Better Regulation: Regulation of Innovations

March 26, 2019
Better Regulation: Regulation of Innovations

On March 20th, the Ukrainian Entrepreneurs Union gathered business and government representatives to discuss better regulatory field in the innovations market. The event was held as a part of the Better Regulation series.

The meeting was attended by the head of the State Regulatory Service of Ukraine Ksenia Liapina, members of Parliament Oleksii Mushak and Tetiana Ostrikova, Head of the Expert Group on Postal Services of the Ministry of Infrastructure of Ukraine Ruslan Kuznetsov. The business side was represented by Georgii Sokolianskyi (Uber), Ramunas Macius (JTI), Inna Khomych (Nova Poshta) and Serhii Boichun (JayaDigital). The moderator of the discussion was Andrii Dlihach, CEO of Advanter Group.

Does the sphere, presented by the government as the driver of the Ukrainian economy, need legislative regulation? Representatives of Ukrainian business united around the necessity of introducing common standards for innovative products and clear market rules, when it comes to consumer safety. At the same time, the majority of business players advocate the principle of ‘everything which is not forbidden by law is allowed’, they claim it is to protect the market from overregulation.

During the discussion, Georgii Sokolianskyi, Uber's Development Director in Central and Eastern Europe, expressed his position on financial support for innovation. He noted that this tool is necessary only for the realization of social goals and should not violate market competition.

“Subsidies can be an effective mechanism for achieving social goals. An excellent example of a working subsidy in Ukraine is the one for electric vehicles. Distribution of electric vehicles under favourable import regime allowed Uber to launch a fully electric service Uber Green”, he added.

On the other hand, the head of the State Regulatory Service Ksenia Liapina emphasized that the legislative regulation often restrains the development of the market.

“We have to protect the principle of ‘everything which is not forbidden is allowed’ altogether. Ukrainian business can easily operate without state regulation. Moreover, the sectors in which regulation is minimal or absent at all show positive development dynamics. The less regulation, the better the business develops”, she noted, adding that even the EU countries are currently suffering from excessive regulation.

In his turn, the JTI representative Ramunas Macius noted that innovative products should be regulated in order to ensure the consumers’ rights.

“We believe that the regulation in innovative spheres is necessary, particularly in the production of electronic cigarettes. Here, in contrast to the overregulated traditional cigarettes market, there is no control at all”, Macius said.

He noted that out of 180 countries, where the company sells its innovative products, only 50 somehow regulate the production of electronic cigarettes.

According to him, the regulation is necessary for several reasons. First, the consumer needs a high-quality and safe product. Second, tobacco and nicotine products should not be available to minors.

“New tobacco products are freely sold on the Internet, they are publicly available. In addition, there are new manufacturers and brands emerging almost every month, so the market requires common quality standards”, noted the speaker.

In response, the head of the State Regulatory Service noted that the regulation of new tobacco products should not be excessive in order to ensure the equal competition on the market.

The issue of regulating innovations in postal market was overviewed by Inna Khomych, Head of Legal at Nova Poshta.

“A company that has created a new product or significantly modified the existing way of consumption should reasonably expect the state support in the implementation of its innovation. As there is the freedom of entrepreneurship guaranteed by the Constitution, and the principle of civil law regulation: what's not prohibited by the law, is allowed”, noted the Nova Poshta representative.

She added that the postal industry is still regulated by the absolutely outdated standards, which had been written back in the days of the USSR. For instance, the current Postal Rules approved by the Ministry Cabinet require that the information about the addressee should be written manually directly on the posting. At the same time, modern technologies allow putting the bar code with all the necessary information, complying at the same time with the new standards for personal data security.

In turn, the Ministry of Infrastructure representative, Ruslan Kuznetsov, said that the new postal services draft law should solve the personal data protection issue. He added that state regulation should be implemented when the old norms restrain business development.

During the discussion, the participants also raised the issue of regulating remote medicine selling. Today, the law prohibits to sell the medicine via the Internet and to deliver it by mail. However, in practice, most pharmacies offer medicine delivery.

“We must protect the rights of the consumer because they are at risk of consuming the low-quality and overdue medicine. We suggest lifting the ban on the delivery of the over-the-counter medicine and establish common rules for the delivery market in this sphere”, Khomych said.

This position was supported by the Head of the Subcommittee on Customs Affairs and the improvement of the Customs Code of the Verkhovna Rada of Ukraine, Tetiana Ostrikova, and the Head of the State Regulatory Service, Ksenia Liapina. By the way, the Ukrainian Entrepreneurs Union has already initiated the creation of a working group within the SRS for the regulation of remote medicine selling.

Finally, the participants of the roundtable discussed the regulation of the digital assets market in Ukraine.

“We have to start with the basic things: first, to give a definition of what we are going to regulate, i.e. to determine what a digital asset is. Second, we want digital contracts to work on the Ukrainian market, which requires the adoption of legislation that will enable the use and circulation of digital tokens in the form of standard securities’, JayaDigital representative Serhii Boichun said.

MP Oleksii Mushak told that Ukraine is among the world’s top-10 markets for cryptocurrency operations.

“There are two approaches to regulation of this market. The first option is to define the regulator, procedures etc., which can stop the development of the market. There is another approach: we give a definition and say what should be paid to the budget”, Mushak said.

In the context of the conversation, Tetiana Ostrikova noted the existence of a tax problem in the state's aspirations to “over-regulate” innovation. Products that are just appearing on the market and not yet defined in the legislation, usually already have the definition in the Tax Code of Ukraine.

“First of all, members of Parliament want to tax all the innovations. It is the Tax Code where the distortion of competition begins”, Ostrikova said.

The issue of regulating innovation is a topical issue for business, so the discussion seemed fruitful. We thank the business for the stated initiatives for improving the innovations market climate, and the authorities for their attention to each position because this sphere can become one of the drivers of Ukraine's economic growth.

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