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Expectations for Ukraine Reform Priorities in 2019

At the Ukraine Crisis Media Center (from left) are: Pamela Tremont, deputy chief of mission, U.S. Embassy in Kyiv, Canada’s Ambassador to Ukraine Roman Waschuk, and Olena Prokopenko, former expert of the Reanimation Package of Reforms.

WASHINGTON – It is often assumed that unpopular political decisions regarding reforms cannot take place in an election year. Fearful of losing the support of voters as elections approach, few politicians are willing to push for disruptive changes even if they can bring long-term benefits for the country. However, as Ukraine’s economy lags far behind that of its European neighbors and as Russia continues its military and hybrid aggression against Ukraine, many experts argue that Kyiv cannot afford to avoid or delay reforms that will make its economy more productive and its society more prosperous.

Olena Prokopenko, who up until recently worked for the NGO called Reanimation Package of Reforms, laments the fact that attention in Ukraine is now predominately drawn to the presidential election campaign, which is mostly devoid of public debate about reforms. “But we in civil society believe that elections are no excuse for not advancing reforms,” she said, and “we wanted to take this opportunity to draw the attention of Ukraine’s international partners and the government of Ukraine to those reform priorities that we see as attainable and realistic even during this elections year.”

The opportunity she referred to was a February 14 international videoconference organized by the Transatlantic Task Force on Elections and Civil Society in Ukraine, which featured speakers in Washington, Kyiv, Brussels and Ottawa.

Opening the session were Johnathan Katz of the German Marshall Fund (GMF) and Orest Deychakiwsky of the U.S.-Ukraine Foundation. Mr. Katz explained that the task force was set up as a means to communicate between key capitals and key partners of Ukraine and with Ukrainian civil society, citizens and government, and that the ultimate goal “is to support Ukraine’s democratic transition and to strengthen Ukraine’s security engagement with the West.” He stressed that the 2019 presidential and parliamentary elections in Ukraine “are going to determine in many ways what reforms will be not only passed but also implemented” in the near future and that Ukraine has been fortunate to enjoy strong Western political and financial support. 

Mr. Deychakiwsky, who along with Mr. Katz is a co-chair of the Friends of Ukraine Network Democracy and Civil Society Task Force, recognized that in the five years since the Euro-Maidan Revolution of Dignity many reforms have been undertaken but there is “a lot of room for improvement.” He said that “reforms need to continue,” even in this election year, and that whoever is elected there will be “a lot of challenges ahead for years to come.” 

The former Helsinki Commission policy advisor referred to the United States, Canada and the European Union – all of whom were represented at the video conference – as Ukraine’s “strongest international partners” and Ukraine’s “three best friends.” He said he expects that the international community and, especially, civil society will continue to be “key drivers” of reforms in Ukraine and efforts to integrate Ukraine into the Euro-Atlantic community of nations.

The first keynote speaker was Roman Waschuk, Canada’s ambassador to Ukraine. He noted that Ukrainians are being confronted with deciding whether reforms have been taking place and, if so, voting to preserve that situation or, if not, voting for a candidate that is untested with the hope of fulfilling their reform expectations.

Ambassador Waschuk said he believes 2019 could provide a very important opportunity for a fuller implementation of laws that have been passed in recent years. The key to a successful reform process is not only passing laws, he said, but “making them real.” Thanks to international support, the Ukrainian government has increased its “implementation capability,” he noted, referring to the actual people who are implementing reform measures in the ministries. 

Of course, it’s necessary for Ukraine to adhere to its International Monetary Fund program but rather than prescribing new reforms in an election year, Canada is focusing on less controversial things like decentralization. Major new initiatives, like private land sales and large-scale privatization, “are not going to miraculously happen this summer,” said Ambassador Waschuk. 

Speaking from Ottawa, Jill Sinclair, a senior executive with the Canadian government, announced that Canada will be hosting the third Ukraine Reform Conference in Toronto on July 5. She explained that, in this extraordinary moment of opportunity and transition for Ukraine, “What we’re looking at here is how do you consolidate the trajectory, how do you make… those foundational reforms that have already been achieved irreversible, sustainable? How do you put in place the governance and the systems and the institutions that will make this withstand the political dynamics with any transition?” 

Accountability, integrity and prosperity should be the broad themes for reform going forward, along with inclusivity, i.e., engaging all the key stakeholders internationally and within Ukraine, she said. The Reform Conference will give the president of Ukraine and parliamentary candidates a sense of the expectations for reforms and expected support from international partners that will be forthcoming in order to help Ukraine “to continue to realize its Euro-Atlantic vision and aspirations.”

Pamela Tremont, the deputy chief of mission of the U.S. Embassy in Kyiv, took a moment to acknowledge the many reforms that have already been passed in Ukraine: “They’ve passed anti-corruption court legislation, a law on national security, a currency law, a state bank governance law, privatization reform, pension reform, health care reform, education reform, new justices have been appointed to the Supreme Court, Privat Bank reform, automatic VAT (Value-Added Tax) registry and refund system has been created, business pressure relief law and, of course, decentralization. That’s a lot to accomplish and a lot to implement.” Ms. Tremont added, “Obviously there are always stakeholders in the status quo who are trying to undermine the reforms.”

Based on this track record, she said that the United States believes Ukraine can accomplish a lot in 2019 despite the elections, including Ministry of Finance and National Bank fiscal and financial reforms, establishment of separate customs and tax services, continuation of energy reforms, improvement of corporate governance of state-owned enterprises, continuation of transparent privatizations, creation of a credible anti-corruption court preserving existing and nascent anti-corruption institutions like the National Anti-corruption Bureau of Ukraine (NABU) and the Specialized Anti-corruption Prosecutor’s Office (SAPO), so that the law is equally applied to all citizens regardless of their wealth or power, “as Ukrainians demanded on the Maidan in 2014.”

Ms. Tremont noted that although reform of the electoral code is not realistic this year, there are ways to strengthen electoral justice, including increasing penalties for vote buying and protecting the voting rights of internally displaced persons (IDPs) and labor migrants.

Expressing concern about attacks on civil society and the lack of seriousness of law enforcement officials in pursuing some of these cases, Ms. Tremont underscored that “we would like to see more protections for civil society, because civil society is the backbone of a strong democracy.” 

The next presenter, Peter Wagner, head of the Ukraine Support Group of the EU’s European Commission (EC) expressed support for the comments of the previous speakers, saying that the international community is “extremely aligned” in its support for Ukraine and the reforms that are needed.

Interestingly, he noted that the uncertainty of the elections in Europe are as much of an issue of concern as the elections in Ukraine are. In terms of factors that can hurt Ukraine economically, he noted that Ukraine will be facing enormous debt repayment, high debt, high defense expenditures, plus the decline of international humanitarian support as attention to Russia’s military aggression in eastern Ukraine diminishes. 

In terms of the European Union’s expectations for Ukraine in 2019 Mr. Wagner said: “If the IMF program… stays on track, if the election can be held in a free transparent way, and if there is a bit of credible continuation of the economic liberalization agenda… I think the rest should work out.” 

Mr. Wagner emphasized that the EC is “optimistic with regard to 2019” and that will be reflected in the budgetary support that the EU is preparing for Ukraine and the technical support that is in the pipeline. In particular, the EU will support the continuation of anti-corruption and decentralization reforms and the implementation of the EU-Ukraine Association Agreement. The EU will also provide assistance to civil society, aiming “to go deeper and wider into the country” as much of this support thus far has tended to be Kyiv-centered. 

Later in the discussion, when asked if there was any indication that the European Union might be softening its support for Ukraine, Mr. Wagner responded: “What has changed between 2014 and today? Why should we change our” support for Ukraine? “We have five years ago signed up to a long-term commitment. We have an Association Agreement… and nothing has changed.” He went on to say that much has already been achieved and lots more potential exists. As long as the Ukrainian people and government want to continue with the reform path, the EU will be with them. 

Summarizing Mr. Wagner’s remarks, Bruno Lete of GMF’s Brussels office said he was glad to hear that “the EU will remain vested in Ukraine, our geographic neighbor, after all, and help the transition in that country.”

An important aspect of the Transatlantic Task Force video conference was to discuss whether reform priorities of Ukraine’s international partners align with reform priorities of Ukrainian civil society. Addressing that issue were Hlib Vyshlinsky of the Center for Economic Strategy and Andriy Borovyk of Transparency International Ukraine.

Mr. Vyshlinsky named a number of reforms that should be an immediate priority. He disagreed with the North American panelists, who said it was unrealistic to achieve land reform and land privatization during the 2019 election cycle. “We believe this is so important that it should be a priority even this year,” he stated. 

Referring to a World Bank study on the economic growth potential of Ukraine, Mr. Vyshlinsky said: “We see that Ukraine has very limited potential to grow because of demographic problems, we have diminishing human capital, because of lack of investment we have depreciation of physical capital… The only low-hanging fruit we could have to get higher economic growth rates that will satisfy the Ukrainian population’s need for a better well-being is, in fact, opening the land market and injecting investment into agriculture.”

The other reform priorities cited by Mr. Vyshlinksy, include privatization of all large-scale state-owned enterprises and shortening the list of enterprises prohibited from privatization, simplifying customs procedures, relaunching the State Fiscal Service, establishing financial investigation services that will replace the tax police and numerous economic crime units at law enforcement agencies, and further liberalization of capital controls and foreign exchange regulations, which would open Ukraine to capital flows from the European Union in line with the free trade agreement.

While recognizing that Ukraine’s improvements on Transparency International’s (TI) corruption index have been modest, Mr. Borovyk noted that the general trend over the past five years has been positive. 

He listed a number of achievements, like the public procurement system ProZorro, electronic asset declarations for public officials, anti-corruption institutions and the creation of an anti-corruption court with international support, noting that many candidates perceived as corrupt did not make it through the selection process.

“What we can do this year is to preserve what we have for today, if talking about the anti-corruption infrastructure” like NABU and the anti-corruption court, he said. And TI will be focusing on improving government transparency and accountability at the municipal and regional level, he said. Mr. Borovyk exclaimed that “the real key for solving the issue of corruption is prevention.”

Speaking about corruption in Ukraine, Ambassador Waschuk said that “possibly the single most corrosive thing in Ukrainian public life is the culture of impunity.”

He said reforms have reduced the space for corruption by about 60 percent but most people don’t care “because bad people have not been punished.” And that’s where the anti-corruption court becomes important. Despite many successful reforms people are not satisfied, with a majority in polls saying the country is going in the wrong direction. Ambassador Waschuk suggested that Ukrainians may be underestimating how significantly the economy is improving as wages are up 10 percent and retail sales are up 6 percent.

Deputy Chief of Mission Tremont echoed similar sentiments about the corruption problem: “Corruption is something that has to be dismantled piece by piece and we have to start to build that culture of intolerance for corruption, we can’t do that overnight, but as we close that space for corruption, we start to make people understand that they don’t have to tolerate it.” 

As noted by Ms. Prokopenko, Ukraine’s international partners still enjoy very strong leverage in terms of influence on Ukraine’s reform process. Therefore, it was not unusual that a part of the discussion was devoted to the question of whether the West’s reform expectations for Ukraine might be a bit unrealistic. 

“I think it is a bit disingenuous to expect… Singaporean reforms tempos and achievements,” said Ambassador Waschuk, while maintaining a very inclusive, democratic approach to policy-making. “I think where we have a problem is we collectively bought into a maximalist vision of what post Maidan change in 2014-2015 would do and we’re now discovering that it’s much more complicated in ways that are partly unique to Ukraine but partly, simply the way democratic governance and vested interests – not in the evil sense of vested interests but normal vested interests, regional economic and others in a country work out. But Ukraine is an important part of the Euro-Atlantic system and that is why it deserves continuing support and attention,” he argued.

As an illustration of Ukraine’s deepening relationship with the West, Roman Waschuk noted that “Ukraine is now integrated into the Central and East European labor pool, it’s not simply another place, it’s a place on which the prosperity of Poland and a number of other neighboring countries now depends.”

Reiterating U.S. support for Ukraine Ms. Tremont said: “We want Ukraine to be strong, we want it to be able to defend its territorial integrity and we want a partner in this part of the world… The U.S. is deeply committed to Ukraine and will remain so, and we are constantly exploring new avenues of pushing back on Russian aggression.” 

At the conclusion of the videoconference, Vasyl Babych, the head of international relations at the Reanimation Package of Reforms, announced that on February 27 the NGO coalition will have a public discussion with presidential candidates about reforms. He asked the panelists what they would ask or say to the candidates, if given the chance.

Ambassador Waschuk said he would ask: “How would you arrange your affairs and your relationships with your inner core of supporters and advisers to ensure that impunity is overcome?”

Ms. Tremont said: “My advice would be to be very careful about the alliances you build as you take power, because it seems like those alliances are often the things that drag people back into the past.”

Mr. Vyshlinsky stated that he would ask them to take a sort of Hippocratic oath to do no harm and to “not destroy what was built” during the past five years.

The Ukrainian Weekly