Ukrainian President Viktor Yanukovych has announced an ambitious reform program. In a video Q&A, Irina Akimova, first deputy head of the presidential administration of Ukraine, details the reforms targeting the tax code, corruption, education, and health. Akimova warns, however, that implementing sensitive reforms in the run-up to the country's parliamentary elections in October will be politically difficult.
- Why is Ukraine reforming?
- What are the key reforms on the agenda?
- How will the October elections affect the reforms?
- Will Ukraine be able to secure a new gas agreement with Russia?
- Does Ukraine have a vision for a Euro-Atlantic space?
- How will hosting the European soccer championship affect Ukraine’s image?
Why is Ukraine reforming?
We cannot live like we lived before. And that is understandable for everybody, in society and wider civil society, and with the leaders of the country. Therefore, the motivation is very simple: Ukraine has to become more civilized in terms of the business climate and more developed compared to what we have now.
Therefore, the president, immediately after entering office, established the Committee for Economic Reforms. He asked for preparation, together with the civil society, on a broad reform agenda. He also established the institutional mechanism, which is called the Committee for Economic Reforms, to monitor how things are going and set tasks for the executive power. It also tries to involve civil society members and international organizations in discussions on the proceedings.
What are the key reforms on the agenda?
There are several things. First, and most important, is fiscal sustainability and macroeconomic development. Fiscal consolidation was one of the most important tasks which should have been performed during the last three years. And I think we will have success in this respect, considerable success.
The second part, of course, concerns the business climate. It encompasses a lot of directions. First, it’s mass deregulation, lowering the entrance and exit barriers for businesses in Ukraine. And there has been a considerable step forward in this respect.
The second direction within deregulation, in a broader sense, is the perfection of the tax legislation. A new tax code which was adopted a year ago and with some adjustments afterward, is one of the representative samples. Here also counts the custom legislation. We adopted the custom court just two weeks ago that will improve, considerably, the transparency of custom rules.
In deregulation, we also put as a special point on administrative reform and reform of administrative services. It concerns almost all of the population of Ukraine, including the visitors, who are trying to partake in some administrative services. Starting with registering a vehicle, for example, and going on to obtaining different kinds of passports, or permit residence, all of that is called administrative service. And first of all it was not transparent for very long, as well as highly priced while the money obtained by different agencies did not even go to the budget. So, a very comprehensive law, which sets strict rules on how administrative services are produced, is now in the parliament. It is already half adopted after the first reading. So that is one of the largest parts.
The next part is agricultural reform—striving for opening the agricultural market length. Agricultural market length is one of the main directions in this respect.
Then there is a huge part on the energy sector where tasks, like continual de-privatization in the energy sector, setting transparent rules for natural monopolies, providing a possibility for restructuring of the natural monopolies, structures like NAK Naftogaz, like Ukrzaliznytsia, that is also enshrined in the program.
There is a large, substantial part which is devoted to the social reforms. First of all, making the social benefit system a more targeted one and reducing the benefits for those who do not need it and for highly ranked state bureaucrats.
And the improving situation concerning monetization of all the social benefits will remain after significant cuts. Here also counts the reform of education. Ukraine has to reform its higher education on the university level, making universities more autonomous, both in a financial context and in providing education services. So here, one of the major laws now considered by the government is the law on high education.
And another part of social reform is in fact health care reform which encompasses changes of the net for all the hospitals and medical establishments and changing the major principles of finance.
How will the October elections affect the reforms?
I think the course of reforms will not be affected very much because the set of goals is already in the program of reforms signed by the president and taken into action by the executive body of power.
However, the pace of reforms might be affected of course. It’s absolutely clear that in the pre-electoral period it’s very difficult to implement politically sensitive and especially socially sensitive initiatives. For example, a bit more than half a year ago, we adopted a law on the reform of the pension system. It’s difficult to imagine that more severe steps in this direction will be undertaken before the elections.
Will Ukraine be able to secure a new gas agreement with Russia?
My hope is that the new agreement will be secured. When and how is very difficult to predict. What is absolutely clear is that the present agreement with Russia is economically unjustified and not fair, because it turns Ukraine into a country that buys the gas at a much higher price than even the Western European partners. And the mandatory volume which Ukraine has to buy every year is too high compared to the needs.
So this agreement should be reconsidered. However, the base of reconsideration of course depends on the partners.
Does Ukraine have a vision for a Euro-Atlantic space?
This situation looks like the following: we need a lot of international partners, with whom we can work on different issues and this strategic partnership should go further and deepen without contradicting a strategic partnership with the other side. For example, at the moment Ukraine has a very good relationship under strategic terms, with respect to, for example, a corporation in the energy sector with the United States, concerning the nuclear power issues. Does it contradict the strategic partnership on the same thing with Russia? From my point of view, no. Because here a lot of interest could be combined and they could be made into the decisions which are acceptable for all the parties.
The same concerns our deepening economic relationship, for example, with the Asian countries like China. Will it contradict our European factor? Definitely not, because new investment projects if they will be undertaken with a Chinese business, would be very beneficial for Ukraine and for China and definitely they will not hurt the interest of any other trade partner.
The most important thing is, while making agreements, of course one should carefully check that the balance of interest is preserved. First of all it is in the interest of your country, and it is in the interest of not violating already signed international cooperation agreements, like WTO or whatever else. And I think that is the most important way of dealing with the issues: multiplicity of partners and cooperation with each of them, ether in a very wide sphere and quantity of different areas or on a selected basis where both partners feel most appropriate.
How will hosting the European soccer championship affect Ukraine’s image?
I hope that the overall picture and enthusiasm with which the Ukrainian people are waiting for this European championship will be felt by foreign visitors and will probably produce a new outlook on Ukraine as a country with not only huge potential but with huge possibilities which could be exploited and used now. So that is our aspiration, and we are also looking forward to welcoming a lot of guests during this championship.
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