurs;
• Ltava Broadcasting Company;
• Svitlo Luks Company;
• Center for Social Studies.
Simferopol
• Association for Franchise Development
in Ukraine;
• Pervaya Krymskaya [First Crimean],
a newspaper;
• League of Young Economists, civic
organization;

• Reform Support Center, a civic
organization;
• Committee for Monitoring Press
Freedoms in Crimea;
• Crimean Association of Academics;
• Crimean Ministry of Economy;
• Crimean Ministry of Industry, Transport
and Communication;
• Crimean Ministry of Justice;
• Institute for Social Studies, Simferopol
city civic organization;
• Business Teaching Center, Tavria
National University;
• Center for Stabilization.
Chernihiv
• Noviy Chernihiv  [New Chernihiv]
Company;
• ARATTA, a civic organization;
• Chernihiv State Tax Administration;
• Institute of Chernihiv Oblast Local
Development;
• Young Entrepreneur, a club;
• Chernihiv Oblast Oversight
Administration;
 improving the business climate
• Ministry of Economy and European
Integration;
• Chernihiv private business;
• CheZaRa Company;
• Universal, an insurance company;
• Business Support Fund;
• Chernihiv Regional Development
Agency;
• Law Enforcement Activity Department,
Chernihiv City Council;
• Finance Department, Chernihiv City
Council;
• Communal Property Fund, Chernihiv
City Council;
• Molod XXI Stolittya [Youth of the
st Century], Chernihiv city youth
organization;
• Main Economic Department, Chernihiv
Oblast State Administration;
• Business Development and Regulatory
Policy Department, Chernihiv Oblast
State Administration;
• External Relations and Foreign
Economic Activity Department,
Chernihiv Oblast State Administration;
• Committee of Voters of Ukraine,
Chernihiv oblast office.