Defend the achievements, keep the course. Experts discussed economic, environmental and energy reforms
By: Reanimation Package Of Reforms Coalition
Tags: Reform, Economic Development, Ukraine, Energy, Environmental Issues

Economic reforms

Dmytro Lyvch, Expert at EasyBusiness, said that the government has now begun developing a National Economic Strategy 2020–2030, which includes the main stages: restoring confidence, competition for capital, competition for markets and competition for human development.

According to the speaker, now is the time to implement the reforms that have been discussed for a long time. Developing an early plan is a priority. It includes market reforms, improving the investment climate, improving the conditions for international trade, the rule of law and a number of market-based sectoral initiatives. The adoption of a comprehensive plan is expected in the first quarter of 2021 as an important step.

“Ukraine is now in a very interesting situation. Last year, we attracted 5.8 billion in foreign direct investment. Instead, about 15 billion remittances abroad. This situation is completely inadequate for an economy that wants to develop. The fundamental idea for the growth of Ukraine’s economy should be to attract foreign and domestic investment, as well as to stimulate Ukrainian exports. ” The most important issue on the agenda is the renewal of the Association Agreement with the EU.

Hlib Vyshlinsky, Executive Director, Centre for Economic Strategy, noted that the government did not take advantage of the peak of reforms in the fall of 2019, when “a few steps left to the wave of direct investment.” Before the corona crisis, the reforms were over.

The expert said that despite the expected decline in GDP, the future for Ukraine does not look particularly happy.

“This year, instead of the planned three tranches from the IMF, we received one. This limited the government’s ability to both fight the epidemic and stimulate the economy.

The corrupt judiciary has not only topped the list of barriers for foreign investors, but has also been able to undermine macroeconomic stability by a ruling by the Constitutional Court.

Economic reforms also came to a halt. No privatization has taken place, the oligarchs are regaining control of state-owned enterprises, and independent members of supervisory boards have been deliberately pushed back. The unmotivated change in the NBU’s leadership has also created additional problems for the IMF, and this remains a risk to stability. Instead of standing guard over financial stability, the Ministry of Finance has submitted a draft budget for 2021 with unrealistic figures.

The country cannot develop and talk about strategy when we discuss every year whether we will default. To remove this issue, we at least need to implement the signed program with the IMF and address issues that stand in the way. “

The speaker summarized: macrostability, investment attraction, human capital development — guidelines for development.

Hlib Vyshlinsky added that according to the results of the polls, ideas about economic processes and systemic reforms in society are superficial and contradict each other. Ukrainians cannot form a logical and consistent opinion about privatization, the principle of price regulation, etc., because not everyone has a touch in the field, unlike in the fields of education or health care. Civil society can also play an important role in forming sound ideas about the economy, the expert said.

Oleksandr Romanishyn, Deputy Minister of Economic Development, Trade and Agriculture of Ukraine, emphasized that the new economic strategy is becoming measurable and includes KPIs — this has not always been enough.

According to him, now the task is to radically change the emphasis from the benefits of exporting raw materials and industry with high added value to the export of products with high technological components. There are all prerequisites for this.

Another vector is to show foreign companies the advantages of Ukraine for relocation, namely industrial parks, a favorable legal field, talents and the development of the IT industry. The speaker noted that the reforms are being made in small steps, and despite the fact that many resources are allocated for firefighting, certain vectors must remain unchanged.

He added that currently Ukrainian producers need protection in international markets and support in the regions.

Ihor Burakovsky, Head of the Board, The Institute for Economic Research and Policy Consulting, Co-Chairman of the RPR Coalition Board, emphasized the key points:

Coronavirus and related challenges do not need to be aligned with traditional economic policies. There is a suspension of economic transformation. In this situation, the government’s mission is to protect gains (such as the public procurement system) and prevent reforms from rolling back. “After the coronavirus, we forget about strategic planning of public finances.” Much has been done to move to medium-term planning, but so far it does not exist. Little attention is paid to the interaction of the center with the regions in view of decentralization. Dynamism in cooperation with international partners is being lost.

“Today there is a lack of semi-academic awareness of what is happening to us and how we will move forward,” — summed up Ihor Burakovsky.

The speaker stressed the important elements of the Strategy that is being prepared: the country’s economic audit, visions and vectors of economic development. He noted that the main vectors for the development of the sphere are macroeconomic stabilization, institutional development, and increasing the government’s independence.

Dovydas Vitkauskas, Team Leader of EU-funded Project “Pravo-Justice”, presented key findings on the state of the public and private sectors. He stressed that many factors give a “head start” to state-owned enterprises compared to private ones. He emphasized, among other things, the problems of a number of legislative and judicial moratoriums, transparency, and corporate debt. The speaker noted that the notion of bankruptcy should remove the stigma that is rooted in Ukrainian society and business environment.

“Bankruptcy does not mean that the company is being liquidated. It is an attempt to conduct an audit, diagnose the patient and treat. This treatment is possible. For this, restructuring or reorganization as part of the institution of bankruptcy is very important. Unfortunately, except in rare cases like Ukroboronprom, this institution does not apply to state-owned enterprises and the private sector. Restructuring and reorganization do not currently have the scope they need to be if we want Ukraine to follow European best practices. ”

The speaker also noted that the moratorium should be seen not only as a political problem, but also as a legal one. They can also be illegal in terms of international agreements.

Key messages of Natalia Nemyliwska, Director of the Ukraine World Congress Economic Prosperity and Investment Committee:

The Ukrainian diaspora numbers 20 million; it is a powerful partner and resource for Ukraine. The diaspora is emotionally attached to Ukraine and wants it to develop. The diaspora should be involved more and systematically. The diaspora should not be seen as just investors: it is a very narrow version of the joint potential and cooperation. The diaspora can provide communication; it is a network of people with contacts, opportunities for influence. It can also provide advice and evaluation of external reforms. Most professionals are communication specialists, so they can convey messages to the audience that are beneficial to Ukraine and on its behalf.

Oleksii Dorogan, CEO at Better Regulation Delivery Office (BRDO), noted that the lack of a systemic economic policy that has been implemented for several years is worse than the best economic policy, which changes every six months. The common challenge is the transition from strategy to implementation, which was previously unsuccessful. The speaker also drew attention to the problems of reforms in construction, transport and agriculture.

The moderator of the discussion, Pavlo Kukhta, First Deputy Minister of Economic Development, Trade and Agriculture (2019–2020) , finally asked Oleksandr Romanishyn to name the top 5 reforms for 2021. The speaker identified areas for reducing the influence and presence of the state in business, the development of deregulation, attention to innovative entrepreneurship, and digitalization.

Energy sector

Moderator Tetyana Boiko, coordinator of housing, communal and energy programs of the Civil Network OPORA, suggested that the speakers identify the leading priorities in the development of the sector for 2021. Including:

Development of competitive markets; Energy efficiency; Green course, decarbonization of Ukrainian energy; Reaction to crisis phenomena; Stabilization of the electricity market; Integration with international markets; Transformation of coal regions; Strengthening the institutional capacity of authorities and their interaction with each other; Digitalization and transparency (data discovery); Improving communication between stakeholders.

Oleksiy Orzhel, Member of the Board at Better Regulation Delivery Office (BRDO), Minister of Energy and Environmental Protection (2019–2020), spoke about the implemented liberalization of the retail gas market. In particular, he stressed the possible abuses, and also called it a shortcoming that citizens do not fully understand the new specifics of market competitiveness. The speaker summed up that Ukraine has formally complied with the requirements of the IMF and it is very correct that “we are converting the consumer market to a competitive basis, but not much homework has been done.”

At the initial stage of market formation, many representatives will overestimate their capabilities and go bankrupt, so the state must carefully monitor the stability of suppliers.

The heat issue is painful, said Oleksiy Orzhel. Central heating systems are in poor condition (40% of losses). In the absence of a discount and a reduction in gas prices, it may be possible to accumulate funds for infrastructure upgrades.

Andrij Herus, Member of Parliament, Head of the Parliament Committee on Energy, Housing and Utilities Services, noted that the Ukrainian electricity market has changed very similarly to European ones. However, tariffs were higher in Ukraine. This is due to production capacity and the need to pay debts to producers. The increase in tariffs from December 1 has a similar reason. Discussions are currently underway to change the work of producers at the green tariff to reduce their dependence on the guaranteed buyer and allow them to work independently in the market, receive funds from electricity sales, and the difference would be compensated by the guaranteed buyer.

Olha Buslavets, First Deputy Minister of Energy of Ukraine, explained that markets are needed to move away from manual process control. That all participants could optimize the expenses, and the consumer was informed, conscious in the actions and received better service in the conditions of competition for it.

The speaker called the unresolved issues before its creation a problematic market issue — accumulated debts and a large amount of subsidies (about UAH 50 billion).

Among the positive changes — the introduction of Energoatom on the market of bilateral agreements, the law on support of green energy was adopted.

Initiatives in development — prepared simplified changes to the tender for new generating capacity, planned discussion of quotas to support green generation to introduce green auctions from the beginning of 2021, as well as the concept of reforming the coal industry.

Viktoriia Hryb, Member of Parliament, Member of the Parliament Committee on Energy, Housing and Utilities Services, noted that the main goal of energy reform is to make energy affordable. In order to ensure that prices do not exceed European prices, reforms should be systematically implemented: merge with ENTSO-E (European Network of Transmission System Operators for Electricity), certify the transmission system operator, and introduce energy distribution auctions. The speaker added that it is important for the central authorities to reach a consensus in the policy of the sphere in order to stop speculation in the markets.

Yuliia Kyrychenko, Co-Chairwoman of the RPR Coalition Board, noted the threat of renewable energy reform — the Constitutional Court’s opening of proceedings on a large number of provisions of the law “On Alternative Energy Sources and Electricity Market”, mostly on the green tariff. According to experts, there are no grounds to declare the provisions of the law unconstitutional.

Olena Pavlenko, President of the DiXi Group, noted that civil society can inform consumers more about the market and its participants only in conditions of access to open data. There is also the problem of the possibility of placing social advertising on rating TV channels, through which you can disseminate information most effectively.

Regarding the proceedings of the Constitutional Court, the speaker noted that investors will not have confidence in Ukraine if it regulates economic and business issues through political instruments.

Speakers also noted that consumers can reduce their bills if they consume less through energy efficiency measures. They focused on the problem of the profile Fund, the need to adopt a law on energy efficiency.

Environmental Protection

Moderator Kostyantyn Krynytsky, Head of the Energy Department, Center for Environmental Initiatives Ecoaction, noted that the issue of environmental protection is not given due attention, and it directly affects the health of the population.

Yuliia Ovchynnykova, Member of Parliament, Member of the Parliament Committee on Environmental Policy and Nature Management, assessed the work of the committee at 3/5, as the first steps have been taken and the results have yet to be achieved.

Among the achievements — the adopted law on forest inventory, adopted in the first reading bills “On waste management”, “On protection of animals from cruel treatment”, preparation of legislation in the direction of the bill “On the territory of the Emerald Network”, steps to resolve legislation objects of the nature reserve fund.

The speaker stressed that the committee understands the need for horizontal and sectoral reforms. As for horizontal steps, the draft law “On Environmental Control” has been developed, but is being re-discussed in the committee. It is considered one of the priorities: the basis for the next steps. Initiatives within international commitments are also important. In particular, the subcommittee initiated the creation of the Biodiversity Conservation Strategy (approved by the EU) and established a working group. 35% of European biodiversity is in Ukraine (compared to 5.7% of the territory), said Yuliia Ovchynnykova

The draft of the National Forest Protection Strategy has been developed on the platform of the Ministry of Ecology.

For the first time in the history of the parliament, an inter-factional parliamentary association “Humane Country” was established to protect animals. It is important to support initiatives to ban the euthanasia of homeless animals, protection from cruelty, the ban on fur, and the ban on cuttings.

Regarding the resonance around the bill on the registration and identification of animals, the speaker stressed that this is an important reform that European countries have undergone at different times. Communication and public information are currently being carried out.

Roman Shahmatenko,Deputy Minister of Environmental Protection and Natural Resources of Ukraine, said that the mentioned bill on environmental control is the main priority. This is not the first year of dialogue. Its most anticipated innovation is the renewal of the system of liability for environmental violations.

Other important steps are the registration of the draft law “On Prevention, Reduction and Control of Industrial Pollution”, the adopted law “On Principles of Monitoring, Reporting and Verification of Greenhouse Gas Emissions”, and the vectors — irrigation reform, digitalization and open data.

Osnat Lubrani, UN Resident Coordinator and Humanitarian Coordinator in Ukraine, stressed the importance of action on climate change, but should pay attention to environmental recovery and flooding.

The speaker provided important recommendations from a global point of view, including investing more in green jobs, providing incentives for energy efficiency, involving ministries other than the relevant ones, as well as not forgetting about the most vulnerable groups.

According to Hanna Bashnyak, Head of the Supervision and Control Sector at Better Regulation Delivery Office (BRDO), the analytical brief does not sufficiently reflect the positive changes made in the previous year:

the Subsoil User Investment Atlas was created;

created online data-room geological information;

the fight against “dormant” licenses — permits that have not been used for several years — has begun;

work on updating the subsoil code;

electronic accounting of wood by forest users has been introduced;

changing the approach to the sale of wood.

The speaker noted the existence of major problems in the “fishing” industry, including the fact that aquaculture rates are three times lower than those of industrial catches. “The positive thing is that the newly created ministry understands a number of problems and is ready to solve them with the help of the code on responsible fisheries. A working group is currently being set up, and all public organizations, citizens and institutions can join it, ”Hanna Bashnyak summed up.

In terms of digitalization of the sphere, the Ministry supported and expanded the joint development — Ecoplatform. She called this vector the most important, because open and accessible data contribute to the transparency, competitiveness and efficiency of natural resources.

The speakers also discussed the importance of the Green deal and cooperation in this direction with all stakeholders, including in the field of energy. Ukraine’s participation in the green European course is currently being calculated. The results are announced for February-March 2021.

Read the sectoral briefs on reforms prepared for Ukraine Reform Conference 2020/2021

The Forum is organized by the RPR Coalition in partnership with the Embassy of the Republic of Lithuania. The Forum is supported by the Ministry of Foreign Affairs of the Republic of Lithuania, the European Union, the EU Project Pravo-Justice, «Civil Society for Enhanced Democracy and Human Rights in Ukraine» project implemented by UNDP Ukraine under financial support of the Ministry of Foreign Affairs of Denmark, and the Embassy of Canada in Ukraine. The Forum is organized within the framework of the project “Core Support of the Reanimation Package of Reforms Coalition” carried out by the RPR Coalition and is made possible by the generous support of the American people through The United States Agency for International Development (USAID) within the Ukraine Civil Society Sectoral Support Activity, implemented by The Initiative Center to Support Social Action “Ednannia” in partnership with the Ukrainian Center for Independent Political Research and the Centre for Democracy and Rule of Law.