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2007 OECD Economic Surveys: Ukraine 2007

image of OECD Economic Surveys: Ukraine 2007

This first OECD Economic Survey for the Ukraine reviews recent economic developments and points out key economic challenges that Ukraine faces in the medium-term, including reducing barriers to economic growth though institutional and regulatory reform and raising competitiveness. The Survey makes a series of Recommendations.

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Reducing barriers to growth: the role of institutional and regulatory reform

This chapter addresses the most important structural barriers to growth and investment that must be overcome if Ukraine’s current growth momentum is to be sustained over the long term. It focuses on two aspects of economic governance in Ukraine. The first concerns the basic institutions of Ukraine’s market economy and the framework conditions for business. These remain a major impediment to sustained growth, in so far as they deter investment. The issues here have primarily to do with the instability, unpredictability and opacity of a great deal of public policy. The second set of issues concerns the specific regulatory and institutional barriers to entry, exit and restructuring, which constitute a related but nevertheless distinct problem. One of the striking features of central planning was the extent to which it simply arrested the Schumpeterian processes of creative destruction that drive innovation and structural change in market economies. Unleashing these processes via the creation of efficient mechanisms for entry, exit and reallocation was thus a first-order concern for all transition economies. However, a great deal of Ukrainian government policy since independence has actually served to impede these processes. It is therefore difficult to exaggerate the importance of reducing the barriers to entry, exit and reallocation in Ukraine, which are largely the product of excessive and often ill-administered regulation.

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