Ukraine's slow struggle to reform

As part of its Reforming Ukraine Project, Carnegie Europe hosted a panel discussion to mark the launch of the April 2017 edition of the Ukraine Reform Monitor. The panel discussion featured the following experts: Anastasiya Leukhina, member of the Monitor Team, Valerii Pekar, co-founder of the New Country civic platform, Dirk Schuebel, head of division for the Eastern Partnership at the European External Action Service (EEAS) and Dmytro Shymkiv, deputy head of the Presidential Administration of Ukraine. 

Dmytro Shymkiv started the discussion by emphasizing the important decision to include Ukraine in the list of visa-free third countries. This constitutes a milestone. Shymkiv mentioned that the reform agenda started 3 years ago against a background of aggression from Russia on all fronts and internal instability at the same time. This has been addressed by the Ukrainian government with a primary focus on building institutional capacity, energy reforms and fighting corruption. Although these changes are not popular among the population, without them a system of non-transparency would continue to exist in Ukraine. Another important reform was territorial decentralisation, which is about giving more power to the communities. Over 350 new amalgamated communities have been formed out of smaller administrative districts. This decentralisation received broad international support. 

The second panellist, Valerii Pekar, summarized last years top achievements in Ukraine. The two top achievements, according to him, were electronic declarations and reform of the gas market. Ukraine ended its dependence on Russian gas supplies and recently celebrated 500 days without Russian gas. Other smaller but no less important achievements that he mentioned were the successful local elections in new municipalities, the abolition of price regulation, tax legislation, the  education and public health reforms and the beginning of a more transparent budget procedure. At the same time, Pekar also indicated numerous less positive developments, such as the failure of privatisation, the delayed opening up of the land market, the postponement of a comprehensive tax reform and the decreasing number of reformers in official posts since many left their jobs, exhausted by  their reform efforts.

Another stimulating reflection was related to the lack of demand for reform among the citizens in Ukraine, a subject addressed by both Leukhina and Pekar. Leukhina focused on the lack of pressure from the population on the government and gave numbers for certain trends regarding civil society development. Only one third of the population of Ukraine is ready to refuse a bribe, and 42% of Ukrainians do not believe that they would report it to the authorities if they were asked to accept a bribe. The most striking fact that she gave was the answer to the question of who is responsible for reform, with only 1% of the population believing that it is the population itself.

All panellists agreed that the reforms are very much concentrated in the cities. Citizens in smaller towns see no direct changes, are not prepared to ask or demand changes and are therefore unable to put local pressure on the local authorities. Although decentralisation has begun and local authorities are receiving a flow of funding, they don't know how to spend that money and how to take advantage of the reforms. According to Leukhina, this is also due to the  low general level of education. The Ukrainian population in the villages has no skills, does not engage in critical thinking and has no knowledge of what is going on. She said that educational reform is therefore crucial in order to meet the need for soft skills, education and social understanding and give the reforms a participatory approach. Shymkiv hopes that the changes in the visa requirements will be a first visible result for the population and will enable people to see how things are done elsewhere. Another concern is the way the government communicates with the Ukrainian population. In order to get into the hearts and minds of the majority of the population you have to make use of television. It is important to show what reforms are going on and what has changed in the country. However, all TV stations are owned by oligarchs. Shymkiv underlined that an alternative story to that of the oligarchs has to be told and that a concept of communication still needs to be found.

Although oligarchs still have an important role in the country, especially in agriculture, Shymkiv explained that there is a process of de-oligarchisation going on in markets formerly controlled by oligarchs. The introduction of the gas law made the tariffs the same for commercial and private use and limited the waste in the gas pipelines. Therefore, the market is not profitable anymore, which has made it less interesting for the oligarchs. The regulation and cleaning up of the banking system, and the changes in the electricity law have had the same effects on them.

The European vision on the reforms in Ukraine was described by Dirk Schuebel who pointed out the war in Eastern Ukraine as the main element hindering successful reform in the country. He stressed the urgent need for a peaceful solution and emphasised that the negative spiral of further isolation of non-government controlled areas should be reversed. A more inclusive approach was needed whereby both sides are brought together under the governance of the Ukrainian authorities. Schuebel definitely sees visible results concerning the reforms, but also underlines that a lot still needs to be done. Three anti-corruption agencies were set up, but their resources needed to be strengthened in order to be fully operational. The EEAS was glad to see that the first high-level corruption cases have been brought to court. Ukraine's economy is on an upward trajectory. The DCFTA agreement led to an increase of more than 8% in just one year in the volume of trade between Europe and Ukraine. The EEAS believes that Ukraine's key to success is to keep reforming in an irreversible manner and it supports the implementation of the reform plans for this year, which includes, among other things, the privatisation of health care, land reform, the electricity market law and the reform of the energy market.

The panel discussion ended with the expectations for the future concerning Eastern Ukraine and the reform process. All agreed that the future of Eastern Ukraine lies inside Ukraine, just like the Crimea. Schuebel emphasized that the EU fully supports Ukraine in the conflict in Eastern Ukraine. Shymkiv commented that the situation in Eastern Ukraine  posed a challenge, with Russia making every possible move to block any change.

According to Shymkiv, the priorities for reform are to build unity around social reforms, health care reform and education reform. Privatisation is still a difficult process. The government sets the bar very high on the price of highly valuable assets for the government. It is expected by society and politicians to sell these assets for a good price. Companies, however, say no to those high prices because of the security situation and the credit risks. Both Pekar and Schuebel underlined the importance of judicial reform in reducing corruption. There is a need for reform of public administration reform and, lastly, reform of state finances in which tax, pension and budget reform work in a triangle. Schuebel emphasized that the EU will continue its financial support to the country and hopes to fully implement the EU-Ukraine Association Agreement.