“Low demand” ranked first among the barriers for growth of Ukrainian small and medium enterprises (SMEs) in 2016. This barrier replaced the “unfavorable political situation” – the number one barrier in 2015. In 2016, political instability moved down to the second place in the list of the barriers for SMEs.
These are the results of the “Annual Business Climate Assessment” (ABCA) survey of 2016, the second annual survey of business environment in Ukraine, conducted by the Institute for Economic Research and Policy Consulting within the USAID «Leadership in Economic Governance» Program.
The central ABCA survey index, the Index of business climate in Ukraine, equals 0.06 on a scale from -1 to +1. It grew by 5 points since 2015, when its value was 0.01. This index is calculated based on the expectations and evaluations of the current business and economic situation by the surveyed entrepreneurs, as well as on their business development plans for the next 2 years. The index suggests that assessment of the business environment by entrepreneurs improved and their optimism about the short-term plans increased. At the same time, SMEs were less optimistic about their two-year plans compared to the previous year’s responses. This indicates that there is no time left to postpone business regulation reforms in Ukraine.
Another component of the aggregated Index of business climate is the assessment of the changes in the regulatory environment of Ukraine over the past 2 years by SMEs. Ukrainian SMEs positively assessed the changes in the process of business registration and state inspections. The average evaluation of the procedures required to start using business premises had a negative value in 2015, but it changed to the positive one in 2016. However, there are still problems in Ukraine with obtaining certificates of conformity and sanitary conclusions, regulations of export operations, and administration and payment of taxes.
The ABCA survey also asks the SMEs to indicate in detail the amount of money they paid – officially and unofficially – to go through all the required administrative procedures. This, and the amount of time they spent on it, converted into monetary value, makes up the “cost of regulations” for SMEs in Ukraine. Ukrainian SMEs spent a total of UAH 27,412.00 annually on regulatory compliance in 2016. In 2015 this figure was higher – UAH 29,761.00. The decrease is primarily due to the less costs spent by SMEs during inspections.
The ABCA survey also makes it possible to describe the SME sector in Ukraine, to understand its structure and to create a “portrait” of Ukrainian small and medium businesses. In particular, the survey shows that there are as much as 3 times more male CEOs of the enterprises than female ones. The findings also showed that on average, one surveyed SME fired two employees over the past two years. A year ago, the average figure was minus five employees over two past years. Thus, companies continue to cut staff, but at a slower pace.
ABCA was conducted in the late 2016 – early 2017. A total of 1,851 representatives of SME sector were surveyed who assessed the current business environment in Ukraine, identified key business issues and reforms which entrepreneurs expect from the government.
Only Ukrainian version of full report is available