The financial crisis of 2008-2009 in Ukraine caused an abrupt fall in small and medium sized enterprises’ (SMEs) access to bank loans because of economic recession, financial difficulties for SMEs and accumulation of bad loans by banks. Now banks slowly increase SMEs financing, but credit conditions are much tighter. Banks increase their requirements towards SMEs financial statements and collateral, they more often refuse SMEs application for loans and investment loans to SMEs considerable declined. SME lending is a perspective business for banks, and they are ready to increase amount of loans to SMEs in 2013-2014 even under the current moderately pessimistic economic expectations. However, impediments to recovery of SMEs access to bank financing are serious: slow economic growth, still high amount of bad loans, slow progress in strengthening creditors’ rights, weak and non-transparent business of SMEs. SMEs name such impediments as high interest rates and collateral requirements. Given the prominent role of SMEs in economic development, state policy is needed to increase SMEs access to financing. However, direct state financing of SMEs are very small and is not able to affect SMEs access to financing. At the same time, state initiatives to strengthen legal and business environment to stimulate bank lending to SMEs have had little progress for the moment.
Land ownership issues in Ukraine are painful because they accumulate contradictory social and business interests. Therefore, while introducing the land market, Ukraine has to choose between highly productive agricultural production and social welfare in rural communities. International experience of land reform in countries that are constantly used as examples for Ukraine (Russia, Moldova, Georgia, Baltic countries, Poland, Hungary and Brazil) confirms this. In each of these countries private ownership and land market were formed with a specific purpose – either to achieve a high level of agricultural production or to develop a mechanism of social protection for population living in rural areas. Unfortunately, it is hard to combine these two goals.
Common Ukrainians with salary near UAH 2-3 thnd. contribute to the budget near UAH 25 thnd. per year. To large extent, millions of such contributions ensure 2/3 of budget revenues. Still only few in our country realize the chain «my money -> taxes -> public spending». What more, the majority of Ukrainians believe that budget collects taxes only from large businesses and that is why there is no reason to care about «other people’s» money. Such perception of the world is the main reason of alienation to state waste and corruption.
The public finance system is based on small contributions of millions of Ukrainians. In fact, common Ukrainians, not industrial giants or oligarchs, maintain financially huge state apparatus, cover state procurements and pay social assistance bills. Unfortunately, the chain “my money → taxes → government spending” is not that obvious for wide audience. Only private entrepreneurs recognize this fact bringing taxes to state treasury by their own. However, unless taxes common employees and consumers pay, government would lose two-thirds of budget revenues.
Over the last twenty years education system of Ukraine did not see any reforms. The key weaknesses of the system are limited autonomy of educational institutions, inefficiency and corruption. All these problems are interrelated and lead to worsening of the education quality. In 2010 the President economic reform program launched a new attempt to reform education system and the main focus of the reform was to strengthen the competitiveness of Ukrainian education. However, after two years of reformation efforts in this area results look very contradictory.
In 2011 Ukraine launched a large-scale reform of primary healthcare. Our country was seriously delayed with implementing family healthcare system compared to other Central and Eastern Europe countries, which started reform in the ‘90s, and even compared to some CIS countries which joined the trend in the ‘00s. As we see from this experience, reforming primary healthcare is time-consuming and success is not secured. Nevertheless, example of Estonia showed that real progress can be achieved even with that challenging task.
The current stance of the housing sector in Ukraine satisfies neither residents due to poor services, nor the state, which pays large subsidies to the sector. The needed changes are usually substituted with technical modernization, or even are narrowed down to simple tariffs increase what should, on one side, cover the cost of the services, and, on the other, should envisage resources for renovation and capital investments. However, even for successful technical modernization of the housing sector and imposing economically justified tariffs a fundamental reformation of “the rules of the game” is critical i.e. institutional reform is needed. The crucial issue of such reform is the property rights.
Already two years have passed since the day Viktor Yanukovich announced new reformation course and presented Economic reform program 2010-2014 «Prosperous society, competitive economy, effective state». The ambitious plan outlined considerable changes in economic system and even in case the plan was partially implemented, Ukraine could reach another level of development. A Coordinative Center for Economic Reforms had been created at the President Office and active work had started. However, after two years of active changes and contradictory results a question arose – what, out of all implemented measures, was indeed for good and deserves to be called «reforms».
Inter-budget relations are a kind of technical problem which is of poor interest for general public. However, the point is that all major problems, related to the life quality of common people (healthcare, education, social protection etc.), closely correlates with the quality of so inconspicuous inter-budget relations issue.
In general, public opinion treats poor funding as the main reason for bad public services quality. However, this point of view is too much simplified. Almost all countries face budget limits problems (even the richest one). However, what really improves public service quality under budget limits is an adequate system of incentives and efficient surveillance over the public funds use. In this context improvement of inter-budget relations mechanisms are crucial for Ukraine.
The health-care reform gained momentum in 2011. For the first year of the reform implementation it is subjected to the fierce criticism by public. In the comics-presentation that is based on the report “Health-care reform: taking first hard steps” we talk about why the reforms are needed, the results of the first years of the reforms and whether public should attempt to stop unpopular reforms.