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

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
Food Oil & Gas IT
~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
11
6
30
11
10 16
14
24
21
8
12
6,5
1 3 9
6,0
5 20
8,0
7,0
7,5
15
5,5
2,5
2 22
0,5
8 18
1,0
2,0
6 7 11
3,5
3,0
4
1,5
13 16 21
5,0
4,0
4,5
10 12 14 17 19 23 24 25
REDUCTION IN STATE EXPENDITURES, UAH BN
CORRUPTION REDUCTION, UAH BN
Control system
Permission and licensing system
Other issues
ІТ
8 Tax system
Customs
Food
Technical regulation
Oil & Gas
Agriculture Construction
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
STAGE
AMOUNT OF WORK
RESULTS
>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
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

Source: Project office, Ukrstat, OECD, IT Ukraine, Derzhzovnishinform 9
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
B METHODOLOGY OF DEREGULATION STRATEGY DEVELOPMENT

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
Construction Oil&Gas IT
~70
~30
Economy-wide
initiatives
~100
~800
ВСЬОГО
~400
Agriculture
~90
~70
Food Electricity
~40
ECON. EF.,
[UAH mn]
CORRUPTION,
[UAH mn]
~100
~250 ~600
~300
~1 000
~300 ~250
~300
~500
~10 ~50
~200
B METHODOLOGY OF DEREGULATION STRATEGY DEVELOPMENT

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
EASE OF IMPLEMENTATION 1)
EFFECT FROM IMPLEMENTATION 2)
І-st priority
ІІ-nd priority
ІІІ-rd priority
small
large
difficult
easy
ІV-th priority
ILLUSTRATIVELY
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

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
14
80
8 13
7 27
11
~14
~12 ~8 ~8 ~21 ~24
~86
C ECONOMY-WIDE INITIATIVES
~9 ~6 ~6
~10
~64
~15 ~18
1) Economic effect is estimated for the period till the year 2020
~7 ~3 ~2 ~2 ~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%
62
387
54 33 37 94 107
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 IMPLEMENTATION
EFFECT FROM IMPLEMENTATION
ІІ-nd priority І-st priority
ІІІ-rd priority
small large
difficult
easy
ІV-th priority
C ECONOMY-WIDE INITIATIVES
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
[units]
~13
~17
~5
81
~16
~11
~4
69
Corruption,
[UAH bn / year]
Economic impact,
[UAH bn]
Reduction in state
[units]
Corruption,
[UAH bn / year]
Economic impact,
[UAH bn]
Reduction in state
[units]
Corruption,
[UAH bn / year]
Economic impact,
[UAH bn]
Reduction in state

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
C
ECONOMY-WIDE INITIATIVES
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
C

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
C

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
C

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
C
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
C
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
3,2% 3,1% 1,4% 0,9% 7,7% 8,3%
10,9% 0,8% 3,3%
-0,1%
15,8%
-0,2%
58,6% 28,4% 17,9% 6,9% 4,7% 18,1%
374 576 322 498 198 235
12 11 3 21
7 7
10 16 11 11 6 30
3 1 1 2 4 4
12 24 14
15 24 28
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

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%
374
Number 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
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
INITIATIVE
MEDIA MESSAGE
EXPERTS

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
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
D.1
FOOD
INITIATIVE
MEDIA MESSAGE
EXPERTS

28
Analysis of deregulation initiatives within food industry value
chain
MATRIX OF INITIATIVES BY VALUE CHAIN
AND LICENSING
SYSTEM
REGULATION
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
ІІ-nd priority І-st priority
ІІІ-rd priority
small large
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%
[units]
Corruption,
[UAH bn / year]
Industry growth,
[UAH bn]
Reduction in state
[units]
Corruption,
[UAH bn / year]
Industry growth,
[UAH bn]
Reduction in state
[units]
Corruption,
[UAH bn / year]
Industry growth,
[UAH bn]
Reduction in state
[units]
Corruption,
[UAH bn / year]
Industry growth,
[UAH bn]
Reduction in state

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 products, substances, materials and hazards, use, transfer or sale of which may cause harm to human health; documentation for developing technology, equipment, tools, etc.
D.1
FOOD

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
GDP
Industry dynamics,
CAGR [2008-2012]
Exports,
CAGR [2008-2012]

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
INITIATIVE
MEDIA MESSAGE
EXPERTS

36
Value chain in agriculture industry analyzed through a number of
deregulation initiatives at each step
AND LICENSING
SYSTEM
REGULATION
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
5
3
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
n.a.
1
1
1
2
3
7
4
5
10
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

37
After final prioritization, 24 deregulation initiatives of first
priority were identified in agriculture industry
AGRICULTURE INITIATIVES PRIORITIZATION
ІІ-nd proirity І-st proirity
ІІІ-rd proirity
small large
difficult
easy
ІV-th proirity
Number
of initiatives, [units]
Corruption, [UAH bn]
Industry growth,
[UAH bn]
Reduction in state
~1,4
~3,4
~1,4
25
Number
Industry growth,
[UAH bn]
Reduction in state
expenditures, [UAH bn] ~0,3
~0,3
~0,7
5
Number
Industry growth,
[UAH bn]
Reduction in state
~1,4
~3,2
~1,4
24
Number
Industry growth,
[UAH bn]
Reduction in state
~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 Soviet 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 pesticides 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 receipts 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 vehicles (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 in 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

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
Number of people
GDP
Industry dynamics,
CAGR [2008-2012]
Exports,
CAGR [2008-2012]

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.
Taras Lylyk, CCU
Oleksiy Feliv, GLN
D.3
CONSTRUCTION
INITIATIVE
MEDIA MESSAGE
EXPERTS

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
Taras Lylyk, 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%
Oleksiy Feliv, GLN
D.3
CONSTRUCTION
INITIATIVE
MEDIA MESSAGE
EXPERTS

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
INITIATIVE
MEDIA MESSAGE
EXPERTS

47
All deregulation initiatives within construction were spread
through the industry value chain to identify problem zones
AND LICENSING
SYSTEM
REGULATION
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
1
3
3
7
1
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
ІІІ-rd proirity
small large
difficult
easy
ІV-th proirity
Number
Impact on GDP, [UAH bn]
Reduction in state
~6,7
~1,7
~8,6
36
Number
Reduction in state
~1,7
~0,4
~2,1
9
Number
Reduction in state
~5,2
~6,7
~1,3
28
Number
Reduction in state
~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/customer 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 renewal 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 double 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 from 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 investors - at the request of the constructer
Approve the procedure for engineering networks connection for the completed construction s (except electricity and gas networks)
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 build 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

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
Number of people
GDP
Industry dynamics,
CAGR [2008-2012]
Exports,
CAGR [2008-2012]

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
Denys Maliuska, IFC
Іnna Buriak, EBA
INITIATIVE
MEDIA MESSAGE
EXPERTS
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
Denys Maliuska, IFC
Іnna Buriak, EBA
Denys Maliuska, IFC
Іnna Buriak, EBA
INITIATIVE
MEDIA MESSAGE
EXPERTS
D.4
ELECTRICITY

57
Value chain of electricity industry was analyzed and deregulation
initiatives spread over it to identify pain zones
AND LICENSING
SYSTEM
REGULATION
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
ІІІ-rd proirity
small large
difficult
easy
ІV-th proirity
Number
Industry growth,
[UAH bn ]
Reduction in state
~4,3
~4,9
13
Number
Industry growth,
[UAH bn]
Reduction in state
~0,4
~0,1
~0,3
1
Number
Industry growth,
[UAH bn]
Reduction in state
~4,0
~4,5
12
Number
Industry growth,
[UAH bn]
Reduction in state
~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 transition 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

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
Number of people
GDP
Industry dynamics,
CAGR [2008-2012]
Exports,
CAGR [2008-2012]

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
Roman Opimach, CCR
Inna Buriak, EBA
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
Roman Opimach, CCR
Inna Buriak, EBA
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
Roman Opimach, CCR
Inna Buriak, EBA
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
Roman Opimach, CCR
Inna Buriak, EBA
For - investors
For – business, State Geological Service
For – business, State Geological Service Against – Ministry of Ecology
D.5
INITIATIVE
MEDIA MESSAGE
EXPERTS
OIL & GAS

64
Deregulation initiatives within a value chain of the Oil & Gas
industry
AND LICENSING
SYSTEM
REGULATION
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.
2 n.a.
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
ІІІ-rd proirity
small large
difficult
easy
ІV-th proirity
Number
Corruption, [UAH bn ]
Industry growth,
[UAH bn]
Reduction in state
~1,4
~0,2
~1,5
5
Number
Industry growth,
[UAH bn]
Reduction in state
~0,5
~0,6
2
Number
Industry growth,
[UAH bn]
Reduction in state
~7,0
~0,8
~6,6
24
Number
Industry growth,
[UAH bn]
Reduction in state
~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 Monopolies)
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 several 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 Ministry 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 the 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 compliance
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

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
Number of people
GDP
Industry dynamics,
CAGR [2008-2012]
Exports,
CAGR [2008-2012]

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
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
INITIATIVE
MEDIA MESSAGE
EXPERTS
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
Dmytro Shymkiv, APU
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
Artem Afian, Iuskutum
Oleg Zaiets, LF Dentons
INITIATIVE
MEDIA MESSAGE
EXPERTS
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
INITIATIVE
MEDIA MESSAGE
EXPERTS
D.6
IT

75
IT sector deregulation initiatives distribution over the industry
value chain
AND LICENSING
SYSTEM
REGULATION
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
ІІІ-rd proirity
small large
difficult
easy
ІV-th proirity
Number
Industry growth,
[UAH bn]
Reduction in state
~1,2
~0,3
~2,1
13
NO INITIATIVES
Number
Industry growth,
[UAH bn]
Reduction in state
~1,1
~1,9
~0,3
14
Number
Industry growth,
[UAH bn]
Reduction in state
~1,2
~2,1
12
GDP share: 1,4%
D.6 IT

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 design 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

Source: Working group of the Ministry of Economic Development and Trade of Ukraine 81
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
INITIAT. [units]
CORRUPTION
[UAH bn/year]
ECON. EF.1),
[UAH bn]

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
INITIAT. [units]
CORRUPTION
[UAH bn/year]
ECON. EF.1),
[UAH bn]

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