USAID study: there is hope for small and medium-sized businesses in Ukraine

USAID study: there is hope for small and medium-sized businesses in Ukraine
July 12, 2016.

Unstable political and economic situation, the war and corruption are the biggest obstacles to doing business in Ukraine. However, the recent USAID study shows that there is a hope for small and medium-sized businesses in the country. 1,827 representatives of small and middle-sized businesses took part in the poll conducted within the study. Interviewed entrepreneurs represent all sectors of economy and all regions of Ukraine but the temporarily occupied areas.

 

Obstacles for business

Corruption remains a considerable obstacle in Ukraine’s business climate, however it was ranked only seventh in the obstacles rating. 55 per cent of respondents agreed that entrepreneurs give bribes in order to avoid the checks, said Oksana Kuziakiv, coordinator at the USAID LEV program, executive director at the Institute for Economic Research presenting the new edition of the study “Annual assessment of the business climate in Ukraine in 2015″ at Ukraine Crisis Media Center.

However, in 2015 regardless of the moratorium on inspections, each second company was subject to checks. Most frequent checks were made by the state fire inspection and the tax inspection. Their checks are longest and most expensive – entrepreneurs are losing 31,000 UAH. As to administration of taxes, entrepreneurs are having biggest problems because of unstable legislation.

One of the interesting findings of the research is the fact that 86 per cent of small and middle-sized businesses consider the state being “an obstacle” or “an enemy” of doing business, and almost the same number of respondents – 89 per cent, are waiting for the state support.

 

Problems of export

Majority of small and medium-sized entrepreneurial businesses are operating in the area of services and trade as well as industry. Only nine per cent of them are exporters.

Andriy Butin, expert at the USAID LEV program, senior researcher at the Institute for Economic Research, noted that among the obstacles to doing business entrepreneurs-exporters named unpredictability of each separate export operation. “When an entrepreneur comes to the customs house, they cannot foresee how much time customs clearance will take, how much money will be spent,” he emphasized. “Two days and 1,727 UAH are spent on average to undergo customs clearance, 6.8 per cent of exporters note to have been paying bribes,” he added. According to Butin 50 per cent export goods to CIS countries, one third of them to the Russian Federation, 49 per cent to the EU, mostly to Germany and Poland.

 

Modest positive tendencies

Kuziakiv noted that the key index of the study – “Index of the business climate” in Ukraine is currently at the “0.01” point in the general scale from -1 to +1. At the same time small and middle-sized businesses are quite optimistic about the changes of the business climate: 53 per cent of the interviewed plan to intensify their business activities over the next two years.

As to the changes over the past years, business representatives generally evaluate them positively. In comparison to 2012, entrepreneurs in 2015 report more frequently about the lack of difficulties of registering a business and note a better situation with checks. 

“Biggest progress has been achieved as to the registration procedures. In this regard we coincide with the Doing Business rating, business community has experienced these changes very well. The situation with inspections has also improved. It is the result of the two-year long moratorium on inspections. General improvement is noted in the entire regulatory area,” said Kuziakiv.

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