What are we working on? Strategic goals
* Strategic goals will be synchronized with the strategy of small and medium business development.
We believe that our activity will have a positive impact on:
Increase of registered business in Ukraine and in each settlement.
Increase in tax revenues to the city budget (through business growth rather than additional regulations).
Increasing the number of employed in Ukraine and in each settlement.
Reduction of the number of businesses on the verge of bankruptcy in Ukraine and in each settlement.
Separately highlight the areas:
The strategic direction will include the development of entrepreneurial culture and competencies, stimulating the development of entrepreneurial initiative and promoting the image and role of the entrepreneur.
During the implementation of measures envisaged in this area, the share of people for whom the risk of failure is not an obstacle will increase 1.5 times, the share of people who believe that it is advisable to start a business in Ukraine will double, and almost all residents will consider that being an entrepreneur is prestigious.
As of 2021, Ukraine ranks 77th in the Global Entrepreneurship Index. It shows the worst results on three pillars*, which belong to the section "Entrepreneurial Attitudes". As a result of achieving the goals in this strategic direction, Ukraine will be able to rise in the rankings by more than 20 positions and will be in the top 50 countries in the world, ahead of Bulgaria, Croatia, Hungary and other countries.
Basic entrepreneurial skills training should be available
A significant number of the population does not receive education aimed at acquiring or developing entrepreneurial knowledge, even at the basic level. Thus, for the results of research ("Qualitative assessment of the business climate in Ukraine: 2016", USAID Leadership in Economic Governance (LEV) Program) among the planned public policy measures to support small and medium enterprises 47% of the surveyed small and medium enterprises need consultations and trainings on starting of business and business development.
The lack of such knowledge in the future becomes a deterrent in the development of business, and often the cause of improper planning of activities, which leads to bankruptcy and business closure. Some entrepreneurs do not want or do not have the funds to acquire entrepreneurial knowledge and skills in business schools or through other paid sources. Therefore, the creation of easily accessible training materials on basic entrepreneurial knowledge and skills will contribute to positive changes.
As a result of the implementation of measures to achieve this operational goal, one million existing businesses and potential entrepreneurs will receive additional knowledge on business development.
Promotion of entrepreneurial success
Entrepreneurship culture in Ukraine is still not widespread enough. Thus, from the analysis of statistical indicators and external research, we can conclude that public opinion is more in favor of employment than doing business. For example, according to social surveys in 2019, as well as according to the Global Entrepreneurship Rating, the number of Ukrainians who would like to start their own business varies around 40-44%. At the same time, the Global Entrepreneurship Rating estimates the same indicator for the Netherlands at 71%, Norway at 96%, and Germany at 58%. Fear of the unknown, lack of confidence in success is also a deterrent to the spread of entrepreneurial initiative.
In addition, the relationship of a significant number of entrepreneurs with their customers can be described more as an employment relationship, and a significant number of businesses use a simplified system of taxation as a way to hide employment. Entrepreneurship is often chosen as a "survival" strategy, rather than as a way to implement one's own ideas or independence from employers.
As a result of the implementation of measures for this intermediate goal in Ukraine, the share of people who believe that it is expedient to start a business in Ukraine may double.
The strategic direction will include support for micro, small and medium enterprises in entering domestic and foreign markets.
In particular, during the implementation of measures provided for in this area in 2025:
- number of businesses operating in the public procurement market will increase by 100,000 (from 245,000 SMEs to 350,000 SMEs);
- the number of exporters among SMEs will increase 1.5 times (from 29,000 in 2020 to 50,000 in 2020);
- sales will increase by 50% (from 7.1 trillion UAH in 2019 to 10.6 trillion UAH in 2025).
As a result of achieving the goals in this strategic direction, the number of dynamically developing SMEs will increase to 200,000.
Conditions should be created to strengthen cooperation between small and medium-sized enterprises and to facilitate the search for partners for start-up entrepreneurs
Capacity building for cooperation between entrepreneurs needs significant incentives. Cooperation can take various forms — from localization of supply chains within production clusters, to the opposite — increasing intersectoral and interregional cooperation, internationalization of enterprises to include them in international supply chains. Start-up entrepreneurs also often face the problem of finding partners, suppliers of materials and services, and so on.
The European Cluster Cooperation Platform (ECCP) is the exemplary tool for building the potential of cooperation, as the online platform with instant access to more than 1,200 clusters in Europe and beyond. Such tools have also proven effective during the transformation of the Chinese economy.
In addition, clusters play a relatively minor role in promoting economic growth. There is no information on the exact number of clusters in Ukraine, but most clusters exist in traditional industries (in particular, construction, agriculture and textile industry). High-tech clusters in Ukraine are still underdeveloped, except in the field of information technology.
As result of the creation of digital online tools for clustering and cooperation of small and medium-sized enterprises will significantly improve the access of entrepreneurs to domestic markets.
Effectiveness of existing programs to stimulate entrepreneurship and access to finance for small and medium-sized enterprises needs to be improved
Limited access to finance is a constant problem for the development of entrepreneurship (especially micro and small entrepreneurship). Despite the reduction of interest rates, access to credit remains a significant barrier: for micro and small businesses, the loan rate is currently over 13.5% per annum, a large number of SMEs do not have collateral and internal competencies needed to communicate with the bank.
Existing government programs cover only a small proportion of entrepreneurs, focused on medium and small and small businesses and built in a way that increases the profitability of existing successful projects rather than subsidizing the start of new ones, which "are a little short of survival." One of the key problems of state programs is poor sample of funds due to weak work of government bodies, especially local ones, in terms of SME awareness and process organization (excessive bureaucracy and low customer orientation).
The implementation of the measures envisaged by this operational goal will focus on assistance to micro and small businesses, on grant programs that cover part of entrepreneur's costs (taxes, rent, etc.), on partial portfolio guarantees for projects that start.
As a result of this operational goal, the average cost of financing for SMEs will exceed the cost of financing for large business by no more than 50%, and financial support programs are planned to cover at least 100,000 entrepreneurs.
Stimulating the SMEs participation in public procurement
From a financial point of view, public procurement is the greatest opportunity for the state to proactively influence the income of a certain category of business. Practical implementation of the principle "think small first" in the field of public procurement, further development of factoring or subsidiary financial instruments to provide small and medium enterprises of equal starting and competitive conditions when participating in public procurement, will help them get an additional 10% of all large purchases for budget funds. Small and medium-sized entrepreneurship also need to be better informed about the possibility of participating in public procurement, as well as appropriate preparation and training materials to increase its capacity to take advantage of public procurement opportunities.
State support for the promotion of SME products in foreign markets
According to research, the total amount of non-estimated potential that Ukraine could make up for is 12.98 billion US dollars. This potential market is extremely attractive in terms of supporting and promoting SMEs for its development. This operational goal envisages integration with the measures of the National Export Strategy and expansion of the list of countries that are potentially attractive but remain outside the NES (for example, South Korea, Mexico, Qatar, Vietnam, Norway, Singapore, Hong Kong, South Africa, China). As well as increasing the capacity of export support institutions: the Entrepreneurship and Export Promotion Office, the Export-Credit Agency and the Exporters and Investors Council under the Ministry of Foreign Affairs of Ukraine to assist SMEs in entering foreign markets.
During the implementation of measures envisaged by this operational goal, it is planned to increase the number of exporters by 1.5 times and help SMEs to increase the number of export contracts by 2025.
The strategic direction will include improving access to business support infrastructure, improving access to finance, creating equal starting conditions for entrepreneurs from vulnerable categories of the population - veterans of the anti-terrorist operation/joint force operation, youth, women, people with special physical needs.
During the implementation of the measures envisaged in this area, 25 regional business support offices will be established and at least 100+ regional partner organizations will be involved, which will provide business support infrastructure to all cities of the country with a population of over 50,000. More than 80% of existing micro, small and medium-sized enterprises will be involved in entrepreneurship support programs in the form of training, access to finance or other types of business support. In the form of direct financing, micro, small and medium enterprises will have access to at least billion US dollars through portfolio guarantees, grants, donor assistance, micro investments, and other sources of financing, of which at least 20% will be allocated to business development by vulnerable groups. As a result, the backlog of vulnerable groups among SME owners/managers will be halved.
As a result of achieving the goals in this strategic direction, 200,000 new jobs will be created in small business.
Expanding the SMEs support infrastructure in the regions
A significant part of entrepreneurs, living outside large agglomerations of cities with a population of millions, have difficulty accessing information and support. Entrepreneurs, especially senior age, may prefer live communications instead of online presence. Business incubators and accelerators are concentrated in large cities. There is often a need for physical infrastructure (coworking spaces, conference rooms, laboratories or workshops) which is not nearby.
Therefore, expanding the offline business support infrastructure for SMEs will increase the involvement in training, consulting and, in fact, support programs. Micro and small businesses need to significantly expand the network of business support infrastructure, in particular in AHs, the creation of remote jobs for work of center administrators.
During the implementation of measures aimed at expanding the infrastructure through the promotion of the Diia.Business brand and attracting partners from non-governmental organizations, more than 100 small and medium business support centers will be established, covering each city with a population of over 50,000 inhabitants.
Providing equal starting opportunities to start own business for vulnerable groups
Statistics show the unsatisfactory state of ensuring equal rights and opportunities for women and men in Ukraine, including in the field of small and medium enterprises. Thus, according to research (Annual Assessment of the Business Climate in Ukraine: 2016, USAID Leadership in Economic Governance Program), the gender portrait of small and medium enterprises is characterized by the following ratio of men and women: three quarters — men, one quarter — women. Although in the case of individual entrepreneurs the gap is narrowing, it is still there: 46% of individual entrepreneurs are women and 54% are men. In only three sectors is the share of women over 60%: education, household and other services.
At the same time, there are currently no separate state support programs in the field of entrepreneurship for vulnerable groups — women, internally displaced persons, former servicemen, youth, and the older generation (over 50 years of age).
Thus, it is necessary to create effective government policies to overcome social barriers — educational, moral and psychological, and others, which help reduce discrimination in the involvement of certain segments of the population in entrepreneurship. Unequal starting conditions lead to the fact that the most difficult to start a business are those strata that need it the most in terms of public revenue policy and ensuring equal opportunities.
As a result of the implementation of the measures provided for in this operational objective, the backlog of vulnerable groups among SME owners and managers can be halved.
Development of communication channels and feedback
There is needed further improve public-private dialogue on the SME sector through ongoing bilateral dialogue and cooperation. The existence of dozens of hotlines and government websites in the country has so far not helped to improve public-private dialogue with micro, small and medium-sized enterprises. The SME sector does not have its own ideological and political representation, its voice is often lost against the background of large taxpayers. As a result, the state cannot communicate to small and medium-sized businesses its vision and the need for certain legislative changes concerning small and medium-sized businesses, and certain groups of entrepreneurs are forced to resort to often radical demonstrations of their views to be heard.
During the implementation of this operational goal, digital channels of communication with entrepreneurs will be significantly expanded, as a result of which each entrepreneur will be able to leave a response or complaint in a centralized online system. And before the closure of businesses, feedback is provided from the state body for support and development of entrepreneurship through the "hot line" to attract possible support or development programs that will prevent the closure.
Development of a plan of reserve measures in case of crisis phenomena of regional or global scale
The COVID-19 pandemic has caused a global economic downturn, and small and medium-sized businesses are the most vulnerable group to economic challenges. According to research, 83% of SMEs expect to lose 20% of their income after closing, and 33% of SMEs cannot withstand more than 2 months of restrictions due to the crisis. As a result, the number of SMEs surviving the crisis and also the depth of the economic recession in the country depend on the speed and prudence of the government's actions.
As Ukraine usually has no contingency plans in case of global crises, the availability of prepared decision scenarios that can be promptly implemented in the event of new crises is an urgent need, especially given the projections for new waves of morbidity even in 2021-2022.
As a result of this operational goal, the country will have a detailed action plan for SMEs, developed with the participation of entrepreneurs, leading think tanks and government institutions, in case of global crises.
Restoration and increase of entrepreneurial potential of Donetsk and Luhansk regions
The armed conflict in the eastern regions of the country has led to the destruction of production facilities and transport infrastructure, the loss of intersectoral and logistical ties, the complication of international relations, and the growth of investment risks. All this has had a comprehensive impact on reducing the activity of small and medium-sized businesses in Donetsk and Luhansk regions. Thus, the business environment of SMEs in Luhansk and Donetsk regions is more complicated than in other regions:
- Access to financial resources in these areas is even more limited
- Lack of conditions for entering foreign markets, such as EU markets
- Destroyed transport infrastructure
- Limited access to quality administrative services
- Limited access to knowledge about starting and doing a business
- Limited opportunities to attract skilled labor.
SME support in Luhansk and Donetsk oblasts is provided by various stakeholders, including the Ministry of Reintegration of the Temporarily Occupied Territories of Ukraine and donors. At the same time, central executive bodies, local executive bodies and local self-government bodies should implement better coordinated effective policies and tools to support small and medium-sized enterprises in these regions before the end of the conflict. Better coordination in this direction is also needed.
As part of the implementation of this operational goal, SMEs in the regions affected by military aggression need to return to the growth trajectory.
This direction provides support for the implementation of digital and innovative technologies by small and medium enterprises, as well as support for innovative enterprises and startups.
During the implementation of this strategic direction it is planned to create at least 10 technology hubs/business incubators/business accelerators with targeting of key sectors and "regulatory sandboxes" will be created in industries with advanced development of the latest technologies (for example: fintech, IT, biotechnology, etc.). 10 million US dollars will be aimed annually at grant support for research activities of SMEs and interaction with research institutions, and at least 10% of SMEs are involved in programs of adaptation to the digital environment.
As a result of the implementation of this strategic direction, Ukraine will become the most open country for new technologies in Europe, where businesses can experiment with any ideas without unnecessary bureaucracy.
Support for implementation of innovative and digital technologies
Although the structure of SMEs is broadly in line with other countries, this sector in Ukraine is less dynamic, there is almost no renewal of leaders in key sectors and the emergence of star startups. Last but not least, this is due to the low level of penetration of innovative and digital technologies in the sector of micro and small enterprises. Thus, according to the OECD study (2020) "Digital Transformation of SMEs", small businesses around the world lag behind in digital transformation, despite the incredible benefits. And the crisis caused by the global pandemic has demonstrated how the difference in digital maturity and readiness can reduce the resilience of businesses and their chances of a speedy recovery.
As a result of the implementation of this operational goal, at least 10% of existing SMEs will be involved in programs for adaptation to the digital environment with a focus on micro and small enterprises.
Stimulating SMEs — generators of innovative products / startups with a unique value proposition
The link between the research and development sector and the real sector of the economy is weak, which hinders the emergence of new products and services, processes, technologies, etc. The level of research and development costs in the SME sector in Ukraine is low, including due to inefficient infrastructure to support it. Cooperation between existing business support facilities (business incubators and other similar institutions) and higher education institutions aimed at encouraging and supporting research activities with a focus on small and medium-sized enterprises should be encouraged.
In order to promote innovation, the focus should be on small and medium-sized enterprises which are development and innovation oriented. This goal can be achieved by improving the link between research institutions and research institutes and small and medium-sized enterprises, taking into account co-financing between stakeholders.
The National Digital Champions Development Program brings together the top 100 most promising innovative businesses.
Stimulation of SME support programs in accordance with the principles of smart specialization
Objective regional features of Ukraine lead to the fact that the "window of opportunity" for entrepreneurs in different regions differs. Such features should be reflected in the context of regional SME support programs.
As a result of the implementation of this operational goal, each region of Ukraine receives its smart specialization within the European methodology.
Creation of "regulatory sandboxes" for business development related to the latest unregulated technologies
New technologies, as a rule, significantly ahead of the accompanying development in the field of state regulation. For example, globally, there are still no established policies for regulating new technologies in the areas of fintech (blockchain and cryptocurrency), computing technologies (robotics, AI), and biotechnology (genetic engineering). The lack of regulation, in fact, makes it impossible to develop in this direction for innovative entrepreneurship, which in turn makes it impossible for startups to appear in such areas, which have a chance to become "unicorns" with a unique trade offer and global demand for the product.
As a result of this operational goal, entrepreneurs will have the opportunity for up to 5 years to work with any new technology within the framework of the "regulatory sandbox" without restrictions of existing legislation.
This area combines measures aimed at improving access to public services through digitalization, reducing administrative pressure through the provision of online services and minimizing the number of procedures required.
During the implementation of measures provided for in this area, Ukraine will not have government services for entrepreneurs which are not available online — from business registration in any organizational form, opening accounts, obtaining licenses/permits, paying taxes, renting state property, obtaining financing or consultations/assistance, concluding contracts, finding partners/suppliers, participating in virtual exhibitions abroad, etc. The cost of complying with government regulations and tax rules for SMEs will be reduced by 25% by revising the taxation system for small and medium-sized businesses and introducing tax incentives.
Digital transformation of public services for SMEs
Low productivity, outdated technologies and management approaches, lack of funds for the development of physical infrastructure and solving problems in the "traditional way" require the adoption of a digital first strategy in all aspects of SME development. Accordingly, the state strategy should be aimed at the digital transformation of all viable segments of SMEs, which allows to "jump over" some stages of development.
During the implementation of operational objectives, 100% of public services for micro and small businesses will be converted to electronic format.
Ensuring normative integration into the EU digital market
Simplifying the entry of SMEs into European and international markets for goods, services and public procurement and promoting the digitalization of cross-border trade in goods and services with the EU and the world.
The implementation of this operational goal will allow achieving joint development of digital trade infrastructure with the European Community through the use of interoperable electronic identification tools and digital governance systems with the EU.
As a result of the implementation of this operational goal will be ensured the free cross-border provision and use of online services, making online payments, concluding contracts and invoicing in electronic form that will promote secure and convenient cross-border electronic identification between Ukraine and the EU.
Disclosure of data on quantitative and qualitative indicators of SMEs at the regional and national levels
Public access to open data in the field of SMEs will help SMEs to be more aware of markets, competition, etc. in certain regions and industries. The availability of this data can also contribute to better analysis of the quality of SME support at the regional/sectoral level through the emergence of outside research.
All data on SMEs are available as open data on a single portal.
Strengthening the role of open bidding in ensuring access to resources in government
It is often a problem for entrepreneurs to gain access to resources that are managed by the state — whether it is property for rent, grants, special permits (for example, permits for transportation to another country, etc.). In order to create equal conditions and prevent non-transparent distribution of such resources, it is expedient to implement of such resources exclusively through the system of open bidding.
Competitive online access to limited resources is provided, access to which is administered by the state.
Modernization of the tax system for micro, small and medium enterprises
The task of the Strategy is not to solve the issue of tax rates, but it is impossible to ignore the problems of simplification of tax administration, in particular regarding registration, payments, de-shadowing of the informal sector of the economy, tax status (self-employment).
Thus, the tax system and tax administration have been at the top of the list of problems identified by SMEs for years. Despite the apparent "simplicity" of the simplified taxation system, due to conflicting rules, inconsistencies in legislation resolved over the years, etc., 27% of small and medium enterprises said that tax administration is one of the main obstacles to development and 80% — say that the priority measure should be a simplification of tax administration.
During the implementation of this operational goal, a gap analysis of the taxation system for SMEs will be conducted and, based on the results of the analysis, legislative proposals will be made, as a result of which the cost of compliance with state regulations and tax norms for SMEs will be reduced by at least 25%.