Freedom will save economy

In the past two weeks President Viktor Yushchenko, Prime Minister Yulia Tymoshenko, and MPs have spoken on better conditions for entrepreneurs, and parliament has started voting through the much-needed laws for businesses.

The government team carried out a large-scale operation: at one meeting they managed to pass 22 resolutions, issue two orders, and approve three draft laws, which are to finally create normal conditions for small and medium-sized businesses. In particular, the licensing procedure was simplified and a ban on inspections until 2011 was introduced.

In his turn, at the forum “Government and business are partners” Yushchenko laid down the agenda to support medium-sized businesses and pledged to facilitate scrapping administrative barriers to entrepreneurship in crisis conditions. Businessmen were split on this kind of care. Some were all ears and analyzed all the pros and cons, while others picketed the main entrances to the buildings where the top leadership presented its business proposals. The Day has asked experts about whether our leaders’ recent activity is a sign of true care or courting the electorate and whether businessmen will “buy” this new batch of promises.

Volodymyr STUS, head of the analysis and forecasting group, Strategic Initiatives Center:

“One of the anti-crisis recipes is to increase domestic consumption. In Ukraine virtually no measures have been taken in this direction, while other countries saw the redistribution of the tax burden: the rich were made to pay higher taxes, and the poorer received a reduction. In our country it has been the other way around. Therefore, it is no surprise that these government actions met with resistance on the part of businesses, especially small and medium-sized ones.

“Considering the existing negative attitudes in society, it becomes obvious that the authorities are afraid of a protest wave that could develop into riots. The approaching elections campaign calls for feedback from the government, if only purely declarative. This is their entire motivation. I believe that businesses will be able to negotiate a partial restoration of the previous taxation levels. Whether the powers that be will again enjoy the trust of the business community will be clear after the next presidential elections.”

Oleh USTENKO, executive director, Bleyzer Foundation:

“The government finally began to understand that it is necessary to restore conditions in the country for businesses and stimulate the real sector. The financial well-being of a country depends on the quality of its investment climate. Ukraine needs investments for many reasons among which I would like to distinguish two. First, we need currency influx into our domestic market, which will help secure financial stability and due payments on external debts. Second, it is impossible to ride out the crisis without investments. That is the reason the government is taking positive steps in an attempt to somehow straighten out the situation.

“On the other hard, these kinds of one-time shots at improving the business climate will not yield much. We need an effective program to develop the investment climate. This is indeed something important. It is time we fought for every investor because businessmen are not lining up to enter Ukraine’s market. The business community has long stopped believing words; rather, it wants to see real steps. If the government team takes them, businessmen will believe them.”

Yurii RUBAN, director, National Institute for Strategic Research:

“The country is, of course, in a hard economic situation. Clearly, the government does not have the resources to pour into the economy, thus overcoming the crisis. Certain organizational measures are indeed being carried out, but the hope for redemption has to rest on the economy itself. And here we come to textbook concepts. The economy can provide the resources for both its own revival and its programs. However, first it needs to be given freedom of action. Ukraine has a problem of overregulation, which was inherited from the Soviet Union and does not fit well with the modern-time market principles.

“Returning to the current economic tendencies, it should be noted that the single greatest social threat posed by the crisis is unemployment. It can be reduced, above all, by the small and medium-sized businesses. The president, prime minister, and MPs are probably well aware of this. Thus they have channeled their efforts in the right direction. They are showing to the business community a desire to engage in effective dialog. At this stage it is crucial to offer to any business an honest program to overcome the economic crisis in order to generate trust in the declared intentions.”

Volodymyr DUBROVSKY, senior economist, member of the supervisory board, CASE Ukraine:

“The president has held the forum ‘Government and business are partners’ since 2005. The government has on many occasions declared that it is going to make concessions to entrepreneurs, offer tax reliefs, and cut down on inspections. Parliament has recently passed good laws that are not always being enforced: for example, the laws on the permit-issuing system and regulatory policies.

“The current flurry of activity regarding business is due to the fact that the branches of power have finally reached a common denominator in the formula for pulling the economy out of the crisis. They have grasped that the only chance to ride out the crisis in a constructive way, rather than sticking with the old enterprises and patterns, is to make concessions to the business community.

“It would be great if initiatives of this kind brought positive results. On the other hand, we should not forget that the presidential elections are coming soon. The incumbent president, prime minister, and some MPs would like to run, and win, the race. But it is very hard to win these days without the support of business community. Given this understanding, they are coming out to meet the wide business community halfway, rather than some specific sector.

“However, in the long run, many of the declared offers are unlikely to work. In particular, if they impose a moratorium on inspections but keep the current VAT reimbursement mechanisms, the ban will be useless. Why? Because these mechanisms imply comprehensive financial audits of businesses. Moreover, if tax receipt quotas are maintained, this will also spell fiasco for the idea. The tax administration can be banned from inspecting businesses ad infinitum, but if this is the only tool it has to squeeze taxes out of them (under pressure from the government), it will still continue running it checks.”