COVID-19 and economic activity: a dilemma for local authorities

On 26 November 2020,  the Institute for Economic Research and Policy Consulting (IER), with the support of the International Renaissance Foundation and the European Union, organised a discussion platform «COVID-19 and economic activity: a dilemma for local authorities». IER presented the eponymous study and discussed with representatives of local authorities and businesses the issues of how to support the business during the quarantine period.

«The COVID-19 pandemic is a natural phenomenon, in contrast to «traditional» economic crises,»  said Igor Burakovsky, Head of the Board of IER, who presented the study. «It has caused negative socio-economic consequences for all countries of the world. The local authorities were challenged on how to balance the interests of public safety and the economic interests of the community. In practice, it means how to support businesses during the pandemic».

According to the representatives of regional state administrations and city councils of Khmelnytsky, Kherson, Lviv, Cherkasy, and Vinnytsia regions, who spoke at the event, local authorities use various tools to promote economic activity for supporting the economy during the pandemic. This involves the provision of privileges for the payment of local taxes and fees, exemption from rent for the use of property, reimbursement of the «residual» interest rate on loans under the program «5-7-9». Additionally, of course, active purposeful communication with businesses acquires special importance.

The previous experience of promoting the development of small and medium-sised businesses under «normal conditions» has become an important factor in the effective response of local authorities to the economic challenges of the pandemic. In particular, Tetyana Lamakina, Head of the Regulatory Policy and Administrative Services Department of the Department of International Cooperation and Regional Development of the Vinnytsia Regional State Administration, said that the SME Development Strategy, developed in partnership with IER and with the support of the USAID LEV Program, is about to end. The region was able to continue supporting businesses during the pandemic because of this strategy and held a competition of business plans in May 2020, which supported 30 startups.

Meanwhile, as explained by Volodymyr Honcharuk, the Deputy Mayor of Khmelnytsky, privileges during the first «lockdown» were insufficient. Therefore, businesses have a very negative attitude towards both the weekend quarantine and the possible subsequent «lockdown». According to Yulia Krasnova, the representative of the European Business Association, small and micro business suffers the most from the quarantine. Business expects a clear plan of action and the equal rules of the game, tax holidays, and reporting on the use of the «COVID» fund.

In general, the discussion showed that the regions today, represented by local authorities, need a platform to share experiences in supporting businesses during the quarantine period. The importance of such information exchange is determined by the fact that local authorities today are learning how to support economic activity during the quarantine period in practice.

The event took place within the projects «COVID-19 and Ukraine: independent monitoring and assessment of socio-economic consequences of the pandemic for the regions of Ukraine. Phase 1» funded by the International Renaissance Foundation and «Strengthening the role of CSOs in the democratisation of Ukraine» funded by the European Union. Both projects are implemented by the Institute for Economic Research and Policy Consulting.

Source: IER