The results of a study called Ukraine’s enterprises in 2000 (with 2150 managers polled) conducted by the International Financial Corporation with the assistance of the Ministry of Foreign Affairs of Norway and the US International Agency for Development, were made public on Thursday. Some new points were outlined more clearly in the development trends of the Ukrainian economy.
“What strikes me is the difference between the effectiveness of state-run and private businesses,” project manager Max Jakub told The Day , “While the former stagnate and fight for survival, the latter are developing in spite of all difficulties. Moreover, the state takes over quite a few cost-effective enterprises, thus retarding their economic growth.” The greatest number of profitable businesses was found in trade and the service industry (71% of the total) and the smallest in transport (38%). According to the study, trade and telecommunications have boosted sales by 46% and 41% respectively. Public catering also displays a good index of 38%. Trade and the service industry also show the highest profit factor (33% and 23% respectively). In addition, the earlier the enterprise was founded, the more profitable it was found to be.
Large privatized enterprises remain the main exporters. They account for 46% of all exporters. Overall, only 5% and 14% of enterprises work for the world and CIS markets respectively, thus leaving the domestic market as the principal object of the enterprises’ efforts.
“Improved macroeconomic indicators are a good thing, but most Ukrainian businesses work at the local level. Neither the World Bank nor any other organization is in a position to trace what is going on in the provinces, while the key to economic reforms is precisely there, not in the center,” Mr. Jakub noted.
While the government officials present at the ceremony took quite an upbeat view of the survey’s positive results, the negative conclusions stirred up heated disputes. As a result, the attempt to award prizes for the most corrupt and the most democratic regions fizzled. The survey claims Uzhhorod, Lutsk, and Mykolayiv are the most democratic, while Simferopol, Cherkasy, and Odesa are the bulwarks of corruption. These conclusions were rejected by Volodymyr Zahorodny, first deputy chairman of the State Committee for Entrepreneurship. “Transcarpathian oblast is quite a problem region, and the committee’s experience does not allow it to be called the most democratic,” he told The Day . “Such regions as Chernihiv, Dnipropetrovsk, and Kherson are under too tight control. There are also problems in Cherkasy.” Mr. Zahorodny also said he would not rank even Kyiv as the most democratic region. “To achieve this, the city administration should improve very much its work in decision making,” he added.
In addition, a dispute erupted over whether assistance from the authorities to entrepreneurs was inadequate. According to Mr. Zahorodny, the government made quite a large number of deregulation efforts, to which experts responded that far from all Kyiv’s instructions were fulfilled.
Experts believe that the main change in the behavior of Ukrainian businesses is that entrepreneurs are increasingly worried over feeble demand on the domestic market, while discontent over taxes and administrative pressure is gradually abating. Yet, these factors still remain the main causes of displeasure.
“Most entrepreneurs think the state should not interfere in their work, but most of them also regard the state as their savior from many woes,” Mr. Jakub told The Day . “This is a glaring contradiction. Either you pin hopes on the state and don’t complain about its actions or you act on your own.”
Ukrainian entrepreneurs are so far slow to act on their own. Over a half of them confessed they have no impact whatsoever on the state’s proposed rules of the game. A mere 10% dare to turn to the media to solve their problems and approximately the same percentage turn to non-governmental organizations. Conversely, personal contacts with bureaucrats are in much higher esteem: they are approached twice as frequently.
COMMENTS
Andriy SYSOLIATYN, chair, department of regulatory policies in entrepreneurship, Ministry of the Economy:
“As a whole, we positively assess the IFC’s activities because this institution renders considerable assistance to our ministry and this country. Their reports provide quite objective information on the state of entrepreneurship in Ukraine. For example, I used their latest report yesterday when preparing for a meeting on foreign investment. It should be noted the problem of tax burden is quite serious in the regions. This problem could be somewhat cushioned by the passage of the new Tax Code. But, frankly, it is difficult to expect any revolutionary changes for the better. What is really needed for a normal development of entrepreneurship is a simplified and stable tax law. As to frequent inspections of enterprises, other problems are now coming to the fore, such as competition, demand, etc. Still, tax inspections remain a serious problem. Unfortunately, their number in regions has not diminished over the past year. The inspecting bodies have done serious work on the very procedure of inspections, but still the question of their number and duration remains on the agenda. These inspections are not always justifiable and sometimes result from the personal wish of an inspector without any real justification. On the other hand, many inspecting bodies have undergone cuts.”
Volodymyr ZAHORODNY, first deputy chairman, State Committee of Ukraine for Regulatory Policies and Entrepreneurs:
“All Ukrainians need this kind of survey. As a whole, they show the main tendency in the development of our economy and give a chance to analyze the effectiveness of public administration bodies. At the same time, the results of the IFC’s latest research contain some errors, for example, as far as licensing is concerned. The data on corruption in the Transcarpathian region run absolutely counter to ours, although noncompliance with central decisions still remains a problem in some oblasts. It should also be noted that these results hardly reflect the situation of today, because the survey was conducted last year. Yet, our committee has taken some serious measures in the past six months toward the solution of many of the problems mentioned, so the data are, to some extent, unexpected for me. I will be looking forward to the 2001 survey results.”
Prepared by Vyacheslav DARPYNIANTS
