Building Sustainable Feedback into Ukraine’s Economic Reform Efforts

02.19.2016 | Eric Hontz
Expert Discussion of SURE Draft_April, 2015
(Photo: CIPE)

This past year has been filled with both positive and negative news regarding ongoing reforms in the Ukrainian economy. Ukraine entered into a historic free trade agreement with the European Union that went into effect on January 1, 2016, which was met with the predictable implementation of retaliatory tariffs on Ukrainian goods by Russia.

Additionally, and in spite of raucous parliamentary sessions and infighting among the parties, the Rada (Ukraine’s legislature) has adopted various pieces of pro-reform legislation, some of which were proposed by CIPE’s partners under a recently completed USAID-funded program Supporting Urgent Reforms to Better Ukraine’s Business Environment (SURE).

The support of USAID allowed CIPE and partners to build a sustainable institutional framework for business associations representing SMEs to have direct input into legislation that effects SME operations specifically, and to improve the environment for doing business in Ukraine more broadly.

Even as Ukraine’s Ministry of Economy and Trade went through three internal restructuring processes and leadership was facing significant challenges to implement reform, officials at the Ministry maintained an active interest in SURE activities and continue to request additional support. Experts engaged during the program, working closely a group of civil society leaders and experts with the goal to facilitate the implementation of reforms, have advised the government on prioritizing SME reform, reducing complex legislation and inefficient, costly state services, and improving the regulatory framework.

Specifically, at the national level SURE was able to provide recommendations on 86 pieces of legislation being considered for amendment by the Rada and individual MPs by leveraging CIPE’s Ukrainian and international partner network to draft business-related legislation ranging from taxation to licensing and access to credit. SURE supported Ukraine’s Ministry of Economy and Trade by assisting in the development of 13 new draft laws to improve the business environment for SMEs with the cooperation culminated in a joint efforts by SURE and MEDT experts developing the Concept of the State Program for SME Development 2020.

Working with other civil society leaders, they provided input on a number of new tax reform laws. One of these, for example, would do away with an intrusive and expensive requirement that even the smallest of businesses, including individual entrepreneurs, would need to pay to install and maintain costly electronic cash registers.

SURE also cooperated closely with the Ministry of Justice and Prosecutor General’s office on the development of anti-corruption measures and, at the request of the Presidential Administration, CIPE conducted integrity training sessions for civil servants and held anti-corruption compliance training sessions for state-owned enterprises.

Finally, SURE strengthened the National Business Platform, a coalition of chambers, associations, and experts across the county representing SME interests in order to build capacity and links among the Ukrainian business community, think tanks, and other civil society groups.

As a result of SURE’s efforts, CIPE gathered ample evidence of broad support from the SME community to get its voice heard in the parliamentary process. CIPE also found that Ukrainian MPs are receptive, and in some cases eager, to receive greater private sector contributions to the legislative debate. CIPE received multiple requests from government agencies for additional support of pro-SME reforms and anti-corruption initiatives based on the legislative analysis approach.

Importantly, SURE focused on expanding the pool of anti-corruption expertise outside of Kyiv by conducting training sessions on how to apply anticorruption analysis methodology to local regulations in three cities of Ukraine (Kharkiv, Odesa, and Cherkasy). SURE also conducted anticorruption analysis of local regulations in three regions, Sumy, Ivano-Frankivsk, and Vinnytsia, which were followed by advocacy campaigns that achieved the abolition or amendment of certain local regulations and in the case of Sumy, the establishment of working group to advise the Mayor. The abolition or amendment of these regulations will allow small and medium sized enterprises in these three cities to operate more freely and has led to better dialogue between local government and small business community in those cities.

MPs and business community representatives continue to express a strong interest in further developing and institutionalizing the channels of communication between small business and government. CIPE Ukraine will continue its work as economic reform progress, helping the SME community to provide input into legislative process and hold the government accountable for the quality of implementation and enforcement of the new laws.

Through ongoing efforts CIPE is assisting Ukraine in solidifying a sustainable culture of independent input from the private sector into policy reform and discussion that will be crucial for the country’s democratic consolidation.

Eric Hontz is a Program Officer for Eurasia at CIPE.