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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

The Mainstay of Government

Businesses should not factor bribes into the cost of their products
8 February, 2005 - 00:00
ENTREPRENEUR TETIANA HALYTSKA HAS BEEN IN BUSINESS SINCE 1990. AFTER WITNESSING THE EXPLOSION IN KYIV’S TROYESHCHYNA MARKET, SHE DECIDED TO TRY HER HAND AT A MORE CIVILIZED FORM OF BUSINESS AND RENTED COMMERCIAL SPACE AT A LOCAL SUPERMARKET. BUT, AS SHE TOLD THE DAY, SHE HAD TO GIVE UP ON THIS EXPERIMENT, SINCE ALL OF HER INCOME WENT ON RENT / Photo by Mykhailo MARKIV, The Day

Creating jobs and developing small- and medium-sized businesses are among the central planks of the political platform of President Viktor Yushchenko and his team. In the following interview Yury YEKHANUROV, chairman of the parliamentary committee on industry and entrepreneurship and a longtime Yushchenko ally, discusses the new government’s plans.

“Thousands of people poured into Independence Square to support Yushchenko. What will they get in return for their devotion?”

“Society’s expectations are tremendous. More than half the people want freedom for self-realization. Others are hoping to get a big spoon and a kettle, along with social benefits. But without businesspeople, the kettle will be empty. So, the new government is banking on the emancipation of small and medium businesses. Over the next decade we expect to form a middle class that will become the government’s mainstay. This is Yushchenko’s main project.”

“What steps will be taken to provide civilized jobs to millions of people who depend on makeshift markets for their survival?”

“The experience of Eastern Europe has shown that makeshift markets go out of business in the face of competition from supermarket chains. These stores employ up to 250 persons and take away jobs from at least 1,000 small businessmen and their employees. Kyiv’s demand for supermarket chains is currently satisfied by 50%. When this figure reaches 100%, few people, if any, will continue buying their groceries from street markets. To avoid mass unemployment, Yushchenko plans to create five million jobs both in major enterprises and small businesses. People must find a place for themselves in a civilized economy. The government will be doing everything to this end.”

“Is there any specific market research to suggest the sectors in which small and medium businesses can operate successfully?”

“People who have accumulated some startup capital will be able to obtain counseling at business centers that will be opened at economic departments of local government agencies. So far, there has been no focused research, but now that Yushchenko has become president this process will get underway.”

“Won’t such centers be a mere facade? Officials are funded from the budget anyway. Why should they worry about problems that afflict small businesses?”

“Business associations are much more active and qualified than officials. It is therefore not ruled out that the government will entrust them with providing counseling to startup businesses. The government will pay these associations for their services. In general, the more duties we take away from the government and delegate to local authorities and civic organizations, the more civilized Ukraine will become.”

“Will small business develop in the current police state system? My neighbors, who work at a market, have to pay kickbacks to the police and the tax people, on top of the rent. This way you can go bankrupt in no time at all.”

“This is commonplace in a state that is corrupt to the bone. Even during the elections we estimated that 5.8% of the popular vote would be stolen owing to the administrative resource. The same is true of business: every businessman is forced to factor in bribes into his costs. In order to prevent this, we have to dismantle the system of permits that are used in this country. We are drafting a bill to abolish over 1,500 types of mandatory permits.”

“What else will the government do to make the life easier for small and medium businesses?”

“Parliament is about to pass a bill that will classify businesses by categories: a micro business with up to 10 employees, a small business with up to 50 employees, and a medium business with up to 250 employees. For them we will retain the single tax system and simplified financial statements (monthly or quarterly), to prevent officials from harassing them. The government will keep the local authorities in check, making it easier for such businesses to lease or buy business premises, such as vacant premises of mothballed industrial enterprises and ground floors of buildings in the city. Information on their lease and sale will have to be posted on the Web sites of all local governing bodies. The authorities will openly discuss their decisions and publicize all projects two weeks before they are approved. In this connection, businessmen should decide who will be defending their rights. Since it is difficult for the authorities to reach out to individual businessmen, civic organizations of entrepreneurs will obviously emerge en masse. Their lawyers and financiers will be able to push for the revocation of unfavorable resolutions.”

“Where will startup entrepreneurs secure loans to set them up in business? After all, only people with money can afford such expenses.”

“Back in 2000 the government of then Prime Minister Yushchenko began the practice of issuing cheap loans. For the first time government subsidies were not being channeled into individual sectors, but were used to make up for the difference between high and moderate interest rates on bank loans for businesses. The state paid the difference, while businessmen paid 2-3% in interest, and everyone was satisfied. Incidentally, not everyone took out loans. They were obviously afraid of the responsibility.”

By Svitlana STEPANENKO, special to The Day
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