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Business emphasizes the importance of debureaucratization in Ukraine

23/ 07/ 2021
  The Verkhovna Rada is currently considering two draft laws that are of concern to the business community. If adopted, they could negatively affect the business environment and the flow of investment to Ukraine. Having analyzed the draft laws, the European Business Association noted the negative aspects of the development of the countrys business climate. Draft law № 5011 on foreign investment in economic entities of strategic importance for the national security of Ukraine This draft law introduces a new procedure for assessing the impact of foreign investment on national security. It is assumed that foreign investors will have to obtain the approval of a specially created authority, namely – Interdepartmental Commission, the composition of which will be approved by the Cabinet of Ministers. The formal term for granting approval is 45 days from the date of application. However, the criteria for such approval are not specified. It is proposed to introduce such a procedure for 38 strategic sectors of the economy. This list includes areas that are directly related to national security, such as nuclear energy, weapons production, ammunition disposal, etc., as well as those whose impact on national security is highly questionable, such as port services, telephone services, telecommunications, etc. This draft law is currently scheduled for consideration in the first reading. Draft law № 5219 on critical infrastructure This draft law contains a list of industries in which the engaged company can potentially be classified as critical infrastructure. Such companies will be entrusted with a number of responsibilities, such as obtaining additional approvals, passing additional inspections, certification of critical infrastructure facilities, insurance against the risk of financial losses, etc. Detailed lists of critical infrastructure facilities will be compiled by specially authorized bodies, but there are no specific criteria for classifying companies as such. This can lead to unwarranted decisions and lead to corruption. This draft law was adopted in the first reading by the Verkhovna Rada and is being prepared for the second reading. Both draft laws provide for the introduction of new bureaucratic procedures and additional control in many areas of economic activity. In contrast to the developed countries of the EU and the world, where similar laws have already been adopted, for Ukraine now the key issue of national security is not to control the concentration of private investment, including the foreign one but to attract them. After all, today the state is not able to independently maintain strategic infrastructure facilities and therefore needs total and urgent investment to prevent their complete decline and to ensure their further development. Currently, excessive over-regulation of economic activity is already leading to the delay in investment projects for years. Besides, the conditions for doing business and investment attractiveness of Ukraine already have very low scores in international rankings. Therefore, the introduction of additional control mechanisms will further aggravate the situation. This means that in the face of a deficit of investment, the country cannot currently afford to install additional filters for the investment inflow in many areas of the economy. In view of the above, the EBA experts consider it appropriate to return the first draft law for revision in order to significantly narrow the activities covered, namely removing business entities that provide port services, for example, from the scope of this draft law. Regarding the second draft law, it should be rejected based on the results of the second reading. Then a new version should be drafted specifying clear criteria that will allow to include in the critical infrastructure only those facilities and enterprises that really need additional control measures. The government has been talking about debureaucratization for many years - so it is worth implementing it not in words but also in deeds!   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

The Verkhovna Rada is currently considering two draft laws that are of concern to the business community. If adopted, they could negatively affect the business environment and the flow of investment to Ukraine. Having analyzed the draft laws, the European Business Association noted the negative aspects of the development of the country’s business climate.

Draft law № 5011 on foreign investment in economic entities of strategic importance for the national security of Ukraine

This draft law introduces a new procedure for assessing the impact of foreign investment on national security. It is assumed that foreign investors will have to obtain the approval of a specially created authority, namely – Interdepartmental Commission, the composition of which will be approved by the Cabinet of Ministers. The formal term for granting approval is 45 days from the date of application.

However, the criteria for such approval are not specified. It is proposed to introduce such a procedure for 38 strategic sectors of the economy. This list includes areas that are directly related to national security, such as nuclear energy, weapons production, ammunition disposal, etc., as well as those whose impact on national security is highly questionable, such as port services, telephone services, telecommunications, etc. This draft law is currently scheduled for consideration in the first reading.

Draft law № 5219 on critical infrastructure

This draft law contains a list of industries in which the engaged company can potentially be classified as critical infrastructure. Such companies will be entrusted with a number of responsibilities, such as obtaining additional approvals, passing additional inspections, certification of critical infrastructure facilities, insurance against the risk of financial losses, etc. Detailed lists of critical infrastructure facilities will be compiled by specially authorized bodies, but there are no specific criteria for classifying companies as such. This can lead to unwarranted decisions and lead to corruption. This draft law was adopted in the first reading by the Verkhovna Rada and is being prepared for the second reading.

Both draft laws provide for the introduction of new bureaucratic procedures and additional control in many areas of economic activity. In contrast to the developed countries of the EU and the world, where similar laws have already been adopted, for Ukraine now the key issue of national security is not to control the concentration of private investment, including the foreign one but to attract them. After all, today the state is not able to independently maintain strategic infrastructure facilities and therefore needs total and urgent investment to prevent their complete decline and to ensure their further development.

Currently, excessive over-regulation of economic activity is already leading to the delay in investment projects for years. Besides, the conditions for doing business and investment attractiveness of Ukraine already have very low scores in international rankings. Therefore, the introduction of additional control mechanisms will further aggravate the situation. This means that in the face of a deficit of investment, the country cannot currently afford to install additional filters for the investment inflow in many areas of the economy.

In view of the above, the EBA experts consider it appropriate to return the first draft law for revision in order to significantly narrow the activities covered, namely removing business entities that provide port services, for example, from the scope of this draft law. Regarding the second draft law, it should be rejected based on the results of the second reading. Then a new version should be drafted specifying clear criteria that will allow to include in the critical infrastructure only those facilities and enterprises that really need additional control measures. The government has been talking about debureaucratization for many years – so it is worth implementing it not in words but also in deeds!

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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