Ease of doing business: what the rankings measure, and what they miss

Between roughly 2012 and 2019 Ukraine moved up the international ease of doing business rankings by a substantial number of places. Officials cited the improvement frequently, and critics dismissed it as gaming the indicators. Both positions are partly right and the gap between them is worth understanding, because it applies to every country that uses such rankings as a policy target.

What genuinely improved

The reforms behind the climb were real and several of them changed daily practice.

Company registration went from weeks to a day, online, with a substantially reduced document set. Anyone who registered a Ukrainian entity in 2010 and again in 2018 will confirm the difference.

Construction permitting was simplified and partly digitised, which mattered enormously in a sector where permitting delay was a larger cost than construction finance.

Electricity connection procedures were shortened and the tariff structure published, removing a negotiation that had previously been conducted informally.

Property registration moved to an electronic register with public access, which is a genuine structural improvement and reduced a category of fraud that had been common.

Cross-border trade procedures were simplified with the introduction of a single window for customs, which cut clearance times measurably.

What the index does not measure

The rankings assess a standardised case — a domestic limited company of a defined size in the largest city, doing a defined transaction. That methodology has virtues, chiefly comparability, and one structural blind spot: it measures the written procedure rather than the lived experience.

Four things it does not capture.

Whether a court judgment can be enforced. Contract enforcement appears in the index as time and cost, not as probability of a correct outcome.

Whether a tax audit is a compliance exercise or a negotiation. The index measures the number of payments and hours of preparation, both of which improved substantially, while the question that actually determines a company's tax exposure is not measured at all.

Whether a licence granted can be withdrawn arbitrarily.

And regional variation. A standardised case in the capital tells you nothing about a permit process in a regional city, and the variation between oblasts on the same procedure is larger than the difference between countries in the middle of the ranking.

How to use rankings properly

They are useful for one thing: identifying which specific procedures a government has reformed, because the sub-indicators are published and they are precise.

They are not useful as a summary judgement on whether a market is easy to operate in, and no serious investment decision should rest on a headline position.

The practical approach is to read the sub-indicators for the procedures you will actually use, ignore the aggregate, and supplement with the things the index cannot see — which means talking to companies already operating in your sector, in your region, at your scale.

Where Ukraine actually stands

Registration, permits, property and customs are genuinely much better than a decade ago and comparable to EU norms in several categories.

Courts, tax administration and regulatory discretion remain the areas where the operating experience diverges most sharply from the procedural description, and they are also the areas the accession process targets most directly. That alignment is the reason to expect continued improvement, and it is a better forecasting basis than any ranking.

Related in this archive

• Why the hryvnia stopped moving: the mechanics of a managed float
• The pandemic year: a milder contraction on a weaker base
• The 2015 reform record: what was actually achieved in the worst year
• Ukraine Annual Review 2018: growth against a rising wage floor

The rankings measure how long it takes to register a company, not what that company meets a year later. Registering a company in Ukraine genuinely became easier — I have done it — and the hard part was always what came afterwards: inspection, renewing a permit, going to court. The right way to use the index is to read it for where the improvement stopped.