• 03.08.2018

    Exporters and importers in Ukraine: Trade facilitation means transparency and clear rules

    *This article was published in the Monthly Economic Monitoring of Ukraine (Jun-Jul, 2018)

    The full-scale implementation of the customs reform in Ukraine has not been implemented. Therefore, customs clearance in the country remains lengthy and complicated, which is reflected in Ukraine’s low positions in comparative international rankings. A new annual survey of exporters and importers in Ukraine conducted by the IER shows that a customs reform that would bring more transparency and reduce bureaucracy is necessary.

    In 2015, Ukrainian government defined the World Bank’s international “Doing Business” ranking as the indicator of success of the deregulation reform that intended to remove barriers for private entrepreneurship in the country. Despite a notable progress that Ukraine demonstrated in this ranking over the recent years moving up from the 96th place in 2015 to the 76th one in 2018 worldwide, its international trade performance still brings the overall result down. Due to the long hours needed to import and export and the related high compliance costs, Ukraine was placed at the 119th position in the “trading across borders” category in 2018.

    Last year, the Ministry of Finance of Ukraine initiated a reorganization of customs, which is a part of the State Fiscal Service. But in 2018, the Cabinet of Ministers canceled the decrees that were meant to guide this process. Meanwhile, Ukrainian businesses involved in international trade report recurrent problems that are rooted in complicated legislation as well as in the lack of transparency at Ukrainian customs. myt_eng_1_2018

    The IER conducted the third wave of the survey of Ukrainian exporters and importers in late 2017 and early 2018. The survey shows that the assessment of the customs performance by businesses virtually has not changed since 2015 when the first wave of this survey took place. In 2017, the Customs Performance Index calculated by the IER was +0.21 on the scale from -1 to +1 (the index shows the assessment of customs efficiency by the surveyed enterprises). The value of the Customs Performance Index was +0.2 in 2015 and +0.1 in 2016. This suggests that while positive assessments prevail over the negative ones, there is no visible change in the businesses’ opinion about customs performance.

    According to surveyed enterprises, major barriers that hinder foreign trade include bureaucracy and lack of access to information at customs, as well as difficulties associated with infrastructure and currency rate in Ukraine. For importers, complicated customs and tax legislation is the main obstacle (38% of them reported this problem). However, the impact of some of the other barriers is smaller now than it was a year before. The share of the importers that report among key barriers the lack of transparency at determining customs value of goods and the unfavourable currency regulations decreased in 2017 as compared to 2016. This may be attributed to foreign currency liberalization in Ukraine and successful court appeals by businesses that resulted in lowering custom values of goods.

    The most frequently reported trade barriers for exports are low quality of transport infrastructure and large number of permits needed to export. 27% of the surveyed exporters reported these problems. Slightly smaller shares of exporters name complicated rules of origin and unpredictable trade policy of Ukraine as obstacles. While the share of the enterprises reporting lack of predictability in Ukraine’s trade policy reduced in 2017 compared to 2016, the percentage of those facing large number of permits for export, on the contrary, increased. The Export Strategy approved by Ukrainian government in 2017 can explain the improvement in policy predictability assessments, but the fact that the problem of many permits required for exports became more pressing signals the need of deregulation in foreign trade.

    Recently, the Verkhovna Rada took steps towards actual implementation of the single window at customs and the Cabinet of Ministers approved the operation of police force at customs. While the latter move has been explained as an anti-smuggling measure, its legitimacy is disputed. Making customs procedures more transparent, reducing the bureaucracy and making trade policy more clear and predictable will not only boost Ukraine’s international business rankings, but also will encourage entrepreneurship and trade.


    Authors:  Fedets Iryna
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