Another nail in the coffin of private enterprise in Ukraine

11.09.2013 |

The government is proposing to create yet another controlling body.  Small business owners complain that all the checks cost them too much, while consumers do not feel any particular benefit from the work of the state regulatory bodies.

Olena Sakhno, whose wholesale shop sells children’s orthopaedic shoes, checks are carried out at least once a week. The visitations can be from the fire service, or tax inspectorate or the inspectorate for the protection of consumers’ rights.  “When they come with their checks, then work stops – everybody works for them. Whether it’s to give them a document, or make them coffee, so that, Heaven forbid, you don’t annoy the officials, because then they’ll definitely find something and fine you”.

According to the Federation of Employers, at present in the country 75 state bodies can check out the work of businesses. 30 of them have the power to stop an enterprise’s activities.

Now the government is planning to create a State Metrological Inspectorate which would check trading networks; petrol stations, medical establishments and laboratories for the accuracies of the measurements they make.  The relevant draft law has already been approved by the Cabinet of Ministers.

Although the International Financial Corporation had advised Ukraine to introduce such a body, they are now saying that the Ukrainian government is moving in the wrong direction.  Spokesperson Serhiy Osavolyuk says that they need only have reformed the State Department for Consumers’ Standards.

The Union for the Protection of Business Enterprise fears that the new inspectorate will become yet another fiscal body milking businesses. Serhiy Dorotych says that such institutions are normally created to serve particular people or financial objectives.  He calls this “yet another nail in the coffin of small and middle-size business”.  He stresses that there are so many controllers in Ukraine that their frequent checks are blocking the work and development of enterprises.

Under such circumstances there is unlikely to be any flow of investment capital into Ukraine since it’s too expensive to run a business that way.  Back in 2010 the International Financial Corporation estimated that direct costs for Ukrainian enterprises on such checks were in excess of 3.2 billion UAH.

The IFC say that although Ukraine has perhaps the greatest number of controlling bodies in the world, yet the benefit from them is minimal since Ukrainians do not feel protected from shoddy products, goods and services. 

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