Economic Action Plan for 2018: How We Will Grow

02-02-2018

Journalists of the website “24” found out what problems were planned to solve in the Ukrainian economy that year and to what extent those plans were optimistic in the view of economists.

At the government meeting on January 31 this year, “Draft Laws 2018” were presented on behalf of the Prime Minister Volodymyr Hroisman. The Cabinet of Ministers promised that the main focus would be on economic growth. At the same time, the GDP growth is projected at 5-7%. The Head of the Government states the following main business problems in this document: pressure on businesses, barriers to access to public resources, burdensome regulation, lack of innovation support and limited access to funding.

Therefore, the Cabinet of Ministers promised businesses to ensure the protection of rights, transparent access to public resources, deregulation and improving the business climate, encouraging innovations and facilitating access to funding.

35 draft laws have been drafted for this purpose, and the fate of the Ukrainian economy depends on their adoption.

It should be noted that prepared 35 draft laws targeted at economic growth is definitely a positive fact. But these initiatives should be adopted by the Verkhovna Rada to make the plan effective.

The website “24” asked experts what draft laws they considered the key one and what the chances of implementing the action plan were.

Pavel Kuhta, the Deputy Head of the Strategic Advisory Group for Supporting Ukrainian Reforms:

“All these draft laws can be broadly classified into 5 groups: the ones aimed at protecting business rights, a series of deregulation initiatives, which get the business environment under control, access to funding – as a separate topic, access to public resources and encouragement of innovations.

In terms of protecting business rights, this is the aspects related to the interaction of businesses and control and law enforcement agencies, the creation of a financial investigation service designed to bring together the activities on investigation of economic crimes in one analytical service, this is the law of the business ombudsman, which institutionalizes this concept, and the laws on the responsibility of inspection body officials. The second category of draft laws is related to the customs: a “single window” at the customs, a reform of environmental and radiological control.

The biggest deregulation initiative is the Law on Doing Business aimed at increasing Ukraine’s positions by 30-40 points in this rating. If it is adopted by the end of May, there will be a significant leap in the rating this fall. Another interesting initiative is the so-called de-communization of legislation, when acts and laws of the Ukrainian SSR, except those stipulated by other Ukrainian laws as necessary, cease to be effective. For example, we have the USSR Labor Code, but it is necessary, it will effective until there is a new one. Other laws, which are not stipulated, automatically will no longer be valid, and all those outdated legislative regulations of 1940-50s will disappear.

In addition, deregulation initiatives include the law on currency control, which reforms a very outdated system of currency control, the law on deregulation of cash registers to make them demonopolized.

As for the access to investments, it is a set of laws, which, by the way, are included in the text of the MIF’s Memorandum and related to regulating credit activities. In Ukraine, there is a chronic problem related to the fact that nobody repays credits, so banks do not provide credit financing and, therefore, the economy is stagnating. Accordingly, this is the law on protection of creditors’ rights, the bankruptcy law, which will allow collecting debts from bankrupts instead of stealing money through bankruptcy procedures, the law on credit registry and greater monitoring of credit repayments. There are also the laws on new financial instruments – the establishment of corporate management in state-owned banks.

As for the access to public resources: the law on concessions, that is, the private sector access to public-private partnership in infrastructure; the law on the lease of state property through the Prozorro system, which is an interesting and effective initiative.

As for the promotion of innovations, it implies providing support for start-ups, increasing the protection of property rights and copyrights, introducing the possibility of using electronic money, for example, to pay utility bills.

These 35 draft laws have been already submitted to the Parliament, considered and some of them even adopted in the first reading or are at the final stage of development. They are draft laws more or less prepared to be considered and adopted this year, and most of them – even in the first half of the year, so there is such a thesis as “spring of reforms”.”

Oleksiy Honcharuk, the Head of BRDO:

“Each of these legislative initiatives makes good sense. To my mind, there are three principles aspects.

The first one is establishing a financial investigation service and, accordingly, creating conditions to protect businesses from being pushing around by tax authorities. I do not think that it should be explained why it is important for business to transform tax inspectors from a security service coming with assault rifles and making everyone lying face down on the floor into an analytical agency. This is a critical initiative. There is something to improve, but in terms of the importance of initiatives, this one certainly has top priority.

I would put creating conditions to attract investments as a matter of secondary importance. There is the draft law 6540 that can significantly move Ukraine in one of the most important world rantings – Doing Business – by dozens of positions up. This will attract the attention of world investors to Ukraine and will be a strong signal that Ukraine is changing as well as a good reason to invest here, and not anywhere else. Only this is not enough, but it is an absolutely necessary and important component. Ukraine requires investments, including from abroad, to have the economic growth and create new jobs. This draft law will provide an understanding that our country is changing considerably in terms of ease of doing business.

The third initiative, which is extremely important, is the de-communization and the change of a principle that Soviet legislation still applies. One of the main problems of our country’s efficiency is that we still have the Soviet model of the planned economy regulation, and the state intervenes in areas, where it should not, too much. At the same time, we have the undeveloped market model. There is the small draft law 4650 to eliminate the remnants of many Soviet systems both in labor and residential laws and overcome this array of planned regulation holding us as an anchor. It will allow to put an end to the 90s legal framework, under which all Soviet laws that have not been replaced with the new ones work. There are many similar cases and they restrain the development of the economy. It should be changed.

Moreover, there is a number of other important initiatives: liberalization of currency legislation, a step towards energy independence, the draft law 3096. In fact, we can discuss each draft law and explain its importance.

Whether all these draft laws will be adopted – this is a matter of leadership of the prime minister. He said that he would support and take on this task, and this is an important factor. But 35 draft laws are an extremely ambitious goal, and the prime minister won’t be able to pay attention to all of them. If there were 10 draft laws, I would say that 70% of them would be implemented. But if 10-15 of 35 draft laws will be adopted, then it will be a big win.”

By Yanina Tkachuk

 

 

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