EU FORBIZ – Creating better business environment

Project Goal

Over the course of three years, the EU FORBIZ – Creating better business environment project will support the Ukrainian Ministry of Economic Development and Trade in realigning its SME policy and corresponding regulations.

 

The overarching goal is to contribute to the sustainable and inclusive growth of the economy in Ukraine, promoting business opportunities, regional prosperity, and national cohesion.

To achieve this goal, the project has formulated three specific plans:

  1. Support of deregulation plans and their implementation by the Ukrainian government and administration on all relevant levels, with a special focus on small- and medium-sized enterprises (SMEs) in key areas of the economy.
  2. Strengthening the capacities of the Ukrainian administration on national, regional, and communal levels, as well as those of the interest groups concerned, in order to assure the successful implementation of economic development measures with a specific focus on SMEs.
  3. Improve Ukrainian SMEs’ access to information.

Implementation

  • At the national level, Berlin Economics will offer technical support and political consultation on deregulation and national and regional economic development strategies.
  • At the regional level, the project will prepare enterprise advice and training sessions, to be held through a network of business support centers. Access to financing will be facilitated through complementary EU-financed measures, for example the NIF/EIB Guarantee Facility, which will equip local commercial banks with an effective risk management tool, improving their capacity to finance SME projects. This project will be implemented through the European Bank for Reconstruction and Development (EBRD).

Expected Project Results

  • A consolidated body of legal regulations related to the following key sectors: constructions, foodstuffs, IT, foreign trade, sales, electricity and other utilities like water, sewage, heating, and a horizontal reform of market oversight.
  • A transparent and well documented review of legal regulations related to enterprise, with a clear and standardized evaluation of their legality, necessity, and business friendliness, including their susceptibility to corruption. Legal regulations that receive poor reviews in this context will either be simplified or entirely eliminated.
  • Ukrainian SMEs, their affiliations, and relevant think tanks will be supported in their efforts to establish and maintain efficient dialogues with national, regional, and communal offices. The self-regulated organization model will be encouraged, and supported on all administration levels and industries.
  • Improved and sustainable information services that present national and international information on laws and markets, and are easily for Ukrainian SMEs through a widely marketed and user-friendly web portal.

The project team in Kiev, Ukraine, will be working with the GFA Consulting Group. Berlin Economics supports the team with a large network of German, international, and Ukrainian experts.

Background

Ukraine was hit especially hard by the global financial crisis in 2008. The subsequent recovery proceeded only slowly, and came to a practical standstill in 2013. The economic situation then grew dramatically worse in 2014 due to the political situation in the country – the financial system, foreign trade, industrial production, and infrastructure were particularly affected.

The stark decline of overall economic output was especially apparent in 2015. Consumer inflation climbed to 46%, the highest level since 1996. Since then, the International Monetary Fund (IMF) has observed a slow stabilization in the economic situation. However, the economic crisis, together with its connected risks, offers the chance for fundamental economic reforms.

A robust SME sector could contribute a great deal to the economic recovery of the country. Its contribution to the GDP – at 12% – is rather small, especially when the high number of registered SMEs are taken into account. SMEs are particularly concentrated in the five largest cities, meaning there is significant room for growth in SME promotion in the rural regions.

The government’s measures to encourage SMEs have so been generally ineffective, or even obstructive, for the development of dynamic small businesses. Recently, however, there has been more initiative to improve the situation. A new law on the development and state support for SMEs entered into effect on January 1, 2013. The law defined SMEs in a way similar to their definition within the EU, and explained the main aspects of the state policy to encourage SMEs.

Since the change of government in October 2014, there has been widespread consensus on the urgency of wide-ranging reforms of the rules and regulations governing business in Ukraine. The promotion of innovation and diversification and support for SMEs are now seen as fundamental pillars of a sustainable economic structure.

The economic reorientation to the EU and the beginning of implementation of the Deep and Comprehensive Free Trade Area (DCFTA) on January 1, 2016, have been important triggers for these new developments. These have included a comprehensive reform agenda regarding foreign trade and the improvement of the investment climate. A friendlier business climate for everyone would particularly improve conditions for small- and medium-sized enterprises – and would be an important milestone in the country’s development.

The EU program EU FORBIZ – Creating better business environment was developed against this background to support the creation and development of SMEs in the region and to help relaunch the Ukrainian economy. It is hoped that this will improve growth and business opportunities.