Ukraine needs to speed up state reforms - UNDP

14:29, 17 April 2009
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To withstand global economic slump

A new report from Blue Ribbon Analytical and Advisory Centre highlights the urgency for high-priority economic and institutional reforms; argues that economic crisis could open windows of opportunity for state reforms in Ukraine, according to the UN Office to Ukraine.

A new report issued by the Blue Ribbon Analytical and Advisory Centre, an independent body of renowned national and international experts that operates with support from the Delegation of European Commission and United Nations Development Programme (UNDP) in Ukraine, has identified high-priority reforms that the Government and Parliament need urgently to enact to weather economic recession and promote growth and better living standards in Ukraine. While saluting the country’s high rankings for political freedoms and development of democratic institutions, which are higher than those of other countries in the CIS, the report warns that in many areas time has been wasted and reforms are long overdue.

  The Report’s authors argue that Ukraine was particularly vulnerable to the global financial and economic crisis because of the slow pace of reforms in recent years. This unprecedented economic meltdown has become a litmus test demonstrating shortcomings in the country’s institutional arrangements and economic basis.  “Ukraine is one of the worst-hit countries by economic slowdown in Eastern Europe due to sharp decline in demand for metallurgical and chemical products in the global market. It is vital to analyse the recent achievements and shortcomings and revisit the agenda of national human development priorities,” explained Cihan Sultanoglu, Deputy Director at UNDP Regional Bureau for Europe and the CIS, who came to Ukraine on official visit.

  “The new report urges for a concerted reform effort in Ukraine, analysing recent developments against a set of 170 policy recommendations, which indicate most relevant measures aimed at building market institutions, providing macroeconomic stabilization and taking advantage of international trade on a path to regaining dynamic, long-term growth that will give the country the international prominence it so richly deserves” she added.

As top priorities in state reforms, the report urges the Government and Parliament to:

-implement monetary policy measures adopted in Memorandum of Economic and Financial Policies agreed with IMF;

-gradually reduce the ratio of recurrent spending to GDP;

-undertake reforms of the pension system;

-strengthen the financial sector’s prudential and supervisory framework;

-make fighting corruption a national policy priority issue;

-develop and implement judicial reform aimed at strengthening the independence, impartiality, and efficiency of the judiciary;

-decentralize public administration according to the principles of the European Charter of Local Self-government in order to increase efficiency and accountability of local self-government;

-increase energy security by stimulating energy savings by allowing prices to reflect costs;

-establish transparent real estate and land market; and

-finalise negotiations with EU on establishment of a Free Trade Area.

  These priority recommendations are selected from a detailed analysis that addresses the challenges faced by Ukraine in three main areas: 1) ensuring macroeconomic stabilization; 2) enhancing market institutions to support further reforms and 3) improving Ukraine’s integration into the world economy.

  Analysis has shown that Ukraine’s few remarkable achievements during 2008 and the early part of 2009 have been largely overshadowed by modest progress in most areas. “Ukraine’s WTO accession and the launch of negotiations on FTA with the EU, adoption of a modern joint stock company law, progress in public procurement law, and transition to a more flexible exchange rate regime are seen as the most important accomplishments,” said Marcin Swiecicki, BRAAC Director. But the list of pending reforms is yet long as there was small or no progress in combating corruption, privatization, empowering local authorities, lifting the moratorium on the sale of agricultural land, implementing the next stage of pension system reforms, instituting better targeted social policies, lowering inflation, abolishing the Commercial Code, and strengthening independence and impartiality of the judiciary.

Speaking during the presentation, Hryhoriy Nemyria, Vice Prime Minister of Ukraine, praised the overall recommendations. In addition he said that, according to his assessment, Ukraine has managed to implement about 60 per cent of the recommendations presented in the Blue Ribbon Reports over past years. "Ukrainian Government is very grateful to the report`s authors. I confirm that our Government is ready to cooperate in real practice, so that in the next year we increase the amount of what has been finally achieved, as compared to what has been recommended here," he added. 

The report treats good governance as the starting point for all reform. Its authors underline that governance failures lie at the heart of the global economic crisis. Thus, making the Government more efficient and accountable is a precondition for success in all other areas. In several post-communist countries crucial reforms happened when it became clear to political leaders and civil society that existing institutional arrangements could no longer serve the wellbeing of the people.

 “These new recommendations are intended to help the President, the Government, and the Verkhovna Rada to shape policy in coming months, and also to give Ukrainian civil society a useful tool to monitor reform progress in key areas,” said Joanna Kazana-Wisniowiecka, Acting UNDP Resident Representative in Ukraine. “UNDP stands ready to support these efforts in order to promote sustained economic growth and thus even out regional disparities in Ukraine and close the income gap between Ukraine and its Western neighbours.”

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