KYIV -- It now takes only 20 minutes to register a business in Ukraine. Since March, entrepreneurs have been able to open and close businesses through a new online portal that the Ministry of Justice and the State Agency for E-Governance are behind.
The new service is proving popular: in its first six months, it was used almost 4,000 times. On average, 20 applications are processed daily, with the number increasing monthly.
The new portal gets good marks from the business community. Andy Hunder, president of the American Chamber of Commerce in Ukraine, says the business community sees it as a “positive step forward.”
“The introduction of e-services is perceived as a transparent tool to mitigate corruption risks, as it eliminates direct contact with officials, and simplifies the procedures, minimizing the bureaucratic aspect,” Hunder said.
Registering a business is one of the most popular administrative services in Ukraine. But, before the new system was put into place, it was an opportunity for corruption.
Long lines and administrative backlogs in state registration bodies are the main reasons for “alternative attempts” to resolve transactions faster. Additionally, direct face-to-face contact with administrators responsible for registrations, jumping the queues, and facilitating creative ways for more efficient access to state registers and administrative services are among the most common sources of corruption.
A Ukrainian saying, “Where there is a queue, there is a way without a queue,” depicts this widespread phenomenon. Cases of illegally-created shadow registers (including electronic ones) where registration spots are sold to entrepreneurs are also common and open avenues for corruption.
The law requires business registration to be provided free of charge and be accessible to all without with any difference in efficiency. Nonetheless, the human factor and deficiencies in the system make space for “mediators.”
For example, if a businessman initiates a Google search for closing a business, the search first displays lists of state registration mediators offering liquidation services at UAH 1,200 to 1,500. A business can be registered for UAH 750 to 950.
While it is not entirely illegal to provide such services, intermediaries tend to have their own registrars that provide exclusive, paid access to a given service, thus endorsing parallel systems and unequal access to basic services.
The new portal wasn’t Ukraine’s first attempt to streamline the process. An online business registration service was first introduced in 2012. However, software and technical limitations prevented the system from working effectively. By 2015, the portal had ceased accepting applications altogether. Registering or terminating a business was again only possible by applying in person, in paper form, or by post with notarized signature.
Last year, several policies were introduced to fix some of these inefficiencies.
First, entrepreneurs were allowed to register irrespective of their place of residence. Second, the Cabinet of Ministers identified business registrations and terminations as priority services for automation.
East Europe Foundation and InnovaBridge Foundation, with Swiss aid, began working closely with key state authorities to reopen electronic registrations.
The State Agency for E-Governance, East Europe Foundation’s primary government partner, held meetings with the Ministry of Justice. A memorandum of cooperation was signed to allow the translation of several services into electronic format. EEF provided technical assistance.
Cooperation with the Justice Ministry was rapid, enabling a gradual transfer of services, including business registrations, to its online House of Justice portal.
The new service helps prevent corruption. It removes direct contact between administrators and applicants. It takes away opportunities for illegitimate duplication of service provision by intermediaries. It issues standard, official receipt for processed business applications.
It simplifies the process for people with disabilities. The full procedure can be carried out without the applicant having to visit a registration office.
Building public awareness is a key challenge. Without a comprehensive public information campaign, citizens may be unaware of the new service.
If citizens are unaware, they may not distinguish between legitimate state e-services and illegitimate, competing non-state portals such as iGov.org. This can be perilous. The latter often offer negative experiences and duplicate services through parallel systems.
Nevertheless, the new portal is something that entrepreneurs, anticorruption activists, and reformers should fully embrace.
Victor Liakh is president of the Kyiv-based East Europe Foundation and Olexiy Zelivyanskyi is an expert on electronic services at East Europe Foundation.
This article first appeared on the Ukraine Alert site of the Atlantic Council
Posted Oct. 27, 2017