Statistics show serious problems for small businesses (07/19/98)

Statistics show serious problems for small businesses

Eastern Economist

KYIV - Three different sets of statistics released on June 30 paint a bleak picture for Ukrainian entrepreneurs.

Speaking on behalf of members of the Ukrainian Union of Small and Medium-sized Businesses, President Vasyl Kostytskyi said that 4,000 entrepreneurs in Ukraine are forced into at least some illegal activities. The current tax system, he argued, effectively imposes a 75-90 percent tax rate on businesses, "preventing them from operating normally and properly paying taxes."

He also spoke in support of some of the economic decrees recently signed by President Leonid Kuchma, including one that simplifies procedures governing the registration of enterprises. Mr. Kostytskyi added that the Cabinet of Ministers is preparing decrees to regulate tax officials, an idea which also has the support of the UUSMB.

Meanwhile, according to a study conducted by the Ukrainian Foundation for New Economy, 41percent of heads of large- and small-scale privatized enterprises say they are having serious problems operating in Ukraine's marketplace. According to the questionnaire, which was answered by 441 enterprise directors in 25 oblast centers, 79 percent of respondents feel that the business environment is unfavorable.

A similar number - 73 percent - believe that having personal connections is the best strategy for defending one's interests before central and local government representatives. The state's privatization program - which allows citizens to exchange privatization certificates for shares in enterprises - was characterized as a failure by 63 percent of respondents.

Finally, the Ministry of the Economy reported that the number of JVs operating in Ukraine has shrunk by 212 companies in 1998. About 3,500 joint ventures are operating in Ukraine. Ministry experts confirm that there are 133,000 functioning small businesses in the country, although the number of registered small business companies is 2.5 times larger. Small and medium-sized companies employ 1.2 million Ukrainians. There are about 900,000 one-man businesses in Ukraine.