The Development of Ukraine’s Private Sector

Ukraine proclaimed its independence from the Soviet Union in 1991. During most of the Soviet period, private business was illegal and private property was restricted. Independent Ukraine has ap-plied two main approaches in an effort to restart the private sector: the privatization of state-owned and communal enterprises and grassroots business development. In addition to privatization, the state distributed state-owned housing and land to the public. As a result, the state sector’s contribution to GDP has shrunk considera-bly, from 100 percent in 1991 to less than 10 percent in 2020. Nevertheless, despite the ongoing efforts of the Ukrainian government, business sector, civil society, and international organ-izations, privatization has not been completed, and the state contin-ues to own and control many enterprises. Most of the remaining state-owned enterprises (SOEs) are characterized by economic inef-ficiency and are vulnerable to political influence. At the same time, private capital is now pervasive and has entered even such tradi-tionally state-run sectors as education and health care. Since 2014, quite a few individuals from the private sector have assumed posi-tions with government agencies and ministries and improved deci-sion-making processes there. Finally, the deregulation and law en-forcement reforms implemented within the last six years have opened new opportunities for private business development. How-ever, at the time of writing incomplete judicial reform remains the main obstacle for investment.