Commission staff working document - Accompanying the Communication from the Commission to the European Parliament and the Council - Taking stock of the European Neighbourhood Policy (ENP) - Implementation of the European Neighbourhood Policy in 2009 Progress Report Ukraine {COM(2010) 207 final} {SEC(2010) 513 final} {SEC(2010) 514 final} {SEC(2010) 515 final} {SEC(2010) 516 final} {SEC(2010) 517 final} {SEC(2010) 518 final} {SEC(2010) 519 final} {SEC(2010) 520 final} {SEC(2010) 521 final} {SEC(2010) 522 final} {SEC(2010) 523 final} {SEC(2010) 525 final}
Date: 2010-05-04
Institutions: European Commission
Subjects: European neighbourhood policy, Ukraine, democracy, economic integration, energy policy, environmental protection, geographical mobility, human rights, legal system, political cooperation, report, settlement of disputes

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EUROPEAN COMMISSION  

Brussels, 12.5.2010 
SEC(2010) 524 final 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying the 

COMMUNICATION FROM THE COMMISSION  
TO THE EUROPEAN PARLIAMENT AND THE COUNCIL 
Taking stock of the European Neighbourhood Policy (ENP) 

Implementation of the European Neighbourhood Policy in 2009 
Progress Report Ukraine 

{COM(2010) 207 final} 
{SEC(2010) 513 final} 
{SEC(2010) 514 final} 
{SEC(2010) 515 final} 
{SEC(2010) 516 final} 
{SEC(2010) 517 final} 
{SEC(2010) 518 final} 
{SEC(2010) 519 final} 
{SEC(2010) 520 final} 
{SEC(2010) 521 final} 
{SEC(2010) 522 final} 
{SEC(2010) 523 final} 
{SEC(2010) 525 final} 

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1. 

BACKGROUND AND OVERALL ASSESSMENT  

Ukraine and the EU first established contractual relations in 1994 through a Partnership and 
Cooperation  Agreement  which  entered  into  force  in  1998.  On  that  basis,  the  EU-Ukraine 
Action Plan was approved in February 2005. 

In the course of 2009 intensive negotiations were conducted to develop an instrument to help 
prepare  for  and  facilitate  the  entry  into  force  of  the  EU-Ukraine  Association  Agreement, 
including  a  deep  and  comprehensive  free  trade  area  (DCFTA).  The  instrument,  called  the 
Association  Agenda,  was  endorsed  by  the  Cooperation  Council  in  June  and  adopted  by 
exchange of letters in November 2009, thereby fulfilling a commitment made by both sides.  

EU-Ukraine  meetings  took  place  at  the  level  of  the  EU-Ukraine  Summit,  the  Cooperation 
Council, the Cooperation Committee and seven subcommittees. 

This  document  reports  on  progress  made  on  the  implementation  of  the  EU-Ukraine  Action 
Plan  and  Association  Agenda,  respectively,  between  1  January  and  31  December  2009, 
although  developments  outside  this  period  are  also  taken  into  consideration  when  deemed 
relevant.  It  is  not  a  general  review  of  the  political  and  economic  situation  in  Ukraine.  In 
addition,  for  information  on  regional  and  multilateral  sector  processes,  please  refer  to  the 
sectoral report. 

As regards the EU-Ukraine Association Agreement, in the course of 2009 further substantial 
progress was made in negotiations on economic  and sector cooperation issues.  Negotiations 
on the DCFTA part of the Agreement continued with the aim of concluding them as soon as 
possible. 

While  the  gas  dispute  in  January  2009  temporarily  disrupted  gas  supplies  to  the  EU  via 
Ukraine,  a  number  of  significant  achievements  took  place  in  the  course  of  the  year  in  the 
energy  sphere.  In  March  2009  the  EU  and  Ukraine  jointly  hosted  a  high-level  investment 
conference on the modernisation of Ukraine’s gas transit system. This was accompanied by a 
Joint Declaration setting out a number of key reforms commitments in the sector. In July 2009 
the European Commission and a number of International Financial Institutions issued a joint 
statement  of  intent  regarding  support  to  gas  sector  reform  in  Ukraine  and  purchases  of  gas 
from  Russia.  In  December  2009  approval  was  given  for  Ukraine's  accession  to  the  Energy 
Community Treaty pending adoption of a gas law in accordance with the EU acquis. 

The negotiations on the EU-Ukraine Agreement on a Common Aviation Area advanced. The 
dialogue  on  developing  relevant  conditions  to  establish  a  visa  free  regime  as  a  long  term 
perspective  also  progressed  well.  The  EU-Ukraine  administrative  arrangement  on  closer 
cooperation in the field of civil protection was successfully used to help Ukraine address the 
flu pandemic.  

Ukraine cooperated constructively on Transnistria settlement efforts, continued to support the 
work of the EU Border Assistance Mission (EUBAM) and agreed with the extension of the 
mission  for  a  second  time.  Cooperation  on  CFSP  matters  also  continued  as  did  Ukraine’s 
alignment  with  most  EU  CFSP  Declarations.  A  Memorandum  of  Understanding  for  the 
Establishment of a Dialogue on Regional Policy and Development of Regional Cooperation 
and  a  Strategic  Co-operation  Agreement  between  Ukraine  and  Europol  were  signed  in  July 
and December 2009 respectively. Negotiations on a Memorandum of Understanding between 

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the  Ministry  of  Health  and  the  European  Monitoring  Centre  for  Drugs  and  Drug  Addiction 
were concluded in 2009 and the document subsequently signed in January 2010. 

Just  after  the  reporting  period,  in  January  and  February  2010,  Presidential  elections  were 
conducted  in  Ukraine.  These  met  most  OSCE  and  Council  of  Europe  (CoE)  standards  for 
democratic elections and underlined the further significant progress which has taken place in 
Ukraine’s democratic development. 

Overall in the course of 2009 the implementation of key political and economic reforms was 
hampered by the continuing constitutional crisis resulting from unclear separation of powers 
between the President, Prime Minister and Parliament and by the beginning of electioneering 
in the second half of the year. 

As  in  2008,  no  progress  was  made  on  the  issue  of  constitutional  reform,  which  therefore 
remains a high priority. No or only limited progress was made with respect to judicial reform 
and  anti-corruption  measures.  Further  efforts  are  needed  to  fulfil  several  Council  of  Europe 
line  with  Council  of  Europe 
related  commitments  and 
recommendations.  

legislation 

improve 

in 

to 

Ukraine’s  economic  situation  continued  to  deteriorate  in  2009  in  the  wake  of  the  economic 
and financial global downturn. In the course of the year Ukraine was able to benefit from a 
comprehensive  economic  stabilisation  programme  agreed  with  the  IMF  under  a  stand-by 
arrangement with the IMF totalling USD 16.5 billion (EUR 11.5 billion). However, towards 
the end of 2009 this agreement went off track amid election preparations and a final tranche 
of USD 3.8 billion (EUR 2.7 billion) was not disbursed. The recently elected Government has 
made the release of the fourth tranche a priority and an IMF delegation visited Kyiv in March 
2010. While the economic outlook is improving, immediate challenges remain, in particular 
as  regards  bringing  social  and  pension  expenditure  under  control.  The  business  climate 
continued  to  be  negatively  affected  by  inter  alia  unequal  treatment  of  companies  and 
bureaucratic  obstacles  to  business  and  investment  which  promotes  and  consolidates 
corruption.  

During  2010, to  fulfil  its  Association  Agenda  commitments,  it  is  in  the  interest  of  Ukraine 
to make further efforts with regard to constitutional reform; reform of the gas sector; reform 
of  the  public  administration;  the  taking  of  effective  measures  against  corruption  notably 
through judicial reform as well as measures to improve the business and investment climate. 
At  the  same  time  there  remains  an  urgent  need  for  Ukraine  to  adopt  a  law  on  public 
procurement which complies with international standards and the acquis. 

The  Ukrainian  authorities  and  civil  society  representatives  participated  actively  in  the 
multilateral  framework  of  the  Eastern  Partnership,  in  particular  through  open  dialogue  and 
their contribution to the working programmes for the four thematic platforms. Together with 
the bilateral elements of the Eastern Partnership, this contributed to the overall strengthening 
of  EU-Ukraine  relations  and  reinforcement  of  the  follow-up  on  the  priorities  of  the  Action 
Plan and the Association Agenda. Ukraine hosted the first meeting of the Eastern Partnership 
Integrated Border Management panel in Odessa in October 2009.  

2. 

POLITICAL DIALOGUE AND REFORM 

The EU and Ukraine maintained regular political dialogue during the year, notably at the EU-
Ukraine  Summit,  the  Cooperation  Council  and  the  Cooperation  Committee.  In  addition, 

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political  dialogue  meetings  took  place  between  the  Ukrainian  government  and  the  EU 
Political and Security Committee, the Council Working Group on Eastern Europe and Central 
Asia  and  EU  Foreign  Ministers  and  EU  Political  Directors.  The  EU-Ukraine  Parliamentary 
Cooperation Committee met in both Brussels and Kyiv. The latter included a visit to Crimea.  

Democracy and rule of law 

In July 2009 a series of amendments to the legislation on presidential elections were adopted 
by the Verkhovna Rada. In October the CoE Venice Commission and OSCE/ODIHR issued a 
Joint  Opinion  on  these  amendments.  While  noting  certain  positive  changes,  overall  it 
expressed serious concerns describing the changes as marking a “backward step”. Among the 
issues highlighted by the report were amendments that make it more difficult to challenge the 
election  results,  provisions  related  to  the  composition  of  electoral  commissions  and  those 
concerning  the  rules  of  changing  the  voters’  lists  on  Election  Day.  In  October,  the 
Constitutional  Court  of  Ukraine  ruled  several  of  the  amendments  to  the  election  legislation 
unconstitutional. 

In  addition,  controversial  changes  were  made  to  the  electoral  framework  between  the  two 
rounds  of  the  Presidential  elections  concerning  the  representation  of  parties  on  electoral 
commissions. The practice of amending the electoral framework in the middle of the electoral 
process was criticised by the International Election Observation Mission. 

Nevertheless,  according  to  the  preliminary  conclusions  of  the  International  Election 
Observation  Mission,  the  presidential  elections  were  largely  conducted  in  accordance  with 
OSCE and Council of Europe commitments and consolidated progress achieved since 2004.  

While work continued on the preparation of a draft concept of public administration reform 
and on draft laws on the civil service and the reform of the state administration none of these 
documents was adopted. A concept on the reform of local self-government was approved in 
July  2009.  The  concept  seeks  to  create  conditions  for  sustainable  development  of  territorial 
communities and to increase local participation in decision-making.  

With  regard  to  judicial  reform  and  rule  of  law,  progress  was  limited.  A  draft  Code  of 
Criminal Procedure passed its first reading at the Verkhovna Rada. A new Code of Criminal 
Procedure  was  one  of  the  conditions  for  Ukraine’s  accession  to  the  Council  of  Europe  in 
1995, originally to be enacted within a year from accession. The reforms enacted by the draft 
code  should  also  enable  Ukraine  to  ratify  and  implement  the  2nd  Protocol  to  the  European 
Convention  on  Mutual  Legal  Assistance  in  Criminal  Matters.  A  draft  law  on  reform  of  the 
Prosecutor’s Office was passed by the Rada in April 2009 and has now been referred to the 
Venice Commission for a view as to its compatibility with international standards. A law “on 
Amendments  to  Certain  Legislative  Acts  of  Ukraine  on  the  introduction  of  automated 
workflow systems in Administrative Courts” was adopted by the Rada in June 2009. The law 
contains  measures  designed  to  ensure  impartial  allocation  of  cases  to  judges  and  thereby  to 
reduce corruption.  

In  June  2009  a  package  of  anti-corruption  laws  was  adopted  to  give  domestic  legislative 
force  to  the  Council  of  Europe’s  Criminal  Law  Convention  on  Corruption  and  the  UN 
Convention against Corruption. In November these were referred to the Constitutional Court, 
which has yet to rule on their constitutionality. In the meantime the Rada voted to postpone 
the entry into force of these measures from January to April 2010, and President Yushchenko 
signed this into law. In December 2009, the Government adopted 14 Resolutions covering a 
wide-range of anti-corruption measures. The same day, the President vetoed an important bill 

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adopted by the Rada in November on money laundering. The draft law contains a number of 
measures  needed  for  Ukraine  to  comply  with  the  recommendations  of  the  Financial  Action 
Task Force on Money Laundering. A Law on procurement of goods, works and services for 
public  funds  was  approved  in  11  February  2010.  It  is  a  condition,  inter  alia,  of  EU  sector 
budget  support  to  Ukraine  that  any  law  adopted  on  this  issue  should  be  consistent  with  EU 
norms  and  standards.  In  2009,  Ukraine’s  position  deteriorated  in  terms  of  perceived 
corruption in comparison with other countries.  

Human rights and fundamental freedoms 

Improvements  took  place  as  regards  pre-trial  detention  administered  by  the  Ministry  of  the 
Interior,  in  particular  through  the  operation  of  Civil  Society  Councils  on  Human  Rights 
(which have an advisory role and operate at national level and regional levels). The Ministry 
of  Interior’s  Department  on  Human  Rights  Monitoring  undertook  monitoring  of  respect  for 
human  rights  in  the  police  force  as  well  as  conducting  educational  activities  in  this  regard. 
The European Committee for the Prevention of Torture and Inhuman or Degrading Treatment 
or  Punishment  visited  Ukraine  in  September  2009  to  carry  out  its  5th  periodic  report.  A 
National  Preventive  Mechanism  has  yet  to  be  established  in  spite  of  the  September  2007 
deadline,  which  was  set  upon  ratification  by  Ukraine  of  the  Optional  Protocol  to  the  UN 
Convention against Torture in 2006. Human rights and international organisations continue to 
report on complaints of torture and ill-treatment in penitentiary and detention facilities. 

A number of cases of violations of the rights of refugees and asylum-seekers were reported, 
including instances of forced deportation and denial of access to asylum seekers by UNHCR 
representatives. 

As  regards  respect  of  the  rights  of  persons  belonging  to  national  minorities,  reports  on 
incidents of anti-Semitism continue which include among others vandalising of the Holocaust 
Memorial  in  Mykolayiv  and  synagogues  in  Kremenchuk  and  Kolomyia.  Other  national 
minorities  continue  to  be  the  object  of  discrimination  and  racism  including  in  particular  the 
Roma  and  Crimean  Tatar  communities.  In  November  2009,  several  articles  of  the  criminal 
code  were  amended  to  include  reference  to  racial  motivation  as  an  aggravating  factor  for 
crimes. Further efforts are needed to increase awareness and to counter racial discrimination. 
No  progress  was  reported  towards  the  adoption  of  comprehensive  anti-discrimination 
legislation,  as  recommended  by  UN  and  Council  of  Europe  monitoring  bodies.  Continuous 
efforts  should  be  taken  to  ensure  respect  of  the  rights  of  persons  belonging  to  national 
minorities  in  line  with  the  Council  of  Europe  Framework  Convention  for  the  Protection  of 
National Minorities and the European Charter for Regional or Minority Languages.  

Significant improvements in the area of respect for freedom of expression have taken place in 
recent  years,  although  progress  has  slowed  recently.  During  the  Presidential  election 
campaign,  as  a  result  of  a  pluralistic  media  environment,  voters  were  offered  a  variety  of 
information  concerning  candidates  and  their  political  programmes.  However,  the  media 
continued  to  be  subject  to  heavy  financial  pressure  and  economic  interests,  in  particular 
during the electoral campaign. While the European Convention on Trans-frontier Television 
entered into force in July 2009, its implementation is still in its initial stage. No effective steps 
were taken to establish a public service broadcaster in line with international standards. 

In June 2009 the Verkhovna Rada adopted at first reading a draft law touching on freedom of 
assembly (“Order of organising and conducting peaceful events”), which included provisions 
restricting  rallies.  The  draft  law  was  criticised  by  the  Venice  Commission.  In  its  Opinion 

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issued in December 2009, the Venice Commission noted “several substantial shortcomings” 
in  the  draft  law,  including  as  regards  the  lack  of  clear  standards  to  guide  official  decision-
making.  The  Venice  Commission  also  stressed  that  freedom  of  assembly  should  enjoy 
constitutional protection and not be restricted by subsidiary legislation. In May 2009, the city 
authorities  in  Mykolayiv  banned  the  holding  of  a  Rainbow  Spring  Festival  to  mark  the 
International Day against Homophobia.  

A  gender  equality  commission  was  established  in  December  2009.  It  addresses  anti-
discrimination issues and investigates complaints filed by citizens. A draft law on equal rights 
remains to be adopted. In June 2009, the Ministry of Education and Science issued a Decree 
providing  for  regular  gender  equality  lessons  in  Ukrainian  schools.  No  progress  can  be 
reported  in  preventing  and  addressing  domestic  violence  either  in  legal  or  administrative 
terms. Women’s participation in the labour market is high although a substantial gender pay 
gap remains. 

Progress was made on children’s rights with the adoption by the Verkhovna Rada in March 
2009  of  a  National  Plan  of  Action  for  Children  to  Implement  the  UN  Convention  on  the 
Rights  of  the  Child  2010  –  2016  and  in  October  of  an  implementing  programme  by  the 
Cabinet of Ministers. Progress was also made in the area of adoption and fostering; in efforts 
to  reduce  HIV  mother  to  child  transmission  rates  and  in  expanding  the  Baby-friendly 
Hospitals  Initiative.  Laws  on  probation  in  the  context  of  efforts  to  develop  a  restorative 
juvenile justice system have been drafted but have yet to be considered by the Rada.  

No progress can be reported on trade union rights and core labour standards. The January 
2009  Committee  of  Social  Rights  of  the  Council  of  Europe  which  reviewed  the 
implementation of the European Social Charter in Ukraine underlined the inadequacy of the 
level of minimum old-age pensions.  

As  regards  international  instruments,  Ukraine  has  extended  an  open  invitation  to  Special 
Procedures. Ukraine has ratified the International Convention on the Rights of Persons with 
Disabilities  and  its  Optional  Protocol,  and  it  has  signed  the  Optional  Protocol  to  the 
International Convention on Economic, Social and Cultural Rights. It has not acceded to the 
International  Convention  for  the  Protection  of  All  Persons  from  Enforced  Disappearance  and  the 
Convention on Migrant Workers and the Convention for the Protection of Individuals with regard 
to Automatic Processing of Personal Data have yet to be ratified. 

Regional and international issues, cooperation on foreign and security policy, WMD non-
proliferation and disarmament, conflict prevention and crisis management  

Ukraine continued to cooperate actively with the EU on regional and international issues, and 
aligned  with  most  EU  CFSP  declarations  open  for  alignment.  The  possibility  of  Ukraine's 
participation  in  EU  naval  operation  Atalanta  was  explored,  building  on  the  positive 
experience of its participation in EU operations in the Balkans. 

Ukraine  cooperated  constructively  with  the  EU  on  all  questions  related  to  the  Transnistria 
settlement efforts. It took part in informal meetings of the so-called “5+2” format. Together 
with  the  Republic  of  Moldova  (hereafter  referred  to  as  Moldova),  Ukraine  continued  to 
implement its customs regime based on the Joint Declaration of the Ukrainian and Moldovan 
Prime Ministers of December 2005. 

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No  progress  was  made  as  regards  the  ratification  of  the  Rome  Statute  of  the  International 
Criminal Court.  

EU Border Assistance Mission to Moldova and Ukraine (EUBAM) 

Ukraine continued to be fully committed to, and to participate constructively in, the work of 
EU  Border  Assistance  Mission  to  Ukraine  and  Moldova  (EUBAM).  With  EUBAM 
support,  the  professional  capacities  of  the  Ukrainian  customs  and  border  guard  services 
continued  to  be  enhanced,  as  was  inter-agency  cooperation  within  Ukraine  and  between 
Ukraine  and  Moldova.  In  December  2009,  following  constructive  bilateral  talks  as  well  as 
talks  between  Ukraine  and  the  Transnistrian  de  facto  authorities,  an  important  advance  was 
achieved in starting the demarcation of the central (Transnistrian) segment of the Ukrainian-
Moldovan  State  border.  By  agreement  between  the  European  Commission,  Ukraine  and 
Moldova, the EUBAM mission was extended in November 2009 for a second time. 

3. 

ECONOMIC AND SOCIAL REFORM  

Macroeconomic framework and functioning market economy 

Since  the  onset  of  the  global  crisis,  Ukraine’s  economic  situation  of  has  deteriorated 
dramatically. In 2008, Ukraine's real GDP growth already decelerated to 2.1%. Over the first 
three  quarters  of  2009,  real  GDP  is  estimated to have contracted  by around  17.8% year-on-
year,  while  industrial  output  decreased  by  28.4%  in  the  same  period.  High  consumer  price 
inflation  eroded  real  wages  and  led  to  a  fall  in  purchasing  power.  Consequently,  private 
consumption  is  estimated  to  have  declined  by  13%.  The  latest  projections  point  to  a  15.1% 
drop in real GDP in 2009 and only a shallow recovery for 2010. 

The  fall  in  real  GDP  was  driven  by  a  reduction  in  external  and  domestic  demand.  Foreign 
demand  for  key  exporting  industries  fell  due  to  the  deepening  global  crisis.  The  fall  in 
domestic demand occurred on the back of reduced domestic credit, resulting from a curtailed 
capability  of  the  domestic  financial  system  to  access  external  financing.  Commodity  prices 
fell  sharply,  affecting  some  of  its  key  exporting  industries  such  as  steel.  At  the  same  time, 
imports became more expensive as Russia is phasing out its gas subsidies. 

The financial sector in Ukraine came under strain as both state-owned and private commercial 
banks had to be recapitalised at significant cost to the tax payer. As a consequence of falling 
depositor confidence, Ukrainian banks faced large losses on their loan portfolio. The National 
Bank of Ukraine reported that the share of non-performing  loans  increased  to 5.4% by July 
2009, practically double the figure for January 2009. Since the second half of 2009, signs of 
recovery  in  the  banking  sector  have  been  visible  and  indicators  on  industrial  activity  have 
suggested a return to growth.  

With respect to fiscal policy, the budget deficit increased from 3.2% of GDP in 2008 to 8.6% 
of GDP in 2009. The budgetary consolidation that had been expected to start in 2009 in line 
with donor requirements became more uncertain in the run-up to presidential elections. Public 
debt strongly increased in 2009, with the net public debt rising to some 23% of GDP. Public 
debt stock is not expected to go beyond internationally acceptable levels. 

The Ukrainian authorities and IMF negotiated a 24-month Stand-By Arrangement (SBA) for 
USD 16.4 billion (EUR 11.5 billion). This was approved in November 2008. By July 2009, 
USD 10.6 billion (EUR 7.4 billion) was paid out. However, since November 2009, the SBA 

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has been at a standstill as Ukrainian authorities failed to reach an agreement with the IMF on 
a  number  of  policy  benchmarks.  After  the  Presidential  elections,  the  new  Government 
signalled its intention to reactivate the standby agreement and an IMF delegation visited Kyiv 
in March 2010. 

The  European  Commission  adopted  a  EUR  610  million  Macro-Financial  Assistance  (MFA) 
package for Ukraine in October 2009. The MFA - subject to the IMF's SBA being on track 
and a number of further structural policy conditions - is expected to meet Ukraine's general 
balance-of-payments  needs  and  could  cover  the  external  financing  needs  of  Ukraine's  state 
budget.  

As a consequence of crisis-related adjustments, Ukraine's current account has improved; for 
2009, a current account deficit of 1.5% of GDP was reported. However, capital flight out of 
the  hryvna,  reversal  of  capital  inflows  and  a  reduction  in  foreign  direct  investment  put 
pressure  on  reserves,  which  could  only  be  kept  at  an  appropriate  level  with  international 
assistance. 

Employment and social policy 
Official unemployment rose to 9% in the 3rd quarter of 2009. Measures aiming at reducing 
the  impact  of  the  crisis  on  vulnerable  people,  pensioners  and  families  with  children  were 
taken.  The  State  Employment  Centres  continued  to  work  actively  to  address  the  mismatch 
between skills and jobs but additional sustained efforts are needed to modernise employment 
policy and administrative structures. These should also address the reduction of the informal 
sector  (estimated  at  39%  of  GDP  in  the  first  half  of  2009)  by  promoting  open  and  decent 
working conditions. Further actions in the field of employment promotion will be undertaken 
in the period 2010-2012 particularly in view of job opportunities to be created by the EURO 
2012 Football Championship. The economic crisis also impacted negatively on the regularity 
of  the  payment  of  wages:  by  October  2009,  the  wage  arrears  were  estimated  around  UAH 
1,679 million (EUR 145 million). 

As regards social protection and the fight against poverty, the Cabinet of Ministers adopted, 
in  February  2009,  an  action  plan  to  implement  its  poverty  reduction  strategy.  Household 
income and real wages declined over the reporting period as a consequence of the economic 
turmoil. In October 2009, the President signed a Law on subsistence minimum and minimum 
wage which aims to increase social standards by about 12% by the end of 2009 as compared 
to  the  provisions  of  the  2009  budget  law and  nearly  30%  higher  than  envisaged  in  the 
September 2009 version of the draft budget 2010. 

It also foresees an increase of 11% of the minimum monthly wage from 669 UAH to the new 
level  of  744  UAH  (around  EUR  67).  The  average  pension  was  also  increased  during  the 
reporting period from 898 UAH (EUR 77) to 946 UAH (EUR 82). The fiscal sustainability of 
these measures and their impact on macroeconomic stability needs to be urgently ensured.As 
regards  social  dialogue,  no  progress  can  be  reported  on  the  adoption  of  the  long-awaited 
amended draft Labour Code and the International Labour Organisation (ILO) voiced concerns 
about  the  non-conformity  of  certain  provisions  with  its  basic  standards,  in  particular  as 
regards  the  right  to  strike.  The  draft  law  on  social  dialogue  is  still  under  parliamentary 
examination and bipartite social dialogue still needs to be strengthened. The implementation 
of  the  Decent  Work  country  programme  continued:  projects  over  the  reporting  period 
included  those  on  social  dialogue,  gender  and  access  to  employment  of  persons  with 
disabilities. 

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Further efforts are needed to ensure the sustainability of the new pension system. In October 
2009, the Cabinet of Ministers approved the concept for pension reform for the years 2010-
2017. However, a preliminary comprehensive analysis of the pension and tax systems has still 
not been issued. 

The  regular  agricultural  dialogue  held  two  sessions  in  June  -  at  Ministerial  level  -  and  in 
November 2009. Those sessions allowed to continue the exchange of best practices and policy 
views  to  help  Ukraine  in  implementing  necessary  reforms  after  their  accession  to  the  WTO 
and  their  process  of  approximation  to  EU  policies  and  standards.  Supporting  measures  to 
agriculture,  bio-fuels,  statistical  evaluation  in  agriculture,  quality  and  organic  policies  and 
rural development strategies were at the centre of the discussions. 

4. 

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

During  the  reporting  period,  bilateral  trade  between  Ukraine  and  the  EU  was  adversely 
affected by the economic crisis. Ukraine’s exports to the EU decreased by 45.9% compared to 
2008 while EU exports to Ukraine dropped by 44.6 %. The decision by the State Committee 
for  Veterinary  Medicine  of  Ukraine  to  issue  an  order  in  May  2009  foreseeing  mandatory 
inspections of all enterprises exporting products of animal origin to Ukraine was a matter of 
concern.  In  December  2009  a  new  order  annulling  the  effects  of  this  order  was  adopted.  In 
March  2009  the  Government  issued  a  Resolution  according  to  which  automobiles  and 
refrigerators were made subject to a 13% import surcharge. This measure remained in force 
until September 2009. Concerning its bilateral commitments and requirements resulting from 
WTO  rules,  during  the  reporting  period  Ukraine  did  not  fulfil  its  obligations  as  regards  the 
adoption or amendment of various pieces of legislation, in areas such as market surveillance, 
general  safety  of  products,  and  safety  and  quality  of  food  products  (see  the  following 
sections).  Moreover,  Ukraine  did  not  comply  with  its  WTO  obligations  as  regards  the 
adoption and publication of import duties for 2010. The Customs authorities currently apply 
WTO-bound  rates  even  in  the  absence  of  the  necessary  amendments  to  the  law  on  customs 
tariff. 

During  the  reporting  period,  five  rounds  of  negotiations  for  an  EU-Ukraine  Deep  and 
Comprehensive Free Trade Area (DCFTA) took place. 

Limited  progress  occurred  in  the  implementation  of  commitments  in  the  area  of  customs. 
Measures  were  taken  to  address  customs  problems  reported  by  express  carriers  and 
humanitarian  aid  agencies.  Work  continued  on  a  comprehensive  customs  modernization 
strategy. There are currently no major delays at border crossing points, partly due to improved 
border infrastructure and better cross-border cooperation, but also due to a decrease in trade 
flows.  In  November  2009,  the  Verkhovna  Rada  adopted  legislation  on  border  control, 
introducing  the  rules  to  be  applied  at  the  Ukrainian  border  crossings.  The  State  Customs 
Service of Ukraine (SCSU) continued to improve the use of risk management. Customs ethics 
remain a matter of concern. A customs code of ethics was prepared, and a proposal detailing a 
disciplinary statute for the SCSU is currently before the Verkhovna Rada. A number of other 
measures  was  introduced  to  improve  customs  powers  in  the  area  of  the  protection  of 
intellectual  property  rights.  Some  amendments  to  customs  legislation  were  presented  to  the 
Verkhovna Rada to harmonize the national legislation with the Revised Kyoto Convention on 
the Simplification and Harmonisation of Customs Procedures, to which Ukraine has not yet 
formally acceded. Work is under way on concepts of E-customs and E-declarations. Ukraine 
still  does  not  fully  respect  WTO  rules  on  customs  valuation.  Problems  also  persist  in 
classification and cumbersome, restrictive and often ungrounded control procedures which are 

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not  based  on  risk  analysis.  The  formal  adoption  of  the  updated  version  of  the  Harmonised 
System for the classification of goods (HS system) has been delayed. 

On free movement of goods and technical regulations, progress remained very limited. A 
draft law on market surveillance, registered in Parliament in early 2008, is being revised by 
the Ministry of Economy. Meanwhile, in July 2009, two draft laws on general product safety 
and on product liability were registered in the Parliament but they have little in common with 
the corresponding EU legislation. The adoption of some technical regulations in the priority 
sectors continued in 2009. No progress was achieved towards the institutional reform of the 
Ukrainian  infrastructure  for  quality.  The  State  Committee  on  Technical  Regulation  and 
Consumer  Policy  (DSSU)  is  presently  the  authority  responsible  for  designation  of  the 
conformity  assessment  bodies.  So  far,  accreditation  remains  the  only  quality  infrastructure 
function separated from the DSSU. In November 2009, the National Accreditation Agency of 
Ukraine  (NAAU)  signed  the  Agreement  on  Mutual  Acceptance  of  Personnel  Certification 
Certificates  with  Signatories  of  the  European  Accreditation  Multilateral  Agreement,  a  first 
important step towards the international recognition of NAAU. 

In the area of establishment and company law, a law on joint stocks companies entered into 
force  in  April  2009.  In  December  2009  the  Government  adopted  a  law  on  simplifying 
business  conditions  in  Ukraine.  It  aims  in  particular  at  facilitating  the  establishment  and 
development  of  companies  by  easing  the  issuance  of  permits  and  reducing  the  quantitative 
requirements  for  the  statutory  capital  of  limited  liability  companies  (see  also  paragraph  on 
enterprise  policy).  Further  efforts  are  needed  to  promote  corporate  governance.  The 
investment  climate  in  Ukraine  is  assessed  negatively  by  investors  and  international 
organisations, as having one of the most burdensome regulatory systems in Eastern Europe. 
The  business  climate  remains  unstable,  and  corruption  remains  a  major  issue  (see  also 
chapter 2).  

Ukraine  pursued  efforts  towards  gradual  approximation  with  EU  sanitary  and  phyto-
sanitary  (SPS)  standards.  The  twinning  project  in  this  area  launched  in  2009  will  support 
these  efforts.  In  June  2009,  the  Parliament  adopted  a  Law  on  the  monitoring  of  residues  of 
veterinary medicinal products and contaminants in live animals, products of animal origin and 
feed  and  food.  This  law  will  contribute  to  improved  implementation  of  Ukraine’s  residue 
monitoring programme. In June, Parliament also adopted a law on animal identification and 
registration  and  Ukraine  continued  to  register  animals  effectively.  Ukraine  also  adopted 
several pieces  of  implementing legislation. In June 2009, the European Commission’s Food 
and Veterinary Office (FVO) carried out an inspection visit regarding poultry meat and eggs. 
In  September  2009  the  FVO  evaluated  the  controls  in  the  area  of  dairy  products, 
following up an earlier mission of 2008. In October the FVO held an inspection mission 
on  controls  regarding  the  production  of  fresh  meat  and  meat  products.  These  missions 
contribute  to  supporting  Ukraine  in  addressing  deficiencies  and  to  prepare  for  the 
implementation  of  the  future  Deep  and  Comprehensive  Free  Trade  Area.  In  November 
2009,  the  European  Commission  relaxed,  in  view  of  progress  made  by  Ukraine,  import 
control  measures  regarding  sunflower  oil.  In  2009  the  European  Union  and  Ukraine  held 
expert meetings aiming to combat rabies, which are present on the entire Ukrainian territory.  

As regards financial services, the global financial and economic crisis undermined Ukrainian 
banks' capitalisation and profitability. In July 2009, amendments to legislation were made to 
facilitate  the  financial  rehabilitation  of  banks.  Further  efforts  are  needed  to  ensure  the 
National  Bank  of  Ukraine's  independence  and  to  increase  the  quality  of  the  supervisory 
systems.  Furthermore,  a  Law  on  anti-crisis  measures  came  into  force  in  November  2009, 

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further to changes to several other laws, including those on the National Bank of Ukraine and 
on  banks  and  banking.  This  law  provides  temporary  conditions  to  enable  banks  and  their 
customers to deal with the effects of global financial crisis until January 2011. The measures 
introduced by the law concern formation of banks’ reserves, requirements to banks’ statutory 
funds  and  rules  for  offset  of  debts.  The  Law  entitles  the  commercial  banks  to  carry  out 
restructuring  of  credits  given  to  natural  persons.  Further  progress  is  needed  to  restore 
normality in the banking system. In November 2009, the NBU established a Working Group 
for  the  Development  of  a  "Green  Book  on  Enhancing  the  Effectiveness  of  Regulation  and 
Supervision of Financial Sector of Ukraine”. In the area of security markets, the Government 
adopted  a  Concept  for  Development  of  the  Domestic  Market  of  Government  Securities  of 
Ukraine  2009-2013.  Draft  laws  on  financial  services  and  on  insurance  have  not  yet  been 
adopted. The supervision of non-bank financial institutions, notably the insurance companies, 
remains problematic. The State Commission for Regulation of the Financial Services Market 
issued  a  number  of  regulations  on  the  insurance  sector  in  2009.  The  EU  funded  project  on 
‘strengthening of Ukrainian financial services sector’ supported the drafting of a strategy for 
the development of the financial sector which was submitted to the Government. 

No progress can be reported in the field of audit and accounting. 

Further  efforts  are  needed  to  ensure  free  movement  of  capital  in  particular  as  regards  the 
repatriation of profits abroad, the purchase and transfer of currency by Ukrainian debtors to 
non-residents. As noted last year, notwithstanding possible justifications under the safeguard 
clause, measures taken by Ukraine in the context of the financial crisis may have an impact on 
the standstill provision concerning foreign exchange rules. 

Other key areas 

Concerning the implementation of the commitments in the area of taxation, in October 2009 
an action plan for the improvement of tax administration was approved by a resolution of the 
Cabinet of Ministers. The action plan foresees a series of gradual changes to the operations of 
the control and revision authorities, the improvement of the transnational taxation system, the 
VAT  administration,  as  well  as  improvement  of  tax  administration  for  large  taxpayers.  A 
Strategy  for  the  Reform  of  the  Tax  System  was  approved  by  a  resolution  of  the  Cabinet  of 
Ministers  in  December  2009  and  provides  for  the  completion  of  tax  reform  in  Ukraine  by 
2018, in particular through the adoption of a unified Tax Code, the simplification of the tax 
system, the introduction of a single social contribution tax, and harmonisation of national tax 
legislation with that of the EU.  

The  issue  of  VAT  refunds  remained  a  systemic  problem  during  the  reporting  period. 
According  to  statistics  provided  by  the  Presidential  Secretariat,  outstanding  VAT  refunds 
grew from 12.8bn UAH (1.2bn EUR) to 21.8bn UAH (2bn EUR) in 2009 (+68%), while VAT 
refund arrears (refunds for which deadline has passed) grew from 2.97bn UAH (0.27bn EUR) 
to 5.4bn UAH (0.5bn EUR) over January-November 2009 the same period (+82.5%). 

A  draft  law  amending  certain  elements  of  the  law  on  unfair  competition  was  adopted  in 
December 2009. It introduced specific rules to prevent distribution of misleading information. 
A  draft  law  amending  the  Economic  Code,  aiming  to  eliminate  duplication  of  competition 
provisions, has been proposed to the Ministry of Justice but has not yet been finalised. As a 
follow-up to the OECD competition review of 2008, the Anti-Monopoly Committee (AMC) 
organised stakeholder consultations and prepared an action plan for the implementation of its 
recommendations.  In  January  2009,  the  AMC  also  introduced  three  block  exemptions  in 

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connection  with  the  specialisation  of  production  The  Inter-ministerial  Working  Group  on 
State Aid stopped its work after the adoption of the concept for reform of the state aid system. 
The AMC drafted an action plan on the concept for implementation of state aid that envisages 
setting up another Interministerial Working Group to implement the three stages of the state 
aid reform in Ukraine. For the time being, the Ministry of Finance (assigned together with the 
Ministry of Economy and AMC to prepare the action plan) opposes the establishment of such 
a Working Group, referring to the absence of a legal basis for preparing a state aid inventory. 
Therefore, the Concept of the state aid law is not even discussed.It should also be noted that 
the  concept  of  the  state  aid  law  and  the  concept  of  the  state  aid  reform  are  two  separate 
documents required by the Cabinet of Ministers Procedure. 

No  progress  can  be  reported  on  intellectual  property  rights  (IPR).  The  adoption  of  the 
revised Copyright law and the new laws on Industrial Property Rights is still pending and the 
National  Coordination  Council  in  charge  of  enforcement  activities  has  not  yet  been 
established.  In  addition,  payment  of  royalties  to  right-holders  is  not  ensured.  Ukraine  also 
needs  to  align  its  legislation  on  data  exclusivity  regime.  Leading  pharmaceutical  firms 
complained  during  the  reporting  period  about  breaches  of  IPR  obligations  in  the  field  of 
patents  and  in  tendering  procedures  for  pharmaceutical  products.  While  ex  officio  actions 
were  introduced  during  the  reporting  period,  pirated  and  counterfeited  goods  remain 
widespread.  Further  efforts  are  urgently  needed  to  enforce  deterrent  measures  against  IP 
crimes, if the Association agenda objectives are to be met.  

While  the  Parliament  worked,  over  the  reporting  period,  on  two  draft  proposals  on  public 
procurement legislation, particular attention should be paid to ensuring that draft Ukrainian 
legislation is in line with European and international standards in particular as regards appeal 
mechanisms, transparency and non-discrimination principles. In December 2009, the Cabinet 
of Ministers introduced changes to the Regulation on public procurement of goods, works and 
services  for  public  funds.  These  are  now  procured  from  domestic  producers  only,  thus 
excluding  official  representatives  of  producers,  their  dealers,  distributors  and  official 
representatives  of  non-resident  producers  from  the  bids.  If  endorsed  and  effectively 
implemented,  this  new  legislation  will  create  a  serious  barrier  to  trade  and  undermine  the 
business climate. 

While the State Statistics Committee and the State Customs Service signed in August 2009 a 
Joint  action  plan  to  implement  recommendations  regarding  upgrading  the  quality  rate  of 
statistical information in Ukraine, no progress can be reported as regards the adoption of an 
action plan to tackle the high level of discrepancies in trade statistics. 

Ukraine  made  some  progress  in  enterprise  policy.  In  February  2009,  a  Small  and  Medium 
Sized  Enterprise  (SME)  dialogue  was  initiated  between  the  European  Commission  and  the 
Ministry  of  Economy  as  well  as  the  State  Committee  for  Regulatory  Policy  and 
Entrepreneurship (SCURPE). The second meeting took place in November 2009. The focus 
of  the  dialogue  is  on  Ukraine’s  progress  in  implementing  the  European  Charter  for  Small 
Enterprises  and  the  move  towards  cooperation  based  on  the  European  Small  Business  Act, 
adopted in December 2008. So far, the implementation of the Charter has been limited. There 
is  no  SME  development  strategy  as  such.  It  is  also  essential  to  define  the  competences  of 
SCURPE and the Ministry of Economy on broader SME policy issues. In December 2009, the 
Parliament  adopted  a  law  with  a  view  to  simplifying  business  conditions  in  Ukraine  (see 
section on Establishment and Company Law). Ukraine does not have an integrated system of 
e-government for enterprises. Measures such as on-line registration are being implemented in 
isolation rather than as part of an overall plan for e-government. 

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On  public  internal  financial  control,  the  Central  Control  and  Revision  Service  (CCRS) 
adopted a Development Strategy for the period 2010-15 in March 2009. As consolidation of a 
draft  public  internal  financial  control  law  was  postponed  due  to  prevailing  political 
circumstances,  the  CCRS  adopted  an  action  plan  for  enhancing  quality  control  and  revision 
and  a  corresponding  order  to  start  developing  internal  audit.  In  January  2010  a  draft 
Government decree was adopted to provide a clear distinction between inspection and internal 
audit. In addition, the CCRS adopted a Code of Ethics in August as well as a series of draft 
secondary rules relating to internal control and internal audit based on INTOSAI standards.  

With regard to external audit, SIGMA provided a technical assessment for a twinning project 
to  improve  the  audit  functions  of  the  Accounting  Chamber  in  2009.  Cooperation  between 
Ministries  and  state  agencies  to  prevent  fraud  and  serious  irregularities  needs  ongoing 
attention. 

5. 

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

In the area of border management, reform of the State Border Guard Service continued in 
line with the targets of the 2015 plan for upgrading legislation, infrastructure and personnel 
training. Legislation allowing for biometric  control  of  foreign  nationals in the processing of 
visa  applications  was  passed  by  the  Parliament  in  November  2009.  The  draft  Law  on  State 
Border Control, based on the Schengen Border Code, was not adopted in 2009 and is now due 
for  adoption  during  the  current  legislative  session.  Local  Border  Traffic  Agreements  with 
Poland,  Slovakia  and  Hungary  are  in  place.  FRONTEX  developed  an  action  plan  for  2010-
2012 to streamline cooperation and prioritize expertise in preparation for Ukraine’s co-hosting 
of  the  European  Football  Championship  in  2012  which  is  still  under  discussion.  As  regards 
border demarcation with Belarus, progress was made through bilateral discussions between 
Ukraine and Belarus which led to the ratification by the Belarusian parliament in April 2010 
of  the  Belarus-Ukraine  1997  State  Border  Agreement.  An  effective  implementation  of  that 
treaty  will  represent  an  important  step  paving  the  way  for  final  agreement  regarding  border 
demarcation.  Discussions  on  border  demarcation  continued  with  the  Border  Commission  of 
the Russian Federation. Cooperation between the State Border Guard service and the Customs 
service  needs  to  be  significantly  enhanced  in  order  to  improve  information  exchange  at  all 
operational levels. (Aspects of border demarcation with Moldova are reported in the section 
on EUBAM). 

Ukraine  has  not  yet  fully  fulfilled  the  commitments  in  the  Action  Plan  or  the  Association 
Agenda related to migration. During 2009 there were certain violations of rights of refugees 
and asylum-seekers in breach of obligations under international human rights and refugee law, 
in particular the 1951 Geneva Convention on the Status of Refugees, notably with regards to 
deportation of migrants to countries despite risks of ill-treatment. Issues of the economic and 
social  rights  of  asylum  seekers  and  their  access  to  the  appropriate  procedure  remain  to  be 
addressed.  

In June 2009, a decree to create the State Migration Service was adopted. This was vetoed by 
a Presidential decree in August 2009. As a result, there is no longer any entity competent to 
take binding decisions in asylum matters. This led to the suspension of more than 600 cases of 
asylum  applications,  leaving  migrants  with  undetermined  status  and  an  inability  to  access 
social services. 

Conditions in Migrant Custody Centres and Temporary Holding Facilities in Ukraine remain 
uneven  and  overcrowding  is  frequently  reported.  The  responsibility  of  Ukraine  in 

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safeguarding  proper  conditions  for  the  detained  irregular  migrants,  including  provision  of 
adequate  food,  clothing  and  legal  aid  is  not  properly  fulfilled.  The  issue  of  unaccompanied 
minors  remains  unaddressed,  including  the  legislative  changes  to  secure  special  status  for 
such  migrants,  provide  separate  holding  facilities  and  ensure  timely  appointment  of  legal 
representatives.  

There  are  some  indications  that  migrants  are  facing  problems  communicating  with  the  state 
authorities due to the lack of interpretation services. 

Asylum-seekers – including those with visas - face problems with access to the territory and 
access  to  the  asylum  and  the  substantive  refugee  status  determination  (RSD)  procedures  at 
some border crossing points. Although the national law on refugees calls for the completion 
of the RSD procedure within six months, most cases result in a final decision, inclusive of the 
appeal  period,  after  two  or  three  years.    The  Regional  Protection  Programme  for  Ukraine, 
Moldova and Belarus will be continued in 2010. 

A visa dialogue is ongoing with the EU, to develop conditions for the establishment of a visa 
free regime as a long-term perspective. In the course of 2009, the Visa Dialogue was pursued 
through  expert  analysis  and  on-site  visits  on  the  basis  of  four  blocks  (document  security; 
illegal  migration  and  borders;  public  security  and  external  relations).  At  the  EU-Ukraine 
Summit  it  was  agreed  that  the  dialogue  would  “focus  on  sequenced  priorities  of  action  and 
recommendations to the Ukrainian authorities”. 40% of Schengen visas are now delivered free 
of  charge  under  the  Visa  Facilitation  Agreement.  The  Readmission  Agreement  was 
implemented for a second year. 

With  regard  to  the  fight  against  organised  crime,  Ukraine  continues  to  implement  its 
obligations under the 2003 United Nations Convention on Trans-national Organised Crime in 
the  context  of  regional  cooperation  in  the  area  of  trafficking  of  persons  and  smuggling  of 
migrants. As was the case in 2008, signature and ratification of its Third Protocol on the Illicit 
Manufacturing  and  Trafficking  of  Firearms,  their  Parts,  Components  and  Ammunition  still 
remains  outstanding.  Ukraine’s  capacity  to  tackle  organised  crime  suffers  from  institutional 
fragmentation  with  several  agencies  sharing  areas  of  investigative  competence.  The 
development of a national strategy and action plan, determining and delineating institutional 
competences and cooperation between all state agencies is needed. 

In  the  area  of  trafficking  in  human  beings,  the  Ministry  of  Family,  Youth  and  Sport  is 
responsible  for  coordinating  national  policy  including  prevention  measures.  National 
protection measures were piloted in three regions providing witness protection, health training 
and social assistance. The Ministry continued cooperation with civil society and international 
organisations to tackle trafficking while the Ministry of the Interior funded a television-based 
awareness campaign. Germany, Spain and Poland remain the main EU destination countries 
for  trafficking  networks  alongside  Russia,  Turkey,  Israel,  Lebanon  and  the  United  Arab 
Emirates. Ukraine cooperated closely with EU Member States and Interpol on personnel and 
technical information exchanges. The 2005 Council of Europe Convention on Action against 
Trafficking  in  Human  Beings  remains  un-ratified  pending  the  adoption  of  a  new  law  by 
Parliament.  A  Strategic  Agreement  with  Europol  was  signed  in  December  2009.  Further 
attention  is  needed  to  combat  trafficking  and  to  develop  prevention,  protection  and 
rehabilitation measures in an integrated manner in cooperation with civil society. 

With regard to the fight against drugs, Ukraine plays an important role in lessening the opium 
trade to the EU and actively participates in regional cooperation in this field. A Memorandum 
of Understanding on technical cooperation between the Ministry of Health and the European 

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Monitoring  Centre  for  Drugs  and  Drug  Addiction  was  prepared  for  signature  and  signed  in 
January 2010. Reductions in demand would be assisted through structured cooperation  with 
civil society groups as part of an integrated approach to tackling this issue. Ukraine continues 
implementation of the 1988 United Nations Convention against the Illicit Traffic in Narcotic 
Drugs and Psychotropic Substances and is a member of the United Nations Commission on 
Narcotic Drugs. 

With  regard  to  the  fight  against  money  laundering  and  economic  crimes,  a  new  law  was 
presented  to  Parliament  after  the  reporting  period,  in  March  2010,  which  intends  to 
incorporate the 49 FATF Recommendations as well as the essential elements of the Third EU 
Directive on Money Laundering. The draft deals with outstanding issues on the regulation of 
non-financial bodies and the arrest and freezing of suspect assets. It also incorporates the main 
elements of the CoE Convention on the Laundering, Search, Seizure and Confiscation of the 
Proceeds from Crime and the Financing of Terrorism. If adopted, the law will clear the way to 
Ukraine's ratification of the Convention. The draft would bring Ukrainian legislation in line 
with the Convention by introducing criminal responsibility for illegal money laundering and 
financing of terrorism. In March 2009, Moneyval adopted a Third Round Mutual Evaluation 
Report  on  Ukraine’s  regime  highlighting  shortcomings  in  the  criminalization  of  terrorism 
financing and coordination between the State Committee for Financing Monitoring and other 
law  enforcement  agencies  on  anti-corruption.  Ukraine  invested  in  the  training  of  some  500 
judges,  prosecutors  and  legal  staff.  It  also  published  and  distributed  free  manuals  to 
universities  and  third  level  institutions  on  this  issue.  Serious  efforts  in  the  prosecution  of 
money laundering cases have yet to be made. 

In  the  area  of  police  and  judicial  cooperation,  in  2009,  EUBAM  with  the  cooperation  of 
Frontex, OLAF and SECI (Southeast European Cooperation Initiative) supported the Nikoniy 
Joint Border Control Operation to improve cooperation between the Ukrainian and Moldovan 
police  forces  on  fighting  cross-border  crime  and  irregular  migration.  Draft  legislation  on 
personal data protection presented to Parliament and the President in 2008 still remains to be 
adopted.  Transposing  the  1981  Council  of  Europe  Convention  for  the  Protection  of 
Individuals  with  regard  to  the  Automatic  Processing  of  Personal  Data  and  of  its  2001 
Additional  Protocol  into  national  law  would  enable  the  ratification  of  these  instruments. 
Failure to do so would impede further development of cooperation with Europol and Eurojust 
in the area of document security. In the area of the civil judicial cooperation, Ukraine worked 
on the implementation of the Hague Conventions on family law issues (e.g. the 1980 Hague 
Child  Abduction  Convention)  while  continuing  the  preparatory  process  for  the  accession  to 
the Hague Inter-country Adoption Convention.  

6. 

TRANSPORT, ENERGY, ENVIRONMENT, THE INFORMATION SOCIETY, RESEARCH AND 
DEVELOPMENT 

Since  November  2009,  a  draft  comprehensive  transport  sector  development  strategy  up  to 
2020 has been in consultation with other ministries, state bodies and with the public. The draft 
strategy  envisages  that  the  Ministry  will  elaborate  and  submit  to  the  Cabinet  of  Ministers 
implementation  programmes  until  2015.  The  approval  and 
shorter-term  strategy 
implementation  of  a  national  transport  strategy  is  a  pre-condition  for  a  EUR  65  million  EU 
budget support programme in the transport sector.  

As regards infrastructure investments, Ukraine signed a loan agreement with the World Bank, 
in  April  2009,  for  a  project  on  roads  and  safety  improvements  (EUR  370  million),  and  a 

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railway modernisation project (EUR 653 million) is still in the pipeline. EBRD has provided 
loans  for  financing  public  transport  projects  in  Kyiv  and  Odessa.  A  draft  law  on  Public-
Private Partnerships was adopted at first reading in November 2009. 

In the road sector, alignment with international standards continued and a draft “regulation on 
working time and rest period of vehicle drivers” is under consultation. In 2009, a multi-annual 
Road Safety programme up to 2012 (replacing one that had elapsed in 2007) was drafted. The 
draft  was  consulted  with  other  ministries  and  rejected  by  the  Ministries  of  Finance  and 
Economy. It is currently under revision. As regards passenger transport, Ukraine has still not 
adhered to the Interbus Agreement.  

A railway reform programme for the period 2010-2015 was approved in December 2009. It 
foresees three phases: separation of the government's regulatory function from the operational 
function of the national state-owned railway company; transformation of the same into a joint-
stock company; and division of different market segments. 

Negotiations on a comprehensive aviation agreement between the EU and Ukraine progressed 
with  two  rounds  of  negotiation  in  2009  and  should  be  finalised  in  2010.  To  fulfil  the 
commitments  of  the  Association  Agenda,  Ukraine  should  continue  its  efforts  to  improve  its 
safety  oversight  system  and  the  implementation  of  relevant  safety  standards.  A  working 
arrangement with the European Aviation Safety Agency was signed at the end of the reporting 
period, following measures taken by the aviation authorities to strengthen their regulatory and 
oversight capacity and to ensure compliance with international safety standards. No progress 
was made in the adoption of primary legislation. To integrate more closely with the EU in the 
aviation sector the adoption of a new framework aviation code should be accelerated.  

The Ministry of Transport and Communications is currently elaborating a national maritime 
safety concept, which should be approved in 2010. The subsequent development of a detailed 
implementation plan is expected to take until 2012. Regulatory alignment with international 
standards  progresses  slowly;  the  Ukrainian  flag  was  still  on  the  2008  black  list  of  the  Paris 
Memorandum of Understanding on Port State Control.  

In 2009, Ukraine and the EU stepped up energy cooperation. Ukraine is an important transit 
country but also an energy producer and a significant energy user. In December 2009, the EU-
Ukraine Summit adopted a fourth progress report on the implementation of the Memorandum 
of Understanding on Energy cooperation.  

As observed in last year’s report (SEC (2009) 515), relations in the energy field were tested in 
January 2009, following a conflict between the Russian Federation and Ukraine concerning gas. 
As a result of this dispute Russian transit supplies to Europe via Ukraine were temporarily cut off, 
resulting in emergency situations in several EU Member States and some neighbouring states. The 
European Commission facilitated the resolution of the gas crisis inter alia by dispatching a team 
to Russia and Ukraine to monitor gas transit flows. 

In March 2009, a joint EU-Ukraine conference on the modernisation of the Ukrainian gas transit 
network was held in Brussels with the participation of the European Investment Bank (EIB), the 
EBRD  and  the  World  Bank.  During  the  conference  Ukraine  tabled  a  master  plan  on  the 
modernisation  of  its  gas  transit  system.  The  joint  conference  Declaration  welcomed,  inter  alia, 
Ukraine’s plan to develop by the end of 2009 a gas sector reform programme (approved by the 
Government in October 2009, see below) on the basis of EU legislation to be implemented during 
2010/2011  according  to  commitments  in  the  context  of  the  future  EU-Ukraine  Association 

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Agreement  and  Ukraine’s  accession  to  the  Energy  Community  Treaty.  Following  the 
Conference,  a  Technical  Coordination  Unit  (TCU)  was  established  within  Naftogaz,  the 
Ukrainian  gas  company,  with  the  participation  of  the  European  Commission  and  International 
Financial Institutions (IFIs). In preparing for Ukrainian gas transit to the EU during the winter 
of2009/2010,  the  European  Commission  facilitated  discussions between  Ukraine,  the  EIB, 
EBRD, the World Bank and the International Monetary Fund (IMF) on financing the purchase 
of gas and further reform of the Ukrainian gas sector. In July 2009 the European Commission 
and the four IFIs issued a “Joint Statement of Intent regarding support to gas sector reform in 
Ukraine  and  the  purchase  of  gas  from  Russia”,  which  could  trigger  significant  additional 
assistance provided specific energy sector reforms are undertaken.  

In  October  2009,  the  Government  approved  a  Concept  on  the  Development,  Modernisation 
and  Re-equipment  of  the  Gas  Transportation  System  2009-2015.  Also  in  October,  the 
Government approved a draft gas law and submitted it to Parliament in accordance with the 
agreements reached in the course of negotiations regarding Ukraine’s accession to the Energy 
Community  Treaty.  In  September  2009,  the  Government  adopted  a  resolution  to  join  the 
Extractive  Industry  Transparency  Initiative,  which  aims  at  transparency  of  hydrocarbons 
revenues.  

Ukraine continued efforts to enhance domestic production including off-shore hydrocarbons in 
the  Black  Sea.  It  also  continued  work  to  find  new  energy  suppliers  and  supply  routes 
including  from  the  Caspian  region  and  North  Africa.  Ukraine  further  contributed  to  the 
development of the Boyarka Natural Gas Metrology Centre, established with EU assistance. 

In  July  2009,  energy  companies  from  Ukraine,  Azerbaijan,  Georgia,  Lithuania  and  Poland 
completed a study on the Euro-Asian Oil Transportation Corridor Project. In December 2009 
the Government adopted  a  concept to establish minimum oil stocks.  However, to date there 
was no substantial progress towards the finalisation of the draft oil stocks law. 

In  October  2009,  Ukraine  and  the  European  Commission  concluded  negotiations  on  the 
country’s  accession  to  the  Energy  Community  Treaty  and  in  December  the  Energy 
Community Ministerial approved Ukraine’s accession  which will be  effective subject to the 
adoption by Ukraine of a gas law complying with the EU acquis and subsequent ratification. 
Complete compliance with EU legislation relevant for the Energy Community will need to be 
ensured by the deadlines indicated in the Protocol of Accession. 

In  October  2009,  a  draft  law  on  the  principles  of  the  electricity  market  was  submitted  to 
Parliament. Since 2007, Parliament has been examining draft laws on state regulation in the 
energy  sector  and  on  the  national  energy  regulating  commission.  The  law’s  objective  is  to 
strengthen the energy regulator’s independence. In October 2009, the Government approved, 
for submission to Parliament, a draft law on payment for natural gas used for heating needs. 
In  November  2009,  the  Government  approved  an  Instruction  "About  changes  to  the 
comprehensive action plan on the financial stabilisation of energy sector enterprises", which 
postpones previously planned energy prices increase for the households and other categories 
of consumers. Energy tariffs do not yet cover costs.  

Ukraine continued to study the conditions under which it could join, together with Moldova, 
the interconnected electricity networks of continental Europe (ENTSO-e, European Network 
of Transmission System Operators for Electricity, the successor of UCTE). It further prepared 
the construction of new internal electricity transmission lines. 

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Ukraine  started  work,  with  EU  assistance,  on  a  Master  Plan  for  the  development  of  the 
Ukrainian coal mining sector. Substantial complementary efforts are required in this sector to 
achieve Ukraine’s reform objectives including the improvement of safety in mines. 

In April 2009, Ukraine amended several laws promoting energy saving as well as the use of 
renewable  energy  sources  and  bio-fuels.  In  addition,  a  law  on  the  efficient  use  of  energy 
resources  is  currently  before  Parliament  and  an  energy  efficiency  action  plan  was  prepared. 
Ukraine needs to increase efforts to reach its objective of achieving 15% energy savings by 
2015.  The  Government  tasked  the  National  Agency  of  Ukraine  for  the  Efficient  Use  of 
Energy Resources to prepare proposals for the participation of Ukraine in the EU Intelligent 
Energy Europe Programme. 

Regarding  nuclear  energy,  the  EU-Ukraine-International  Atomic  Energy  Agency  project  on 
the  evaluation  of  the  safety  of  Ukraine’s  nuclear  power  plants  further  progressed  and  is 
nearing its completion. In 2009, Ukraine continued the upgrading of its nuclear power plants 
and  developed  a  Comprehensive  Programme  on  Nuclear  Safety  Improvements.  Ukraine 
estimated the costs for programme implementation at approximately EUR 1 bn and requested 
international  assistance  including  through  Euratom  loans.  In  2009,  Ukraine  pursued,  with 
Euratom  loans,  the  modernisation  of  the  Khmelnitsky-2  Rivne-4  nuclear  reactors.  The 
Nuclear  Regulatory  Authority  was  further  strengthened.  Ukraine  further  advanced  the 
Chornobyl  decommissioning  work  and  inaugurated  the  completed  project  on  the  industrial 
complex for solid radioactive waste management. Ukraine completed the design phase for the 
interim  spent  fuel  storage  facility  and  decisions  on  starting  the  construction  phase  are  in 
preparation. The design phase of the project to construct a new safe confinement progressed 
and is near to completion. Ukraine continued to work on a draft nuclear waste strategy. 

The  EU,  Ukraine  and  bilateral  donors  launched,  an  Eastern  Europe  Energy  Efficiency  and 
Environment Partnership in Stockholm in November 2009. A multi-donor support fund is to 
be created with initial funding of approximately EUR 90 million. The partnership will initially 
focus on Ukraine and at a later stage on other EaP countries.  

In  the  field  of  climate  change,  Ukraine  submitted  its  Fifth  National  Communication  to  the 
UN Framework Convention on Climate Change in December 2009. It includes a greenhouse 
gas inventory for 2007. The inter-agency commission (chaired by the Vice-Prime Minister) on 
reduction of greenhouse gas emissions continued to meet regularly. Mitigation measures were 
identified for the energy, transport, industry, housing, agriculture and forestry sectors.  

Legislation was adopted on Joint Implementation (JI) projects, green investments, procedures 
to  prepare  greenhouse  gas  inventories  and  on  educational  and  health  projects  to  reduce 
greenhouse gas emissions. Legislation is under preparation on emission trading.  

Ukraine also took steps to prepare and approve new JI projects, ten of which were registered 
at UN level, bringing the overall number of registered projects to 18. Ukraine associated itself 
with the Copenhagen Accord and provided information on the targets  that it will implement. 
The  European  Commission  continued  to  support  Ukraine  in  implementing  the  Kyoto 
Protocol.  

In February 2010 the Prime minister signed a draft national environment strategy up to 2020, 
which  now  needs  to  be  approved  by  the  Parliament.  Some  steps  were  taken  to  prepare  a 
national  environment  action  plan.  Nonetheless,  the  legislative  framework  requires  further 
development,  in  particular  to  align  with  the  strategy  and  with  regard  to  implementing 

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legislation. Presidential Decrees were adopted on the safety of water resources and the quality 
of drinking water as well as on national parks and nature reserves. New laws on landscape and 
on  integrated  coastal  zone  management  as  well  as  amendments  to  the  environment  and 
ambient air laws and to the water code are under preparation. 

A  State  programme  on  Forest  Sector  Development  2010  –  2015  and  a  concept  on  a  State 
Programme for Water Sector Development until 2020 were adopted. Amendments to the State 
Programme 2006 – 2020 on Drinking Water are under preparation. Ukraine, together with the 
other Danube countries, adopted the first Danube river basin management plan, several sub-
basin  flood  action  plans  and  a  Ministerial  Declaration  committing  to  establishing  a  Danube 
Climate Change Adaptation Strategy and phosphates ban for the period 2012 – 2015. It also 
continued to take steps together with Moldova and Romania to prepare for the implementation 
of cross-border river basin management in the Danube Delta sub-basin. Continued attention is 
required  to  implement  existing  strategies  and  plans  and  to  further  enhance  monitoring  and 
enforcement. 

Further strengthening of administrative capacity at all levels of the country continues to be a 
major  challenge.  Coordination  between  authorities  was  enhanced  to  prepare  for  the 
implementation of EU-funded environment sector budget support, but further improvements 
are  still  needed.  Access  to  information  and  communication  issues  also  requires  attention. 
Some steps were taken with regard to integration of environmental considerations into other 
policy sectors such as energy and transport.  

Ukraine made no significant progress regarding the UNECE protocols1 whose ratification is 
still  pending.  Moreover,  the  implementation  of  several  agreements  already  ratified  requires 
particular  attention.  The  European  Commission  launched  projects  to  assist  Ukraine  in  the 
implementation of the Espoo, Aarhus, Danube and Ramsar Conventions.  

After  the  preparation  of  an  Aarhus  action  plan  and  subsequent  contacts  by  Ukraine,  the 
Convention’s Compliance Committee decided in April 2009 that a conditional caution should 
not  become  effective.  However,  the  Committee  underlined  that  Ukraine  is  not  yet  fully  in 
compliance and therefore reserved the right to make further recommendations. The Ministry 
for Environmental protection established an inter-ministerial working group in May, which is 
considering  analyses  and  legislative  proposals  to  enhance  the  implementation  of  the 
Convention.  Discussions  continued  between  the  European  Commission  and  Ukraine  on  a 
revised Charter and Founding Agreement to re-establish the Regional Environmental Centre 
(REC) in Ukraine even if in December 2009 the process stalled.  

As regards the Bystre Deep Water Canal, in March 2009 Ukraine submitted a report on the 
implementation  of  the  Convention  on  Phases  I  and  II  of  the  project,  in  April  a  written 
statement,  and  in  August  a  report  to  the  Espoo  Convention.  An  independent  review  of 
Ukraine’s  legal,  administrative  and  other  measures  was  also  completed.  The  Espoo 
Convention’s  Implementation  Committee  meeting  of  September  2009  decided  that  the 
continuation  of  works  under  Phase  I  was  contrary  to  the  earlier  requirements  of  the 
Committee. The continuation of works on Phase II represented a further breach, because an 

1 

the  Protocol  on  Strategic  Environmental  Assessment  to  the  UNECE  Convention  on  Environmental 
Impact Assessment in a Transboundary Context and the following protocols of the UNECE Convention 
on  Long-Range  Transboundary  Air  Pollution:  Protocol  on  Persistent  Organic  Pollutants;  Protocol  on 
Heavy Metals; Protocol on Further Reduction of Sulphur Emissions; Protocol concerning the Control of 
Emissions of Volatile Organic Compounds or their Trans-boundary Fluxes. 

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environmental  impact  assessment  (EIA)  procedure  was  ongoing.  The  Committee  concluded 
that Ukraine remains in breach of the obligations under the Espoo Convention with respect to 
both  phases  of  the  Project.  The  Committee  decided  that  its  conclusions  regarding  the  case, 
including  a  “final  decision”  in  January  2010  should  be  addressed  at  the  next  session  of  the 
Meeting of the Parties (MOP). Procedures and consultation with the public in the context of 
environmental assessments therefore continue to require attention. 

Ukraine participated in the Danube - Black Sea Task Force within which a loan agreement for 
Mykolayiv water supply and wastewater treatment project was signed in February 2010 with 
the  EIB.  A  national  policy  dialogue  continued  under  the  EU  Water  Initiative.  Ukraine  also 
participated in the International Commission for the Protection of the Danube River and in the 
Commission  on  the  Protection  of  the  Black  Sea  against  Pollution.  Ukraine  continued  to 
support the objective of the European Union to accede to the Convention on the Protection of 
the Black Sea against Pollution.  

Cooperation  and  information  exchange  took  place  between  the  European  Commission  and 
Ukraine  on  multilateral  conventions,  environment  strategy,  water,  forestry,  waste 
management,  environmental  data,  nature  protection  and  air  quality.  Other  topics,  such  as 
environmental communication issues and nature protection were identified for possible closer 
cooperation. 

Ukraine  and  the  EU  continued  close  cooperation  in  the  field  of  civil  protection.  The 
Community Civil Protection Mechanism was mobilised in November 2009 to assist Ukraine 
in  the  flu  pandemic  as  well  as  in  March  2010  regarding  a  potential  tailing  dam  collapse  in 
Kalush.  A  strategy  was  prepared  and  adopted  on  natural  risk  reduction  and  early  recovery. 
New civil protection code is being prepared. A joint 112 emergency system was designed but 
not yet put into operation. Significant new equipment was purchased. Ukraine participated in 
the December 2009 launch event of the Eastern Partnership flagship initiative on prevention 
on, preparedness of and response to man-made-made and natural hazards.  

As regards the information society, two main draft laws on electronic communications were 
prepared,  covering  the  main  aspects  of  regulation  (market  analysis,  SMP  determination, 
licensing, universal service, etc). The National Commission for Communications Regulation 
took several important decisions that are currently being implemented, such as the approval of 
the  List  of  Telecommunications  Markets  susceptible  to  price  regulation,  the  price  cap  for 
publicly available telecoms services, and the establishment of the dispute resolution procedure 
for  telecoms  operators.  The  issuance  of  a  further  Third  Generation  mobile  communications 
(3G) licence was postponed to 2010. The relevant spectrum was freed up by the military and 
allocated to civilian use.  

Regarding  audiovisual  policy,  the  ratification  of  the  European  Convention  on  Transfrontier 
Television by Ukraine entered into force in July 2009. The Ukrainian authorities are currently 
drafting  an  action  plan  for  its  implementation.  In  June  2009,  the  Ukrainian  Parliament 
considered, but rejected, the draft law on public service broadcasting. 

In the area of research, Ukraine continued to increase its involvement in the 7th Framework 
Programme (FP7), with higher levels of applications and projects selected for funding. Some 
104 Ukrainian research organisations were successful in FP7, as of November 2009, receiving 
some  EUR  8  million  of  EU  funding,  particularly  within  the  Marie  Curie  calls  for  proposals 
and the Environment, Transport, and Socio-economic sciences and the Humanities Themes.  

The  FP7  BILAT-Ukraine  project  continued  implementation  with  the  aim  of  strengthening 
S&T cooperation between the EU and Ukraine in particular through a stronger participation of 

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Ukraine  in  FP7  and  other  programmes  and  initiatives.  In  September  2009,  two  BILAT-
Ukraine workshops took place in Kyiv: one contributed to the identification of concrete sub-
topics of S&T cooperation between the EU and Ukraine and the other resulted in identifying 
opportunities, future trends and obstacles in scientific mobility. 

The bilateral S&T Cooperation Agreement is being renewed for a further five years, and the 
first Joint Committee meeting under the Agreement is being planned for spring 2010. 

In July 2009 Ukraine formally expressed its interest to discuss the terms and conditions of its 
possible  association  to  FP7.  A  technical  meeting  to  discuss  this  was  held  in  October  2009, 
which led both sides to conclude that an association needs to be well prepared, in particular 
through  increased  training,  information  dissemination  and  capacity  building  measures,  to 
ensure  that  the  Ukrainian  research  community  may  fully  reap  the  benefits  offered  by  FP7 
association. The current work in Ukraine in nominating an increased number of FP7 contact 
points is a positive step in this regard. 

7. 

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

The  direction  of  higher  education  reform  in  Ukraine  is  determined  by  the  need  to  ensure 
convergence with EU standards and implementation of the principles of the Bologna Process.  

Advances  took  place  in  the  implementation  of  a  third-cycle  for  doctoral  programmes  under 
the Bologna Process and the European Credit Transfer System for the first and second cycles 
as of the academic year 2009-10. A Higher Education Reforms Expert Group was established 
in August 2009 with EU support with involvement of Ministry of Education and Science of 
Ukraine and the National Tempus Office convening its first meeting in October. The Bologna 
Process  Diploma  Supplement,  providing  for  greater  transparency  on  higher  education 
qualifications  was  (and  is  still  being)  gradually  introduced  in  Ukrainian  universities  and 
higher education institutions during the course of 2009.  

University autonomy also advanced with the granting of the status of self-governing academic 
institutions and research centres to five Ukrainian universities. However, a number of major 
challenges still remain including improving equal and transparent access to higher education, 
reforming  curricula  to  take  account  of  labour  market  needs,  strengthening  partnerships  with 
enterprises  and  industry,  developing  mechanisms  for  recognition  of  prior  learning  and 
establishing  a  national  quality  assurance  agency.  In  pursuing  greater  internationalization  of 
higher  education,  greater  attention  should  be  paid  to  the  professional  development  of 
academic and administrative staff as well as to the need to promote the active involvement of 
students  in  decision-making  processes,  particularly  in  the  areas  of  mobility  and  curricular 
content.  

In  the  area  of  vocational  training,  a  draft  law  on  a  national  qualifications  framework 
prepared  in  close  cooperation  with  the  Confederation  of  Employers  was  presented  to 
Parliament  in  October.  It  proposes  alignment  to  the  European  Qualification  Framework 
(EQF), establishment of a national qualifications agency and measures to empower the social 
partners  in  this  area.  The  participation  of  enterprises  in  the  definition  of  training  content  in 
order to maximize the  employment  prospects of trainees remains a key policy challenge. In 
July  2009,  the  Ministry  of  Economy  established  an  inter-agency  working  group  to  improve 
education and training planning towards economic and labour-market needs, benefiting from 
EU experience on job demand analysis and skills forecasting. 

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Ukraine continued to benefit substantially from its active participation in Tempus, with a total 
of  11  projects  selected  under  the  second  Call  for  Proposals  for  Tempus  IV.  A  total  of  29 
Ukrainian  students  and  eight  scholars  benefited  from  Erasmus  Mundus  Masters  Courses 
scholarships  during  the  academic  year  2009-10.  Student  and  academic  mobility  to  the  EU 
continued  to  develop  through  the  award  of  98  individual  mobility  grants  under  Erasmus 
Mundus,  for  the  academic  year  2009-10.  One  additional  Ukrainian  university  was  selected 
under  the  Jean  Monnet  Programme  in  2009,  raising  to  five  the  total  number  of  universities 
benefitting from the programme. As yet, there are no funded Jean Monnet Chairs or Centres 
of Excellence. Ukrainian young people, youth workers and youth organisations continued to 
benefit from the opportunities offered by the Youth in Action programme in youth exchanges, 
voluntary  service  actions  and  youth  activities  in  non-formal  education.  The  Europe  Day 
Conference organised in Ternopil in May 2009 by the EU Delegation had a specific session 
on youth.  

In the area of culture, Ukraine ratified the 2005 UNESCO Convention on the Protection and 
Promotion  of  the  Diversity  of  Cultural  Expressions,  after  the  reporting  period  in  January 
2010. Ratification will now enable Ukrainian cultural organisations to participate in the Call 
for Proposals of the ENP Special Action under the Culture Programme in 2010. In the context 
of its commitment to implementing the above Convention, the Ministry of Culture organised a 
forum of national cultures in October 2009 to highlight the contribution of ethnic minorities to 
future  cultural  development.  To  advance  its  regional  cooperation  in  the  framework  of  the 
Eastern Partnership and the Kyiv Initiative, Ukraine is encouraged to ratify the 2005 Council 
of Europe Framework Convention on the Value of Cultural Heritage for Society. 

Ukraine  pursued  health  sector  reform,  which  continued  to  aim  at  quality  improvement, 
financial sustainability and better access to health services. Ukraine further developed a basic 
health  law,  which  is  under  consideration  in  Parliament.  Ukraine  took  various  measures, 
following  the  outbreak,  in  October  2009,  of  severe  respiratory  diseases  and  influenza  A 
(H1N1)  in  the  country.  Measures  included  additional  budget  allocations,  enhanced 
surveillance, quarantine, vaccination, school closures and travel advice. In June 2009, in the 
context  of  the  influenza  A  epidemic,  the  European  Commission  proposed  to  Ukraine  to 
establish  communication  channels  for  the  exchange  of  epidemiological  information  in  the 
case  of  health  crisis  situations.  The  EU  provided  assistance  to  address  the  challenges 
including  through  the  Civil  Protection  Mechanism  and  bilateral  assistance.  The  European 
Centre  for  Disease  Prevention  and  Control,  in  close  cooperation  with  WHO  also  provided 
support  to  Ukraine.  Ukraine  continued  the  fight  against  HIV/AIDS  and  tuberculosis.  It 
adopted, in February and April 2009, a National HIV/AIDS prevention, support and treatment 
programme covering 2009–2013 as well as a related action plan. Ukraine participated in the 
European  Commission’s  HIV/AIDS  Think  Tank  and  a  Ukrainian  NGO  participated  in  the 
European Commission’s HIV/AIDS Civil Society Forum. In September 2009, with a view to 
implementing the Framework Convention on Tobacco Control, Ukraine adopted a programme 
aiming  at  the  reduction  of  the  harmful  influence  of  tobacco  on  the  population’s  health.  In 
October 2009, Ukraine participated in the newly established EU enlarged health information 
committee. 

8. 

FINANCIAL COOPERATION – 2009 KEY FACTS AND FIGURES 

The European Neighbourhood and Partnership Instrument (ENPI) envelope for Ukraine under 
the National Indicative Programme (NIP) 2007-2010 is EUR 494 million. The programme is 
geared  towards  supporting  the  achievement  of  key  policy  objectives  as  outlined  in  the  EU-

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Ukraine  Action  Plan,  replaced  by  the  Association  Agenda  in  November  2009,  and  pursues 
three  priorities:  (1)  Support  to  democratic  development  and  good  governance,  including 
public administration, public finance management and rule of law; (2) Support for regulatory 
reform and administrative capacity building, including the promotion of mutual trade and (3) 
Support  for  infrastructure  development  in  areas  like  energy,  transport  and  border 
management. 

The  implementation  of  the  measures  covered  by  the  2007  and  2008  Annual  Action 
Programmes,  is  underway.  In  general  terms,  implementation  is  proceeding  in  line  with  the 
multi-annual programming, with a stronger focus on priorities 2 and 3, concentrating the bulk 
of  sector  budget  support  operations,  and  of  the  Twinning  instrument.  Launching  of  sector 
budget support operations is slower than initially expected, mainly due to a long preparatory 
phase and the process of intergovernmental consultation in Ukraine.  

In 2009, the European Commission continued to support Ukraine with programmed assistance 
of  EUR  116  million.  The  2009  Annual  Action  Programme  focused  on  2  priorities:  mainly 
regulatory  reform  (EUR  51  million)  and  infrastructure  development  (EUR  65  million).  It 
included two sector budget support operations covering transport and the environment.  

Additionally, ten twinning projects on a varied number of sectors, such as debt management, 
energy  regulation,  WTO  SPS  standards,  training  in  the  judiciary  to  name  a  few,  were 
notified/launched for the sum of EUR 11 million.[ 

An  indicative  financial  envelope  of  EUR  470.1  million  will  be  available  to  support  co-
operation  activities  in  Ukraine  in  the  period  2011-2013,  based  on  a  European  Commission 
decision of March 2010. 

In  addition  to  the  bilateral  allocation,  Ukraine  also  benefited  from  cooperation  activities 
financed  under  the  ENPI  multi-country  and  regional  programmes,  as  well  as  horizontal 
thematic  programmes,  such  as  the  European  Instrument  for  Democracy  and  Human  Rights 
(EIDHR) and Thematic Programme on Environment and Sustainable Management of Natural 
Resources  including  Energy  (ENRTP).  Ukraine  also  participates  in  four  ENPI  Cross  Border 
Cooperation  (CBC)  programmes  (Black  Sea  Basin;  Romania/Ukraine/Moldova;  Hungary-
Slovakia-Romania-Ukraine;  and  Poland-Belarus-Ukraine) with the overall  allocation of EUR 
401.163  million  for  programmes  in  the  period  2007-13.  The  main  priorities  of  these  are 
economic and social development, including improvement of competitiveness; environmental 
protection  and  emergency  preparedness;  people-to-people  cooperation  and 
increased 
efficiency in border management. 

Under the Neighbourhood Investment Facility (NIF), two projects in Ukraine were approved 
in 2009 for a total amount of EUR 13.6 million in technical assistance, leveraging EUR 1.15 
billion in loans from European Finance Institutions in the energy sector. Ukraine also benefits 
from  three  NIF  regional  projects  in  the  energy  sector  and  support  to  the  private  sector, 
amounting to EUR 19.4 million in total.  

Ukraine  is  one  of  the  main  direct  beneficiaries  of  the  Instrument  for  Nuclear  Safety 
Cooperation  (direct  funding  in  2009  amounted  to  EUR  29.7  million  plus  EUR  16.7  million 
transferred  to  Ukraine  following  a  modification  of  the  Annual  Programme  2008). 
Additionally,  Macro-Financial  Assistance  for  a  maximum  amount  of  EUR  610  million  in 
loans has been proposed by the European Commission.  

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In 2009, the EU Delegation to Ukraine ensured the coordination of assistance activities and 
confirmed  the  EU’s  role  as  the  lead  donor  in  both  financial  and  technical  terms  due  to  the 
sector coverage ensured. Strong coordination with EU Member States was also pursued and 
an  ENP  donor  coordination  matrix  was  compiled  and  updated.  The  principle  of  division  of 
labour  was  applied,  more  generally  at  EU  level  and  particularly  in  the  development  and 
implementation of a Joint Cooperation Initiative in Crimea.  

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