JOINT STAFF WORKING DOCUMENT Implementation of the European Neighbourhood Policy in Ukraine Progress in 2012 and recommendations for action Accompanying the document JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS European Neighbourhood Policy: Working towards a Stronger Partnership
Date: 2013-03-20
Institutions: European Commission, High Representative of the Union
Subjects: European neighbourhood policy, Ukraine, democratisation, economic integration, economic reform, educational reform, institutional reform, political cooperation, political reform, sustainable development, trade cooperation

EUROPEAN 
COMMISSION 

HIGH REPRESENTATIVE OF THE
EUROPEAN UNION FOR
FOREIGN AFFAIRS AND
SECURITY POLICY

Brussels, 20.3.2013  
SWD(2013) 84 final 

JOINT STAFF WORKING DOCUMENT 

Implementation of the European Neighbourhood Policy in Ukraine 
Progress in 2012 and recommendations for action 

Accompanying the document 

JOINT COMMUNICATION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, 
THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE 
COMMITTEE OF THE REGIONS 

European Neighbourhood Policy: Working towards a Stronger Partnership 

{JOIN(2013) 4 final} 
{SWD(2013) 79 final} 
{SWD(2013) 80 final} 
{SWD(2013) 81 final} 
{SWD(2013) 82 final} 
{SWD(2013) 83 final} 
{SWD(2013) 85 final} 
{SWD(2013) 86 final} 
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{SWD(2013) 92 final} 
{SWD(2013) 93 final} 

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1.  

OVERALL ASSESSEMENT  AND RECOMMENDATIONS 

This  document  reports  on  the  progress  made  in  implementing  the  EU-Ukraine 
Association  Agenda  between  1  January  and  31  December  2012.  Developments  outside 
this reporting period are also taken into consideration where deemed relevant. This is not 
intended  to  be  a  general  review  of  the  political  and  economic  situation  in  Ukraine.  For 
information  on  regional  and  multilateral  sector  processes,  readers  should  refer  to  the 
Eastern Partnership report. 

In March 2012, the EU and Ukraine initialled the text of the Association Agreement and 
its  Deep  and  Comprehensive  Free  Trade  Area  (DCFTA).  There  was  a  common 
understanding  that  Ukraine’s  performance,  notably  in  relation  to  respect  for  common 
values  and  the  rule  of  law,  will  be  of  crucial  importance  for  the  speed  of  its  political 
association and economic integration with the EU, including in the context of conclusion 
of the Association Agreement and its subsequent implementation. Ukraine stepped up its 
efforts to implement the priorities of the Association Agenda, as evidenced by the Joint 
Committee’s report of November 20121. However, much remains to be done by Ukraine, 
for example the fight against conflict of interest and corruption in the judiciary, and the 
stabilization and consolidation of its public institutions so as to enable it to benefit fully 
from the Association Agreement’s potential. 

Overall  Ukraine  presented  a  mixed  picture  of  developments  on  deep  and  sustainable 
democracy. The were some positive developments in the field of legal reform, including 
the  judiciary,  where  some  important  laws  were  enacted  (entry  into  force  of  a  new 
Criminal Procedure Code, the new legislation on the Bar, the establishment of a National 
Preventive Mechanism against torture), and in the area of freedom of association. It was 
decided  to  launch  the  preparation  for  constitutional  reform:  a  Constitutional  Assembly 
was  established  to  act  as  an  auxiliary  and  advisory  body  to  the  President.  At  the  same 
time, these developments remained over-shadowed by the matter of selective justice and 
the  conduct  of  parliamentary  elections  which  showed  deterioration  in  several  areas 
compared to standards previously achieved. The perception of corruption remained high, 
and Ukraine continued to occupy a lowly position in international rankings. This was also 
due  to  lack  of  progress  in  improving  the  anti-corruption  system  and  even  regression  in 
budget transparency and in terms of legislation on public procurement. Ukraine took only 
at a late stage initial measures to start removing EU’s concerns related to public finance 
management.  This  led  to  delays  in  planned  disbursements  under  EU  sectoral  budget 
support. 

Progress  was  achieved  in  the  energy  sector,  notably  with  the  adoption  of  legislation 
enabling the unbundling of Naftogaz. At the same time, Ukraine’s notification of wishing 
to  renegotiate  its  World  Trade  Organisation  commitments  under  Article  XXVIII  of  the 
General Agreement on Tariffs and Trade (GATT) raised commercial concerns and posed 
a challenge to the integrity of the multilateral trading system. 

1 The Association Agenda will be updated in 2013 to reflect the priorities of the finalised Association 
Agreement. 

2

 
 
                                                 
In the framework of the first (legislative) phase of the Action Plan on Visa Liberalisation, 
Ukraine  continued  to  pursue  the  adoption  of  the  requisite  legislation  and  strategic  and 
policy  documents  in  such  areas  as  the  legal  status  of  foreigners,  border  and  migration 
management,  asylum,  trafficking  in  human  beings,  drugs  and  mutual  assistance  in 
criminal  matters.  The  agreement  amending  the  Visa  Facilitation  Agreement  between 
Ukraine and the EU was signed on 23 July 2012. Instances of refoulement and of denial 
of access for United Nations High Commissioner for Refugees (UNHCR) representatives 
to asylum seekers were observed with concern by the EU. 

In  2012,  the  risks  to  Ukraine’s  economy  increased  markedly  as  growth  stalled  and  the 
balance  of  payments  deficits  widened,  partly  as  a  consequence  of  sluggish  external 
demand. Foreign direct investment remains at a low level as a result of the deteriorating 
business  climate.  International  reserves  decreased  significantly  as  Ukraine  attempted  to 
stabilise its currency, contrary to the recommendation of the International Monetary Fund 
(IMF).  Negotiations  with  the  Fund  on  a  new  standby  arrangement  started  in  January 
2013.  

Ukraine continued to cooperate with the EU on several regional and international issues. 
At regional level, it adopted a positive stance in the 5+2 Transnistria settlement talks, and 
its cooperation with the EU on all questions related to this matter was constructive. 

The  Council  Conclusions  of  10  December  2012  reaffirmed  the  EU’s  commitment  to 
signing  the  Association  Agreement,  including  the  DCFTA,  as  soon  as  Ukraine 
demonstrates determined action and tangible progress in three areas - actions to remedy 
the  shortcomings  noted  in  the  October  2012  parliamentary  elections;  progress  in 
addressing  the  issue  of  selective  justice  and  preventing  its  recurrence;  and  action  to 
implement the reforms set out in the jointly agreed Association Agenda, possibly by the 
time  of  the  Eastern  Partnership  Summit  in  Vilnius  in  November  2013.  It  indicated  that 
signature  could  be  accompanied  by  opening  for  provisional  application  of  parts  of  the 
Agreement.  At  the  16th  EU-Ukraine  Summit  which  took  place  on  25  February  2013  in 
Brussels  Ukraine  confirmed  its  determination  to  comply  with  those  areas/elements 
specified by the Conclusions to that end. 

In  2012,  Ukraine  did  not  address  most  of  the  key  recommendations  contained  in  last 
year's  European  Neighbourhood  Progress  (ENP)  progress  report.  However,  it  did  take 
steps  toward  legal  and  judicial  reform,  with  the  entry  into  force  of  a  new  Criminal 
Procedure  Code  and  other  important  legislation.  It  also  adopted  a  law  on  Asylum  and 
Refugee  Status,  though  implementation  is  flawed.  Progress  is  needed  on  the  other  key 
recommendations.  On  the  basis  of  this  year’s  report,  and  with  a  view  to  the  sustained 
implementation of the Association Agenda in 2013, Ukraine is invited to: 

•  Take early steps to establish a reliable electoral system based on an Election Code 
and  clear  rules  for  balanced  media  access  for  candidates;  fully  implement  the 
OSCE-ODIHR’s  other  recommendations  on  the  conduct  of  the  October  2012 
parliamentary  elections,  and  address  the  shortcomings,  in  line  with  the  public 
commitments made by the Prime Minister of Ukraine in an inclusive dialogue with 
the opposition. 

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•  Address  the  cases  of  politically  motivated  convictions  without  further  delay;  take 
further steps  to reform  the  judiciary  to  prevent any recurrence, including  an early 
implementation of all judgments of the European Court of Human Rights and of the 
recommendations  by  the  Council  of  Europe  related  to  detention  conditions  and 
medical  assistance  for  persons  in  detention;  review  in  close  consultation  with  the 
Council  of  Europe/Venice  Commission  the  law  on  the  functioning  of  the 
Prosecutor’s Office, the Criminal Code, the role of the High Council of Justice, the 
laws on the Judicial System and the Status of Judges, and reform of the Police. 

•  Step  up  fight  against  conflict  of  interest  and  corruption,  including  in  the  judiciary 

system and in relation to improving the business climate. 

•  Reverse the backsliding which occurred in 2012 on public procurement and budget 
transparency; develop and start to implement a public finance management strategy; 
broaden  the  remit  of  the  Accounting  Chamber  and  amend  the  law  on  the  civil 
service of November 2011 in line with EU norms. 

•  Ensure  that  the  constitutional  reform  process  is  carried  out  in  an  inclusive  and 
transparent way in line with all constitutional norms and in close cooperation with 
the Council of Europe/Venice Commission. 

•  Make  greater  efforts  to  meet  the  benchmarks  set  out  in  the  Action  Plan  on  Visa 

Liberalisation. 

•  Comply  with  its  obligations  under  international  refugee  and  human  rights  law,  in 

particular the principle of non-refoulement. 

•  Establish a macroeconomic framework conducive to the resumption of IMF support, 

addressing such issues as fiscal sustainability in the energy sector. 

•  Refrain from introducing protectionist measures, such as recycling fees on vehicles, 
which  are  potentially  in  breach  of  its  WTO  commitments,  and  withdraw  the 
notification for renegotiating its WTO commitments. 

•  Comply with its obligations under the Energy Community Treaty (as reflected in the 

Association Agreement and the Association Agenda). 

2.  

POLITICAL DIALOGUE AND REFORM 

Towards deep and sustainable democracy 

The conduct of the 28 October 2012 parliamentary elections presented a mixed picture. 
The  voters  had  a  genuine  choice  between  distinct  parties;  candidate  registration  was 
inclusive; the centralised voter registration system appeared to be functioning well; and 
the  campaign  was  visible  and  active  and  was  competitive  in  most  parts  of  the  country. 
But  the  lack  of  a  level  playing  field,  caused  primarily  by  the  abuse  of  administrative 

4

 
 
resources, cases of candidates and electoral staff being intimidated, lack of transparency 
of campaign and party financing, lack of balanced media coverage, and the irregularities 
and delays in the vote count and tabulation constituted a step backwards compared with 
recent national elections. The Prime Minister made a public commitment to follow-up on 
electoral complaints. It proved impossible to establish the election results in five single 
mandate  electoral  districts.  Electoral  legislation  still  needs  to  be  brought  into  line  with 
OSCE and Council of Europe standards. Trials which did not comply with international 
standards prevented some opposition representatives from standing in the elections. 

The  new  law  on  civic  organizations,  which  entered  into  force  on  1  January  2013, 
represented an important step forward in the area of freedom of association. If correctly 
implemented, it will address such problems as territorial restrictions on the activities of 
NGOs and administrative obstacles to their registration. 

Freedom  of  assembly  has  been  undermined  by  the  lack  of  modern  legislation.  Steps 
have been taken to prepare new legislation, though this has still to be adopted. 

Media freedom did not improve in 2012. Reports of physical attacks on journalists have 
become  more  frequent,  and  the  law-enforcement  agencies  have  failed  to  investigate 
alleged cases properly. The information space has been dominated by pro-governmental 
media.  The  pressure  on  media  which  are  critical  of  the  government  has  increased. 
Journalists and media experts have criticised the Inter-Agency Working Group under the 
Presidential Administration for failing to address the situation effectively. A draft law on 
defamation was passed by the Parliament at first reading but withdrawn following strong 
criticism  from  civil  society  and  the  international  community.  There  was  no  progress  in 
adopting legislation on public broadcasting and on the transparency of media ownership. 

Confidence  in  Ukraine’s  judiciary  was  undermined  by  trials  which  did  not  meet 
international  standards  as  regards  fair,  transparent  and  independent  legal  processes  and 
which indicated a selective use of justice vis-à-vis leaders of the opposition and members 
of  the  former  government.  Ukrainian  judges  are  subject  to  interference  from  the 
executive branch. 

In  August  2012,  the  adoption  of  new  legislation  on  the  Bar  was  a  positive  step.  In 
November, the entry into force of a new Criminal Procedure Code, formulated elaborated 
in  close  consultations  with  the  Council  of  Europe,  was  a  further  major  step,  if 
implemented correctly, the Code will play its part in ensuring fair trials, and equality of 
status between prosecution and defence, and in preventing ill-treatment and torture. 

The  Prosecutor  General’s  Office  remains  largely  unreformed,  resists  any  restrictions  of 
its current prerogatives and interferes with law-enforcement investigations. Despite a law 
adopted  in  September,  Ukraine  needs  a  comprehensive  reform  of  how  the  Prosecutor’s 
Office operates. A  law on the Police and a revision of the  Criminal Code are  yet  to  be 
pursued. 

Despite  the  National  Anti-Corruption  Strategy  approved  in  October  2011,  corruption 
perception  remains  high:  Transparency  International  rated  Ukraine  144th  out  of  176 

5

 
 
countries  in  the  2012  Corruption  Perception  Index.  Conditions  for  business  and 
investment have deteriorated further. In September, the government approved a Concept 
Paper on reform of public financial management (PFM), and initiated work on an Action 
Plan.  Progress  in  PFM  is  a  condition  for  EU  budget  support  and  EU  macro-financial 
assistance. 

There  were  some  steps  to  prepare  for  a  constitutional  reform.  In  May,  the  President 
adopted a decree appointing the members of a Constitutional Assembly, which acts as an 
auxiliary body advising the President. The Assembly has met three times, but its working 
methodology  has  not  yet  been  approved.  Draft  constitutional  amendments  prepared  by 
the Assembly are to be sent to the President who intends to submit them to Parliament. 
Reform  of  the  local  self-government  and  judicial  systems  have  been  announced  as  a 
priority  issue.  The  Assembly  includes  some  members  of  independent  civil  society 
organisations,  but  opposition  parties  have  declined  to  take  part.  It  will  be  of  crucial 
importance that the constitutional reform process be transparent and inclusive. 

Other human rights and governance-related issues 

In spring, the election of a new Ombudsperson proved to be a divisive issue in a very 
polarised  Parliament.  The  aim  of  electing  an  Ombudsperson  outside  of  the  domestic 
political  struggle  was  not  achieved.  Subsequently,  the  Ombudsperson's  office  has 
undergone a number of positive changes. Further steps will be needed to create a climate 
of  confidence  and  to  prove  that  the  Ombudsperson’s  office  is  genuinely  free  of 
interference. 

The  establishment  of  a  National  Preventive  Mechanism  against  torture  is  a  substantial 
step  forward,  in  line  with  Ukraine’s  obligations  under  the  Optional  Protocol  to  the 
Convention  against  Torture,  which  it  ratified  in  2006.  Together  with  the  new  Criminal 
Procedure Code, it should significantly reduce cases of torture and ill-treatment. The 
Criminal  Procedure  Code  provides  for  the  establishment  of  an  Independent  Bureau  of 
Investigation, i.e. an independent body with authority to investigate cases of torture and 
ill-treatment.  Detention  conditions  and  overcrowding  in  prisons  remain  matters  of 
concern. 

The  situation  regarding  freedom  of  religion  in  Ukraine  is  generally  satisfactory.  The 
authorities engage in dialogue with most religious denominations. There were some cases 
of display of religious hatred and disputes over property during the reporting period. 

The  promotion  of  gender  equality  by  Ukraine  government  entities  was  affected  by  a 
significant slow-down in cooperation with civil society, as well as some regression from 
the standards previously achieved. 

Progress  has  been  made  in  terms  of  children’s  rights.  In  June,  Parliament  ratified  the 
Council of Europe’s Convention on the protection of children against sexual exploitation 
and sexual abuse. The Government approved the concept and subsequently the National 
Strategy  to  Prevent  Social  Orphanhood.  Despite  improved  legislation,  though,  societal 
and cultural factors are still leading to violence against children. 

6

 
 
Despite  the  adoption  of  anti-discrimination  provisions  related  to  disability,  Ukrainian 
legislation lacks comprehensive provisions regarding the rights of disabled persons and 
the need for their integration in society and in the workplace. 

Regarding labour rights, no progress can be reported regarding the adoption of the long-
awaited  amended  Labour  Code.  Concerns  were  expressed  by  the  ILO  on  the  non- 
conformity of certain provisions with its basic standards. 

Ukraine adopted a Law on Countering Discrimination. The new legislation represents a 
step  in  the  right  direction  but  lacks  clear  and  complete  definitions,  broader  scope 
including an explicit reference to sexual orientation and institutional provisions to ensure 
its  effectiveness.  The  LGBT  community  continues  to  face  discrimination  and  is  often 
victim  of  hate  speech.  Their  freedom  of  peaceful  assembly  during  the  Kyiv  Pride  2012 
was  effectively  prevented  by  anti-LGBT  protesters.  In  October,  the  adoption  at  first 
reading  of  a  draft  law  banning  homosexual  promotion  raised  important  concerns. 
Crimean Tatars and Roma minorities as well as smaller groups such as refugees, foreign 
students  and  illegal  migrants  face  different  forms  of  discrimination  and,  occasionally, 
acts of violence. The representation of the Crimean Tatars in the local administration has 
decreased and the adoption of the draft Law on Deported People has been postponed. The 
proposal  of  the  Mejlis  of  Crimean  Tatars  to  hold  an  International  Forum  on  the 
Restoration  of  Crimea  Tatars’  and  others’  rights  as  deported  people,  supported  by  the 
OSCE High Commissioner for Minorities, did not materialize. Tensions and clashes over 
land  property  and  other  contentious  issues  were  reported  recurrently,  with  turmoil 
erupting  in  December  2012  when  a  group  of  unidentified  persons  tried  to  organize  a 
pogrom in a rural Crimean Tatars settlement. 

A  new  law  that  allows  regional  and  local  bodies  to  grant  regional  status  to  minority 
languages  spoken  by  at  least  10%  of  the  population  has  mostly  consolidated  the  use  of 
Russian in the official sphere in Eastern and Southern regions and has had some positive 
impact on people’s right too use other minority languages. The law triggered a wave of 
protests by opposition parties and citizens who felt that the Ukrainian language was being 
threatened by the wider use of Russian. 

lack  of  protection  for  certain  nationalities, 

Human rights and international organisations reported a number of cases of violation of 
the  rights  of  refugees  and  asylum-seekers,  including  instances  of  forced  deportation, 
systematic 
lack  of  protection  for 
unaccompanied minors, widespread corruption in the asylum system, and denial of access 
to asylum seekers for representatives of the UNHCR. The adoption of a Law on Asylum 
and  Refugee  Status  was  a  positive  development,  but  there  are  practical  challenges  in 
getting it implemented and in running the new structures effective. 

Ukraine remains one of the most centralised states in Europe, something which impacts 
on  local  and  regional  self-government.  Reform  efforts,  closely  coordinated  with  the 
Council of Europe, have yet to yield practical results. The press and NGOs have reported 
increasing pressure on elected mayors who are not members of the central ruling party. In 
several  cases  elected  mayors  have  been  dismissed  by  local  deputies  and  replaced  by 
‘Heads of Administration’ appointed by the central authorities. 

7

 
 
Although  the  EU  continued  to  support  Public  Administration  Reform  through  a 
SIGMA  initiative,  the  law  on  the  civil  service  passed  at  the  beginning  of  2012  was 
assessed  by  the  OECD/SIGMA  and  the  Council  of  Europe  as  not  in  line  with  the 
European  standards.  The  November  2012  amendments  to  the  law  merely  deferred  the 
entry  into  force  of  the  law  that  SIGMA  has  already  flagged  as  being  not  in  line  with 
European principles. The main reason for the law entering into force a year later (now 1 
January 2014) appears to be budgetary, while the current legislative framework continues 
to  allow  the  civil  service  in  Ukraine  to  be  politicised  and  subject  to  arbitrariness.  It 
therefore did not provide a sufficient basis for the EU sectoral budget support programme 
in this area. Consequently the EUR 70 million initiative agreed between Ukraine and the 
EU  to  support  public  administration  reform  was  cancelled.  There  was  at  least  some 
progress with the adoption of the law on administrative services. 

Cooperation  on  foreign  and  security  policy,  regional  and  international  issues, 
conflict prevention and crisis management 

In 2012 Ukraine aligned with 23 out of 62 EU CFSP declarations it has been invited to support 
(36 out of 82 in 2011). The rate of alignment has been decreasing over the last three years. On 
the other hand, good progress was achieved as regards cooperation on the Transnistrian 
issue.  Five  official  meetings  of  the  ‘5+2’  forum  showed  the  resilience  of  the  reinstated 
negotiating process. In the course of 2012 the ‘5+2’ reached agreement on two important 
documents:  ‘Principles  and  Procedures  for  the  Conduct  of  Negotiations’  and  a 
comprehensive agenda for the negotiating process. Ukraine took a pro-active part in the 
resumed  5+2  talks.  Ukrainian  diplomacy  has  become  more  active,  particularly  with  a 
view  to  its  chairmanship–in-office  of  the  OSCE  in  2013.  Kyiv  has  reiterated  that 
Transnistria will be a central issue on the OSCE agenda in 2013. 

Ukraine continued to participate constructively in the work of the EU Border Assistance 
Mission to the Republic of Moldova and Ukraine (EUBAM). With EUBAM support, 
the  Ukrainian  customs  and  border  guard  services  continued  to  enhance  their  capacities 
and to secure inter-agency cooperation both within Ukraine and between Ukraine and the 
Republic of Moldova. EUBAM continued to support the demarcation of the state border 
with the Republic of Moldova, as well as the joint pilot project launched with the Republic of 
Moldova  in  February  2012,  establishing  joint  control  on  Ukraine’s  territory  of  the  “Briceni-
Rososhany” border section. 

Ukraine  contributed  one  Officer  to  the  ATALANTA  with  Operational  Headquarters. 
Discussions on deploying Ukrainian maritime patrol and reconnaissance aircraft as well 
as  Vessel  Protection  Detachments  have  continued,  as  have  discussions  on  signing  the 
Administrative  Arrangement  on  Strategic  Air  Transport.  Ukraine  plans  to  contribute  to 
the Greek-led HELBROC battle group in 2014 by offering strategic airlift capabilities, a 
marine  company  and  ten  staff  officers.  The  Ukraine-Poland-Lithuania  Brigade  should 
become fully operational in 2013 and available for future CSDP missions. 

8

 
 
 
3.  

ECONOMIC AND SOCIAL REFORM 

Macroeconomic framework and functioning market economy2 

Ukraine's  economy  was  increasingly  affected  by  the  negative  global  environment  in 
2012.  Following  strong  expansion  of  4.2%  in  2010  and  5.2%  in  2011,  GDP  growth 
slowed  to  0.2%  in  2012,  as  a  consequence  of  declining  industrial  production,  weaker 
agricultural output and tight credit conditions. In the absence of a strong global economic 
recovery, real growth in 2013 is expected to remain sluggish. 

Low food prices helped keep inflation under control. Headline inflation reached a record 
low of -0.2% at year end, after 9.1% and 4.6% in December 2010 and 20113. Ukraine's 
fiscal deficit exceeded the target agreed with the IMF in 2012. IMF expects the deficit to 
increase  to  5.3%  of  GDP  (up  from  4.2%  of  GDP  in  2011),  mainly  as  a  result  of  the 
authorities'  refusal  to  increase  gas  tariffs  for  households  and  utilities  to  cost-recovery 
levels, and due to increased government spending before the October 2012 Parliamentary 
elections.  After  a  marked  rise  following  the  2008-09  crisis  public  debt  stabilised  at 
around 36-40% of GDP in 2011-2012. 

The current account deficit, already high, grew further in 2012, reaching an estimated 
8.3% of GDP (up from 6.2% in 2011). Foreign currency reserves declined to USD 25.3 
billion (EUR 18.6 billion) at the end of 2012. Ukraine received no disbursements under 
the IMF standby arrangement in 2012, as the authorities had reached no agreement with 
the  Fund  on  gas  tariffs  and  the  budget  parameters.  Macro-financial  assistance  from  the 
European Union to the value of EUR 610 million presupposes IMF disbursements. 

Progress in implementing structural reforms to boost competitiveness has been slow, and 
Foreign  Direct  Investment  remains  very  weak 
in  regional  comparison.  Public 
administration  reform  was  not  pursued  in  line  with  European  practice,  and  technical 
advice from SIGMA was not taken adequately into account in formulating the new Civil 
Service law. The law was not amended despite repeated requests from the EU side. Initial 
steps were, however, taken to prepare a public financial management reform through the 
adoption of a Concept in September and the formulation of an Action Plan. 

Social situation and employment 

The  economic  crisis  continued  to  impact  negatively  on  the  employment  and  social 
situation.  According  to  ILO,  the  activity  rate  for  the  working  age  population  was  at 
73.0% (first half of 2012), the employment rate at 66.9%.  While the unemployment rate 
stood  at  7.9%  in  2011  (8.8  for  men,  6.8  for  women  and  18.6  for  young  people), 
unemployment is expected to be at 7.5% for 2012. 

2 Figures on GDP, inflation, trade and employment are generally from Eurostat based on data supplied by 
the national statistical offices; or IMF or Commission Staff estimates, as indicated in the Statistical Annex. 
When other data sources are used these are then indicated. 
3 All figures as per Ukrainian statistical office 

9

 
 
                                                 
The National Tripartite Agreement on Employment and Jobs signed in June was seen as a 
response  to  the  ILO's  Global  Jobs  Pact  and  was  aligned  on  the  ILO's  Decent  Work 
Agenda. This could be a move towards a more comprehensive approach to employment 
and social challenges and a step in fostering social dialogue. The agreement set specific 
targets  for  the  employment  rate  and  the  training/retraining  of  employees  to  be  met  by 
2017. 

Social  payments  and  wages  were,  in  theory,  increased  in  an  attempt  to  mitigate  the 
impact  of  the  crisis,  but  the  payments  were  not  actually  made.  New  legislation  entered 
into  force,  with  the  aim  of  encouraging  employment  among  vulnerable  groups  (e.g. 
young  people,  parents  with  children  under  six,  disabled  persons,  orphans  and  persons 
over 50); for one year, employers will be able to reclaim social taxes paid for employing 
persons falling under these categories. 

No progress can be reported towards the adoption of the long-awaited, amended Labour 
Code. 

In  June,  the  Parliament  adopted  the  law  on  "Amendments  to  the  Administrative  and 
Criminal  Code  to  strengthen  the  responsibility  of  actions  in  line  the  legislation  on 
occupational health and safety". These amendments aim to reverse the current situation 
whereby  entrepreneurs  are  willing  to  pay  a  small  fine  rather  than  bear  the  expense  of 
creating  safe  conditions  for  work.  A  more  comprehensive  approach  and  more  capacity 
building and training would be needed to create the conditions for a real improvement of 
in health and safety at work. An EU supported project on health and safety, run by ILO, 
ended in September 2012. The improvements need to be sustained. 

4.  

TRADE-RELATED ISSUES, MARKET AND REGULATORY REFORM 

The EU is Ukraine's second largest trading partner accounting for about 27% of its trade 
volume in 20114. Bilateral trade flows increased and during the first eleven months of 
2012  amounted  to  EUR  35.2  billion.  EU  exports  to  Ukraine  consisted  mainly  of 
manufactures  of  machinery  and  vehicles,  other  manufactured  goods  and  chemicals.  EU 
imports  from  Ukraine  consisted  mainly  of  other  manufactured  goods  (mostly  iron  and 
steel), raw materials (mineral fuels, ores) and food and drinks (cereals, oilseeds). 

In a move that raises both commercial and systemic concerns, including about the impact 
of such action on the global trading system, Ukraine notified the WTO in September of 
its  intention  to  modify  import  tariffs  for  a  large  number  of  agricultural  and  industrial 
products. Another worrying development took place in November, when a new Law on 
Customs  Tariff  was  adopted  by  Parliament,  raising  customs  tariffs  on  some  100  tariff 
lines to the highest levels allowed under Ukraine’s WTO-bound tariffs. 

The  entry  into  force  of  a  new  Customs  Code  in  June  had  a  significant  and  positive 
impact in a number of areas. The new Code enhanced the rights of operators by allowing 
them to choose customs entry points and reversed the burden of proof regarding customs 

4 Data for 2012 was not available at the time of writing. 

10

 
 
                                                 
valuation.  Operators  acquired  the  right  to  make  electronic  declarations  and  to  modify 
their customs declarations within three years of the release of the goods. The new Code 
also facilitated customs flows by reducing the number of documents required for customs 
declarations, limiting customs clearance time to four hours and introducing the concepts 
of preliminary customs declaration and authorised economic operator. Valuation control 
has  improved,  with  fewer  complaints  from  trade  operators,  but  classification  control 
remains  an  area  of  concern  as  customs  authorities  tend  to  change  the  classification  of 
imported goods to a higher duty category. The improvements may be helpful in the fight 
against corruption, which remains a serious concern. 

In the area of free movement of goods, Ukraine prepared a draft Law on Standardisation 
which envisages a separate standardisation body for the construction industry. This is not 
consistent  with  EU  practice  and  needs  reconsideration.  A  new  Law  on  Metrology  was 
under  preparation.  Ukraine  has  adopted  40  technical  regulations,  loosely  based  on  EU 
directives,  and  about  20  more  were  being  drafted.  The  process  of  revising  existing 
technical  regulations  started,  with  the  aim  of  achieving  closer  correspondence  to  the 
relevant EU directives. Ukraine established a legal basis for market surveillance and set 
work in motion. 

On sanitary and phyto-sanitary (SPS) issues, Ukraine approved an Institutional Reform 
Plan in June in preparation for the DCFTA; a detailed Action Plan is being drafted, with 
EU support.. Ukraine is preparing a food safety strategy and a list of SPS legislation to be 
approximated  with  EU  standards.  Laws  on  food  safety,  official  controls,  veterinary 
checks, novel  food,  hygienic  production  and  animal  feed  are  in  preparation.  Ukraine 
approved an Order on microbiological criteria. It continued to train SPS staff with some 
TAIEX  support,  on  areas  such  as  animal  welfare,  African  swine  fever  and  auditing  of 
food processing enterprises. Greater efforts are needed on training at regional level too. 

The business climate remained poor in 2012. The main causes are the lack of rule of law 
and  widespread  corruption.  The  new  Customs  Code  and  the  progress  made  with  the 
automated  VAT  refund  system  are  the  positive  elements.  The  poor  business  climate 
affects SMEs in particular: the contribution of SMEs to the Ukrainian economy is falling, 
with  employment  in  medium-sized  enterprises  falling  by  some  10 %  per  year  between 
2007  and  2010.  Ukraine  maintains  a  low  position  in  the  World  Bank’s  Ease  of  Doing 
Business  Index:  it  moved  up  to  137th  place  in  2012  (out  of  185  countries)  due  to  some 
improvement  on  starting  business,  registering  property  and  paying  taxes.  Transparency 
International  has  rated  Ukraine  144th  out  of  176  countries  in  the  2012  Corruption 
Perception  Index.  The  ranking  reflects  the  lack  of  activity  on  the  part  of  the  National 
Anti-corruption  Committee  under  the  President,  and  amendments  to  the  public 
procurement legislation. 

In the course of 2012, the Government submitted to the Parliament draft laws introducing 
amendments  to  the  Joint  Stock  Company  Law  on  simplification  of  the  procedures  for 
reorganising  joint  stock  companies  into  companies  with  different  forms  of  ownership, 
and on reducing the quorum for general shareholders’ meetings. Neither law has been yet 
passed  by  Parliament.  International  Standards  for  Financial  Reporting  were  introduced 
for all publicly listed companies. 

11

 
 
In the area of financial services, in September Ukraine adopted a law on the depository 
system  raising  businesses'  concerns  over  the  potential  establishment  of  a  Central 
Depository under the National Bank’s control. Ukraine introduced legislative changes to 
the  functioning  of  payment  systems  and  non-cash  payments  which  provide  for  the 
creation of a National  clearing  centre for electronic  payment under the oversight of the 
National  Bank.  The  potential  monopolisation  of  the  sector  is  a  matter  of  concern  for 
market operators. The newly established National Commissions for Securities and Stock 
Market,  and  for  Regulation  of  Financial  Services  Markets  were  subordinated  to  the 
President of Ukraine and not to the Cabinet of Ministers. Both non-bank regulators were 
fully  dependent  on  state  funding,  which  is  not  compliant  with  the  best  international 
practices. The major weaknesses in the financial services market in Ukraine remained a 
lack  of  sector  consolidation  and  too  many  weakly  capitalised,  non-viable  financial 
institutions.  Ukraine  needs  to  make  progress  on  capital  adequacy  in  the  banking  and 
securities sectors, on investor protection and on protecting the rights of financial services’ 
consumers. 

In  the  area  of  movement  of  capital,  the  National  Bank  of  Ukraine  (NBU)  introduced 
obligatory  sales  of  F/X  proceeds  from  exports  and  mandated  conversion  into  local 
currency of any individual transfers from abroad exceeding UAH 150 000. The NBU also 
reduced the maximum term for the repatriation of profits from 180 to 90 days, as from 19 
November,  and  set  a  requirement  to  sell  50%  of  exporters’  profits  received  in  foreign 
currencies. The measures will be in effect for the next six months. Also on 19 November, 
the  NBU  set  up  a  Committee  to  prevent  fraudulent  operations  in  the  foreign  exchange 
market. 

Other key areas 

Amendments  to  the  Tax  Code  changed  the  rules  for  the  administration  of  taxes,  and 
introduced new tax rates and tax benefits in Ukraine. Ukraine’s further efforts to reform 
the  tax  system  could  benefit  from  greater  involvement  on  the  part  of  experts  and  the 
business  sector.  The  long-standing  issue  of  VAT  refunds  saw  some  progress  with  the 
improved automatic VAT refund system; approximately 50% of refunds were processed 
automatically. The total amounts of VAT refunds have increased. The automated system 
functions best for larger taxpayers, while many smaller businesses were unable to access 
the system because of its strict criteria. Economic operators complained about pressure to 
pay corporate income tax in advance in order to receive VAT refunds or to refrain from 
submitting  VAT  refund  applications.  On  fighting  fraud,  Ukraine  replaced  criminal 
penalties for goods smuggling with fines, to be determined by the authorities taking into 
consideration  the  gravity  of  the  act.  This  raises  concerns  about  the  possible  negative 
impact  on  investigations  and  sanctioning  of  cases  of  smuggling  of  excisable  goods, 
especially  cigarettes.  Given  the  high  profit  margins,  fines  might  not  always  ensure  the 
adequate  level  of  deterrence.  Ukraine  is  expected  to  provide  further  information  on  the 
impact of these changes. The EU will continue to follow this matter closely. 

In  2012  the  Antimonopoly  Committee  adopted  a  regulation  on  leniency  for  cartel 
participants. In August a draft State Aid Law, seeking to approximate with EU rules, was 
submitted to the Parliament. It proposes to designate the Antimonopoly Committee as the 

12

 
 
State aid authority and to give the Cabinet of Ministers an important role on exemptions 
from  notifications.  In  September,  the  Cabinet  of  Ministers  approved  a  concept  for  the 
draft law on Competitive Strategy. 

their  work.  The 

In  2012,  intellectual  property  rights  (IPR)  protection  and  enforcement  in  Ukraine 
deteriorated in some areas. The situation regarding copyright protection and related rights 
raised  particular  concerns:  piracy  and  counterfeiting  were  widespread,  and  the 
institutional  and 
enforcement  authorities  did  not  coordinate 
administrative  weakness  of  the  State  Intellectual  Property  Service  is  also  a  concern. 
Ukrainian  legislation  did  not  provide  for  adequate  and  effective  enforcement  of  IPR 
rights, especially in the digital environment. Existing criminal sanctions did not prove to 
be a sufficient deterrent and the rules concerning the destruction of IPR-infringing goods 
and of equipment used for their production were applied inconsistently. 2012 saw some 
worrying  developments  regarding  the  system  of  collective  management  organisations 
(CMOs),  especially  in  terms  of  CMO  accreditation.  The  establishment  of  a  collective 
management  system  in  accordance  with  EU  standards  would  help  to  ensure  the 
remuneration of royalties, paving the way for proper implementation of the DCFTA. 

In  the  area  of  enterprise  policy,  in  April  the  President  signed  the  Law  on  the 
‘Development  of  and  State  Support  for  Small  and  Medium  Business  in  Ukraine’.  The 
Law’s definition of an SME aims to approximate with the EU acquis. The Law sets the 
goals and the tasks of the new SME Agency which, under the supervision of the Cabinet 
of  Ministers,  will  be  responsible  for  drafting  and  implementing  SME  policy  and  policy 
instruments. 

Public  procurement  policy  still  lacks  a  coherent  strategic  approach  to  legislative 
approximation  with  EU  rules  and  standards.  A  series  of  amendments  to  the  public 
procurement  law  were  passed  during  2012,  restricting  the  scope  of  competitive 
procurement  by  either  excluding  certain  operations  or  by  increasing  the  scope  of  the 
single source procedure. A law on procurement by utilities was adopted in May, but the 
key concept of ‘utilities’ is not fully compliant with EU rules due to a different definition 
of  the  entities  concerned  and,  in  some  cases,  to  higher  threshold  values  for  the  law  to 
apply. 

From January onwards, internal audit units were being established and audits conducted 
in  the  ministries,  other  central  executive  authorities,  their  territorial  offices  and  budget 
institutions.  However,  further  evidence  is  needed  to  demonstrate  that  the  audits  meet 
international  standards.  Their  effectiveness  might  be  limited  in  the  absence  of  a 
comprehensive Internal Control strategy based on the applicable international framework 
(COSO-ERM)  and  of  strategic  reflection  on  the  interaction  between  Internal  Control, 
Internal Audit and Financial Inspection. 

In June, Ukraine adopted the amendment of the Regulation on the State Statistics Service 
and  re-instated  the  professional  independence  of  the  statistical  office  to  accord  with 
European standards. The multi-annual statistical work programme has been developed for 
the  period  2013–2017,  taking  into  account  the  recommendations  of  the  2011  global 
assessment and EU best practice. 

13

 
 
Ukraine prepared a draft Concept for State Policy on consumer protection. The point is 
to  gradually  shift  the  emphasis  from  the  State  to  progressive  inclusion  of  consumers 
NGOs  in  consumer  protection  activities.  It  also  addresses  consumer  information, 
education and counseling; access to justice; consumer collective actions; and out-of-court 
resolution  of  disputes.  The  Concept  has  still  to  be  adopted.  There  was  no  progress  on 
adopting the legislation on protection of rights of financial services’ consumers. 

5.  

COOPERATION ON JUSTICE, FREEDOM AND SECURITY 

Progress  in  the  area  of  migration  and  asylum  slowed.  There  is  a  Migration  Policy 
Strategy and Action Plan in place, but the State Migration Service (SMS, established in 
2010) was not fully and effectively functional. A major EU project in support of the SMS 
was  finalised  as  part  of  the  Comprehensive  Institution-Building  Programme  (CIB),  and 
relevant preparatory measures were launched. 

The  Second  EU  Report  on  the  implementation  by  Ukraine  of  the  Visa  Liberalisation 
Action  Plan  was  issued  in  February.  Implementation  of  the  EU-Ukraine  Visa 
Facilitation  and  Readmission  Agreements  continued,  and  was  monitored  at  the  Joint 
Committee meeting of July. The amended EU-Ukraine Visa Facilitation Agreement was 
signed 
in  July.  Negotiations  with  several  EU  Member  States  continued  on 
implementation of the Protocols under the Readmission Agreement. 

Regarding asylum, in July Ukraine adopted the Law on Refugees and Persons in Need of 
Subsidiary and Temporary Protection. Work on bylaws and other related legislation was 
launched. Human rights and international organisations reported a few cases of violation 
of the rights of refugees and asylum-seekers, including instances of refoulement, lack of 
protection  of  certain  nationalities,  lack  of  protection  of  unaccompanied  minors, 
widespread  corruption  in  the  asylum  system  and  denial  of  access  for  UNHCR 
representatives to asylum-seekers. 

Ukraine  started  to  implement  the  2011  Integrated  Border  Management  Strategy  and 
Action Plan. A EUR 66-million sector budget support programme was launched to help 
implement the Action Plan. 

Ukraine  adopted  an  Action  Plan  in  January  to  give  effect  to  its  strategy  on  the  fight 
against  organised  crime.  The  Third  Protocol  on  the  Illicit  Manufacturing  and 
Trafficking of Firearms, their Parts, Components and Ammunition remained unsigned. 

The  administrative  reform  process  almost  paralysed  criminal  investigations  of  human 
trafficking  in  2011,  leading  to  a  significantly  lower  number  of  prosecutions  and  of 
identified  victims  in  2012.  Administrative  capacity  on  counter-trafficking  (CT)  was 
weakened, partly because of the reorganisation at the Ministry of Interior. According to 
the  Minister  of  Interior,  combating  trafficking  was  not  among  the  priorities.  Local 
investigation 
counter-trafficking  units  were  subordinated 
departments, and suffered of a high staff turnover and a lack of financial resources. 

local  criminal 

the 

to 

14

 
 
Good progress was achieved on combating money laundering and terrorism financing. 
Ukraine  significantly  enhanced  its  legislation  by  adopting  the  Law  on  Prevention  and 
Counteraction to Legalisation of the Proceeds of Crime, on Terrorist Financing and three 
laws  that  concern  money  laundering  and  the  freezing  of  terrorist  assets.  The  Financial 
Action  Task  Force  (FATF)  removed  Ukraine  from  the  list  of  states  with  shortcomings 
and Ukraine is no longer subject to FATF’s monitoring process. 

Concerning the fight against illegal drugs, Ukraine continued to implement the National 
Strategic  Programme  and  Action  Plan  including  by  incorporating  the  institutional 
activities into the National Service for Drugs Control created in 2011. Also in April, an 
EU Dialogue on Drugs with Azerbaijan, Georgia, the Republic of Moldova and Ukraine 
was  held  in  Brussels.  Cooperation  with  the  European  Monitoring  Centre  for  Drugs  and 
Drug  Addiction  (EMCDDA),  based  on  a  2010  Memorandum  of  Understanding, 
continued.  Ukraine  attended  the  EMCDDA  first  European  Information  Network  on 
Drugs and Drug Addiction (Reitox) week in Lisbon in May. The Ukrainian Medical and 
Monitoring  Centre  on  Drugs  and  Alcohol  (UMMCDA),  reporting  to  the  Ministry  of 
Health, sent its annual report following EMCDDA guidelines at the end of June 2012. 

Ukraine  adopted  amendments  to  the  Data  Protection  Law.  However,  the  law  is  not  in 
full  compliance  with  European  and  international  standards.  Remaining  concerns,  inter 
alia  insufficient  guarantees  on  freedom  of  expression,  and  independence  of  the 
Supervisory Authority, are expected to be addressed by further amendments to the law. 

No progress was made following the initialing of a draft agreement between Ukraine and 
Eurojust  (in  December  2011).  Further  steps  will  depend  on  full  alignment  of  data 
protection legislation with European standards. 

Regarding  judicial  cooperation,  the  Second  Additional  Protocol  to  the  European 
Convention  on  Mutual  Assistance  in  Criminal  Matters  entered  into  force  on  1  January 
2012. 

6. 

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

Ukraine’s 2010 national transport strategy envisaged the development of transport sub-
sector  programmes.  Despite  their  approval  being  a  condition  for  the  disbursement  of 
transport  sector  budget  support  tranches  for  2012,  none  of  the  draft  programmes  was 
approved. Following the approval in May 2011 of a strategy for improving road safety by 
2015,  the  action  plan  was  approved  by  the  Cabinet  of  Ministers  in  March  2012. 
Regarding  maritime 
the  Paris 
Memorandum  of  Understanding  (MoU)  on  Port  State  Control.  In  order  to  address 
deficiencies in maritime safety, Ukraine established a new State Inspection body; further 
efforts in this area are needed. In June, Ukraine approved a Law on Sea Ports. It regulates 
the  administration  and  governance  of  ports,  monitoring  of  shipping  safety,  and  the 
supervision and monitoring of sea port operations. On inland waterways, Ukraine has yet 
to apply EU standards regarding technical requirements for inland waterway vessels. The 

transport,  Ukraine  remains  on 

the  blacklist  of 

15

 
 
negotiations  between  the  EU  and  Ukraine  on  the  Common  Aviation  Area  Agreement 
were resumed in September 2012, following the tentative technical resolution of the issue 
of  aircraft  certification.  The  EU  and  Ukraine  will  keep  their  own  certification  methods 
and work towards a revised MoU on the convergence of certification systems. 

Ukraine  made  progress  in  implementing  some  of  its  Energy  Community  Treaty  (EnCT) 
commitments. In particular, the regulator approved rules on certifying eligible customers 
of natural gas and on third party access to the gas transportation system though they need 
further  work  to  bring  the  rules  fully  into  line  with  the  EU  acquis.  As  Ukraine 
progressively  implements  its  EnCT  commitments,  the  investment  climate  is  improving 
and it has been able to further diversify energy supplies. Since November 2012, Ukraine 
received  gas  from  the  West.  The  EU  is  closely  working  with  Ukraine  in  developing 
additional routes of bidirectional gas supplies. In June, a law on natural monopolies was 
adopted; it is a first step towards incentive-based regulation in the sector. A draft law on the 
principles  of  electricity  market  operation  was  submitted  to  the  Parliament.  Legislation  on 
state regulation in the energy sector and legislation aiming to approximate with EnCT rules 
on energy performance in buildings and the energy services directive are in preparation. 
Ukraine is encouraged to swiftly agree with the EnCT Secretariat on an Action Plan and a 
Roadmap for implementing its EnCT obligations and to make progress on implementation. 
No progress was noted in bringing energy prices to cost recovery levels. This continues to 
be  an  obstacle  to  sustainability  of  the  sector.  The  continued  low  rates  of  energy  bill 
collection (households approximately 85%, heating utilities approximately 40%) remain a 
concern. 

Ukraine  continued  to  implement  the  2009  Joint  Declaration  on  the  modernisation  of 
Ukraine’s gas transit system. It made progress on the unbundling of Naftogaz, with the 
amendment  of  the  pipeline  transport  law  in  April  and  a  regulation  allowing  for  the 
corporatisation  of  two  key  subsidiaries  of  Naftogaz,  Ukrtransgaz  and  Ukrgazproduction. 
This was expected to be completed by the end of 2012. The EU-World Bank Trust Fund on 
restructuring  Naftogaz  was  signed  in  December.  Implementation  of  this  fund  will  be 
important to pave the way for future lending by international financial institutions. 

Ukraine  has  yet  to  finalise  the  revision  of  its  Energy  Strategy  to  2030.  The  strategy 
should  incorporate  Ukraine's  EnCT  commitments  and  reflect  the  International  Energy 
Agency’s  recommendations  from  its  in-depth  review  of  the  country's  energy  sector 
policy, which was co-funded by the EU, as well as the joint comments from the EU, US 
and the World Bank. 

In April, Ukraine announced its plan to implement the Extractive Industries Transparency 
Initiative.  A  multi-stakeholder  group,  created 
in  October,  started  drafting  an 
implementation action plan. The 'Master Plan for the Development of the Ukrainian Coal 
Industry' – the main output from the EU supported coal support programme – is gradually 
being  implemented,  albeit  with  some  delay  due  to  the  lack  of  financial  resources.  In 
April, Ukraine adopted a law on the privatisation of coal mining enterprises. 

In  November,  Ukraine  amended  its  renewable  energy  law.  The  country  needs  to 
vigorously  step  up  its  efforts  on  energy  efficiency  and  the  use  of  renewable  energy 
sources.  It  also  needs  to  adopt,  among  other  things,  its  draft  Energy  Efficiency  Action 

16

 
 
Plan up to 2020 and, in line with Energy Community commitments, the draft law on the 
efficient use of energy resources. 

The  EU’s  energy/energy  efficiency  related  assistance  continued  through  two  sector 
budget  support  programmes  (EUR  157  million),  technical  assistance,  twinning,  the 
Neighbourhood  Investment  Facility  and  a  contribution  to  the  Eastern  Europe  Energy 
Efficiency and Environment Partnership Fund. 

The EU Instrument for Nuclear Safety Cooperation focuses on the consequences of the 
Chernobyl  accident  (shelter  fund,  nuclear  safety  account)  and  on  the  management  of 
radioactive  waste  and  safety  improvements  to  currently  operational  nuclear  power 
plants.  Energoatom  designed  an  "upgrade  package"  for  its  nuclear  power  plants  to  the 
value  of  EUR  1.2  billion.  The  EU  (EURATOM)  and  EBRD  are  considering  a  loan  to 
help implement this package. In September 2012, Parliament approved the construction 
of  two  new  1000  MW  nuclear  units  at  the  Khmelniskiy  site  without  waiting  for  the 
results of the impact assessment required under the Espoo Convention. 

Regarding  climate  change,  in  June  the  Government  launched  a  national  platform  on 
green economy/sustainable development under the auspices of the Ministry of Economy. 
The  suspension  imposed  on  Ukraine  from  trading  emissions  units  under  the  Kyoto 
Protocol  of  the  United  Nations  Framework  Convention  on  Climate  Change  (UNFCCC) 
was lifted. The EBRD will provide expertise to Ukraine for the possible development of a 
national  greenhouse  gas  emissions  trading  system.  Ukraine  participated  in  preparations 
for  the  forthcoming  regional  EU  Clima  East  project  (EUR  18  million)  that  will  be 
implemented  in  the  period  2013-2016.  Ukraine  is  encouraged  to  build  capacity  and 
engage in the new carbon market mechanism to be developed following the 17th and 18th 
sessions of the UNFCCC Conference of the Parties. Ukraine is also encouraged to make 
additional efforts to fully implement the Cancun and Durban agreements and in particular 
devise a low-carbon development strategy. The country is also encouraged to ratify the 
Doha agreement on the second commitment period of the Kyoto Protocol. 

Work  continued  on  implementing  the  National  Environmental  Strategy  (NES)  and 
Action  Plan.  In  December,  the  Ministry  of  Ecology  and  Natural  Resources  published  a 
report on the civil society assessment of NES implementation in 2011. In May, Ukraine 
adopted  a  water  management  programme  for  the  period  up  to  2021.  The  Minister  of 
Environment  approved  an  approximation  plan  for  the  environmental  acquis.  Past 
pollution  from  industrial  dumps  remained  a  concern.  In  April,  the  Ministry  of  Ecology 
and Natural Resources organised a forum, ’Environment for Ukraine‘, to raise awareness 
of  environment  issues.  In  May,  Ukraine  submitted  an  implementation  report  to  the 
Secretariat  of  the  Aarhus  Convention,  following  the  decision  by  the  Meeting  of  the 
Parties  (MOP)  to  the  Convention  in  July  2011  to  issue  a  caution  to  Ukraine  for  non-
compliance with its obligations under the Convention. The report indicates that a law is 
under preparation but, based on the evaluation process established by the MOP, gives no 
evidence of full implementation of the measures requested by the 2011 MOP. Following 
the  caution  for  non-compliance  with  the  Espoo  Convention  in  May  2011,  Ukraine 
informed  the  Espoo  Convention  Compliance  Committee  in  June  that  the  relevant  draft 
law on environmental impact assessment in a trans-boundary context had been submitted 

17

 
 
to the Parliament. However, the draft law did not pass its first reading before Parliament 
was dissolved following the elections in October. Ukraine is encouraged to strengthen its 
environmental  legislation  and  administrative  capacity,  to  apply  develop  procedures  for 
environmental  impact  assessment  consistently  and  to  pay  particular  attention  to  public 
participation. The EU provides environment sector budget support of EUR 35 million. 

In November 2012, Ukraine signed the Charter of the Regional Environmental Centre 
for Central and Eastern Europe (REC-CEE) enabling a branch of REC-CEE to be opened 
in Ukraine. 

In  the  field  of  civil  protection,  Ukraine  continued  to  participate  in  the  EaP  flagship 
programme on prevention, preparedness and response to natural and man-made disasters 
(PPRD East). As a part of the programme Ukraine is contributing to the development of 
Electronic Regional Risk Atlas. Ukraine is encouraged to take advantage of the guiding 
document on Risk Assessment Policy for the EaP region produced under the PPRD East 
programme. In December 2012 the Ministry of Emergencies became an agency under the 
Ministry of Defence. 

Ukraine is among the 168 governments that adopted the "Hyogo Framework for Action: 
Building the Resilience of Nations and Communities to Disasters", but work on Disaster 
Risk Reduction is still only at the beginning and it will require considerable further effort 
to develop capacities and processes. 

In terms of the information society, Ukraine defined the competencies of the regulatory 
authority, eliminated duplications of price-setting controls and extended the powers of the 
regulator  to  identify  telecommunications  operators  with  significant  market  power.  The 
regulator  established  unified  requirements  for  the  routing  of  voice  telephony  traffic  by 
telecommunications  operators  in  public  telecommunications  networks  (in  force  since 
July). 

Despite  Ukraine’s  ratification  of  the  European  Convention  on  Transfrontier  Television 
(ECTT)  in  2008,  only  minor  changes  has  been  made  to  legislation  on  the  audiovisual 
media  up  to  2012.  This  was  partially  caused  by  the  standstill  in  the  revision  of  the 
Convention. Two draft laws on setting up the public broadcasting system were tabled in 
Parliament  in  mid-December  2012.  However,  neither  of  these  drafts  meets  European 
standards and both need substantial improvement. 

In  the  field  of  research  and  innovation,  Ukraine's  participation  in  the  Seventh 
Framework Programme for Research and Technological Development (FP7) continued at 
a  good  level.  Ukraine  was  the  seventh  most  active  international  partner  country  in  the 
programme. There are 125 public and private Ukrainian institutions participating in 123 
projects  under  FP7.  The  total  EU  contribution  to  these  projects  amounts  to  EUR  390 
million, of which EUR 18 million went to the Ukrainian partners. They have been most 
active  in  collaborative  research  projects  in  the  fields  of  the  environment,  health, 
agriculture and international cooperation activities. 

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7.  

PEOPLE-TO-PEOPLE CONTACTS, EDUCATION AND HEALTH 

Education reform progressed in Ukraine, notably in the area of higher education, which 
moved  decisively  towards  the  implementation of  the  Bologna  principles.  Ukraine  made 
progress  in  areas  like  organising  the  first  two  cycles  of  tertiary  education,  and 
implementing  quality  assurance  measures  and  the  European  Credit  Transfer  and 
Accumulation  System  (ECTS).  Further  efforts  (methodical  support  and  legislative 
amendments) are needed in areas such as the reform of the third cycle, the application of 
learning outcomes, and the development of internal and external mechanisms for quality 
assurance. In this context, the government proposed recasting the existing legislation on 
higher  education.  The  proposed  amendments  include  the  key  points  under  the  Bologna 
Process:  introducing  a  three-cycle  system;  granting  greater  autonomy  to  universities; 
granting  more  rights  to  students’  self-governance;  supporting  companies  which  employ 
graduates; improving the legal basis for independent external assessments. In December 
the Government decided to use a draft law prepared by a working group headed by the 
Rector of the Kyiv Polytechnic University as a basis for further work by the Ministry of 
Finance and the Ministry of Education, Science, Youth and Sports. 

With regard to vocational education and training, Ukraine adopted an inter-ministerial 
decree  in  April  to  implement  the  National  Qualification  Framework  (NQF).  An  inter-
agency working group began drafting an NQF implementation strategy. The involvement 
of  the  social  partners  and  particularly  employers  in  education  and  training  policy 
development  was  endorsed  through  two  laws  adopted  in  January  and  June  respectively 
(the Law on Professional Development of Employees, and the new Law on Employers’ 
Organisations). In spite of these positive developments and growing awareness, Ukraine 
has  only  limited  technical  competence  and  capacity  to  reform  its  vocational  education 
and training with a view to addressing the mismatch between supply and demand of skills 
on the labour market. The upcoming EU-funded Twinning project will assist the Ministry 
of Education and Science in this field. 

Ukraine continued to benefit substantially from its active participation in Tempus, with 
the selection of 23 new projects. There is a steady increase in Ukrainian participation and 
a clear willingness on the part of Ukrainian higher education institutions to act as project 
coordinators.  The  Tempus  programme  has  done  a  lot  to  internationalise  Ukrainian 
universities,  help  to  establish  long-term  partnerships  with  European  counterparts, 
contribute  to  new  initiatives  and  exchange  programmes,  promoted  competitiveness  in 
higher education and introduce a culture of quality assurance, establishing new curricula 
and  introducing  new  forms  of  governance  and  evaluation.  Ukraine  continued  its  active 
participation in the Erasmus Mundus programme, with the award of 52 scholarships for 
Erasmus Mundus joint Masters programmes, two scholarships for Erasmus Mundus Joint 
Doctoral programmes, and a further 391 grants for short-term mobility organized within a 
university  consortium.  Five  new  Ukrainian  projects  were  selected  under  the  Jean 
Monnet  Programme  in  2012.  Among  the  Eastern  Partnership  (EaP)  countries,  Ukraine 
ranks first in terms of the number of institutions (63 institutes) and individual researchers 
in  Marie  Curie  Actions  supporting 
(107 
researchers’ training, mobility and career development. 

individual  researchers)  participating 

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Ukrainian young people and youth organisations continued to benefit from the Youth in 
Action programme. For 2012 and 2013, the ENPI is providing additional funding for the 
Youth in Action Programme to increase cooperation among young people, youth workers 
and  youth  organisations  from  the  European  Union  and  the  Eastern  Partnership  (EaP) 
countries.  The  setting  up  of  the  EaP  Youth  Window  within  the  Youth  in  Action 
Programme enables significantly more young Ukrainians to participate in the programme. 
In  2012,  1976  young  Ukrainians  and  Ukrainian  youth  workers  were  involved  in  512 
projects. 

Ukraine  was  fully  involved  in  the  EaP  Culture  Programme.  Of  the  fifteen  regional 
projects  selected,  eleven  involve  Ukrainian  partners  and  four  projects  are  led  by  a 
Ukrainian partner. The priority field for the period 2012-2013  is to get  more Ukrainian 
cultural  players  involved  in  cultural  cooperation  programmes,  with  special  reference  to 
launching the new Creative Europe programme as of 2014. 

In  the  area  of  health,  Ukraine  continued  to  implement  its  reform  concept,  inter  alia, 
through  pilot  decentralisation  projects.  The  EU  and  Ukraine  strengthened  health 
cooperation. Following a risk assessment by the European Centre for Disease prevention 
and Control (ECDC) in the wake of the outbreak, in early 2012, of measles in Western 
Ukraine,  the  EU  provided  health  security  support  during  the  EURO-2012  football 
championship. In the run-up to this tournament, Ukraine adopted, with TAIEX support, 
the  law  on  the  emergency  system  operation  under  “112”  calls.  In  March  the  Ukrainian 
President signed a law banning any advertising, promotion or sponsorship by the tobacco 
industry. In October, Ukraine adopted a programme to fight non-communicable diseases. 
To fight maternal and infant mortality, Ukraine started implementation of its "New life" 
programme  aiming  to  establish,  by  2014,  twenty  seven  prenatal  centres  throughout  the 
country.  It  continued  to  address  the  problem  of  HIV/AIDS  and  tuberculosis.  In  2012, 
despite being invited, Ukraine did not participate in the Commission’s HIV/AIDS think 
tank. Through the thematic programme "Investing in people", the EU supports Ukrainian 
civil  society  organisations  in  developing  a  network  of  legal  support  in  the  field  of 
HIV/AIDS.  A  programme  to  combat  tuberculosis  is  before  Parliament  for  adoption.  As 
major contributor to the Global Fund to Fight AIDS, Tuberculosis and Malaria, the EU 
supports Ukraine through this fund. 

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