MULTINATIONALS PROTEST UKRAINE RED TAPE BURDEN

The Ukraine's US$1.1bn pharmaceutical market is likely to see solid growth in the next few years, with imports accounting for nearly 77% of sales in 2004. However, a growing number of foreign firms are complaining that local bureaucracy and restrictive import policies are continuing to worsen.

Most import tariffs in the Ukraine are levied at ad valorem rates, in the range of 2-70%. About 16% of all tariff line items are subject to compound, alternative minimum, or specific rates of duty. VAT, currently at 20%, as well as discriminatory excise taxes also hinder exports to Ukraine; excise taxes can be levied at up to 100%. A new law, requiring registration of legal entities within three working days of a request for a permit, became effective in mid-2004 and has led to a rise in complaints over red tape.

These problems aside, foreign drug firms are also concerned over clinical testing requirements on products that have been used safely in other markets for many years. The state certification body has a network of 780 test laboratories, but many are so poorly resourced that some oblige firms to supply the necessary analysis equipment, often at high cost. Government procurement, which in its various forms accounts for roughly 28% of sales, is allegedly open to corrupt practices.

Although the prospect of greater integration with the European Union offers some hope for progressive reform, meaningful efforts to slim the Ukraine's bureaucratic procedures are unlikely in the short term. In the meantime, foreign companies are likely to remain cautious when considering market entry plans.