The ease of connection to electricity networks is one of the key aspects of business and economic freedom. In Ukraine, this process is so overwhelmingly complicated and costly that it alone has been dragging us down the World Bank’s Doing Business ranking. In 2019, out of 189 countries analyzed on an annual basis, we were 128th best country for getting a connection to electricity networks. We haven’t moved up since 2016.
Our excessive bureaucratization of key regulatory processes and lack of transparency have been detrimental to our economy, our businesses, and our people. As we seek to rebuild the economy after COVID-19 and improve our global standing, we need to integrate a completely radical pro-business narrative into every branch of government. The Office of Simple Solutions and Results (OSSR) has been working tirelessly to uproot the soviet socialist approach in Ukraine, and making it easier for businesses to get connected to electricity networks, has been one of our priorities.
The procedure for connecting to the electricity grid is complex, bureaucratic, and time-consuming. In some cases, it can take years. To be more specific, on average, it takes 267 days, or about 66 weeks, to get electricity in Ukraine. For aspiring small bakeries or production rooms (shops) that is a real quest for survival. By comparison, in Russia, it takes only 38 days. Ukrainian entrepreneurs are overburdened by the system that seeks to block their activities from the start or entice corruption.
At the same time, the cost of connecting to electrical networks for business is one of the highest in the world. This negatively affects the overall position of Ukraine in the ranking, slows down business development, and reduces the investment attractiveness of the country as a whole. The reform that we put together would help us substantially decrease the cost of connection: for standard connection – by 20-25 percent, and for non-standard ones (more used by businesses) – by 30-40 percent.
Aside from that, currently, applicants need to submit 17 documents to get a connection. Our top priority should be to ensure that grid connection services are provided to companies in the shortest possible time and in the most convenient and simple way. This will help strengthen Ukraine’s competitive advantages and its attractiveness to foreign investors. Under our plan, only one document – an application as such – would be required.
When procedures, rules, and regulations are clear and understandable, starting a business is easier not only for large companies but also for smaller ones, which have less capital and resources. One of the major challenges is the complex and bureaucratic procedure for the registration of land rights required to place energy facilities makes it extremely difficult to place energy facilities. Combined with non-transparent and time-costly coordination processes among interested parties, these cancerous areas are among top reasons why we lag behind advanced countries.
The first step would be to reduce the number of intermediaries in the process and create a “single window” for issuing data and getting approvals from authorities and local government, municipal services and enterprises. This move, in particular, would help us reduce corruption risks: a large number of steps and complex processes make the system conducive to corruption. Prospective businesses should be treated as value creators by the government system, and the latter should be focused on enhancing their role as such by not putting brakes on their development.
The pursuit of transparency is ingrained in the reform we propose, and for that reason, the state should guarantee open access to urban databases and other source data. This also ties into the urgent need for clarity and cost-efficiency. In our information age, monopolizing access to government data that is instrumental for business activities is completely backwards and unjustified.
Now, in order for the getting electricity reform to be successful, government officials need to be brought to responsibility if they fail to cooperate with the business. This is why we propose to introduce administrative responsibility for failure to ensure data access. This would create a much-needed and long-overdue environment of liability and cooperation. Bureaucrats need to feel like it is in their self-interest to help businesses get electricity faster, and the suggested responsibility clause will leave them no choice.
We are grateful to have worked with the Verkhovna Rada Committee on Energy and Housing and Communal Services and the National Commission for State Regulation of Energy and Public Utilities on putting together a comprehensive and innovative draft law. If passed and implemented, it will reduce the time needed to get electricity from 270 days to 97 days and cancel unnecessary bureaucratic procedures. It is one of those reforms that has been unilaterally endorsed by all stakeholders which is extremely rare for Ukraine. Our Doing Business ranking would immediately improve, as well as our global standing and economic wellbeing of Ukrainian businesses and consumers. We can and will become Georgia or Estonia in terms of business-friendliness if we commit to working together to liberalize the getting electricity procedure.
I would like to finish off by stressing the importance of political will and cooperation. In October last year, President Volodymyr Zelensky supported our getting electricity reform concept during the National Reforms Council meeting, and there is every reason to hope that the nine circles of hell businesses need to go through to get electricity connection will become history soon.
Mikheil Saakashvili has been the chair of the executive committee of the National Reform Council since May 7, 2020. He served as governor of Odesa Oblast from May 30, 2015, to Nov. 9, 2016. He was president of Georgia from Jan. 25, 2004, to Nov. 17, 2013
