Without a doubt, it will take more than a decade and tremendous efforts before Ukraine has a chance of joining the “free” echelon

published this month points out that the country still lags far behind on the economic front.

The study, an index featured in this week’s issue of the Post, indicates that Ukraine appears not to have made major progress of late in establishing a business-friendly environment.

Conducted by the United States-based think tank Heritage Foundation, in cooperation with The Wall Street Journal, the study ranks countries according to an index measuring ‘economic freedom,’ a mark designed to reflect how many barriers businesses face.

The index rates countries’ levels of business, monetary, financial, investment, trade, labor and fiscal freedom. Freedom from government and corruption, as well as the strength of property rights, are also measured.

A score between 50 and 59 percent means that a country’s economy is “mostly unfree.” Higher scores label a country as “free,” while lower indexes indicate that a country’s economy is not “free,” and thus significant barriers face businesses and entrepreneurs.

According to the Foundation’s 2007 Index of Economic Freedom, which was released on Jan. 16, Ukraine scored 53.3 on a 100-point scale, ranking 125th out of the 157 countries rated. In this year’s 13th annual Index of Economic Freedom, Ukraine scored 2.2 percentage points lower than last year, the Heritage Foundation reported. In the 2006 Index of Economic Freedom, Ukraine was ranked 99th of 161 rated countries.

The big picture is that Ukraine has not really made progress relative to other countries, continuing to rank amongst the “mostly unfree” batch, along with, surprisingly, neighboring Poland and the usual suspects, such as Cameroon, Ethiopia, Haiti, Moldova, Nepal, Nigeria, Russia and Uzbekistan.

Higher up in the ranking with so-called “moderately free” scores are other former Eastern Bloc countries, such as Armenia, the Czech Republic, Georgia, Hungary and Kazakhstan.

Nevertheless, the so-called “mostly free” countries include former Soviet republics like Estonia, Latvia and Lithuania. And higher up are the economically “free” countries, such as powerhouses Hong Kong and the United States.

Without a doubt, it will take more than a decade and tremendous efforts before Ukraine has a chance of joining the “free” echelon, but climbing up the ranks toward Hungary and the Baltic states is not mission impossible. It would just require a show of strong political will and the execution of much talked about reforms, many of which have been on the backburner for a decade.

Where to start?

The study rated Ukraine’s fiscal freedom as high, with a relatively low personal income tax of 15 percent, top corporate income not exceeding 25 percent, and overall revenue from taxes not compromising a high percentage of the nation’s gross domestic product.

However, Ukraine is weak in many other key areas.

The government continues to interfere in markets. Take for example the government’s decision this year to slap restrictions on grain exports and its inability in more than a decade to push through a clear tax system. VAT is still not refunded in full and on time to exporters.

Insiders say only the privileged few who have connections to top government officials get timely refunds. Corruption remains rampant, property rights insecure, and regulations put unnecessary burdens on a burgeoning business community, which is ever more eager to pay its full share of taxes.

Business has pleaded for fair rules, openly expressing its desire to come out of the shadows, but top politicians continue to stick to the old ways of doing business, where influence clears a path through the bureaucratic minefields.

Ukraine can make a major leap, rising up in the rankings in next year’s Index of Economic Freedom. Everyone knows what needs to be done. It is only a question of whether the politicians in charge set these reforms, or their own ambitions, as the priority. Where there’s a will, there’s a way.

We urge Ukraine’s divided leadership to put politics aside and unite around the goal of pushing forward with these key reforms. After all, it will benefit them by garnering more public support from potential voters, as opposed to demoralizing the electorate ever more toward radical politicians with empty promises.