strategy of ukrainian economy deregulation

Kyiv, 22/08/2014

Deregulation Strategy of Ukrainian Economy

2

Contents Page

А. Main points 3 B. Methodology of deregulation strategy development 6 C. Economy-wide deregulation initiatives 12 D. Specification of deregulation initiatives by industries 22 D.1. Food 24 D.2. Agriculture 34 D.3. Construction 43 D.4. Electricity 54 D.5. Oil & Gas 62 D.6. IT 71 E. Specification of deregulation initiatives by state inspections 81

3

А. Main points

4

~100 organizatіons interviewed and ~800 “pain points” for business identified while developing deregulation strategy

Source: Ministry of Economic Development and Trade of Ukraine

~70

TOTAL

~30

Economy-wide

Agriculture Construction

~800

IT Food Oil & Gas

~40

~400

Electricity

~90

~70

~100

А MAIN POINTS

KEY ORGANIZATIONS INVOLVED

5

Total economic effect from deregulation strategy implementation is estimated at UAH ~300 bn BASIC INDUSTRY AND REGULATORY AREAS INDICATORS

А MAIN POINTS

116

30

11

161014

24

21

8

12

6,5

9 1 3

6,0

5 20

8,0

7,0

7,5

15

5,5

2,5

2 22

0,5

18 8

1,0

2,0

11 7 6

3,5

3,0

4

1,5

21 16 13

5,0

4,0

4,5

19 25 24 23 17 14 12 10

REDU

CTIO

N IN

STA

TE E

XPEN

DITU

RES,

UAH

BN

CORRUPTION REDUCTION, UAH BN

Control system

Permission and licensing system

Other issues

ІТ

8 Tax system Customs

Food

Technical regulation

Oil & Gas

Construction Agriculture

Electricity

6 Economic effect from industrial initiatives implementation, [UAH bn] 8 Economic effect from economy-wide initiatives (not related to industries analyzed) implementation, [UAH bn]


6

B. Methodology of deregulation strategy development

7

In order to formulate deregulation strategy a comprehensive methodology was developed

B

Source: Ministry of Economic Development and Trade

STAGES OF THE STRATEGY DEVELOPMENT

> Preparation of the list of experts and other interested parties

> Analysis of previous experience

> Analysis of barriers in the process of ideas preparation

> Preparation of preliminary hypotheses

> Conducting expert interviews with: Expert groups Business associations Industrial associations

> Conducting enterprise surveys in the regions

> Dialogue with other “stakeholders"

> Preparation of principal hypotheses

> Analysis of international experience

> Formulation of primary deregulations goals

> Grouping the hypotheses into matrix

> Carrying out hypotheses evaluation: Potential effect Easiness / difficulty

> Consulting experts, associations, deputies, officials, and other “stakeholders"

> Preparation of deregulation strategy document: Hypotheses

prioritization Actions planning Evaluation of

resources needed > Confirmation of

“stakeholders’ “ consent > Development of

methodology for control implementation

> Media support

> Understanding of previous experience

> List of preliminary hypotheses

> Set of «matrices» with structured hypotheses

> Grouped and prioritized list of hypotheses

> Final document on deregulation strategy

EXPERT INTERVIEWS

HYPOTHESES FORMULATION

HYPOTHESES EVALUATION

PRIORITIZATION AND STRATEGY FORMULATION

DATA COLLECTION ST

AGE

AMOU

NT O

F W

ORK

RESU

LTS > Results of business

survey > Understanding of

deregulation problems

METHODOLOGY OF DEREGULATION STRATEGY DEVELOPMENT

8

Regulatory constraints were analysed within regulatory spheres and by industries APPROACHES TO DEREGULATION INITIATIVES ANALYSIS


ECONOMY-WIDE APPROACH INDUSTRIAL APPROACH Regulatory constraints that influence all aspects of doing business

METHODOLOGY OF DEREGULATION STRATEGY DEVELOPMENT B

1

2

4

5

6

3

GENERAL ISSUES

PERMISSION AND LISENSING SYSTEM

TAX SYSTEM

CUSTOMS

TECHNICAL REGULATION

CONTROL SYSTEM (INSPECTIONS)

1

2

4

5

6

3

FOOD

AGRICULTURE

CONSTRUCTION

ELECTRICITY

OIL&GAS

IT

Regulatory constraints that influence particular industries

9 Source: Project office, Ukrstat, OECD, IT Ukraine, Derzhzovnishinform

APPROACH TO KEY INDUSTRIES SELECTION

INDUSTRY SHARE OF GDP [2012]

INDUSTRY DYNAMICS, CAGR [2008-2012]

NUMBER OF PEOPLE EMPLOYED, thsd persons [2012]

EXPORT, CAGR [2008-2012]

CROP FARMING

CONSTRUCTION

ІТ

FINANCIAL SERVICES

FOOD

STOCKBREEDING

ELECTRICITY

OIL&GAS

AUTOCONSTRUCTION

METALLURGY

COAL INDUSTRY

MACHINERY

ENERGY MACHINERY

RANKING

CHEMICALS INSUDTRY

AGRICULTURE

2,1%

2,3%

4,7%

0,9%

3,2%

3,3%

7,7%

2,2%

1,0%

1,4%

3,1%

1,4%

5,0%

0,7%

4,0%

1,3%

-27,6%

9,8%

2,9%

3,3%

-0,1%

0,8%

12,4%

-39,7%

10,9%

15,8%

-1,4%

1,1%

148

102

244

274

322

194

277

235

198

498

322

294

282

374

20,1%

18,1%

-5,2%

28,4%

8,8%

11,3%

4,7%

8,0%

15,2%

10,1%

17,9%

41,2%

17,4%

6,9%

Industries of first priority according to the analysis: food, agriculture, construction, electricity, oil & gas, ІТ


10

ACCUMULATED DEREGULATION INITIATIVES BY INDUSTRY

Based on the analysis conducted ~800 deregulation initiatives were formulated and prioritized


EXAMPLES OF BURNING ISSUES

FOOD

AGRICULTURE

1. Elimination of corruption flows of SOE «Ecocomresursy» in order to reduce business administrative expenses

2. Reforming food safety system

1. Liquidation of the State Agricultural Inspection

2. Forming State Register of Real Estate Rights in part of derived rights to agricultural lands

IT 1. Permission for company and

banking accounts registration abroad

2. Simplifying the procedure of getting permit for foreigners employment

IT Oil&Gas Construction

~70

~30

Economy-wide

initiatives

~100

~800

ВСЬОГО

~400

Agriculture

~90

~70

Electricity Food

~40

ECON. EF., [UAH mn]

CORRUPTION, [UAH mn]

~100

~250 ~600

~300

~1 000

~300 ~250

~300

~500

~10 ~50

~200


11

Prioritization is based on two criteria: economic effect and ease of implementation APPOACH TO INITIATIVES PRIORITIZATION

1) Criterion «Ease of implementation» considers both technical (passing laws/acts) and nontechnical (lobby, social resistance) aspects of implementation 2) Criterion «Effect from implementation» provides expert evaluation of economic effect on industry and economy Source: Ministry of Economic Development and Trade

EASE

OF

IMPL

EMEN

TATI

ON 1)

EFFECT FROM IMPLEMENTATION 2)

І-st priority ІІ-nd priority

ІІІ-rd priority small large

difficult

easy

ІV-th priority

ILLU

STRA

TIVE

LY

1 Selling of 3G licenses

2 Liquidation of the State Agricultural Inspection

3 Cancelling the moratorium on the sale of agricultural land

4 Introduction of liability for regulatory bodies in the area of consumer rights protection during inspections

5 Cancelling of license on veterinary business

B METHODOLOGY OF DEREGULATION STRATEGY DEVELOPMENT

12

С. Economy-wide deregulation initiatives

13

TOTAL

Еffect of economy-wide initiatives accounts for ~ UAH 86 bn, corruption reduction ~UAH 64 bn, expenditures ~ UAH 24 bn ECONOMY-WIDE DEREGULATION INITIATIVES SEGMENTATION

0. OTHER ISSUES 1. PERMISSION AND LICENSING SYSTEM

2. TAX SYSTEM 3. CUSTOMS 4. TECHNICAL REGULATION

6. CONTROL SYSTEM

1480

8 13 27 7

11

~14 ~8 ~8 ~12 ~24 ~21

~86

C ECONOMY-WIDE INITIATIVES

~6 ~9 ~6 ~10

~64 ~18 ~15

1) Economic effect is estimated for the period till the year 2020 ~2 ~2 ~3 ~7 ~6

~24 ~4

EASING OF DOING BUSINESS IN UKRAINE

(1) General business climate improvement

(1) Cancelling of ~100 licenses (2) Cutting the number of permits

(1) Cutting the number of taxes to 9 (2) Simplifying tax adm-tion

(1) «Single window»creation (2) Simplifying customs procedures

(1) Technical regulation harmonization with EU

(1) Cutting the number of contr. bodies to 32, contr. fun-tions by 40%

62387

37 33 54 107 94

NUMBER OF PRIMARY

INITIATIVES ON THE WEBSITE,

[UNITS]

ECONOMIC EFFECT1), [UAH

BN]

REDUCTION IN STATE

EXPENDITURES, [UAH BN/YEAR]

CORRUPTION, [UAH BN/ YEAR]

MAIN POINTS

NUMBER OF GENERAL

INITIATIVES, [UNITS]


14

Based on the analysis of economy-wide initiatives, 81 deregulation initiatives of first priority were identified ECONOMY-WIDE INITIATIVES PRIORITIZATION


EASE

OF

IMPL

EMEN

TATI

ON

EFFECT FROM IMPLEMENTATION



difficult

easy

ІV-th priority


Number of initiatives, [units] Corruption, [UAH bn / year] Economic impact, [UAH bn] Reduction in state expenditures, [UAH bn]

~29

~40

~11

176

~10

~4

~14

61

Number of initiatives, [units]

~13

~17

~5

81

~16

~11

~4

69

Corruption, [UAH bn / year] Economic impact, [UAH bn] Reduction in state expenditures, [UAH bn]



15

Economy-wide initiatives of first priority within «Other issues» regulatory area

Source: Working group of the Ministry of Economic Development and Trade

1

2

3

4

5

Reduce the procedure of business activity cessation of individual entrepreneurs by application principle

Accelerate the adoption of a separate Law on Currency Regulation and Currency Control

Establish a «single investment window»

Improve the ownership rights registration procedure

TOP-5 ECONOMY-WIDE DEREGULATION INITIATIVES WITHIN REGULATORY AREA


Cancel the requirements of mandatory provision of paper extracts from the Unified State Register of legal entities and individual entrepreneurs

16

Economy-wide initiatives of first priority within «Permission and licensing system» regulatory area


1

2

3

4

5

Cancel alcohol export license

Develop draft laws and other legal acts on transfer permits issuing authority to local offices of central executive bodies and local administrations

Cut the number of economic activities subject to licensing by more than 50 percent

Switch to electronic way of submitting and getting permits and licenses

Reduce the number of documents the entity must provide in order to get a permit



17

Economy-wide initiatives of first priority within «Tax system» regulatory area


1

2

3

4

5 Develop and adopt legal acts on simplifying tax reporting forms

Introduce only annual reporting for small and medium enterprises (except VAT reporting in case of tax credit refund need)

Eliminate unreasonable grounds for VAT refund refusal, particularly, recognition the transactions as void; ensure 100% VAT refund for entities

Develop a procedure of electronic financial statements submission, in accordance with the international standards

Improve the transfer pricing system



18

Economy-wide initiatives of first priority within «Customs» regulatory area


1

2

3

4

5

Eliminate plans of tax mobilization for customs posts and customs clearance centres

Add types of customs declarations ІМ 74 «Customs warehouse» ІМ 51 «Processing on the customs territory of Ukraine» to the list of customs declaration contained in paragraph 2 article 3.3. of NBU Instruction №136 from March 24, 1999

Improve customs valuation procedures in accordance with the WTO and EU recommendations

Approve the legal act on the application of automated analysis and risk management during the customs control and customs clearance of goods using the cargo customs declaration

Transfer authority to provide certificates of EUR1 origin to the State Customs Service of Ukraine



19

Economy-wide initiatives of first priority within «Technical regulation» regulatory area


Generate a full-text electronic database of national standards

Ensure adoption of technical regulations identical to the European ones

Ensure adoption of laws and legal acts, defined by the new Law of Ukraine on Metrology and Metrological Activities

Differentiate requirements for labeling of food and non-food products

Approve the Technical Regulation Development Strategy of Ukraine for the period till year 2018



1

2

3

4

5

20

Economy-wide initiatives of first priority within «Control system (inspections)» regulatory area


Establish the norm on limiting the number of days in a year for regulatory authorities verification measures

Prohibit checks for compliance with legal acts conducted by regulatory bodies if there is no free access for the legal acts; introduce liability for violation of such a prohibition

Cancel mandatory contracting on permanent service of the state emergency services

Cancel the need for mandatory trainings on actions in emergency situations for managers



1

2

3

4

21

D. Specification of deregulation initiatives by industries

22

Economic effect by industries is UAH ~85 bn, сorruption and state expenditures reduction by UAH ~60 bn and UAH ~16 bn


Reduction of corruption in production and sales

Raise of Ukraine up in Doing Business and reduction of corruption level

Market liberalization and raise of Ukraine up in Doing Business rating

Harmonization of production processes with EU standards

Increase of own share in oil & gas production, and decrease of dependency on Russian supplies

Integration of IT industry into the worldwide market

D SPECIFICATION OF DEREGULATION INITIATIVES BY INDUSTRIES

KEY POINTS

INDICATOR & INDUSTRY

FOOD AGRICULTURE CONSTRUCTION ELECTRICITY OIL & GAS IT

1,4% 3,1% 0,9% 3,2% 8,3% 7,7%

3,3% 0,8% 10,9%

-0,1%

15,8%

-0,2%

28,4% 58,6% 4,7% 6,9% 17,9% 18,1%

235198498322576374

311122177

61111161030

113442

142412282415

INDUSTRY SHARE IN GDP

INDUSTRY DYNAMICS, CAGR [2008-2012]

EXPORT, CAGR [2008-2012]

NUMBER OF PEOPLE EMPLOYED, [THSD PERS.]

CORRUPTION, [UAH bn / YEAR]

ECONOMIC EFFECT1), [UAH bn / YEAR]

REDUCTION OF STATE EXP-RES, [UAH bn / YEAR]

IMPACT ON DOING BUSINESS

# OF PRIMARY INITIATIVES ON THE WEBSITE

1) Economic effect is calculated till 2020

23

D.1. Food

24

The main focus of deregulation in food industry is harmonization with EU standards and norms


KEY INDUSTRY INDICATORS ECONOMIC IMPACT

~30 UAH bn

D.1 FOOD

IMPACT ON DOING BUSINESS CORRUPTION

~7 UAH bn

15,8%

7,7%

17,9%

374Number of people employed, [thsd. pers.]

Share of industry in GDP

Industry dynamics, CAGR [2008-2012]

Exports, CAGR [2008-2012]

25

Deregulation initiatives of first priority in the food industry according to the results of business survey (1/3)


Reforming food safety system and adaptation of Ukrainian legislation to the requirements of the EU one

Mechanism and control: Adoption of the Draft Law of Ukraine on Amendments to Certain Legislative Acts of Ukraine on food products №4179а (deputies-initiators: O. Prodan, Т. Kutovyi, N. Agafonova, О. Belkova, S. Kaplin and others)

For – business Against – State Sanitary and Epidemiological Service of Ukraine, Ministry of Health and their lobby in the Parliament of Ukraine, State Inspection for Consumer Rights

Corruption: Current law does not define clear procedure for food products safety examination and the maximum period of examination Econ. effect: Reduction in state expenditures on the maintenance of food safety regulatory bodies by 314 UAH mn annually (annual exp.– 744 UAH mn)

Improving the safety and quality of food products. Reducing the number of regulatory bodies. Creating the conditions for exporting food products to the EU and other developed countries

(1) Improvement of the safety and quality of food products (2) Consumers will pay less for the state control (3) Reduction in business expenditures related to the state control system (4) Reduction in state expenditures on the control system

Kateryna Onul, IFC Yana Dobidovska, expert Genadii Kuznetsov, League of food producers Mykhailo Sokolov, Kesarev Consulting Mariia Baranovych, Arzinger Oleksandr Baldeniuk, Ukrkondprom Inna Buriak, EBA

Cancellation of the CMU Resolution №915 from July 26, 2001 and joint decree №789/414/709 from July 30, 2009, and adoption of the Law of Ukraine №4266а on Packaging and Packaging Waste

Mechanism and control: (1) Cancellation of the CMU Resolution №915 from July 26, 2001 (2) Cancellation of the joint decree №789/414/709 from July 30, 2009 (3) Adoption of the Law of Ukraine №4266а on Packaging and Packaging Waste

For – business Against – SOE «Ecocomresursy», Ministry of Ecology

Corruption: Opaque money usage by SOE «Ecocomresursy», corruption flows ~250 UAH mn/year Econ. effect: (1) Reduction in administr. costs and costs on solving ecol. problems (saving 10+ UAH mn); (2) 600 UAH mn inv. in infr. during first year

Elimination of the monopoly of SOE «Ecocomresursy», reduction in business administrative expenses and creation of the system of packaging waste recycling in accordance with EU practice

(1) Reduced environmental pollution (2) Consumer costs will be reduced, as producer expenses on environmental protection measures are included in production costs

Volodymyr Slabyi, UkrPEK

Initiative is supported by the public association «Reanimatsiynyi paket reform» Initiative is supported by the Administration of the President

D.1 FOOD

INITIATIVE MECHANISM AND CONTROL OF IMPLEMENTATION

«FOR» AND «AGAINST»

CORRUPTION AND ECONOMIC EFFECT

INITIATIVE EXPLANATION

MEDIA MESSAGE EXPERTS

26



Improving legislation on identification and registration of animals

Mechanism and control: Adoption of the Draft Law of Ukraine on Amendments to Certain Legislative Acts of Ukraine on Identification and Registration of Animals № 4986-1 from June 16,2014 (deputies-initiators: I. Gorina, К. Liapina, О. Myrnyi, К. Vaschuk)

For – business, State Sanitary and Epidemiological Service of Ukraine, State Veterinary and Phytosanitary Service, Agency of Animal Identification and Registration Against – individuals-owners of farm animals

Corruption: There are some gaps in the legislation that create conditions for public officials getting benefits from corruption by means of threatening to delay the registration of animals Econ. effect: Reduction in business expenditures on getting permits that are not applicable in the EU and other developed countries

Improving legislation on identification and registration of animals by adopting the Draft Law of Ukraine on Amendments to Certain Legislative Acts of Ukraine on identification and Registration of Animals № 4986-1 from June 16,2014

Yana Dobidovska, expert Mykhailo Sokolov, Kesarev Consulting Mariia Baranovych, Arzinger Genadii Kuznetsov, League of food producers Iryna Syrotenko, АСС Volodymyr Lapa– Ukrainian Agribusiness Club Denys Marchuk, Ukrainian Agricultural Council Liuba Akulenko, Reanimatsiynyi paket reform and others

(1) Improvement of the safety and quality of food products (2) Consumers will pay less for the state control (3) Reduction in business expenditures related to the state control system (4) Reduction in state expenditures on the control system

D.1 FOOD






27



Elimination of the state regulation of food products prices

Mechanism and control: (1) Cancellation of the CMU Resolution № 1222 from October 17, 2007; (2) Amending the CMU Resolution №1548 from December 25,1996

For - business Against - State Inspection on Price Control

Corruption: The CMU Resolutions №1222 and №1548 contain requirements for operators of food products that are almost impossible to satisfy Econ. effect: Increased production and sales due to eliminating distortions of the competition mechanism

Cancellation of the mechanism of state regulation of trade margins and profitability

Increased supply of goods on the market, which would benefit consumers

Genadii Kuznetsov, League of food producers

Amending the CMU Resolution №767

Abolition of licensing procedures for operators of food products that are not applicable in the EU

Mechanism: (1) Amending the CMU Resolution №767; (2) Adoption of the Draft Law of Ukraine №4179а Control: All procedures are simplified and their number is minimized

For - business Against– research institutes, Ministry of Health of Ukraine, State Sanitary and Epidemiological Service of Ukraine

Corruption: Ambiguity of procedures creates corruption risks Econ. effect: Reduction in business expenditures on getting permits that are not applied in the EU and other developed countries

Reduction in business expenditures on getting permits that are not applied in the EU and other developed countries

Genadii Kuznetsov, League of food producers

D.1 FOOD






28

Analysis of deregulation initiatives within food industry value chain MATRIX OF INITIATIVES BY VALUE CHAIN



6. CONTROL SYSTEM

TRANSPORT AND LOGISTICS

Internal logistics

External logistics

Storage

PROCESSING AND PRODUCTION

Processing and of producing food products

Quality control

Ароматизатори та харчові добавки


Internal sales

Exports

MARKETING AND SALES

INNER PRODUCTS

Other issues

Inner products

10

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

20

3

1

1

2

1

17

n.a.

n.a.

n.a.

n.a.

1

1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1

1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

3

2

2

n.a.

n.a.

n.a.

23

n.a.

n.a.

n.a.

n.a.

4

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

15

n.a.

n.a.

n.a.

108 INITIATIVES

Imports

OTHER

D.1 FOOD

29

For the food industry, 16 deregulation initiatives of first priority were identified FOOD INITIATIVES PRIORITIZATION


EASE

OF

IMPL

EMEN

TATI

ON




difficult

easy

ІV-th priority

~0,6

~3,5

~1,6

38

~0,3

~1,6

~0,7

17

~1,5

~0,7

~0,3

16

~0,6

~3,4

~1,5

37

D.1 FOOD

GDP share: 7,7%

Number of initiatives, [units] Corruption, [UAH bn / year] Industry growth, [UAH bn] Reduction in state expenditures, [UAH bn]




30

Based on the «Economic effect» and «Ease of implementation» criteria initiatives of first priority were identified (1/3)


1

2

3

4

5

Oblige all laboratories performing tests for the purpose of state control to obtain accreditation according to the EN / ISO / IEC 17025 standard

Harmonize the procedure for monitoring of hazardous substances in animal products with the current EU legislation

Cancel the necessity of getting the state sanitary and epidemiological inspection conclusion for the HACCP system

Improve the procedure for imported products advanced control, which is currently carried out and duplicated by two services: veterinary and sanitary

Cancel state registration of premixes and finished feeds

6 Eliminate the monopoly of SOE «Ecocomresursy» in order to reduce business administrative expenses, create the system of packaging waste recycling in accordance with EU practice

D.1 FOOD

DEREGULATION INITIATIVE

31



7

8

9

10

11

Harmonize the procedure for customs clearance of animal products with the current EU legislation

Cancel a certificate for food raw materials and food products

Implement Commission Regulation (EU) 136/2004 from January 22, 2004, which establishes the procedure for veterinary checks of goods imported from third countries at Community’s border crossing points

Cancel the certificate of conformity for food products

Harmonize the procedure for tracking the location of animals with the current EU legislation

D.1 FOOD


32



12

13

14

15

16

Reform the food safety system and adapt the Ukrainian legislation to the requirements of the EU one by adopting the Draft Law of Ukraine on Amendments to Certain Legislative Acts of Ukraine on food products №4179а

Improve legislation on identification and registration of animals by adopting the Draft Law of Ukraine on Amendments to Certain Legislative Acts of Ukraine on identification and Registration of Animals № 4986-1 from June 16,2014

Abolish licensing procedures for operators of food products that are not applicable in the EU by amending the CMU Resolution №767 Eliminate state regulation of food products prices

Cancel sanitary and epidemiological inspection conclusion for investment projects and programs; products, intermediate produc ts, substances, materials and hazards, use, transfer or sale of which may cause harm to human health; documentation for developin g technology, equipment, tools, etc.

D.1 FOOD


33

D.2. Agriculture

34

Key focus of deregulation in agriculture is corruption elimination as well as export promotion



~10 UAH bn


~7 UAH bn

-0,2%

8,3%

58,6%

576

D.2 AGRICULTURE

Number of people employed, [thsd. pers.]




35

Based off the business survey conducted, top deregulation initiatives in agriculture were identified and analyzed

Source: IFC, UCAB, Working group of the Ministry of Economic Development and Trade

Liquidation of the State Agricultural Inspection; transferring its functions (2-3 of approximately 11) to other CEB’s

Adoption of the Draft Law on the Liquidation of the State Agricultural Inspection The text of agreement is currently being finalizing with market participants

For – agricultural associations, international organizations Against – MinAgr, small businesses, individual associations of producers related to the Inspection

Corruption flows on grain quality certificates accounted for about1 UAH bn Liquidation will allow to save 260 UAH mn of state budget annually

Fixing the deregulation process, the impossibility of restoring unnecessary regulatory functions and powers of control

Liquidation of the authority performing regulatory functions Eliminating corruption Reducing the administrative burden on state business

Serhiy Gluschenko, IFC Volodymyr Lapa, UCAB Denys Sobolev, АСС Iryna Dushnik, EBA

At least - amending the CMU Resolution and the National Standards of Ukraine Ideally – adoption of the Draft Law on Amendments to the Law on regulation of urban planning activities

For – agricultural producers, Ministry of Justice of Ukraine, international organizations Against – State Architectural and Building Inspection

Significantly reduces construction costs for each object Lowers corrupt relations in the country

Development of priority (exports oriented) sectors (agriculture) Caring for village, jobs in rural areas etc. Development of related industries (construction, transport)

Volodymyr Lapa UCAB, Denys Maliuska, IFC Serhiy Gluschenko, IFC

Classifying construction of elevators, livestock farms, and other agricultural infrastructure as the III-rd construction category

Simplification and acceleration of: (1) Project documentation approval (2) Getting permits (3) Commissioning Will attract investments in the sector

Forming State Register of Real Estate Rights in part of derived rights to agricultural lands

Adoption of the Draft Law of Ukraine №3237

For – agricultural producers, Ministry of Justice of Ukraine Against – n.a.

Saving on informal payments of 100-800 USD for the rental agreement (4 ha) Prevention of land cultivation rejection

Acceleration of the land rent rights registration that would allow to cultivate agricultural land legally

Eliminating corruption of the previous government delays Acceleration of the land rent registration for businesses and individuals

Volodymyr Lapa, UCAB Marian Zablotskyi, UAA

D.2 AGRICULTURE






36

Value chain in agriculture industry analyzed through a number of deregulation initiatives at each step



6. CONTROL SYSTEM

TRANSPORT AND LOGISTICS

Auto transportation

Vessel transportation

Railway transportation

PROCESSING / STORAGE

Granaries

Mills

Forages


Internal sales

Exports

MARKETING AND SALES

BASE PREPARATION AND PRODUCTION

Other issues

R&D

Land

Seeds

Irrigation

Agricultural equipment

Breeding

5

1

5

53

n.a.

n.a. n.a.

n.a.

n.a.

n.a. n.a.

n.a.

n.a.

n.a.

n.a.

111

23

74

510

1

n.a. n.a.

n.a.

n.a.

n.a.

n.a. 1

n.a.

n.a.

n.a.

n.a.

n.a. n.a.

n.a. n.a.

n.a.

n.a. n.a.

n.a.

n.a. n.a.

n.a.

1

1

2

n.a.

n.a. n.a.

n.a. n.a. n.a.

n.a.

n.a.

n.a. n.a.

n.a.

n.a.

n.a.

2

1

2

2

5

1

n.a. n.a.

n.a.

n.a.

n.a.

n.a. n.a.

n.a.

n.a.

n.a.

Fertilizers and pesticides

1

n.a. n.a. n.a.

n.a.

n.a.

n.a.

n.a.

n.a. n.a. n.a.

n.a.

n.a.

n.a.

n.a. n.a.

OTHER

73 INITIATIVES

D.2 AGRICULTURE

MATRIX OF INITIATIVES BY VALUE CHAIN

37

After final prioritization, 24 deregulation initiatives of first priority were identified in agriculture industry AGRICULTURE INITIATIVES PRIORITIZATION


EASE

OF

IMPL

EMEN

TATI

ON


І-st proirity ІІ-nd proirity

ІІІ-rd proirity small large

difficult

easy

ІV-th proirity


Corruption, [UAH bn]

Industry growth, [UAH bn]

Reduction in state expenditures, [UAH bn]

~1,4

~3,4

~1,4

25




Reduction in state expenditures, [UAH bn] ~0,3

~0,3

~0,7

5





~1,4

~3,2

~1,4

24





~2,6

~1,1

19

GDP share: 8,3%

D.2 AGRICULTURE

38


Source: Working group of the Ministry of Economic Development and Trade of Ukraine

1

2

3

4

5

Allow to submit application for land rent registration electronically

Assist local communities in returning land to public ownership

Transfer the right of state-owned land disposal to local communities

Reduce the period of the phytosanitary certificate issuance to 2 hours

Review the National Standards of Ukraine for grain and industrial crops, which are based on the standards of the former Sovie t Union and are incompatible with international standards, and, as a result, lead to the increased logistics costs

6

D.2 AGRICULTURE


Establish soil quality control for the companies that rent land during the period not less than 10 years

39



7

8

9

10

11

Define the clear procedure for issuing certificates of plant protection products state registration and permits for importing plant protection products for state tests

Classify construction of elevators, livestock farms, and other agricultural infrastructure as the III-rd construction category

Form the State Register of Real Estate Rights in part of derived rights to agricultural lands

Amend the Law on the Procedure of Actual (Afield) Allocation of Land Parcels to Owners of Land Shares (Pais) №899-IV from June 5, 2003, defining that the owner of the field can actually knock only the edge of the field/array (to keep its integrity)

Liquidate the State Agricultural Inspection; transfer its functions (2-3 of approximately11) to other CEB’s (State Ecological Inspection, State Veterinary and Phytosanitary Service etc.)

12

D.2 AGRICULTURE


Harmonize the procedure for importing the seeds, entered in the register of the OECD, with the aim of its breeding in Ukraine and subsequent exportation with the rules of the OECD

40



13

14

15

16

17

Increase the volume of seeds imported for research, field testing and state registration to more acceptable and reasonable level

Cancel the need for certification for imports of agricultural machinery from developed countries. Implement recognition of certificates of EU member states, the OECD countries and others

Cancel the certificate account for agricultural machinery registration

Cancel import licensing of pesticides and agrochemicals

Eliminate crop rotation control

18

D.2 AGRICULTURE


Cancel licensing regime for trade of pesticides and agrochemicals, harmonizing the procedure of market placement of pesticide s and agrochemicals with Regulation 2009/128 (articles 5 and 6)

41



19

20

21

22

23

Eliminate the conflict within the Law of Ukraine on the Protection of Plant Varieties where "variety breeder” (breeder) is defined as the individual exclusively, whereas the term "applicant“ refers to the person who has applied

Review the issue on payment for modifying grain registry documents, which should not depend on the number of warehouse receipts issued (the number of operations with grain)

Eliminate inconsistencies of the Law related to the introduction of the Guarantee Fund for obligations under warehouse receip ts for grain with other laws and the Constitution of Ukraine

Transfer the power to register specialized machinery from the State Agricultural Inspection to the body that registers vehicl es (at this moment -special unit of the State Automobile Inspection)

Identify prohibited plant protection products transportation routes (all other routes should be allowed)

24

D.2 AGRICULTURE


Cancel mandatory getting of the quarantine certificate for grains and oilseeds (is not required for domestic transportation i n the EU) by reducing the list of regulated objects in the field of quarantine of plants under the CMU Resolution N 705 from May 12, 2007

42

D.3. Construction

43

Deregulation in Construction industry is aiming at corruption elimination and leveling Ukraine up in Doing Business rating



~16 UAH bn


~21 UAH bn

10,9%

3,2%

6,9%

322

D.3 CONSTRUCTION

Decreasing the time and number of procedures on construction permits obtaining, increase rating of Ukraine in Doing Business rating for over 20 positions to make it to TOP-20





44

Deregulation initiatives in construction industry of first priority based on the results of a business survey (1/3)


Simplification of procedures and terms of the land acquisition

Mechanism Adoption of the Draft Law №3238 from September 12, 2013 with amendments from the Confederation of Con-structors of Ukraine Control (1) Reducing the duration of land allotment to 130 days; (2) Reducing the number of procedures to 10; (3) Reducing the mandatory period of permit issuance to 10 days

For – business, public, agricultural committee in the VRU Against – local government, National Academy of Agricultural Sciences

Corruption: Appears at the repeated stages of land acquisition approval and lack of accountability of officials for unjustified refusals Econ. effect: (1)10% industry growth annually (5 USD bn. * 10% = 500 mn); (2) Eliminating corruption flows, accounted for the 5% of construction budget = 250 USD mn

(1) Reducing the duration of land allotment from 540 to 130 days by eliminating duplicative procedures and reducing the number of procedures from 30 to 10 (2) Reducing the mandatory period of permit issuance from 15 to 10 days. Harmonization with the EU legislation

(1) Corruption elimination in construction (2) Housing prices reduction by 5%

Lev Partshaladze, CCU Taras Lylyk, CCU Mariana Riabchun, CCU Oleksiy Feliv, GLN

Simplifying electricity and gas networks connection, improving connections and technical conditions obtaining

Mechanism: Elaborated regulatory framework of CCU and the World Bank, which should be transformed to laws Control: Adoption of the appropriate Draft Law of Ukraine

For – business, public Against -National Electricity Re-gulatory Commission, oblenergo, oblgazy

Corruption: Appears in the process of electricity and gas networks connection Econ. effect: Eliminating corruption flows (10 USD per sq.m. = 100 USD mn for residential real estate, or 200-300 USD mn for all kinds of real estate)

(1) Simplifying the procedure for electricity and gas networks connection, which is currently corrupted (2) Increasing position in Doing Business from 150 to 80

(1) Corruption elimination in construction (2) Housing prices reduction by 10 USD per sq.m.

Lev Partshaladze, CCU Taras Lylyk, CCU Mariana Riabchun, CCU Oleksiy Feliv, GLN

D.3 CONSTRUCTION






45



Finalizing deregulation initiatives for Ukraine's entry in the top 20 ranking of Doing Business

Mechanism: Finalize and adopt the Draft Law №2285а from June 11, 2013 Control: (1) Ukraine's entry in the top 10 ranking of Doing Business in construction (2) Ukraine's entry in the top 20 ranking of Doing Business overall

For – bisiness, public Against - State Architectural and Building Inspection

Corruption: Results from artificial certificate issuance postponement by the SABI Econ. effect: Eliminating corruption flows (10 USD per sq.m. = 100 USD mn for resid. real estate, or 200-300 USD mn for all kinds of real estate)

(1) Introduction of declarative principle for acquiring construction rights and building commissioning (2) Establish clear grounds for permits issuance refusal

Lev Partshaladze, CCU Taras Lylyk, CCU Mariana Riabchun, CCU

(1) Corruption elimination in construction (2) Housing prices reduction by 10 USD per sq.m.

Development and approval of urban planning documentation (zoning, detailed plans of territories)

The transition from manual construction criteria setting to the zoned urban development plan with clear definition of criteria and building rental costs

Mechanism: Writing and adopting the Law on Zoning Control: Adoption of the appropriate Draft Law of Ukraine

For – land committee in the VRU Against - State Architectural and Building Inspection, architectural bodies

Corruption: Appears at the mayors of settlements and bodies that coordinate urban planning documentation Econ. effect: 1)10% industry growth annually (5 USD bn. * 10% = 500 mn); (2) Eliminating corruption flows, accounted for the 5% of construction budget = 250 USD mn

(1) Corruption elimination in construction (2) Housing prices reduction by 5%

Mariana Riabchun, CCU Oleksiy Feliv, GLN

D.3 CONSTRUCTION






46



Allow companies with 100% foreign participation to purchase non-agricultural land

Mechanism: Amending article 82 of the Land Code of Ukraine Control: Practical realization of permission for purchase of non-agricultural land for companies with 100% foreign participation by amending article 82 of the Land Code of Ukraine

For - business Against – land committee in the VRU (believe that the initiative deals with the agricultural lands)

Corruption: No corruption Econ. effect: Growth in construction and new projects by 20% on average

Increasing the number of foreign investors who can develop real estate projects in Ukraine

Oleksiy Feliv, GLN Dmytro Senychenko, Jones Lang LaSalle

Allow to transfer the right to rent the land of the state or municipal property, if such a rent entitles construction. Allow to add the rental right for the land plots of state or municipal property to the company's charter, mortgage

Mechanism and control: Amending a number of articles of the Land Code of Ukraine

For - business Against - local communities (explanations of future benefits for local communities are needed)

Corruption: Significant corruption occurs at mayors level during re-registration of rental agreements for new potential investors Econ. effect: Growth in construction and new projects by 20% on average

The ability to revive and build up large amount of land that is currently "dead" because rental rights can not be transferred or pledged, while the tenant can not implement the project himself

Creating opportunities for the implementation of the "frozen" projects

Oleksiy Feliv, GLN Dmytro Senychenko, Jones Lang LaSalle

(1) Access of foreign investors to the market (2) Creating clear and understandable rules of land acquisition for companies registered as legal entities in Ukraine

D.3 CONSTRUCTION






47

All deregulation initiatives within construction were spread through the industry value chain to identify problem zones MATRIX OF INITIATIVES BY VALUE CHAIN



6. CONTROL SYSTEM

Building construction

Ennobling the territory

Internal assemblage works

CONDUCTING ASSEMBLAGE AND CONSTRUCTION WORKS

Construction site preparation

Groundwork

Earthworks


Utility connections

Commissioning

BUILDING COMMISSIONING

GETTING CONSTRUCTION PERMITS

Other issues

Land allocation

Prepar. data for planning

Prepar. and approv. the project

Complex project expertise

ACW permit

1

5

n.a.

22 n.a.

n.a. 11

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

10

6

133

71

6

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

88 INITIATIVES

Preliminary preparations

OTHER

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a. n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

5

1

1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a. n.a.

n.a.

n.a.

2

3

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

D.3 CONSTRUCTION

48

28 deregulation initiatives of first priority in construction were identified CONSTRUCTION INITIATIVES PRIORITIZATION

EASE

OF

IMPL

EMEN

TATI

ON




difficult

easy

ІV-th proirity



Impact on GDP, [UAH bn]


~6,7

~1,7

~8,6

36





~1,7

~0,4

~2,1

9





~5,2

~6,7

~1,3

28





~3,6

~0,7

~2,8

15

GDP share: 3,2%

D.3 CONSTRUCTION


49

Initiatives of first priority based on the «Economic effect» and «Ease of implementation» criteria (1/4)


1

2

3

4

5

Approve the right of building owner to use autonomous engineering systems regardless of whether the required engineering support is available on the territory

Approve (by CMU) typical form of investment contract, which provides: detailed description of the investee characteristics, responsibility of the constructor/customer for provision of information to investors, responsibility of the constructor/custo mer for reporting to the investor, the responsibility of the constructor/customer for failure to fulfill contract terms

Create legislative mechanism for providing the association of investors of troubled property with the right for construction completion without permits renewal

Simplify the mechanism of land for urban planning needs rent renewal and introduce an exclusive list of grounds for rent rene wal refusal

Introduce a system of "implied consent" for approvals, not related to the safety (protection of monuments)

6 Implement preliminary registration of property rights for apartments that will be built in the future in order to avoid doubl e sales

7 Ensure transparency and accessibility of data planning documentation

D.3 CONSTRUCTION


50



8

9

10

11

12

Unify the principles and procedures for obtaining licenses in construction

Introduce a system of auctions for the allocation of land plots for construction instead of the current two -stage system (according to the law, only the land plot with fully finished planning documentation should be exhibit at the auction)

Introduce a system of auctions organized by companies licensed to conduct land auctions

Accompany the Draft Law of Ukraine on reducing the period of land allocation for urban needs to 60 days in the Verkhovna Rada of Ukraine

Regulate the procedure for setting the mailing address of the construction object

13 Reduce the number and timing of permits necessary to start assemblage and construction works

14 Provide individuals intending to build the land in their possession or use with technical conditions within 10 working days f rom the date of application submission (no application registration)

D.3 CONSTRUCTION


51



15

16

17

18

19

Leave mandatory technical supervision of the urban planning construction object for state budget projects. For private invest ors - at the request of the constructer

Approve the procedure for engineering networks connection for the completed construction s (except electricity and gas networ ks)

Set standardized price for network connection for each settlement

Compute the cost of network connection in a "transparent" way and link it to the cost of new networks and distribution points construction

Set an exclusive list of grounds that provide the right to cancel declarations of start of construction works

20 Make information on the monopolies’ network connection points available

21 Set the mechanism for obtaining "repayable financial assistance" when the monopolist returns the constructor funds spent to b uild out-site networks

D.3 CONSTRUCTION


52



22

23

24

25

26

Simplify the procedures and terms of the land acquisition

Allow to transfer the right to rent the land of the state or municipal property, if such a rent entitles construction. Allow to add the rental right for the land plots of state or municipal property to the company's charter, mortgage

Simplify electricity and gas networks connection, improve connections and technical conditions obtaining

Develop and approve the urban planning documentation (zoning, detailed plans of territories)

Set a mechanism for transferring the balance of out-site networks to operating organizations

27 Introduce the declarative principle for acquiring construction rights and building commissioning

28 Allow companies with 100% foreign participation to purchase non-agricultural land

D.3 CONSTRUCTION


53

D.4. Electricity

54

Ukraine’s raise in Doing Business rating as well as corruption elimination - key deregulation priorities for electricity industry



~11 UAH bn


~12 UAH bn

0,8%

3,1%

28,4%

498

Decreasing the time on electricity connection

D.4 ELECTRICITY





55

Electricity deregulation initiatives of first priority according to the results of business survey (1/2)

Джерело: IFC, КЦР, Робоча група при Міністерстві економічного розвитку і торгівлі

Accelerating the process of simplified procedure for electricity networks connection (second degree 16-50 kV, third degree 50-160 kV)

Amending the Law of Ukraine №5021 on the fee for natural monopolies networks connection, stating the period of the standard connection of larger power The Draft Law is ready and the President may give in it to Parliament

For – business, planning to use electrical energy in large amounts (around 1-3 thsd. connections annually) Against – oblenergo, National Electricity Re-gulatory Commission

(1) Corruption – around 10 USD per sq.m. due to non-transparent procedures for non-standard connection (2) Reduction in housing pricing (3) Foreign investment through improvements in Doing Business ranking

Simplifying the process of electricity networks connection for real estate (including commercial objects)

Corruption reduction Improving Ukraine's position in the Doing Business ranking

Denys Maliuska, IFC Anton Iaschenko, CCR Іnna Buriak, EBA Dina Narezhneva, ACC

Improving the transparency of energy-efficient equipment imports

MinEk should amend the CMU Resolution №444 on the clear criteria and mechanism for defining the energy efficient equipment

For – producers wishing to use energy- efficient equipment Against – company, defined "individually"

(1) Elimination of budget losses from providing unjustified benefits (first half of 2013 – approximately 1 UAH bn of benefits) (2) Increased energy-efficiency due to the imports of energy efficient equipment

Increasing the transparency of the imports of energy- efficient equipment on favorable terms. Non-transparent procedure of energy-efficient equipment definition

Corruption reduction Increasing energy efficiency







D.4 ELECTRICITY

56

Electricity deregulation initiatives of first priority according to the results of business survey (2/2)

Джерело: IFC, КЦР, Робоча група при Міністерстві економічного розвитку і торгівлі

Creating free market of renewable energy equipment (Reduction of the local component to 25-30%)

Amending the Law of Ukraine on Electricity

For – producers of the green energy, EU, equipment producers Against – Ministry of Energy, National Electricity Re-gulatory Commission , Furlander Windtechnology, Activ Solar (Kliuev’s assets)

(1) Investments in renewable energy will account for around 300-500 EUR mn (2) Increasing the share of renewable energy (3) New jobs creation at new electric power plants (4) Reducing gas dependence by means of cogeneration plants (biomass, biogas)

Reducing the share of mandatory Ukrainian components in the equipment used to produce electricity

(1) Increase the share of renewable energy (2) New jobs creation (3) Cancel the local components for cogeneration plants

Introduction of stimulating tariffs

Oblenergo gets economic incentives to invest in equipment modernization

National Electricity Re-gulatory Commission should adopt the resolution on stimulating tariffs introduction

For – all key market players Against – poor people because of increased tariffs at the early stages

(1) Improving the reliability of electricity networks and reducing power losses (2) Tariff reduction in the medium term (3) No corruption

(1) Reducing the cost of electricity in the medium term (2) Reduction of losses due to the new and more efficient equipment








D.4 ELECTRICITY

57

Value chain of electricity industry was analyzed and deregulation initiatives spread over it to identify pain zones



6. CONTROL SYSTEM

Materials delivery (fuel, equipment, expertise)

Transfer

Electricity production

DISTRIBUTION

Sales of Ukrenergo capacities


Distribution

Sales SALES

OTHER Other issues

2

1

n.a.

n.a.

n.a.

n.a.

22 1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

32 INITIATIVES

GENERATION

TRANSFER

1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

1

1

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.

3

n.a.

n.a.

n.a.

n.a.

n.a.

n.a.


D.4 ELECTRICITY

58

For the electricity industry, 12 deregulation initiatives of first priority were identified ELECTRICITY INITIATIVES PRIORITIZATION


EASE

OF

IMPL

EMEN

TATI

ON




difficult

easy

ІV-th proirity



Industry growth, [UAH bn ]


~4,3

~4,9

13





~0,4

~0,1

~0,3

1





~4,0

~4,5

12





~2,2

~2,0

~0,6

6

GDP share: 3,1%

D.4 ELECTRICITY

59

Initiatives of first priority according to the «Economic effect» and «Ease of implementation» criteria (1/2)


1

2

3

4

5

Adopt the Draft Law on Amendments to Some Laws of Ukraine on the Promotion of Electricity Production from Alternative Energy Sources №2946 from April 26, 2013

Develop and adopt the Cabinet of Ministers of Ukraine Resolution concerning the approving of the action plan for the transiti on period (until full-scale implementation of the electricity market based on bilateral contracts and balancing market)

Adopt the Cabinet of Ministers of Ukraine Resolution concerning creation of the Coordinating Center to ensure implementation of the new model of the electricity market in Ukraine

Enter economically justified energy tariffs (heat and electricity), produced by cogeneration plants running on biofuels

Create free market of renewable energy equipment (Reduction of the local component to 25-30%)

6 Encourage the imports of foreign equipment for biomass cogeneration at early stages (first 2-3 years)


D.4 ELECTRICITY

60

Initiatives of first priority according to the «Economic effect» and «Ease of implementation» criteria (1/2)


7

8

9

10

11

Cancel mandatory procedure for National Electricity Regulatory Commission approval for contracts of electricity sale signed by SOE "Energorynok" with the producers of electricity from alternative sources

Improve the transparency of energy-efficient equipment imports

Introduce the stimulating tariffs

Accelerate the process of simplified procedure for electricity networks connection (second degree 16-50 kV, third degree 50-160 kV)

Accelerate the spread of "standard“ connection mode for the third degree power of electrical installation

12 Approve the list of operations/actions that must be performed in the territory of Ukraine in order to eventually reach the total fixed share of each individual element of the local component (%)


D.4 ELECTRICITY

61

D.5. Oil & Gas

62

Deregulation in Oil & Gas industry aims at accelerating exploration and increasing local output of oil and gas



~11 UAH bn


~11 UAH bn

-0,1%

1,4%

4,7%

198

D.5 OIL & GAS





63

Based on the business survey and expert interviews, top deregulation initiatives in Oil & Gas were analyzed


Simplification of the land provision for the exploration and construction of networks

Amending the Land Code of Ukraine

Against – State Agency for Land Resources

Getting 3 bn cubes of gas during 3 years

Starting of drilling operations within the 4-12 months period after getting a permit

Increasing energy independence

Roman Opimach, CCR Dina Narizhneva, ACC Inna Buriak, EBA

Updating and codification of the basic law on subsoil use

Creating the document «Subsoil Code of Ukraine»

For - business Increase in gas production

Adoption of the new Subsoil Code

(1) Increasing energy independence (2) Guarantees for investors rights


Excluding requirements for monitoring specific conditions of subsoil use

Amending the CMU Resolution №605, conducting auctions for granting special permits

Reducing barriers of doing business, reducing costs for business

Reducing abuse, eliminating unnecessary procedures

(1) Corruption elimination (2) Increasing energy independence


Easing geological information exporting

Amending Regulations on the procedure for geological information the disposal

(1) Acceleration of subsoil development (2) Reducing the time to get permit for data exporting

Possibility of quick data transmission

Attracting investment, technology


Improving PSA taxation

Amending the Tax Code of Ukraine

Increased investment in oil and gas sector, increased budget revenues from PSA projects

Providing individual taxation for several investors within one PSA

Increasing energy independence


For - investors

For – business, State Geological Service

For – business, State Geological Service Against – Ministry of Ecology

D.5






OIL & GAS

64

Deregulation initiatives within a value chain of the Oil & Gas industry



6. CONTROL SYSTEM

Production

Processing

PSA realization

Exploring


Marketing and sales DOWNSTREAM

OTHER Other issues

4

1

1

5

8

n.a.

1

4

n.a.

n.a.

n.a.

n.a.

39 INITIATIVES

UPSTREAM

MIDSTREAM

1

n.a.

n.a.

n.a.

n.a.

n.a.

1

1

2

n.a.

n.a.

n.a. 2

2

n.a.

n.a.

n.a.

n.a.

3

2

1

n.a.

n.a.

n.a.

D.5


OIL & GAS

65

For the Oil & Gas industry, the number of deregulation initiatives of first priority stands at 24 OIL AND GAS INITIATIVES PRIORITIZATION


EASE

OF

IMPL

EMEN

TATI

ON




difficult

easy

ІV-th proirity


Corruption, [UAH bn ]



~1,4

~0,2

~1,5

5





~0,5

~0,6

2





~7,0

~0,8

~6,6

24





~2,2

~0,3

~2,3

8

GDP share: 1,4%

D.5 OIL & GAS

66

Initiatives of first priority based off the «Economic effect» and «Ease of implementation» criteria (1/4)


1

2

3

4

5

Amend the transitional provisions of the Tax Code of Ukraine, Customs Code of Ukraine and other laws of Ukraine according to which the state must guarantee to domestic refineries immutability of legal conditions for petroleum industry enterprises for a period of not less than 10 years Introduce a simplified digital online access to "secondary geological information”

Solve the problem of entering the entities in the state register of producers of liquid biofuels and biogases, which actually does not exist

Adopt the Draft Law of Ukraine №3145 on Recognition as Void the Law of Ukraine on Amendments to Some Laws of Ukraine regarding the production and use of motor fuels containing bio-components"

Amend the Law of Ukraine on Natural Monopolies №1682-III from April 20, 2000 on the elimination of legal conflicts of the existence and functioning of national regulators (particularly, the National Commission for the Regulation of Natural Monopol ies)

6 Amend the transitional provisions of the Tax Code of Ukraine (№2755-VI from December 2, 2010), Customs Code of Ukraine (№4495-VI from March 13, 2012) on the temporary setting of a zero VAT rate and exemption from import duty on machinery, components etc. imported for the purpose of modernization /reconstruction of refineries

D.5


OIL & GAS

67



7

8

9

10

11

Disclose the geological information for strategic resources, particularly oil and gas

Cancel the geological data export permit as a means of over-regulation

Adopt amendments to the Land Code in order to introduce a simplified and safer land allotment for exploration and production of carbohydrates

Amend the Tax Code of Ukraine and other legal acts in order to implement the mechanism of individual VAT accounting for sever al investors within one PSA

Cancel the automatic recognition of bioenergy plants as high risk and fifth difficulty category objects

12 Exclude oil and gas wells, mine workings and industrial pipelines (including natural gas distribution networks) from the list of objects that are considered as real estate and are subject to the state registration of rights for immovable property and their encumbrances

D.5


OIL & GAS

68



13

14

15

16

17

Bring the regulations of the NBU in accordance with applicable law on production sharing agreement

Identify and enter mechanism to prevent disconnection, threats of disconnection in case of the balance absence in the Ministr y of Energy and Coal Industry Decree №920 from November 26, 2012

Prohibit signing and issuing the partial monthly balance: balance signing should take place in the final version, which is th e basis for the gas market operation

Develop market of biofuels in Ukraine: develop market infrastructure, reliable sources of supply of such fuel, industries that provide necessary equipment

Improving PSA taxation (Providing individual taxation for several investors within one PSA)

18 Adopt appropriate amendments to the articles 167, 170 and 170-1 of the Code on Administrative Offences of Ukraine №8073-X from December 7,1984, which would increase the penalty for the production, sales, non-compliance with the standards during transportation, storage, usage of petroleum products, putting them into circulation without a certificate of packaging compli ance

D.5


OIL & GAS

69



19

20

21

22

23

Update and codify of the basic law on subsoil use

Exclude the requirements for monitoring specific conditions of subsoil use

Adopt the Rules for Oil and Gas extraction

Adopt the new Law on Gas Market proposed by the Energy Community before January 1, 2016

Simplify the land provision for the exploration and construction of networks

24 Ease the geological information exporting

D.5


OIL & GAS

70

D.6. IT

71

IT sector deregulation main goal is to integrate Ukrainian IT business into worldwide market



~6 UAH bn


~3 UAH bn

3,3%

0,9%

18,1%

235

D.6 IT





72

IT deregulation initiatives of first priority according to the results of business survey (1/3)


Ensuring equal access to license for 3G connection obtaining

(1) Conversion of the Ministry of Defence radio frequency (2) Technological neutrality (agreement between telecom on frequencies distribution)

For –operators, public Against - Ukrtelekom, National Commission for the State Regulation of Communications and Informatization

(1) Job creation (2) Increase in GDP (3) Investments in creating 3G / 4G infrastructure

Introduction of modern means of communication, which are already used around the world

(1) Ukraine - one of the few countries in the world where 3G is not yet implemented (2) Introduction of 3G will significantly boost Ukrainian economic development

Illia Kenigshtein Oleg Achtyrskyi, GLN Oleg Matsech, CCR Oksana Prodan, VRU Oleksandr Fediienko Olena Minich

Permission for registration of companies and bank accounts abroad

(1) Cancel the CMU Resolution №122 (2) Amend the CMU Resolution on Currency Regulation System and Currency Control (3) Cancel the NBU Decree №485 (4) Cancel article №162-2 CUAO

For – export-oriented business Against - NBU, SSU, Tax Inspection, conversion centres

(1) Simplification of business activities in foreign markets (2) Goods turnover increase (3) De-shadowing in the IT and start-ups field

Providing possibility of the registration of companies and bank accounts abroad

(1) Citizens of Ukraine will be able to own assets abroad without hindrance (2) Ukraine - one of the few countries where there are existing restrictions on foreign assets ownership

Ievgen Sysoiev, AVentures Andrii Kolodiuk, AVentures Maksym Plachtii, UАОVZ Artem Afian, Iuskutum Oleg Achtyrskyi, GLN Olena Vardamatska, LF WOLF THEISS

Simplification of the procedure for obtaining work permit for non-residents

(1) Amend the Law of Ukraine on Population Employment (2) Amend the CMU Resolution №437 from May 27, 2013

For – foreign business representatives Against - employment centres

(1) Attracting highly skilled professionals (2) Creating favorable conditions for transnational corporations

Issuing work permits for non-residents who are involved in IT using simplified procedure

Increasing the number of leading specialists working in Ukraine for the exchange of experiences and best practices.

Dmytro Gadomskyi, Iuskutum Dmytro Parpales, LF Pravovyi aktsent Mykyta Palataiko, LF Saienko Kharenko






D.6 IT

73



Intellectual property protection

(1) Take measures to ensure enforcement of the CMU Resolution №1433 on Approval of the Use of Computer Programs in the Executive Branch" (2) Amend the Law of Ukraine on Copyright

For – license software right holders, content authors Against – government agencies that use unlicensed software, business representatives and users who actively use unlicensed software

(1) Loss ~ 70 USD mn through sanctions for using unlicensed software (2) Loss ~ 300 UAH mn for copyright infringement (3) Unfavorable conditions for foreign investors

(1) Using unlicensed software (2) Copyright and related content rights protection

(1) Align intellectual property rights to the right to private property (2) The authors should be paid for their content

Maksym Plachtii, UАОVZ Dmytro Shymkiv, APU Andrii Kolodiuk, AVentures Oleg Achtyrskyi, GLN Olena Vardamatska, LF WOLF THEISS Dmytro Gadomskyi, Iuskutum Oleg Zaiets, LF Dentons Dmytro Parpales, LF Pravovyi aktsent Mykyta Palataiko, LF Saienko Kharenko

Introduction of electronic documentation and equating it to the paper one

(1) Adopt a new version of the Law on Electronic Digital Signature, the Law on Electronic Documents and Electronic Documentation (2) Adopt a new version of the SSU Decree on Approval of the Rules for Qualified Certification

For- business Against -commercial centers for certification of electronic keys issuance

(1) Improving the business environment (2) Reducing business costs

Possibility to sign contracts and acts remotely without loss of validity

(1) Saving taxpayers' money (2) Improving the business climate and reducing business costs (3) Reducing corruption

Ievgen Sysoiev, AVentures Andrii Kolodiuk, AVentures Maksym Plachtii, UАОVZ Artem Afian, Iuskutum Oleg Achtyrskyi, GLN Olena Vardamatska, LF WOLF THEISS Dmytro Gadomskyi, Iuskutum Oleg Zaiets, LF Dentons






D.6 IT

74



Ensuring the development of e-commerce

Mechanism and control: Support the adoption of the Law on Electronic Commerce №2306 from June 17, 2013 (in the second reading)

For –consumers/buyers, merchants

Economic effect: (1) Trust and protection of consumers/buyers (2) New opportunities for traders (3) Attracting investment

Adopt the draft Law on Electronic Commerce №2306 from June 17, 2013

(1) E-commerce demonstrates confident dynamics of 35-40% annually (2) Given the situation in the east electronic forms are more convenient for some regions (3) Further opening of trade borders with the EU and increasing competition in terms of both goods, services and facilities for trade and information services

Oleksiy Anikin Olena Vardamatska Oleg Matsech Oksana Prodan Olga Belkova Mykyta Palataiko Dmytro Parpales Vadym Zhuravskyi Artem Afian Oleg Achtyrskyi Iegor Stefanovych






D.6 IT

75

IT sector deregulation initiatives distribution over the industry value chain



6. CONTROL SYSTEM

R&D CENTRES


ELECTRONIC COMMERCE

OTHER ISSUES

2

1

1

1

n.a.

13

2

8

1

1

n.a.

n.a.

5

n.a.

n.a.

n.a.

n.a.

n.a.

1

1

n.a.

n.a.

n.a.

n.a.

1

n.a.

n.a.

n.a.

n.a.

n.a.

1

n.a.

n.a.

n.a.

n.a.

n.a.

39 INITIATIVES

IT OUTSOURCING

START-UPS

TELECOM


D.6 IT

76

For IT industry, 14 deregulation initiatives of first priority were identified IT INITIATIVES PRIORITIZATION


EASE

OF

IMPL

EMEN

TATI

ON




difficult

easy

ІV-th proirity





~1,2

~0,3

~2,1

13

NO INITIATIVES





~1,1

~1,9

~0,3

14





~1,2

~2,1

12

GDP share: 1,4%

IT D.6

77

Initiatives of first priority in IT according to the «Economic effect» and «Ease of implementation» criteria (1/3)


1

2

3

4

5

Register and submit to the VRU the Draft Law on Amendments to Certain Legislative Acts of Ukraine on the improvement of software legal regulation

Ensure intellectual property protection in accordance with the international standards


D.6 IT

Ensuring the development of e-commerce

Give permission for registration of companies and bank accounts abroad

Introduce electronic documentation and equate it to the paper one

78



6

7

8

9

10

Provide the publication of application information at the end of the formal examination of an application for industrial desi gn to allow third parties to submit their objections on the basis of non-compliance of the object with the requirements of patentability

Ensure equal access to license for 3G connection obtaining

Protect critical elements of telecom infrastructure (prohibition of servers removal, network disconnection)

Simplify (or cancel) the issuance of licenses for electronic money and its administration


D.6 IT

Simplify the process of obtaining permits and licenses in IT

79



11

12

13

14

Share tender.me.gov.ua database with all platforms that want to process the data and display it in a convenient way

Simplify the procedure for obtaining work permit for non-residents of Ukraine

Disclose registers of applications for registration of intellectual property

Cancel mandatory labelling checkmarks


D.6 IT

80

E. Specification of deregulation initiatives by state inspections

81 Source: Working group of the Ministry of Economic Development and Trade of Ukraine

1

2

3

State Veterinary and Phytosanitary Service of Ukraine

State Sanitary and Epidemiological Service of Ukraine

State Ecological Inspection of Ukraine

E DEREGULATION INITIATIVES BY STATE INSPECTIONS

Analysis of corruption reduction and economic effect from deregulation initiatives by state inspections (1/3)

4 State Agricultural Inspection of Ukraine

5 State Inspection of Ukraine for Consumer Rights Protection

6

7

State Service of Mining Supervision and Industrial Safety of Ukraine

Antimonopoly Committee of Ukraine

8 State Architectural and Construction Inspection of Ukraine

9 State Emergency Service of Ukraine

10 State Automobile Inspection of Ukraine

11 State Inspection of Ukraine on Price Control 2

6

5

1

5

4

9

19

12

15

12

3,0

1,0

1,5

0,8

0,3

1,0

0,2

2,0

0,8

2,4

0,4

1,5

1,2

0,4

0,2

2,2

1,2

1,4

3,1

2,7

2,8

0,5

STATE INSPECTION NUMBER OF INITIAT. [units]

CORRUPTION [UAH bn/year]

ECON. EF.1), [UAH bn]

1) Economic effect is estimated till the year 2020


12

13

14

State Service of Ukraine on Drugs Control

State Border Guard Service of Ukraine

State Agency for Land Resources of Ukraine



15 State Registration Service of Ukraine

16 State Inspection of Ukraine on Labor

17

18

Securities and Stock Market State Commission

State Commission for Regulation of Financial Services Markets

19 State Education Inspection of Ukraine

20 National Commission for State Regulation of Utilities

21 State Migration Service of Ukraine

22 State Road Agency of Ukraine 2

1

1

1

3

1

3

7

6

13

24

0,1

0,4

0,2

0,6

0,1

0,7

1,4

4,5

0,7

3,2

1,4

0,4

0,1

0,3

0,2

0,5

1,1

0,2

2,3

0,5

1,0

4,5





23

24

25

State Agency on Science, Innovations and Informatization of Ukraine

State Agency on Energy Efficiency and Energy Saving of Ukraine

State Agency for Investment and National Projects of Ukraine



26 State Agency of Fisheries of Ukraine

27 State Water Resources Agency of Ukraine

28

29

State Service for Geology and Mineral Resources of Ukraine

State Forest Resources Agency of Ukraine

30 State Service for Veterans, People with Disabilities of Ukraine

31 State Intellectual Property Service of Ukraine

32 National Commission for Energy State Regulation of Ukraine

33 State Property Fund of Ukraine

34 State Nuclear Regulatory Inspectorate of Ukraine 1

1

6

2

1

9

2

1

6

2

3

13

0,3

0,1

0,1

3,4

0,2

0,3

0,2

5,4

0,4

2,2

0,7

0,3

0,2

0,3

4,9

0,3

0,0

2,6

0,2

0,2

1,8

0,1

0,3

0,2


