Business is the backbone on which the country’s economy rests. According to the experts, Ukraine continues to suffer both from over-regulation and corruption. On the one hand, over the past two years, the government, on the initiative of the State Regulatory Service of Ukraine, has cancelled more than 700 outdated documents that did not affect anything, only preventing businessmen from working. On the other hand, the entrepreneurs themselves, primarily in the localities, still complain both about the corruption schemes they suffer from and the pressure from the authorities. What has already been done and what will be done in the near future to transform the “country ‒ business” relationship into transparent and convenient cities, and in order to start competing for business development not just in words but with real deeds, the State Regulatory Service (SRS) Chairwoman Kseniya Lyapina tells to Opinion.
Kseniya Mykhailivna, for more than a year you have defended the interests of business, step by step introducing mechanisms that allow entrepreneurs to breathe freely. What is remarkable about this year, coming to an end?
My cooperation with business is a continuous constructive process, thanks to which we together find sharp points and try to eliminate them. This year, we worked on a substantial and serious reform in the sphere of state supervision/control. As for me, this is the most successful reform event in the sphere of relations between business and the state. We are talking about new approaches during the control, focused primarily on risk prevention, as a result of which we will receive a systemic reduction of the pressure on business.
At the same time, we still consider hundreds of projects, ranging from regulatory acts of the Cabinet of Ministers, ministries, services and ending with acts of local self-government. At the same time, we closely cooperate with local governments, because the business operates not only in Kyiv but also in other cities of our country. And it should know how to work effectively within the legislative field and feel the changes on the ground.
Recently, you have participated in the Inspection Forum “Perevirok.NET”. How do you evaluate its results?
The main thing is that after the forum, where it was primarily about risk-oriented approaches and the modern methodology of audits, the government intensified its work. On October 31, the Cabinet of Ministers of Ukraine approved the criteria for assessing the degree of risk from business activities in 10 areas: educational activities subject to licensing, electronic trust services, cryptographic protection and technical information recording, nuclear and radiation hazard, urban planning, construction of medium and high-class objects of impact, industrial catching of water bioresources, assessment of compliance with technical regulations, use of intellectual property rights objects, study and use of subsoil. And already on November 2 at the government committee, we considered the instructions of First Deputy Prime Minister Stepan Kubiv on the schedule for approving these criteria for specific areas of activity. Everything should be completed before December 13 of this year.
For business, the interesting question is unified acts of inspections. In fact, this is a kind of check-list, a list of issues on which the audit is carried out. And here it is very important that they are focused and equally understood by both the controller and the businessman to whom this controller comes. These unified acts must be approved before the end of this year. This is a work plan for the near future, and it was the forum that pushed the intensity of work in this direction.
What should be these risk-based criteria?
Every sphere of control has its own. There is no concept of one criterion. They focus on the risks that need to be prevented in each area separately. In ecology these are their risks, in the fire sector, they are theirs. In man-made safety ‒ their own. For example, in the field of quality of education, they will have a completely different character than in the field of financial services. That is, there is no unified understanding of any similar risk criteria. There is a methodology for how to define them. It was developed by the SRS and approved by the government in May of this year. It was discussed during the forum. And in accordance with this methodology, each sphere determines its risks and sets itself a task, which of them it wants to reduce or avoid. And already on this basis, risk criteria for business requirements are formed, which allows determining which businesses are riskier in this area and which are less.
The fight against corruption, despite the large number of specialized bodies, whose activities are precisely aimed at this fight, in our country can hardly be considered successful. Can business get tested without bribes today?
We are contributing and we believe that our part of the fight against corruption is exactly deregulation, reduction of administrative barriers and reduction of interference in doing business. The less the state interferes with the work of the business, the less the officials will have the opportunity to resort to some kind of corruption.
And what about the checks without bribes, then, I think, now many are passing them just like that. It is precisely because both the risk groups and the list of issues that are controlled are settled. It is precisely because there is a law on supervision/control containing Article 10, which protects the rights of a business entity in the verification process. There are grounds for a subject to appeal the check. Therefore, there are a lot of fuses against unlawful claims of a corrupt nature on the part of the overseers. Not to mention the fact that a certain internal struggle is carried out in everybody, thanks to which, from time to time, inspectors are caught on bribes. W are trying to clean the system from all sides.
However, if big business usually disputes prejudice against oneself, because there is something to lose and there is money for quality lawyers, then with a small business the situation is different. If you compare costs, it is easier for it to enter into a corrupt relationship than to seek justice. The same happens in the life of an ordinary person. Let’s say you go to the hospital, what is faster: give a nurse money for help or go through all the circles in order to get this certificate officially? The small business operates according to the same scheme, so corruption is sewn up here very deeply.
It is very important what to check, there are requirements for the business. So we are fighting to make these demands more rational. If we say it very simply, then deregulation is the process of simplifying and reducing the requirements for business, due to which there are fewer corruption risks.
Experts of the analytical center “EasyBusines”, having conducted a study “Bureaucracy Index 18”, argue that small businesses have to perform 63 redundant bureaucratic procedures that are necessary at the state level. It takes almost 500 man-hours and thousands of euros a year. What to do with such bureaucratization?
In this study, it is not the figure of 63 procedures that is interesting, but a comparison with other countries. By the number of procedures, performed by a small business, we are at about the same level as the rest. For example, the same Czech Republic, the Baltic countries. But by the number of hours, spent on their implementation, it is twice as much. Therefore, the number of procedures we have is almost unified with the European Union. The time that is spent on its implementation indicates that all these procedures are still not transparent enough, containing unnecessary requirements. And more time means more money.
And what to do with it?
There is no other way than further deregulation. By the way, not everyone understands what it is. There is even an opinion that if we continue this process, then we will soon have all the food of poor quality because no one can control its producers. And this is an absolute myth. Deregulation is not only a simplification but also, above all, an improvement of all business requirements.
According to the head of the Office of Effective Regulation (BRDO), Oleksii Goncharuk, those 18,000 inspectors that are working now in 33 inspection bodies of Ukraine are simply fixing violations. Do you agree with this?
Before we began to assert these new risk criteria —indeed, this was the case. The purpose of the inspectors was really not to prevent violations, but simply to fix it. I would compare this situation with medicine: it can be aimed at determining the disease in a patient with its subsequent treatment and may be aimed at prevention. Therefore, now the situation is changing, henceforth, the inspection system, which is gradually becoming a service model of supervision, should be aimed precisely at the preventing violations. This is the risk-based approach that I have already mentioned.
But everything cannot change at once, as if by magic, so do we have now a transition period?
This service oversight model is already partially in operation. Why partially? It works in spheres, where they have already developed their own risk criteria and accepted them. The rest must cope until the end of the year. But this is a process that does not have a specific calendar date. For example, the fire risk prevention system already works well now since they have already approved both risk criteria and unified acts. And conduct unscheduled inspections correctly. And these are they, who are already getting the first positive results: fewer violations, at least by the business, fewer fires, fewer risk situations, and the like. But different spheres at different times and in different ways.
I have already said that the Cabinet approved new risk criteria by which the degree of risk from economic activity is assessed and the frequency of planned measures of state supervision (control) for 10 spheres is determined; for 8 spheres, it was approved a little earlier; until recently we had 79 of them, and recently this number has increased to 85. For example, on November 7 of this year, the Law of Ukraine “On Electronic Fiduciary Services” entered into force, by which the administration of the State Service for Special Communications and Information Protection is authorized to exercise state supervision (control) over compliance with the requirements of legislation in the field of electronic fiduciary services. And the State Marine and River Transport Service ‒ the Maritime Administration ‒ is determined by the licensing authority for the transportation of passengers, dangerous goods and hazardous waste by river and sea transport.
That is, we have new criteria for 18 spheres of activity, and in the near future, we expect approval for 55 more spheres. They have even been agreed. Therefore, we expect that in the near future, we will receive new criteria in 73 spheres of activity. There will be 12 spheres that for one reason or another cannot determine their risk criteria.
What are these areas?
One of them, for example, is such a field as aviation control, and it is regulated by international law. Therefore, despite the fact that the supervising bodies are there, they are included in the law on supervision/control, they contain international risk criteria, and their control procedures are international, therefore they do not and will not approve these new criteria.
In addition, this is control in the field of cultural heritage, in the field of financial services and the like.
What sphere of activity was the first to determine the risk criteria?
Fire safety. Representatives of this sphere were the readiest, and they immediately joined in the active work, brought us documents, it didn’t even take long to finalize. And they did the first unified act. Therefore, now they are more ready to conduct such risk-based preventive correct procedures.
The State Service for Geodesy and Cartography quickly worked in two spheres of control: land management and the field of topographic-geodesic and cartographic activities. As well as the Ministry of Economic Development, Trade ‒ in the field of tourism. Their responsibilities include the activities of tour operators. It was in these areas that they first developed and implemented this risk-oriented system.
What array of information will cover the Inspection Portal, which is now in the process of creation? What will it give to business?
This is an electronic system that will work in test mode by the end of this year. It fully covers the entire inspection process that takes place in Ukraine. Everything. First of all, plans, we have scheduled inspections. The comprehensive plan should be approved by November 15, the annual plans of state supervision/control bodies ‒ by December 1. Now all the draft plans have been submitted, they are being corrected, a comprehensive plan has been concluded electronically, this is when several checks are being carried out simultaneously. There are individual plans. That is, everything that concerns the planning of the work of the inspection, on this portal is already in its present form. Also, information has already been entered there ‒ there more than 40,000 entries, but now, probably much more ‒ about the checks that have been carried out. However, until December 31, included, this information is entered by the inspectorate only on its own initiative, and from January 1 of the next year, it will become mandatory. And this portal, where the full information about the checks will be concentrated ‒ that have already been carried out, and those that are only planned, about the consequences of these checks, about the timing, etc. ‒ will work in full force. Do you think this is useful for business?
If the check establishes a violation in the activity of the subject, how will this be reflected on the portal?
In this case, the inspector must fix it by an act and draw up an order for its elimination, giving for this a reasoned period. These regulations will also be posted on the portal. When the deadline expires, the inspection will check for violations. And the result of this re-check will also be highlighted on the portal.
Do ordinary people, who are not related to the business, have access to information posted on the portal? And what useful information can they take from there?
All information on the portal is publicly available: plans, orders for inspections, certificates, inspection reports, regulatory documents. It can be analyzed, the trends can be tracked.
On the other hand, if businessman knows exactly when and what the inspector will come to him, he will be always able to properly prepare for such a visit…
You should not confuse scheduled and unscheduled inspections. We have just talked about the scheduled ones, but there is still a large number of unscheduled ones that are held on certain grounds, and not because someone wanted to. Scheduled inspections are carried out according to a plan that is really known in advance. If we set ourselves the task ‒ not to catch an entrepreneur by the hand on some kind of violation, but to help him make his activities completely legal and safe for the environment and people, then a routine check here is very useful. First, because a business entity, guided by a unified act, can look at all regulatory requirements on the website and independently verify its activities, and then bring it into compliance with legal requirements. And this means that it will become more secure and reliable. So what’s wrong with that?
But unscheduled inspections are carried out both on the basis of complaints from citizens and statements of the entrepreneur himself. Which, by the way, happens quite often. For example, when a business is sold, its new owner often makes a request for an unscheduled inspection, because he or she wants to know in what state he or she is buying this business.
Permits for unscheduled inspections ‒ your prerogative, were they issued a lot this year?
Yes, in those spheres for which a moratorium on scheduled inspections is temporarily in effect. That is, planned and unscheduled inspections have existed and will continue to exist. Unscheduled are held on certain grounds, which are spelt out in the law. The moratorium ‒ in various forms ‒ has been in effect for the past five years. The last two years ‒ last year and this year ‒ this is a law on temporary peculiarities of exercising control. And there is this mechanism, which prohibits scheduled inspections in a fairly wide range of spheres of control. And unscheduled can be conducted on the basis of complaints of citizens through coordination with the State Regulatory Service. It is this mechanism that is now in effect, but it is temporary.
Compared to last year, were there more complaints this year?
Last year 2,233 approvals were granted, in this ‒ already 2,530 approvals.
How to protect consumers from unscrupulous businessmen, which will be checked only transparently?
By the way, for consumers, I draw attention to the fact that consumer rights protection is not under a moratorium, that is, no coordination is required in the SRS. The complaint of a citizen to the State Committee for Helping the Service ‒ and they must respond accordingly to this complaint and go for a check. This is the case if the complaint is justified since the requirement for the validity of the complaint is contained both in our agreement and in any other service in which the complaint arrives.
And who determines whether a complaint is valid or not?
The list of grounds is actually defined by the law. The validity of the complaint should be determined by the body of state supervision and control. If the sphere of control is under the moratorium, the authority should send us an appeal, justifying the need for verification.
And if you need an example… Let’s say if a consumer walks down the street, looks at eggs, meat or milk notices that they have risen in price, and immediately writes a complaint in his defence, then this is unreasonable. But if a person justifiably proves that the business misled him or her, provided the wrong product, which was guaranteed, or the quality of the goods was violated, etc., that is, sets out specific facts on what exactly one’s right as a consumer was violated, then this is justified. The State Service of Ukraine on Food Safety and Consumer Protection reacts at this complaint and organizes a check. Without, I stress, any agreement with the SRS.
You offer the Administration of the seaports of Ukraine to return to the development of a more simplified method for calculating port charges. What is wrong with the existing one? And what will it give?
Today, in the seaports of Ukraine there are a number of serious problems, in connection with which our seaports are in a situation, where international insurance organizations have identified them as very risky and require an increase in insurance payments if the ship has to go to Ukrainian ports. This is an extremely negative situation, which is now causing very serious business anxiety. And this is addressed by the American Chamber of Commerce in Ukraine, and the European Business Association and other associations. Particularly affected grain growers.
Therefore, today there is a deep problem in seaports. The experts of the World Bank, after analyzing the problem, stated the fact that the port charges are too high. Even though rates in seaports have already been reduced, their level is still high. In addition, there is no understandable transparent system for financing the infrastructure of seaports, there is no clear definition of what exactly relates to the infrastructure of seaports, that is, there is a whole tangle of acute unresolved issues.
The biggest problem, in my opinion, is the relationship between ports and environmental inspectorates. They are not ordered and not settled. The biggest stumbling block is around ballast water. The environmentalists take so-called ballast water samples, then ‒ on the basis of laboratory studies ‒ impose high fines. This creates a lot of misunderstandings since fines are imposed on absolutely new ships that do not have any violations. This is due to the fact that neither the process of sampling, nor the process of their analysis, nor the comparison of the results with the harm done, is regulated. Now, this process is chaotic and costs a lot of money. First of all, grain growers, metallurgists say about this.
Is it shown somewhere how much they lose?
They lose billions! I’m not talking about the fact that Ukraine is losing any hope at least for transit. And not only transit but generally ships prefer to use the services of other ports. On the same Black Sea there are Romanian and Bulgarian ports, and the mainstream, both freight and passenger flows, goes there. And does not go to Ukraine. With this approach, we ourselves cut one of the major factors of the country’s economic development. Therefore, we have created a working group that is already working on finding solutions to this problem.
Do we have now any specific suggestions, how to solve it?
There is certain groundwork, but it is too early to make it public since the decision must be a compromise. I will note that the problems that have accumulated in the ports are dealt with in a comprehensive manner: the issue of port fees is raised, and problems with environmental inspections and the like. To resolve the situation, we build a solution that is balanced between business and management and control bodies.
Do ecologists contact you?
Due to the fact that they are not actively participating in the work of our working group, they do not go into contact properly. Once they came and never came again.
Did you invite them?
Of course. We have already gathered many times, and we invite them each time.
In late September, a scandal erupted around the contracts for the disposal of chicken litter at the Chornobayivske poultry farm of the Avangard agricultural holding in Kherson region (village Skhidne of Bilozirsky district) for an “unknown substance with a specific smell”. They opened criminal proceedings. At the same time, the regional eco-inspectorate sent a letter to the SRS with a request to give permission for an unscheduled inspection. Did you give such permission? Do you know what the results of the test showed if it has already been carried out?
It was not allowed. The main reason for our refusal ‒ it is criminal proceedings. The question of the inspection should be decided in the framework of this production, and not on the basis of the citizen’s appeal.
Again, environmentalists accuse you of the fact that in 60% of such cases you do not give permission for an unscheduled inspection.
Which ones? Introduce me to those environmentalists.
In particular, such statistics are provided by the Kyiv Ecological and Cultural Center…
We have published our information ‒ not emotional, but statistical ‒ on our website, as soon as such a question had arisen. How many were agreed or declined? And now it is open to everyone. Typically, 70% of requests for verification in the field of environment are coordinated by the SRS. 30% ‒ were declined, because they were not substantiated. Some of these complaints, for which we refused to conduct an inspection, people process, re-submit to the SRS, have already been substantiated, and we will reconcile them. This is actually a routine daily work that never stops.
In September, the SRS refused Ukrzaliznytsya in raising tariffs for the transportation of cargoes and empty wagons. Do they finalize the proposed documents?
Ukrzaliznytsya has plans to increase the tariffs. Moreover, it separately considers the various components that affect the cost of their services. Each time we work with a specific document, analyze its economic impact, and our decisions are based solely on economic analysis. We refused because these increases could have hit the domestic business, which is a consumer of this service. Particularly, grain traders could suffer. They even made a serious statement about the problem, to which the liberalized component in the tariff for freight transportation led, at a meeting of the Cabinet of Ministers. This component ‒ the cost of wagons ‒ is not regulated by government agencies, the railway sets it independently. And it established by raising 50% in one night. This will affect primarily grain traders, striking both the cost of their transportation and their profits. And their income is the potential next harvest. That is, in this case, there was a significant systemic impact, and we try to balance such issues, where we can.
According to estimates of “Ukrpromzovnishekspertyza”, if the new tariffs were approved, it would reduce the competitiveness of our business, increasing transportation costs by 11%. Is Ukrzaliznytsya ready to compromise here?
Only one factor could increase business expenses so much ‒ the classiness of wagons, and there are a lot of factors influencing the price impact of Ukrzaliznytsya. And each of them will affect the overall state of the economy. As for the situation, in which grain traders can find themselves because of the unregulated cost of cars, a corresponding consultation tool was created ‒ a working group ‒ chaired by First Deputy Prime Minister Stepan Kubiv, which included representatives of industrial enterprises, agricultural and other businesses that use the transportation service. And they all now consult with Ukrzaliznytsya, looking for a way out.
It is hard to say. But there is such a process.
Kseniya Mykhailivna, how do you personally consider these new licensing conditions, which are being worked on by the Ministry of Infrastructure and which will regulate passenger traffic, will it really help a huge number of road accidents?
No, in my opinion, all this fuss will in no way affect safety on the road since, and I am convinced of this, those organizations that owned buses that had accidents in July had corresponding licenses. This question is a joint mutual responsibility and behaviour on the roads, as it is in European countries.
Recently, there has been a lot of information about open data on the regulatory policy, but very few people actually understand what is being said. Will you explain?
This, in my opinion, is the second know-how that we introduced this year, and we can see the consequences of its functioning in the future.
This year, changes were made to the Resolution of the Cabinet of Ministers No. 835. All regulatory authorities should publish the list of decisions shaping the business climate of the country on the Unified State Portal of open data data.gov.ua. Open data is often confused with the publication of information on the websites of the government. In fact, it is information in open formats, which allows its convenient and automatic processing, free use for personal or commercial purposes.
The State Regulatory Service together with the experts of the project “Transparency and Accountability in Public Administration and Services”/TAPAS, on the initiative of the Regulatory Map of Ukraine project, have already developed the first in Ukraine standard for a set of open data of regulatory bodies. Given the relevance of the introduction of this standard by regulators, the SRS, together with the State Agency for E-Government, conducted an exercise in September to introduce the first in our country standard set of open data of regulatory bodies.
Earlier, we supported a public initiative to create a regulatory map of Ukraine. This unique solution with using open data will automate the processes of monitoring the regulatory activities of local governments and set up regulatory oversight with minimal resources, ensure interaction of stakeholders and help to reduce the administrative burden on business, as well as corruption. It will be easy to find out, for example, the level of business overregulation in a particular city and how local governments implement the provisions of the regulatory legislation, do they really care to make it easier for entrepreneurs to do their business. It is an open, transparent, publicly accessible regulatory policy that is a key to developing the economy and attracting investment.
And how did the local governments perceive this idea?
Differently: some in a good way, some are thinking about it, and there are those, who prefer not to notice it yet.
Who took it better?
Quite unexpectedly, Vinnytsya became a champion. They were the first to start this process; one of the deputies of the Vinnitsa city mayor deals with it. And they already not only publish these data, but they have also already begun an active process of revising outdated regulations. In order to update our base so that it becomes modern, not burdensome for business so that entrepreneurs want to work in Vinnytsya. In fact, this approach is very correct, because our future is the competition of cities for business development.
What cities are willing to learn from Vinnytsya?
Chernihiv has already begun work. Chernivtsi is ready to start. Zhytomyr wants to be included, and at the level of the Regional State Administration, it will be able to push its local councils into this process. That is, the process has begun, but as always in Ukraine, not very fast.
How long will it take everyone to start?
The experience of Vinnytsya shows that in half a year they have already managed to see a number of their acts. That is, if there is a desire, and in a year you can make a complete revision of a number of their local acts. And for united communities and small cities, it is even faster, because they have less regulatory powers and regulatory acts. Big cities, where there are many regulatory powers, will take a little more time, but it all depends on the desire of local governments to solve this problem.
Is the work of the State Regulatory Service already planned for the next year?
It is extremely important for us to complete the reform of supervision (control), so that the new system of state supervision (control), the electronic inspection portal, will fully work. At the same time, we need to get feedback, so that we could, on the basis of this portal, conduct our control checks on the controllers. To establish when they violate procedures. We have such powers, and with the electronic system, we will do this much faster. And to further develop open data, because now we are focused on local government. But open data is also a part of the work of the central government.
Therefore, we will plan regulatory activities in government bodies. We will communicate methodologically how better to publicize this plan, and then push it towards full disclosure of regulatory information. Because, on the one hand, the central authorities are now promulgating their adopted acts, registering them. There is a register of the Ministry of Justice, there is a database of the Verkhovna Rada, where the entire regulatory framework is registered. It is all there, but regulatory information is much broader than the simply registered act. This is also information about the indicators that were in the analysis of regulatory influence, that is, what you wanted to achieve when you took this regulatory action. And data on tracking the effectiveness of this act, does it work or not. If it works, then does it work in the right direction or not.
That is, does it interfere with living or not?
Something like that. And when we reach the full publication of this regulatory information, it is then that the automatic process of viewing will begin since the outdated acts, obviously not affect anything, do not bring any effect, must be cancelled. But the acts that bring the opposite effect to the intended, should be corrected. That is how the regulatory system of the state should work.
Do we already know what should be corrected in the near future?
There is a general plan for deregulation, where you can see what needs to be changed. But I am not a supporter of a lightweight approach in this process when some separate acts are pulled out and are corrected. For two years already, we have been conducting deregulation Cabinet meetings, repealing even hundreds of outdated acts that have not influenced activity for a long time but were part of the regulatory and legal field of Ukraine. But until now, all this is done randomly, but it must be done on the basis of performance analysis. Therefore, next year we will set ourselves the task of analyzing performance, including this analysis in open data so that businesses can get acquainted with the results of performance analysis and influence the viewing of those regulatory acts that primarily affect the economy as a whole.
Text by Larysa Vyshynska