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USAID LEV experts: Barriers to Ukrainian exporters must be removed

Kyiv, June 01, 2017.

At present, the main barriers in foreign economic activity are a too rigid and cumbersome system of currency control, disorder in state control over legal compliance, incoherent licensing procedures, excessive transaction costs of making and enforcing contracts, non-transparent and complicated procedures required to export food products, non-transparent penalties. This was stated by USAID LEV experts at a discussion on the analysis of current legislation on foreign economic activity, taking into account system recommendations of the business ombudsman office and consultations with entrepreneurs held at Ukraine Media Crisis Center.

As a result of stringent currency regulation, SMEs put into effect only 25-40% of export potential. Excess technical barriers force SMEs to spend 30-40% more in preparation for export, and unreasonable formal demands result in 15-20% higher administrative costs than could be. Losses of SMEs due to improper execution of export procedures amount to 25-100% of missed profits.

“These barriers (…) can be removed quite easily. It requires only a will and awareness of both business and citizens that access to foreign markets and intensification of our trade outside Ukraine can lead to economic recovery,” said Tamara Solianyk, Director of the USAID program “Leadership in economic governance” (USAID LEV). In addition, she added, we must not only create comfortable conditions for doing business today, but also develop an export strategy for 10-20 years ahead.

Experts recommend making provision for more transparent and justified decisions in the field of foreign exchange control, and monitoring the effectiveness of existing currency restrictions. They suggest making control more risk-based, so that it extends to dual-use and specific products. They also recommend simplifying requirements of foreign trade agreements, contracts and the procedure for obtaining a license, eliminating inappropriate technical barriers, making the procedure of introducing penalties transparent and reasonable. “Although the concept is the same, we propose to divide them into several areas to prevent them from being hindered by each other. The first draft law should provide for removing barriers to exporting goods (settlement of administrative and technical issues), the second – for liberalization of foreign exchange control […]. The third draft law should provide for liberalizing the foreign trade regulation (licensing procedures, sanctions, etc.),” suggested Liubomyr Chornii, senior expert of the USAID LEV program. MP Viktoria Ptashnyk also supports this approach. “I think, USAID LEV would like to collect all proposals for the three draft laws to be prepared and will try to find the allies in the Ministry of Economy, National Bank and State Fiscal Service. […] This work may result in reaching a compromise between business and regulators. I believe that even the compromise position is worth striving for,” she noted.

According to Tetiana Korotka, vice business ombudsman, the regulation of foreign exchange and legislation in the field of foreign trade should become the focus of attention. “Today we have an unprecedented moment of support from various parties to remove these barriers, and we are working both on the regulatory and legislative proposals. […] The government action program provides for preparing the new version of the Law of Ukraine on the foreign trade. These ideas are supported by international financial institutions as well as the NBU and the SFS. The government has this ambition, but it is yet unknown whether it will be the new version or the draft law on amendments. However, this work has already begun,” she noted.

Ihor Snitivker, contributing expert of the USAID LEV program, pointed out that now business has no simple and clear “road map” for export. “The national export strategy alone will not help business. The first step has been made, but business expects its continuation in the form of regional strategies. There are no sectoral export strategies of either. The national export strategy should be the beginning, and the company’s export strategy – its continuation. Then it will be a working tool,” he said. Ukrainian businessmen also lack state programs and research aimed at supporting the export.

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