Re­form Watch

Kyiv Post - - National - Editor’s Note: The Kyiv Post tracks the progress made by Ukraine’s post-EuroMaidan Rev­o­lu­tion lead­ers in mak­ing struc­tural changes in the pub­lic in­ter­est in a broad range of ar­eas, from the de­fense and en­ergy sec­tors, to tax­a­tion and pen­sions. Be­low are t


The govern­ment’s top pri­or­ity ar­eas for re­form are pub­lic ad­min­is­tra­tion, de­cen­tral­iza­tion, state pro­cure­ment, tax­a­tion, ju­di­cial re­form, pen­sion, health, ed­u­ca­tion, state prop­erty man­age­ment and pri­va­ti­za­tion, Ukrainian Prime Min­is­ter Volodymyr Groys­man said while on a visit to Canada on Oct. 1.

Ju­di­cial re­form

While the govern­ment has moved on ju­di­cial re­form, crit­ics say the process was hob­bled and per­haps even sab­o­taged by the process of se­lect­ing judges of the Supreme Court. Mem­bers of the Pub­lic In­tegrity Coun­cil, a civil so­ci­ety watch­dog that over­saw the se­lec­tion of can­di­dates for the court, said 25 of the can­di­dates they ve­toed as be­ing un­suit­able to serve were nev­er­the­less se­lected to be Supreme Court jus­tices among 111 cho­sen. As for the cre­ation of an in­de­pen­dent anti-cor­rup­tion court, President Petro Poroshenko still has not sub­mit­ted a draft law.


Another pri­or­ity where Ukraine’s govern­ment gets mixed re­views is a pen­sion over­haul. Al­though new leg­is­la­tion was passed by par­lia­ment on Oct. 3, the pen­sion age wasn’t raised, (58 for women, 60 for men) as Ukraine’s fi­nan­cial back­ers, the In­ter­na­tional Mone­tary Fund and the World Bank, had wanted. Crit­ics of the new law said the changes to the pen­sion sys­tem were mainly cos­metic.

But the new law raises the num­ber of work­ing years re­quired to qual­ify for a state pen­sion from 15 to 25 im­me­di­ately, and it will grow by one year an­nu­ally, un­til it reaches 35 in 2028.

Ukraine's ag­ing and de­clin­ing pop­u­la­tion has too few work­ers to sup­port the cur­rent pen­sion­ers, who get an av­er­age of less than $100 monthly. Yet pen­sions are costly: $11 bil­lion, or 27.5 per­cent of Ukraine's $40 bil­lion state bud­get, is needed to pay 12.3 mil­lion pen­sion­ers.


Mean­while, re­form of Ukraine’s health care sys­tem looks to be on track, with par­lia­ment ap­prov­ing leg­is­la­tion on Oct. 18 to over­haul what is seen as one of Ukraine’s most cor­rupt sec­tors. The new leg­is­la­tion, drawn up by Ukraine’s re­formist Act­ing Health Min­is­ter Ulana Suprun, came through par­lia­ment vir­tu­ally un­scathed, with al­most 900 amend­ments to the bill be­ing re­jected in a marathon vot­ing process that lasted al­most three days.


One area that Groys­man failed to men­tion is cre­ation of an agri­cul­tural land mar­ket, which also should be a pri­or­ity for the govern­ment as fu­ture tranches of Ukraine’s $17.5 bil­lion IMF aid pack­age could de­pend on it

Groys­man as far back as April set out the govern­ment’s vi­sion for the agri­cul­tural sec­tor, it re­ceived a luke­warm re­sponse.

In­deed, in the six months since, there has been no progress on creat­ing an agri­cul­tural land mar­ket, which some say will boost in­vest­ment by $50 bil­lion in the sec­tor. The World Bank says it hopes to see leg­is­la­tion in Ukraine in 2018.

Ac­cord­ing to ex­perts, the lack of a land mar­ket in Ukraine acts as a break on the econ­omy of Ukraine: Ac­cord­ing to Satu Kahko­nen, World Bank Coun­try Direc­tor for Be­larus, Moldova, and Ukraine, writ­ing in a post on the World Bank web­site on Oct. 2 (re­pub­lished on page 9 of in this week’s is­sue of the Kyiv Post), Ukraine could add 1.5 per­cent to its an­nual gross do­mes­tic prod­uct and $15 bil­lion to its an­nual out­put by car­ry­ing out “mean­ing­ful re­form” of the agri­cul­tural sec­tor.

Such re­form “must in­clude pro­vid­ing in­cen­tives for long-term in­vest­ment and proper land man­age­ment, ac­cess to credit, and trans­fer of land to its most pro­duc­tive uses,” Kahko­nen writes.

How­ever, there is sub­stan­tial op­po­si­tion to the end­ing of the mora­to­rium on land sales not only in par­lia­ment, but among farm­ers them­selves. Many smaller farm­ers — who rent land from landown­ers who re­ceived plots from the state af­ter the breakup of the Soviet-era col­lec­tive farms — fear that they will lose ac­cess should it be­come avail­able for sale. Landown­ers will be tempted to sell their land to large agribusi­nesses, which will then squeeze com­pe­ti­tion off the mar­ket, small pri­vate farm­ers say.


De­cen­tral­iza­tion in Ukraine passed a mile­stone on Oct. 29, when Ukraine held the first lo­cal elec­tions in its new amal­ga­mated com­mu­ni­ties, or hro­madas. Elec­tions were held in over 400 ar­eas. More than 200 other ar­eas cur­rently un­der­go­ing the process of amal­ga­ma­tion also elected lo­cal of­fi­cials.

By the end of the year, Ukraine will have more than 600 new hro­madas out of the 1,500 orig­i­nally en­vis­aged. Ac­cord­ing to the ini­tial de­cen­tral­iza­tion plans from 2014, a re­ac­tion to the over-cen­tral­ized power in Kyiv, Ukraine’s towns, vil­lages and set­tle­ments were to be re­or­ga­nized into amal­ga­mated com­mu­ni­ties, the low­est tier in a three-tier lo­cal govern­ment of oblasts, rayons (dis­tricts), and hor­madas (amal­ga­mated com­mu­ni­ties.)

The re­struc­tur­ing is in­tended to re­bal­ance pow­ers and re­spon­si­bil­i­ties be­tween cen­tral govern­ment and lo­cal au­thor­i­ties. Lo­cal au­thor­i­ties are to re­tain more of the tax rev­enues in their ar­eas (60 per­cent of the in­come tax, and 100 per­cent of state duty and ad­min­is­tra­tive fees), and use the funds lo­cally to im­prove in­fra­struc­ture and ser­vices.

How­ever, Rus­sia’s war on Ukraine dis­rupted the ini­tial plans: the de­cen­tral­iza­tion leg­is­la­tion was amended to take into ac­count Ukraine’s obli­ga­tions un­der the Minsk ac­cords to grant spe­cial sta­tus to the Rus­sianoc­cu­pied parts of Donetsk and Luhansk oblasts, which led na­tion­al­ist and op­po­si­tion politi­cal forces to op­pose it. The leg­is­la­tion passed first read­ing in par­lia­ment on Aug. 31, 2015, amid vi­o­lent clashes out­side of the Rada in which four Na­tional Guards­men were killed by a grenade blast. The leg­is­la­tion has since stalled, with no fur­ther progress in its adop­tion.

Mean­while, the United Na­tions Devel­op­ment Pro­gram in Ukraine has been sup­port­ing the de­cen­tral­iza­tion process in the govern­ment-con­trolled por­tions of Donetsk and Luhansk oblasts. The UNDP has or­ga­nized study trips for lo­cal govern­ment of­fi­cials and civil ac­tivists to amal­ga­mated com­mu­ni­ties in other parts of the coun­try and in Poland to ac­quaint them with best prac­tice un­der sim­i­lar lo­cal-govern­ment sys­tems.

In ad­di­tion, the UNDP has sup­ported the cre­ation in govern­ment-con­trolled Donetsk and Luhansk oblasts of Cen­ters for the Pro­vi­sion of Ad­min­is­tra­tive Ser­vices, or TsNAPs, pro­vid­ing equip­ment and staff train­ing. The TsNAPs are in­tended to act as the pub­lic face of de­cen­tral­iza­tion re­form in Donetsk and Luhansk oblasts, through which ci­ti­zens can ob­tain govern­ment ser­vices, such as the is­su­ing of pass­ports and res­i­dency per­mits, quickly and in­ex­pen­sively.

In ad­di­tion, the UNDP in Oc­to­ber launched its “I Am the Com­mu­nity” in­for­ma­tion cam­paign to im­prove pub­lic aware­ness of the de­cen­tral­iza­tion re­form process. It has also pro­vided train­ing for lo­cal au­thor­i­ties in in­cor­po­rat­ing in­put from or­di­nary ci­ti­zens, es­pe­cially women and in­ter­nally dis­placed per­sons, to re­flect their pri­or­i­ties when set­ting lo­cal devel­op­ment poli­cies and al­lo­cat­ing bud­get spend­ing.

Law­mak­ers con­grat­u­late Act­ing Health Min­is­ter Ulana Suprun (C) and Prime Min­is­ter Volodymyr Groys­man (R) af­ter Ukraine's par­lia­ment, the Verkhovna Rada, on Oct. 19 passed a law that will trig­ger the start of lon­gawaited re­form of the health sec­tor in Ukraine. (Oleg Pe­tra­siuk)

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