Tag Archives: ukraine

Supporting Small Business in Ukraine

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More than a year after the EuroMaidan protests took the world by surprise, Ukraine’s political and economic struggles continue. Developments in the country since the new government came to power highlight the ongoing challenges of systemic overhaul following an exciting, rapid transition. These challenges clearly illustrate the link between democratic development and economic reform, so central to CIPE’s work. Accomplishing the tasks facing Ukraine, from combating corruption, to reducing the barriers to doing business, to creating space for public-private dialogue, will be no easy feat.

The success of Ukraine’s economic and democratic development largely depends on ensuring the success of the country’s small and medium-sized enterprises (SMEs). The entrepreneurial and flexible nature of SMEs makes them integral to achieving a number of the country’s goals: economic diversification; closer integration with Europe; building an adaptable economy; stimulating job growth; and boosting productivity.

Ukraine thus seeks to emulate the ways in which SMEs have helped make the U.S. economy among the world’s most successful. Boosting SMEs will require both giving the business community – and SMEs in particular – a seat at the policymaking table, and providing these firms with extensive support and training. CIPE’s partners are playing an important role in both of these processes.

CIPE’s primary focus in Ukraine has been to reduce policy barriers to business through cross-regional advocacy. Since opening the Kyiv office in 2010, CIPE has developed an extensive network of partner business associations and chambers of commerce across the country that work to represent and support Ukraine’s citizens through the work that they do.

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Can Ukraine Stamp Out its Corruption Culture?

euromaidan

Ukraine’s “Euromaidan” protests were driven by activists fed up with corruption. Can the new government turn things around?

When it comes to opportunity for anti-corruption reform on a massive scale, few countries have ever been as ripe for change as Ukraine today. Western countries and the International Monetary Fund are pushing hard for transparency and clean government. They enjoy unprecedented leverage over Ukraine’s political and economic elites, who need billions in loans to stave off economic ruin. Ukraine’s populace, which took to the streets a year ago to oust a president reviled for his flamboyant corruption, is maddened at the lack of a single, high-profile corruption prosecution since then. Investors, once attracted to Ukraine by a highly educated workforce, cheap industrial assets, and some of the world’s most fertile farmland, have made it clear that corruption is a deal breaker.

Freshly elected Ukrainian leaders committed to reform and European integration are taking seemingly drastic steps on the anti-corruption front. In October, they passed an impressive package of laws that provide the framework to investigate, prosecute and imprison wrongdoers. Just as important, the new laws require the training and monitoring of the tens of thousands of public servants – from traffic cops to school principals to MPs – who collectively represent the “demand side” of Ukraine’s corruption equation.

To implement these new laws and flesh out the details, Ukraine’s elected leaders are turning to technocrats from countries counted as anti-corruption success stories – mostly Georgia and Lithuania. They are laboring away this winter in various ministries and in the Presidential Administration, trying to figure out how to train and empower the men and women who, in the face of a decades-old corruption culture and vastly outnumbered by colleagues benefiting from the status quo, will be the shock troops of anti-corruption reform. Taken together, these are impressive, ambitious moves in a country of 45 million, by far the largest state in the post-Soviet space to attempt such a housecleaning.

All this was on display last week during a fact-finding mission by CIPE’s lead anti-corruption expert in Ukraine, Drago Kos, who also serves as the chairman of the Working Group on Bribery of the Organisation of Economic Cooperation and Development. Kos, a plainspoken man who began his career in the Slovenian police force, spent a week in Kyiv, building rapport and sharing opinions with the Ukrainians at the forefront of the anti-corruption effort.

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Businesses in Eastern Ukraine Threatened by Instability

(Photo: Kyiv Post)

(Photo: Kyiv Post)

When protesters first took to the streets in Ukraine’s largest cities in 2013, economic concerns were at the top of the agenda. As the geopolitical situation in eastern Ukraine has heated up, economic prospects in the contested regions of the country have only gotten worse. Yet average Ukrainians are still working for a more prosperous and democratic future.

Since the Maidan protests, the business climate in the Donbass, the easternmost, coal-mining region of the country, has taken a turn for the worse. Amid the turmoil, local businesses – in particular small and medium-sized firms – have suffered.  Many have been shaken down for so-called “donations,” and in some cases have been looted and ransacked.

A recent article in the local press has documented fines, bribery, and other abuses committed against local businesses by police departments and government officials. Many people have even left the region, heading either for Western Ukraine or even Russia. The owners of small businesses have left their homes and their enterprises behind. They are unsure when they can return, or whether they will find their businesses in the same condition.

As one CIPE partner in the Donbass noted, “Public sector bribes have grown by several times what they were prior to the strife, and not one Grivna [the Ukrainian currency] is going to the budget.” He confirmed that many business owners and heads of banks in the region are being forced to leave their businesses. “Because of roadblocks and military activities, there are just no opportunities to run a business,” he laments.

The pro-European, Kiev-based protests that led to the ouster of former President Viktor Yanukovich made Ukraine a hot topic in international news. Yet in many ways, the situation that set international media ablaze in early February is really a much older story.

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Business in Crimea Faces Economic Uncertainty

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McDonalds, along with some other international firms, closed its stores in Crimea shortly after the Russian annexation. (Photo: Newsweek)

By Iryna Fedets

Recent events have brought uncertainty to the business community of Crimea, particularly with the approach of summer for a region where the economy depends heavily on Black Sea tourism.

A year ago, businesses in Crimea were active, and optimistic. A report on the investment climate in the regions of Ukraine published by the Institute for Economic Research and Policy Consulting in April 2013 placed Crimea in 4th place among the 27 regions of the country according to their attractiveness for investors.

While corruption and extensive business regulations have been the problems for the whole country,  Crimea showed better results than most regions of Ukraine in many aspects. In the sub-category “Absence of corruption,” Crimea held the 4th place nationally, and the 3rd place in the “Administrative procedures” sub-rating. Moreover, business there proved to be the most optimistic in Ukraine as Crimea took the 1st position in the “Business optimism” sub-category.

Now, Crimean businesses are looking to the future with anxiety, not optimism. Some international companies like McDonalds are closing their venues in the region, and local entrepreneurs are left with the limited options of either continuing in uncertainty or selling their business.

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Ukraine Small Businesses Unite to Call for Policy Reforms

Minister of Economic Development Pavlo Sheremeta (left) with CIPE Deputy Director Andrew Wilson (center) and László Kállay, SME expert and Professor at Corvinus University of Budapest (right).

Minister of Economic Development Pavlo Sheremeta (left) with CIPE Deputy Director Andrew Wilson (center) and László Kállay, SME expert and Professor at Corvinus University of Budapest (right).

In the weeks following the so-called “EuroMaidan” protests in Kyiv that led to the installation of an interim government and the scheduling of early presidential elections, attention in Ukraine began to turn to the need for urgent measures to jump-start the economy, as well as for a comprehensive set of policy reforms in the medium- to longer-term to get the country on track.

With stagnant growth, large fiscal deficits, and the likelihood that international assistance from the IMF will be predicated on a set of austerity measures, many analysts believe that the only way to stimulate Ukraine’s economy is to support the growth of the small and medium-sized enterprise (SME) sector, which represents just a small fraction of the country’s economy in comparison to the countries of Europe which Ukraine aspires to join.

To help articulate just what changes are needed, and to ensure that that the SME sector has a voice in the policy reform discussion, a group of Ukrainian business associations representing SMEs and leading think tanks organized a national forum to discuss a coordinated strategy for reform on April 8-9 with support from CIPE.

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Ukrainian Businesses Should Use the Momentum to Speak Up

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By Iryna Fedets

In Kyiv and in other cities across Ukraine, small and medium-sized businesses were a driving force in the recent protests that resulted in the ouster of former President Viktor Yanukovich and the formation of a new Cabinet of Ministers. Entrepreneurs personally participated in the pro-European Union movement, both on the streets and in financing the demonstrations and providing food and medical supplies.

According to a poll conducted in early February 2014, business owners made up about 17 percent of the protesters, although business owners only make up 4 percent of Ukraine’s overall population. Following the 2008 recession, the former government imposed changes in the regulatory and tax structure that increased corruption and raised the burdens on small business, which helped draw them to the streets.

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Ukraine’s Heroes — Everyday People

kiev kiosk

Following months of protest on Kyiv’s Maidan, many Ukrainians have begun to address one another these days not with hello or how are you? Instead, the exchange follows the old saying from the partisan army that fought for an independent Ukraine during World War II: Glory to Ukraine, with the response: Glory to the Heroes!

Yet over the course of the events on the Maidan, a new group of heroes has emerged – everyday people who work in and own kiosks, shops and cafes, who were fighting for right to live in a more open and prosperous country, free of the corruption that has made it so hard to do business in Ukraine.

Indeed, many businesses – often coordinated by business associations – from across Ukraine took part in the Maidan movement, both in Kyiv and in smaller regional demonstrations. CIPE has heard reports that small businesses contributed thousands of dollars in cash and in-kind donations to support people in Independence Square. Business associations provided legal aid to those who were detained or put on local wanted lists for their role in the Maidan.

Given that business associations did not exist during 70 years of Communist rule, and that they are sometimes considered the country’s weakest civil society institutions, they have shown themselves remarkably dedicated and vibrant organizations during these months, capable of uniting across regional divisions. Indeed, recently, 11 new cross-regional coalitions of associations have taken shape.

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