Doing business 2007
It is a hot political season in Ukraine with the parliamentary elections just in several weeks. Politicians compete for the votes by promising higher social protection for population and touching all familiar strings related to the status of Russian language, NATO referendum, and division of political powers. At the same time, relatively little had been said on the reforms concerning the small and medium size business in Ukraine. Does it mean that Ukraine does not need any improvements in this dimension?
The World Bank just issued an annual report called “Doing Business” which indicates very serious problems facing the small and medium enterprises in Ukraine. Out of 175 countries surveyed in the report, Ukraine took the 174th place in the category called “Paying taxes”. A medium-size Ukrainian company should make 98 tax-related payments in a course of a fiscal year with estimated time of complying amounting to stunningly large number of 2,185 hours or 273 days of paperwork. For comparison, a medium-size Russian company makes 70 annual payments and spends 256 hours. On average, a Ukrainian company should make twice as many payments, spend five times more hours, and pay 50% more of labor related taxes than a typical firm from the Eastern Europe or former Soviet Union.
The total tax rate on profits of a company in Ukraine sums up to the 60% which is one of the highest tax burdens in our region. For example, the tax rates in Russia and Poland are estimated at 54% and 38%. Ukraine has a very weak position in protecting the rights of investors (142nd place) with a very low grade in the disclosure index which measures transparency of transactions for a general public.
It takes only two steps and two days to launch a business in Australia, but ten steps and thirty three days in Ukraine (101st place) Moreover, it is even harder to close it (139th place): the bankruptcy procedure takes almost three years with only 8.7 cents per each dollar recovered by creditors from an insolvent firm.
A Hong-Kong exporter files only 2 documents and spends 5 days to ship its products overseas while a Ukrainian company needs to sign 10 documents and spend 33 days. The total cost of shipment per container is 425$ in Hong-Kong and 1000$ in Ukraine. The only two areas where Ukraine performs relatively well are “Getting a credit” (65th place) and “Enforcing contracts” (26th place).
Overall, Ukraine is ranked 128th which is a slight improvement from the 132nd place last year. According to the report, Singapore became the most business-friendly country in 2005/2006. New Zealand and United States took the second and third places.
September 27 2007 | Uncategorized | No Comments »
I always thought UP had a good reputation - but after reading the below in the English translation of UP I wonder whether I need to revise my opinion
http://www.pravda.com.ua/en/news/2007/4/25/7561.htm
and
http://pravda.com.ua/news/2007/4/24/57924.htm
This was on their front page on April 24.
This doesn’t seem to be a piece of serious journalism to me…
April 26 2007 | Uncategorized | No Comments »
The recent decision of the President of Ukraine to dismiss the Verkhovna Rada (VR) and appoint the new elections in May,27 got the squall of emotions from the deputies and Prime-Minister (PM). We will leave the politics to politians. Still there is one thing concerning economics that should be mentioned.
One of the main arguments why all the coalition deputies and PM are so much against such a dismissal is the potential harm to the economic growth. They state that our economy, that is now getting better and better every day, will fall few years back in development should the VR be really dismissed.
This is because of the two keypoints (at least those which I heard). First, the “instability” will harm the image of Ukraine and worsen the investment attractiveness of our country. Second, because our own industries feel bad without a firm and stable government.
As for me both statements are highly disputable and your arguments are welcomed in the comments.
In addition, here is a few links on related topic.
Portugal http://news.xinhuanet.com/english/2005-02/21/content_2599705.htm
Thailand http://english.people.com.cn/200603/03/eng20060303_247636.html
And about recent events in Ukraine http://www.marketwatch.com/news/story/ukraine-faces-political-crisis-protests/story.aspx?guid=%7B30B7C347-A2DE-4CA5-B9E0-36EA42EF7360%7D
April 05 2007 | Uncategorized | 3 Comments »
Ukrainian news last week reported that ‘ Four MPs Suggest Rada’s Further State Support To Producers Of
Nitrogenous Mineral Fertilizers’
The MP’s are
Oleksii Kunchenko (Socialist Party faction)
Yevhen Lapin (Party of Regions faction)
Andrii Lopushanksyi (faction of the Our Ukraine bloc)
Mykola Yankovskyi (Party of Regions faction)
Ukrainian News further indicates that 6 Ukrainian firms would benefit from this : “the Styrol concern (Donetsk region), the Odesa Portside Plant (Odesa region), Rivneazot (Rivne), DniproAzot (Dnipropetrovsk region), the Severodontesk union ‘Azot’ (Luhansk region) and Azot (Cherkasy)”.
and then they further write
“Kunchenko is the honorary president of the Severodontesk union ‘Azot’, Yankovskyi - the honorary board chairman of Styrol.”
I wonder whether these MP’s really had the Ukrainian population in mind when proposing this support.
March 28 2007 | Uncategorized | 2 Comments »
Ministers in the current cabinet change fast - Makhuka has just been dismissed, and Lutsenko, Pavlenko and Tarasyuk left earlier - the issue of ministerial turnover migh be interesting to analyze and it would be nice to see how such turnover has evolved over time and also whether it has any effect on the ministeries
there are some interesting studies for other countries
Berlinski et al (2005) look at hazard rates for the UK
They find “that educational background increases ministers’ capacity to survive, that female ministers have lower hazard rates and older ministers
have higher hazard rates. Experienced ministers have higher hazard than newly appointed ministers. Ministerial rank increases a ministers’ capacity to survive, with full cabinet members having the lowest hazard rates in our sample.”
and Iulia Shevchenko (2005) on Russia writes - ‘The average interrupted duration of ministers is 1.58 years; the average total duration of ministers is 1.89 years. In a comparative perspective, the average duration of Russian ministers, either total or interrupted, is very short. During the post-1945 period and up to the early 1980s the total duration of ministers across the world was 3.55 years. The duration of post-Soviet Russianministers is far shorter than the duration of the Soviet Union’s ministers, who stayed in office for 8.70 years.’
March 21 2007 | Uncategorized | No Comments »
I am disturbed by the stories I hear about the health care in Ukraine. It seems that profit rather than the health benefits is the overriding motive in treating patients. For example, a friend of mine working in a hospital has mentioned that staff routinely recommends surgeries even if they will not lead to improvement in the patient’s condition. This is because performing surgeries allows medical personal to collect bribes. My impression is that the other examples are plenty.
One of the reasons why unnecessary or, sometimes, harmful treatment occurs is the ignorance of the patients. An average person is in no position to understand the reasons for her health condition and consequences of a specific prescription. Furthermore, the mass media is not necessarily interested in education of patients or revealing the cases of malpractice. For example, I have been told of a case when an editor of a local medical newspaper, fearing a potential retaliation, has refused to publish an article about a drug’s negative side effects.
The problem of prescribing treatments that maximize the revenue for a doctor but not the health benefits for the patient is not unique to Ukraine. Recently, my wife had a dentist check up in Germany who recommended several fillings. After an additional check up with a different doctor, it turned out that she needed no treatment.
Nevertheless, I suspect that the situation in Ukraine is much more severe than in developed countries. One can argue that corruption and cheating in medical universities in Ukraine results in inadequate training of medical personnel. Furthermore, the lack of adequate investigation and prosecution by law-enforcement agencies makes medical personnel less accountable for their mistakes than in developed societies.
Economists might argue that the situation will eventually be corrected by the market. The ‘good’ doctors will develop reputation and the ‘bad’ doctors will die out because of the lack of demand for their services. This argument, however, relies on the assumption that it is clear to the market who the ‘bad’ doctors are. Moreover, the market correction might take a prohibitively long period of time.
I wonder what, if any, could be a strategy for a person who needs a good treatment now? One thing which comes to my mind is to always try several independent doctors to see how consistent they are in their recommendations. (This idea has been considered in a paper by In-Uck Park, Cheap Talk Referrals of Differentiated Experts, published in the Rand Journal of Economics and available at http://www.ecn.bris.ac.uk/www/eciup/FilesForWeb/RJE.19_11_04.Park.pdf
The other idea is to never buy the drugs, equipment, or treatment prescribed by a doctor in a recommended place and always have different people diagnose and perform a treatment.
What other solutions are available?
March 21 2007 | Uncategorized | No Comments »
According to ‘Ukrainian News (16/03/2007)’ the rada approved measures related to organization of Euro 2012 in Ukraine - They write ‘According to the Justice Ministry, in 2007-2012, Ukraine will need UAH 1.42 billion (UAH 1.22 billion from the state budget and UAH 0.2 billion from local budget) for preparation and holding of the cup. Besides, it is expected that investments from non-budget sources would be UAH 20 billion. It is expected that about 400,000 foreign tourists would arrive to Ukraine for Euro 2012.” And Further ” Family, Youth and Sport Affairs Ministry Viktor Korzh forecasts that the Ukrainian economy will be able to raise over UAH 37 billion if the country is selected to host the 2012 European Football Cup final.”
Rather nice numbers so it seems - unfortunately, so far i have not been able to find out how they estimated these numbers (even calls to the press office of the ministry didn’t help) - The numbers seem rather optimistic though when compared to some other countries’ forecast (admitted comparison is difficult since I haven’t been able to find the exact way the Ukrainian estimates were obtained)
read for examples the conclusions of this swiss report
www.hsw.fhz.ch/itw_dienstleistungsprojekt_euro2008_summery.pdf
or for the nordic countries
www.meerwaarde.com/downloads/ek2008press.pdf
or the Scottish one
http://www.scotland.gov.uk/Publications/2002/03/10739/File-1
or read the paper by Siegfried and Zimbalist in the Journal of Economic Perspectives
http://ideas.repec.org/a/aea/jecper/v14y2000i3p95-114.html
March 20 2007 | Uncategorized | 1 Comment »
The idea behind this blog is to have a site where economists give
their view on things related to economics and to Ukraine - this can
go from a link to an interesting paper, a short comment on a recent
law proposal to an in-depth review of a particular issue. The views
in this blog are the views of their authors, not of the institution
that hosts this blog. We are open to all kinds of contributions
provided they are not anonymous, are not insulting, plagiarized or
unethical. We reserve the right to delete contributions that violate
these principles.
March 14 2007 | Uncategorized | No Comments »
