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Doing Business 2009: Ukraine fails to improve in global ranking, as other CIS countries push ahead 15.09.2008

Ukraine’s overall standing on the ease of doing business has not improved this year although several reforms were implemented, finds Doing Business 2009 - the sixth publication in an annual series of reports published by the World Bank and IFC. Ukraine is ranked 145th out of 181 countries reviewed in the report, after finishing 144th out of 178 countries last year. By comparison, three other CIS countries, Azerbaijan, Belarus and Kyrgyz Republic were among the top ten reformers globally in the ease of doing business. The rankings present indicators of the time and cost of meeting government requirements to business start-up, operation, trade, taxation, and closure.

Between June 2007 and June 2008, Ukraine made a few positive changes in the areas of Getting Credit and Trading across Borders. In particular, a new private credit bureau has made it easier to get credit by sharing credit information among financial institutions. Now banks can better assess the creditworthiness of potential borrowers. In trade, improvements to port infrastructure and services reduced the time to import by three days.

Ukraine also eased the tax burden on business by reducing several social security tax rates (including pension fund, social security fund, and social insurance for accidents at work). In addition, thanks to the spread of electronic tax filing, the time to pay taxes was reduced by 1237 hours per year. Yet these positive changes did not allow Ukraine to close the gap with top reformers. The Doing Business 2009 finds that a Ukrainian business still has to pay 99 separate taxes and its profits are taxed at a rate of 58.4%, while the global average is about 40%. Consequently, Ukraine’s ranking in the ease of paying taxes remains a low (№ 180).
 
Ukraine’s ranking on Dealing with Construction Permits (№ 179) is only marginally better. This indicator analyses the procedures, time, and cost to build a warehouse, including obtaining necessary licenses and permits, completing required notifications and inspections, and obtaining utility connections. According the report, the cost and time for dealing with construction permits increased in Ukraine. A regulation introduced in 2007 requires businesses to pay a "contribution" to infrastructure development that amounts to 15% of construction costs. The cost of construction related licenses and permits has tripled as a result to around 200 times income per capita and the time required increased from 421 to 471 days.

"Reforms are taking place in Ukraine, but not at a pace sufficient to allow Ukraine to advance vis-a-vis the other economies with whom it is competing for investment and markets", - said Martin Raiser, World Bank Country Director for Ukraine, Belarus and Moldova. "The reform agenda is well known, but its implementation needs to be accelerated. World Bank and IFC programs in Ukraine are dedicated to this goal."

The World Bank and IFC have identified the following areas for priority action, based on a review of the regulatory environment and regular consultations with the business sector:

  • adopt a new Tax Code that includes a significant decrease in the number and complexity of procedures
  • radically reduce and simplify the regime of licenses and permits, including for construction
  • adopt a new Law on Joint Stock Companies, which should establish clear rules regarding director liability, disclosure and protection of minority shareholders
  • revise legislation on technical regulations (standardization and certification) to reduce the number of procedures and time needed to comply, thus making external trade easier and faster.

Ukraine’s ranking on Doing Business Indicators

Doing Business Indicators 

2009 rank

2008 rank

Change
in rank

Easy of doing business rank

145

144

-1

Starting a Business

128

113

-15

Dealing with Construction Permits

179

175

-4

Employing Workers

100

103

+3

Registering Property

140

142

+2

Getting Credit

28

61

+33

Protecting Investors

142

141

-1

Paying Taxes

180

177

0

Trading Across Borders

131

121

-10

Enforcing Contracts

49

48

-1

Closing A Business

143

143

0

About the Doing Business Project
The World Bank Group’s Doing Business 2009 Report ranks 181 economies on the overall ease of doing business. Doing Business tracks reforms and ranks economies based on 10 indicators of business regulation that track the time and cost to meet government requirements in starting and operating a business, trading across borders, paying taxes, and closing a business. The rankings do not reflect such areas as macroeconomic policy, quality of infrastructure, currency volatility, investor perceptions, or crime rates. More information is available at www.doingbusiness.org


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For investors: new entry
Novokahovskyi Lime-Sand Brick Plant

Purposes of company: Investments
Company description:

Market Overview:  Construction volume is increasing 20-25% annually, creating an increased demand for high quality façade bricks. The industrial capacity of façade bricks is estimated at 200 million bricks per year. In 2006, a construction boom is expected in southern Ukraine, where the plant is located. The product is used mainly by construction companies and private companies.

Project Overview:

  • Using KSE-400 (Germany)
  • Equipment supplier offers trainings for the buyer’s staff
  • Can produce 30 million bricks per year including high quality hollow façade bricks, ordinary bricks, molded bricks, white and colored bricks

Competitive Advantages:

  • Production of lime-sand bricks is considerably more energy efficient than the production of ceramic bricks. Moreover, the project envisions the reconstruction of one of the two pit-type 50-ton lime-burning kilns; using coal, automatic blending, loading, and burning will save on gas
  • Plant produces its own lime; a sand-pit is located close to the plant
  • No high quality lime-sand hollow bricks are produced in southern Ukraine
  • Due to the considerable decrease in the weight of the bricks, delivery and transportation becomes much easier; bricks can be transported by auto, railway (via the plant’s rail track), or by water (a river port is 8 km away)
    Investment Project Progress:  Market research has been conducted

Key Financials:

  • Total Investment - € 1.5 mln
  • Investment Needed - € 1.5 mln
  • Payoff period - 5 years

Branch: Construction materials
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Purposes of company: Investments
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