Doing Business in Ukraine

Ukraine now ranks 145th out of 183th in the World Bank's Doing Business ranking, which is similar to last year . Most worrisome is how bad Ukraine compares to other transition countries, its main competitors: only Uzbekistan does worse. Moreover, countries like Georgia and Belarus are among the fastest reformers in recent years, showing that transition countries are able to make substantial progress in a short time. Ukraine however has been a slow reformer since the fall of the Soviet Union and hasn't been able to make much progress despite declarations of good intentions of both the current and the previous governments. Some small progress has been made over the last five years (comparing the 2006 Doing Business Reports and the 2011 report but much remains to be done. The problem is not that one does not know what should be done, the problem is that governments are not able or willing to implement serious reforms.

Ukraine scores especially bad in terms of the difficulty of closing businesses, getting construction permits and paying taxes, hence those are the areas to tackle if Ukraine wants to increase on the World banks ranking. More generally,Ukraine's business climate would benefit from a general simplification and modernization of regulation and, related, a decrease in corruption - once good regulation is in place, consistent enforcement of such regulation would be a priority.

The current government is trying to reform the tax code, but its plans so far have been delayed by an inability to get a consensus on the draft of the new tax code. Tax laws are difficult to reform in any country, and Ukraine is unlikely to be a an exception on this rule, especially given its divided electorate and the short run focus of many Ukrainian politicians. The benefits of reforms typically will only be visible in the medium run, while the political costs are visible immediately, as many people benefit from the current outdated system of regulation.