Ukraine's leading English-language newspaper since 1995

Ukraine’s business climate has never been exemplary, and it seems to be getting worse.

Ukraine’s business climate has never been a model of transparency, simplicity and helpfulness to investors. But conditions for doing business have gotten even worse this year.

Ukraine slipped by 10 points in the World Economic Forum’s Global Competitiveness Report 2009-2010, to 82th out of 133 countries. Ratings don't tell the whole story, but this assessment rings true. The nation’s foreign direct investment dropped by 66 percent in the first half of this year, to $2.7 billion, and we don't think the recession is the only reason.

This week's Kyiv Post has three stories, on pages 1 and 3, that expose the nightmarish assaults on businesses and property owners in Ukraine. There are many other similar stories we could be writing about.

Higher taxes, harassment from regulators and other government agencies, lawlessness and corruption are just a few of the complaints coming from domestic and foreign investors. Businesses say that law means nothing. Due to vague laws and corrupt courts, property rights are not guaranteed. Thugs could show up at your doorstep with a court order and reclaim your home.

Banks, homes, businesses and even industrial giants are threatened. About 2,500 raider attacks are expected to be registered this year by the Anti-Raider Union of Entrepreneurs, an association of 300 businesses. The majority of such cases go unreported, however, as most of the takeovers happen to small businesses that have little means to fight.

Taxes are getting higher and more complicated. The State Tax Administration has said most foreigners working in Ukraine would have to pay more. Thousands of Ukraine’s private entrepreneurs had to go to court to cancel an additional duty to the Pension Fund earlier this year, while exporters continue having trouble reclaiming value-added tax refunds due them. Moreover, taxes are collected upfront to help cover the 13 percent budget gap expected by year’s end.

Some tax hikes, however, like the excise on alcohol and tobacco, can be welcomed as a means to improve the nation’s health while filling the budget. But they still remain among the lowest in Europe.

In the muddle that is Ukraine’s business environment, courts, prosecutors and law enforcement should play a key role as impartial referee, protecting investor rights by upholding the rule of law. Instead, Ukraine’s judicial system is producing more material for jokes than justice. On Sept. 22, a Kyiv judge in the Pechersk district banned advertisements against Yulia Tymoshenko, only to cancel his own decision less than two weeks later after the prime minister withdrew her complaint.

There's so much to do in this nation, but nothing will improve without a trustworthy judicial system. Salaries for judges, prosecutors and police need to be raised to reasonable levels. With many judges and cops currently earning only hundreds of dollars per month, how else could they survive without collecting bribes? These salary increases should be accompanied by stiffer enforcement and penalties against bribe-takers. But this is only a start.