92373 COUNTRY HIGHLIGHTS UKRAINE 2013 The World Bank interviewed a representative sample of the private sector, composed of 1,002 establishments, between January and November 2013. The Enterprise Survey covers several aspects of the business environment as well as performance measures for each firm. Below are the main highlights from the survey. Firm performance indicators point to a significant deterioration over the last five years The Enterprise Survey (ES) data indicate that firm 20 performance in Ukraine has significantly deteriorated over time. Compared to ES data 15 collected in 2008, real annual sales growth significantly decreased, from 18.3% in 2008 to Percentage 10 -2.6% in the 2013 survey. A similar negative trend is observed in employment growth, a drop from 5 5.4% to -3%, and in labor productivity, a drop from 2013 UKRAINE ENTERPRISE SURVEY 14% in 2008 to -0.4% in 2013. Although annual 0 Real annual sales growth Annual employment Annual labor productivity labor productivity growth in 2013 is negative, it is (%) growth (%) growth (%) -5 still higher than the average for lower middle income countries. Ukraine2013 Ukraine 2008 Lower middle income Several access to credit indicators also reveal a deterioration over time Firms’ access to credit seems to have worsened over 90 200 time in Ukraine. The share of private firms with a 80 bank loan or line of credit fell between 2008 and 70 150 60 2013 to levels below the average for lower middle Percentage Percentage 50 income countries. Correspondingly, firms turn to 40 100 their own funds as a source of financing: the share 30 of fixed assets purchased with internal funds 20 50 10 increased from 59% to 67%. Collateral 0 0 requirements have also become stricter over time. Percent of firms with Proportion of a bank loan or line of investments financed Value of collateral needed for a loan As a percentage of the loan value, this requirement (% of the loan amount) credit by internal funds (%) increased from a fairly high level (by international Ukraine2013 Ukraine 2008 Ukraine2013 Ukraine 2008 standards) of 138% to an even higher level of 161%. Lower middle income Lower middle income The time tax imposed by regulations has increased despite improvements in selected indicators tax” the percentage of senior management The “time tax”, 25 160 time spent dealing with regulations, has increased significantly between 2008 and 2013. It increased 140 20 from levels that were already high compared to lower 120 middle incomes countries, at around 11% in 2008, to 100 10 Percentage 15 close to 20% in 2013, one of the highest in the world. Days 80 8 Despite the overall increase in the time tax, the data 10 60 reflect remarkable improvements in selected 40 regulatory burden measures. In particular, the 5 average time that it takes to obtain a construction 20 permit decreased from 135 days to a little over one 0 0 Senior management time spent Days to obtain Days to obtain day, and the time to obtain an operating license was in dealing with requirements of operating license construction-related reduced in half, from 31 days to 16 days. government regulation(%) permit Ukraine2013 Ukraine 2008 Ukraine2013 Ukraine 2008 Kazakhstan2013 Lower middle income Ukrainian firms faced a significant increase in the level of corruption 60 Th ES d The l point data also h constraining i to another f i i factor of the business environment: corruption. Bribery 50 Incidence, defined as the percentage of firms facing 40 at least one bribe payment request when engaging in Percentage 30 six different transactions for public services, permits, or taxes, is significantly higher than in lower middle 20 income countries or than the average for all countries 10 with ES data. The same pattern is observed with 0 Bribery Depth which measures the pervasiveness of Bribery incidence (% of firms Bribery depth (% of public experiencing at least one bribe transactions where a gift or informal corruption by computing for each firm the payment request) payment was requested) percentage of transactions in which bribes were requested or expected. Ukraine2013 Ukraine 2008 Lower middle income All countries Female inclusion in the private economy decreased over the last five years 2013 UKRAINE ENTERPRISE SURVEY 50 Female inclusion in economic activity has also 45 declined in Ukraine over the last five years. The 40 percentage of firms with one or more female owners Percentage 35 and the percentage of firms with a female top 30 manager decreased significantly since 2008 to levels 25 20 below or at par with international levels. The 15 proportion of women in the private sector workforce 10 also decreased in the last five years but it remains at 5 higher levels than international averages or the 0 Percent of firms with Percent of firms with a Proportion of permanent average for lower middle income economies. female participation in female top manager full-time workers that are ownership female Ukraine2013 Ukraine 2008 Lower middle income All countries Access to finance and corruption were the top obstacles chosen by the business community Prior to the start of the Euromaidan protests,protests Access to finance Ukrainian firms reported access to finance and Corruption Tax rates corruption as their biggest obstacles in the business Political instability environment. These concerns correspond to the Informal competitors Tax administration objective findings discussed above regarding finance Access to land and corruption. In 2008, respondents indicated Customs & trade regulations Poorly educated workers political instability as the top business environment Licensing and permits obstacle. However, during 2013 finance and Labor regulations Electricity corruption, along with tax rates, have overtaken Courts Ukraine2013 political instability as the primary concern. Seventy Crime, theft and disorder Ukraine2008 Transport percent of the private sector chose one of these four 0% 5% 10% 15% 20% 25% items as their top obstacle. Percentage of firms The Enterprise Analysis Unit is a joint World Bank and IFC team of economists and survey experts specialized in private sector development. Surveys implemented by the team reveal what businesses and firms experience across the world by interviewing representative samples of the formal, non-agricultural, non-extractive, private sector with 5 employees or more. The resulting globally comparable firm-level data is used to construct business environment indicators and measure firm performance. The findings and recommendations help policy makers identify, prioritize, and implement policy reforms that support efficient private economic activity. For more information on the survey visit http://www.enterprisesurveys.org Generated using Enterprise Survey data as of April 9, 2014