Ukraine Strengthens in Doing Business
On 23 October 2019 World Bank released its annual ranking Doing Business 2020 which proved that economic environment in Ukraine becomes more attractive for investments: Ukraine climbed for 7 positions and ranks 64th with 6 out of 10 key indicators improved.
The most significant grow was reached area “Protection of minority shareholders’ rights” constituting +24 point. This increase is due to the implementing legal requirement to disclose ultimate beneficial owners in transactions with interested parties. The second most strong increase was found in “Dealing with construction permits” (+10 points) for Ukraine making obtaining construction permit less costly and streamlined: innovations include launch of online notification system, elimination of the requirement to hire an external supervisor and reduction of the contribution fee. The other areas strengthened by Ukraine in 2019 are “Getting electricity”, “Registering property”, “Getting credit”, “Trading across borders”.
However, Ukraine needs to pay more attention to development and enforcement of the regulations that are typically considered to assess investment attractiveness of the region.
Firstly, Ukraine needs to improve its regulations related to “Starting business” since currently they are recognized as lengthy (takes 6 days min) and over administrated with number of procedures. Given the tendency for digitalisation generally adopted by the State there is hope that starting business in Ukraine will take just a couple of hours if every procedure is made online.
Secondly, one of the main negative aspects considered while investing in Ukraine is its court system which is far from being fair and impartial. This affected the criteria of “Enforcing Contracts in Ukraine” which proves that protecting your violated rights at court will cost you time (378 days approximately), money (at about 46.3% of claim value) and nerves wasted in court and enforcement proceedings. However, the judicial reform is one of the priorities for the new Government and, hopefully, the situation will improve.
Another stress area is “Paying Taxes” which is again time consuming (those who fill and file tax declarations know for sure) and lacks tax administration efficiency. The total taxes may reach 45.2% of profit, though, it should be noted, that the VAT refund in Ukraine is at par with leading EU economies.
Given Ukraine’s stable development and enforcement of business regulations within last years the state authorities believe Ukraine has all chances to hit TOP-10 in Doing Business in next 3 years.
Doing Business rating evaluates ease of business in 190 countries analysing existing internal regulations that enhance business activity and those that constrain it.
Senior Associate at EVERLEGAL