Successful practices of e-governance: How online business services make Ukraine a tiger of digital transformation
By Olha Riabukha
Olha Riabukha, E-services Project Coordinator of the East Europe Foundation’s Swiss-Ukrainian E-Governance for Accountability and Participation Program (EGAP), on Ukraine’s e-governance success in spite of the ongoing war.
To support continued business operations in spite of the war, the Ministry of Digital Transformation and the E-Governance for Accountability and Participation Program worked to digitalise services like changing the location and name of Sole Proprietorships within 2 weeks. Image: Canva Pro
“There is a war in this country, and one still can register a sole proprietorship (SP) online in a few minutes,” says my friend in surprise. She is starting work for a military tech project and had postponed the registration of her SP time and again, as she thought that it would take a lot of time and nerves. However, she managed to do it in just 15 minutes in the morning while lounging on her sofa – and then ran off to cook breakfast and get ready for her train.
The instructions on the Diia state web portal of electronic services helped her quickly choose the business category and the taxation system. The registration of new entrepreneurs takes place now not only online, but also automatically. Public registrars have no part in the process at all, making the business registration procedure in Ukraine the fastest in the world.
Ukraine impresses foreigners not only with its courage, which has already become a national attribute, but also with the pace of digital transformation. Opening a bank account in a day, signing a document or even registering a business – all this is available online.
Despite massive shelling and frequent blackouts, 135,000 people have created businesses through Diia since the start of full-scale war. Ukraine’s business community does not give up despite the formidable challenges and continues to be the mainstay of our economy, while the government is doing everything to enable this nation to become a country of entrepreneurs.
Automatic business registration
Ukraine is moving towards a paperless regime, with automation of services being one of the most important steps that brings Ukraine closer to becoming a digital state.
Previously, business registration services were highly bureaucratised and resource-consuming: citizens had to visit four to five institutions, including government agencies, banks, and the tax inspectorate.
In order to make the process of starting a business more efficient and reduce the paperwork volume, we have started not only digitalisation, but also automation of services for SPs and LLCs (Limited Liability Companies).
Automation completely removes the human factor from the registration process. This means that the system checks all the necessary data without the help of the public registrar and automatically registers the business if there are no errors. Thanks to this, it is now possible to open an SP in 1.6 seconds, and an LLC even faster. Literally one second elapses between filling out the form and the message, “Congratulations, your LLC is registered”, appearing.
From a technical point of view, services use innovations of their own. There is a test on the Diia portal enabling entrepreneurs to determine which tax system is more suitable for them.
Meanwhile, online registration of LLCs prevents interruptions to the process, which happened earlier during power outages. Data could get lost and fail to reach the necessary registers. Now, the LLC online registration application has become a backup lift that cannot get stuck. That is, no person’s application will fail to register.
The process of filling out the application simplifies the lives of future entrepreneurs as much as possible, because the system collects all the necessary information. There is no need to scan one’s documents or attach them as files. Model charter, ownership structure, meeting protocol — all of these documents are automatically generated by the system.
Increasing popularity of online services
Mere service digitalisation is not enough. In order for citizens to choose online services, we need to think about how to make services as convenient and accessible as possible.
There are two types of internal passports in Ukraine — an ID card and a 1994 model passport booklet with a pasted photo card. Previously, only holders of ID cards (that is, just 5.5 million Ukrainians) had access to online services. However, many citizens did not have time to replace their internal passports. In order for these citizens to receive some online services, they had to notarise a copy of their internal passport. For example, to certify their status as a beneficiary of an LLC. Of course, this was inconvenient, so many people continued to receive services offline.
Nonetheless, a solution was found – many people in Ukraine have biometric international passports, the data from which are stored in electronic registers.
Together with the Ministry of Digital Transformation, we prepared legislative changes, allowing an electronic international passport to be equated with a paper one. As a result, 18 million citizens with such international passports became able to use them to receive services in Diia. Thanks to this, the services have become much more popular.
Relaunching services in wartime
When the full-scale invasion began, the state quickly restricted access to registries and suspended online services to prevent Russian cyberattacks. But within a month, business services (registration, data changing and termination) were operational again on the Diia portal.
This became a lifeline for Ukrainians, because it was almost impossible to access these services offline. A war is always a major shock to society, so public registrars and notaries were slow to resume their work, and administrative service centres were almost always closed at first.
Relaunching online services for entrepreneurs was a good solution allowing us to provide people with the opportunity to register a business, change data on its location or name, or close the business due to the crisis. In March and April 2022, more than 90 per cent of new SPs were registered online.
Changing business data online
The full-scale war created a large number of internally displaced persons, many of them entrepreneurs. Along with this, the number of new marriages, inducing people to change their surnames, also increased.
There was a crazy demand for the service of changing the location and name of the SP. After all, despite the war, entrepreneurs still had to continue their operations, pay taxes and submit reports. The Ministry of Digital Transformation and the E-Governance for Accountability and Participation Program (EGAP) implemented this service in 2 weeks, getting it running as soon as May (three months after Russia’s invasion), even though such timing for launching new services seemed unrealistic before.
Previously, this service was only available offline and was more expensive. Thanks to digitalisation, citizens save time, money for a trip to government offices, and nerves that could be ruined while standing in queues. The ability to pay for the service online by card, Google Pay or Apple Pay also adds convenience. 15,000 SPs have already used the service.
Another new electronic service for entrepreneurs is the receipt of a document confirming the status of an SP. This document is necessary for entering into contracts, obtaining banking services or during tenders. 7,000 citizens have used this service since it was made available.
Plans for the future
We are continuing to work on automating government services, with the aim of excluding the human factor and decreasing the error rate. This allows us to avoid bureaucratisation and make the process more transparent and convenient for both the state and citizens.
Our plans for the near future include:
- Automation of the SP termination service. Many sole proprietors are currently staying abroad. The new service will allow them to close a business in one minute online from anywhere in the world, without any trips to government offices. The greatest miracle of this service is that a person does not even need to fill in any fields – it is enough to click on the button “I want to terminate the SP” and sign the appropriate application online.
- Automation of SP and LLC data change process. It includes changing the business category online. This is especially relevant in this crisis time, when entrepreneurs of Ukraine have to master new fields and areas.
- NGO registration. Last year, civil society was expanding its activities and uniting for victory: more than 2,000 new NGOs and almost 5,000 new charities were registered. Therefore, we aim to simplify the registration process not only for businesses, but also for the NGO sector.
In peacetime and wartime alike, Ukraine takes on the role of helping its citizens. It means creating new opportunities for them and removing bureaucratic obstacles. It means promoting transparency and openness of all processes.
It was not for nothing that Ukraine was named the “digital transformation tiger” in Davos, because Ukrainian online services have already become a good model for other countries.
For instance, Estonia is launching its own Diia-based app, which will be a one-stop-shop for digital documents and services. Meanwhile, the United States of America is granting Ukraine a dedicated funding line to adapt the program in other countries.
According to the USAID/UK Aid 2020 study under the Transparency and Accountability in Public Administration and Services (TAPAS) Project, the savings from the use of electronic services by SPs amount to UAH 17 million (about US$630,000, based on the 2020 dollar exchange rate).
We are confident that successful digitalisation will become one of the pillars of our economy, help to strengthen the reputation of Ukraine as the most convenient country for doing business, and attract new investments necessary for reconstruction after the victory.
Olha Riabukha is the E-services Project Coordinator of the East Europe Foundation’s Swiss-Ukrainian EGAP Program and Senior Lecturer at the National University of Kyiv-Mohyla Academy. She coordinated a team of developers to launch an online business registration service in Ukraine.
Previously she was a Head of the Expert Group for the Reengineering of Public Services at the Ministry of Digital Transformation in Ukraine (2020) and Head of the Expert Group for Strategic Planning at the Ministry of Health of Ukraine. In wartime, she also coordinated the delivery of over 700,000 tons of humanitarian and medical aid to Kharkiv and was awarded the medal "For the Defence of Kharkiv".