Annual Business Climate Assessment in Ukraine 2016

The Annual Business Climate Assessment (ABCA) is an annual research of small and medium-size busines that allows monitoring changes in business environment. This assessment helps to identify barriers towards small and medium-size busines, create a list of top-priority economic, legal and regulatory measures (reforms) to improve the business environment in Ukraine.

The first ABCA study was conducted at the end of 2015. The second annual assessment of the business climate in 2016 was conducted at the end of 2016 – early 2017. The USAID LEV interviewed 1 851 representatives of the SME sector that estimated the current business environment in Ukraine, identified the main business problems, as well as the reforms that entrepreneurs expect from the state. The ABCA research is conducted annually and aims at defining the dynamics of changes.

The Index of Business Climate, the central index of the research, is ‘+0,06’ on a scale of -1 to +1. It has grown by 5 points, compared to 2015, when its value was ‘+0,01’. The main components of the index are: expectations and assessment of the current situation by entrepreneurs, business development plans for the next 2 years. The results of the research indicate that the assessments of the business environment have improved, while the optimism of the SME on the nearest plans has increased. At the same time, the ‘growth rates’ of optimism about biennial plans somewhat decreased compared to the previous years, which indicates that there is no time for ‘postponing’ reforms.

For the second year running the business is positively evaluating “Changes in the regulatory environment of Ukraine over the past 2 years”. The entrepreneurs are positive about changes in business registration process and the inspections issue. There was a negative assessment of procedures related to the beginning of the premises usage of last year, however this year it has changed to a positive. In Ukraine it is still difficult to collect certificates of conformity and sanitary conclusions, arrange export operations and administration and payment of taxes.

In 2016 in Ukraine to run business legally, small and medium-size enterprises spent on average UAH 27,412. That is how much meeting the regulatory requirements of SME costs in Ukraine. In 2015 this figure was higher – UAH 291,761, primarily due to the costs the SME came up with during inspections.

The survey also allows to describe the SME sector in Ukraine, understand its structure and draw up a so-called ‘portrait of SME’. In particular, the results of the survey show that there are 3 men for every woman-CEO of the enterprise, and sole proprietors are 8 years younger than CEOs of enterprises-legal entities: the average age of the sole proprietor is 39 years, and the CEO of enterprise is 47 years. According to the survey, over the past two years, on average, one interviewed enterprise dismissed two employees. But a year ago, the average figure was minus five employees. Consequently, enterprises continue to downsize, but at a slower pace.