Kyiv, September 7, 2006 – The International Finance Corporation and the World Bank released Report Doing Business 2007 stating that Ukraine has improved the ease of doing business, but more reforms are needed.

Kyiv, September 7, 2006 – Ukraine’s overall standing on the ease of doing business has improved slightly this year, moving to 128th out of 175 countries reviewed in the report, from 132nd last year. The improvement in the ranking is due to reforms conducted in two categories: business entry procedures and dealing with licenses.

Doing Business 2007 ranks 175 economies on the ease of doing business—covering 20 more economies than last year’s report. The full list of global top reformers is, in order, Georgia, Romania, Mexico, China, Peru, France, Croatia, Guatemala, Ghana, and Tanzania. Reformers simplified business regulations, strengthened property rights, eased tax burdens, increased access to credit, and reduced the cost of exporting and importing. Within the CIS, Armenia, Azerbaijan, Belarus, Kazakhstan, the Kyrgyz Republic, Moldova, Russia, and Ukraine each implemented at least one reform. Tajikistan had no reforms. Uzbekistan made it harder to do business.

The 10 Doing Business indicators are: starting a business, dealing with licenses, hiring and firing, registering property, getting credit, protecting investors, trading across borders, paying taxes, enforcing contracts, and closing a business.

The rankings track indicators of the time and cost to meet government requirements in business start-up, operation, trade, taxation, and closure. They do not track variables such as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates.


Reforms in Ukraine

Ukraine created a one-stop shop for new business start-up, combining company registration with registration for the pension fund, employment fund, social insurance fund, industrial accidents fund, and tax authority (except for VAT registration). Steps for starting a new business dropped from 15 to 10, and time decreased from 34 to 33 days.

The government simplified the procedures for obtaining business licenses, reducing the time from 265 days to 242 and cutting costs from 229 percent of income per capita to 186.5 percent.

The Ukrainian government launched a guillotine reform effort in June 2005 for “rapid deregulation” of the most overregulated economic sectors, including inspections. In only a few weeks, almost 10,000 regulations were reviewed and over 55 percent slated for elimination. The government expects to reduce the number of required permits for business activities from several hundred to 81 by the end of 2006.

Reforms Needed in Ukraine

To make Ukraine’s economy competitive in the region and greater Europe further reforms are needed particularly the area of taxation and trading across borders.

Ukraine has one of the most cumbersome taxation systems in the world. With 98 tax payments and 2,185 hours per year needed to undergo all necessary procedures to pay taxes, Ukraine’s tax environment is more challenging for businesses than all others except Belarus (125 payments and 1,188 hours per year). Ukrainian enterprises are required to pay 60 percent of their profits in taxes, while a global average is about 40 percent of profits.

Ukraine makes it very costly for Ukrainian business to export. It costs $1,009 per container in official payments to export goods from Ukraine, while it costs only $335 to export a container from China.

“Achieving and sustaining the high levels of growth that Ukraine aspires to requires further significant improvements in the business climate. We hope that the government will build upon, and accelerate, the reforms undertaken in the past year. Ukraine should target quickly joining the top fifty percent of countries globally that have attractive business environment”, says Paul Bermingham, World Bank Director for Ukraine, Belarus, and Moldova.

International Finance Corporation (IFC) is directly engaged in supporting Ukraine's efforts to improve its business environment. In particular, with support from the European Commission, IFC provides the government with advisory expertise on reducing red tape and streamlining small and medium business regulation. Most importantly, IFC assisted the government in drafting a law to facilitate business start up by reducing permit requirements. The new Permits Law, adopted at the end of 2005, will save Ukrainian SMEs tens of millions of hrivnas in time and resources. IFC's local advisory team is now working directly with key state agencies to ensure full implementation of the Permits Law, and has begun cooperation with the government to begin addressing another key barrier to business in Ukraine, the inspections regime.

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The Doing Business project is based on the efforts of more than 5,000 local experts – business consultants,
lawyers, accountants, government officials, and leading academics around the world, who provided
methodological support and review. The data, methodology, and names of contributors are publicly
available online at http://www.doingbusiness.org.

For more information on Doing Business 2007, please contact:
Nadine Ghannam (202) 458 04 82
Cell: (202) 361-77 98; Email: nsghannam@ifc.org
Or:
Dmitro Derkatch (380 44) 490 66 71/72/73
Email:dderkatch@worldbank.org

Larissa Shidlovskaya (380 44) 490 64 00
E-mail: lshidlovskaya@ifc.org