Protest in Warsaw, Poland. Photo by Lukasz Kaminski.
Every year on September 15, the United Nations’ International Day of Democracy offers an opportunity to reflect on the state of democracy and the challenges facing it. This year’s theme spotlights the need to strengthen democratic institutions against a backdrop of increasing disparities of economic opportunity.
In Central and Eastern Europe, those disparities have become more prominent in recent years, heightening the need to re-examine assumptions about the region’s transitions. Although the region made great strides in building democratic institutions and growing market economies over the course of two decades, the quality of—and support for—democracy has started to decline. Corruption has become a way of life in Hungary, where the government doles out public money based on political loyalty and friendships. In Poland, the government has exerted undue influence over the judiciary system, depriving citizens of their fundamental democratic freedoms.
CIPE expert Nataliia Kobylchak (left) and Mykolaiv coalition member Iryna Yerofeyeva (right) at CIPE’s M-Test training in Mykolaiv, Ukraine.
By Nataliya Zhuhay and Caroline Elkin
As in any state ruled by law, local government officials in Ukraine are obligated to work within the framework of existing laws when developing regulations. But in practice, the regulations they create often act as obstacles for entrepreneurs to run their businesses. These flawed regulations can be poorly written, full of holes that corrupt officials can exploit, or do not correspond to existing laws. Until recently, such regulations did not take into account the costs they imposed, for example, on the café owner who wants to open a summertime terrace—or for that matter, any other basic entrepreneurial activity.
In December 2015, Ukraine’s Cabinet of Ministers adopted a resolution requiring all legislators to calculate the cost of implementing regulations for small businesses. This procedure is known as the M-Test. Although the resolution seems to represent a victory for Ukrainian business owners, many challenges remain. First, previously adopted regulations are not subject to the M-Test. Secondly, officials are not required to examine existing regulations for their corruption potential. Thirdly, the State Regulatory Service of Ukraine is unable to change problematic regulations because it can only make recommendations. Thus, only the courts are capable of compelling local governments to withdraw or change regulations. In practice, though, entrepreneurs are reluctant to pursue such matters in court, preferring instead to keep their heads down. As a result, the conditions for doing business on the local level discourage entrepreneurs rather than encourage them.
The Institute for Market Economics (IME), an independent economic policy think tank in Bulgaria, has sought to define the main challenges to democracy, investigating their roots and identifying possible solutions. In addition to its research, IME recently conducted two surveys. The general sentiment in both surveys confirms that there is a perception of democratic backsliding. Forty-five percent of experts and 61 percent of students polled believe that the quality of democracy in Bulgaria has worsened in recent years, while only 25 percent of experts and 18 percent of students have seen positive developments. The leading challenge to democracy, as identified by IME surveys and roundtable discussions, is state capture. This is the catalyst for problems in the judicial system and widespread political corruption. These trends are compounded by a closing media environment that is increasingly dominated by a politically dependent media.
The latest CIPE Feature Service article examines IME’s key findings and provides recommendations for various stakeholders, including the government, political parties, civil society, media, businesses, donors and the population at large.
panelists from Identifying and Removing Barriers to Investment in Ukraine
By Eric Hontz and Kathryn Walson
Three years after Ukraine’s Revolution of Dignity, a centralized, oligarchic power structure has once again taken hold. This has made it challenging to keep the business environment in Ukraine friendly to western investment, as the new power structure allows for increased influence from oligarchs and leads to increased corruption. Further, ongoing hostility with Russia and corruption act as a serious deterrent for western investors, which bring with them demands for higher standards in compliance, governance, and accountability from government institutions.
Because public funding alone cannot solve the country’s infrastructure problems, foreign investment into Ukrainian infrastructure is essential to the country’s ability to increase exports and gross domestic product. Despite this paradox in expectations and reality, an increase in investment in Ukraine has already begun, as Ukraine has consciously turned its efforts towards recruiting western businesses. CIPE and the U.S.-Ukraine Business Council co-hosted a panel discussion in June to discuss the investment climate in Ukraine, featuring Volodymr Omelyan, Minister of Infrastructure in Ukraine; former Ambassador John E. Herbst, current Director of the Dinu Patriciu Eurasia Center at the Atlantic Council; and Matt London, Deputy Managing Director at Amsted Rail Russia-CIS at Amsted Rail Inc.
By Peter Goliaš, Jozef Hajko, and Michal Piško
The Institute for Economic and Social Reform (INEKO), with support from CIPE and the National Endowment for Democracy, conducted a study on the recent trends in Slovakia affecting democracy in the country. The study shows considerable popular dissatisfaction with the quality of democracy, worsening in the last few years. In order to ensure broad input, the research was based on a representative public poll, a questionnaire conducted with selected public figures, detailed interviews with business people, and discussions with thought leaders and students. The results reveal that the most frustrated segment of the population is prone to accept radical non-democratic solutions. This is a warning sign that further strengthening of extremists and opportunists in Slovakia’s political life is a real possibility.
The latest CIPE Feature Service article summarizes key findings of this study along with recommendations for various stakeholders, including the government, political parties, civil society, media, businesses, donors, as well as teachers and the society at large.
Podcast guest Maya Eristavi (second from left) with the recipients of the Women Leader Award at the 3rd
Annual Women’s Role in Economic Growth and Policy Development Conference. Photo Courtesy of G4G.
On this week’s Democracy that Delivers podcast, Maya Eristavi, CIPE’s representative with USAID’s Governing for Growth (G4G) Project, talks about the role of women in Georgia and how women in business have been taking on a larger role in society, especially since the fall of the Soviet Union. She also talks about the young entrepreneurs and businesswomen who have benefitted from the comprehensive free-trade agreement Georgia has with Europe.
Eristavi also reflects on growing up in Tbilisi, studying abroad in America, and how this shaped her attitude towards business and put her on the path to where she is today.
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A CIPE partner in Albania, Center for Economic Research (ACER), recently had a great reason to celebrate: their efforts to have Albania’s tourism VAT decreased had finally been successful. This outcome was the result of and the national tax administration recognized the work of the ACER-supported National Business Forum (NBF), including the recent release of the Forum’s priorities for economic reforms focusing on taxation, informality, and public private dialogue, which included a recommendation to reduce the tourism VAT.