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Doing Business 2012 – Ukraine Fails to Keep Pace with Fast Reforming Europe and Central Asia

October 20, 2011

Kyiv, October 20, 2011 — A new IFC and World Bank report finds that for the ninth consecutive year, Eastern Europe and Central Asia led other regions in improving regulations for entrepreneurs.

Released today, Doing Business 2012: Doing Business in a More Transparent World assesses regulations affecting domestic firms in 183 economies. The report ranks the economies in 10 areas of business regulation, such as starting a business, resolving insolvency, and trading across borders. The study’s methodology expanded this year to include indicators on getting electricity connections. On the list of the most improved economies on the ease of doing business, two countries from Europe and Central Asia are among the top three in the world: Moldova is number two – moving up 18 places from 99 to 81 – and the Former Yugoslav Republic of Macedonia is number three – moving up 12 places from 34 to 22.

This past year, 21 of the region’s 24 economies improved business regulations for domestic firms by implementing a total of 53 reforms in areas such as resolving insolvency, dealing with construction permitting, enforcing contracts, and protecting investors. Amid a global economic crisis, 40 percent of the region’s economies improved insolvency proceedings by implementing such measures as amended bankruptcy laws.

Georgia, Latvia, FYR Macedonia, Moldova, the Russian Federation, and Ukraine each implemented four regulatory reforms in 2010/2011. However, Ukraine’s ranking failed to improve because Ukraine’s most important reform measures came too late to affect this year’s rating. This is true for the Law on Simplification of Starting a Business which became effective June 6, and measures to simplify construction permits which become effective between June 2011 and January 2013. Note that while June 1, 2011 is the general deadline for recognizing reforms in the Doing Business methodology, for the Paying Taxes indicators, Doing Business assesses the tax burden of a standardized company based on the previous calendar year. So in Doing Business 2012 the data are based on calendar year 2010. This implies that the reduction in tax compliance costs and tax rates introduced with the new Tax Code as of January 2011 are not reflected in the Paying Taxes ratings.Ukraine is ranked 152 out of 183 economies reviewed in the Doing Business 2012, down from 149th place in the previous year.

In particular, Ukraine amended legislation to streamline commercial dispute resolution and increase the efficiency of enforcement procedures. The country has also made paying taxes easier and less costly for firms by revising and unifying tax legislation, reducing corporate income tax rates, and unifying social security contributions. Amendments to legislation on bankruptcy and enforcement introduced more guarantees for secured creditors. Ukraine also eliminated the requirement to obtain approval for a new corporate seal, making starting a business easier. However, the introduction of additional inspections for customs clearance made trading across borders more difficult.

“As the competition for investment globally heats up, we see an acceleration in the pace of reforms to improve the business climate,” said Martin Raiser, World Bank Country Director for Ukraine, Belarus, and Moldova. “Ukraine has made some positive steps, but others are moving faster. To regain investor confidence, Ukraine will need a more determined and consistent effort across tax policy, customs policy, regulatory policy and in the area of enforcement of contract and property rights”.

About the Doing Business report series
Doing Business analyzes regulations that apply to an economy’s businesses during their life cycle, including start-up and operations, trading across borders, paying taxes, and resolving insolvency. The aggregate ease of doing business rankings are based on 10 indicators and cover 183 economies. Previous year’s rankings are back-calculated to account for the addition of new indicator(s), data corrections, and methodology changes in existing indicators so as to provide a meaningful comparison with the new rankings.  Doing Business does not measure all aspects of the business environment that matter to firms and investors. For example, it does not measure security, macroeconomic stability, corruption, the level of skills, or the strength of financial systems. Its findings have stimulated policy debates in more than 80 economies and enabled a growing body of research on how firm-level regulation relates to economic outcomes across economies.

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