5 steps Ukraine is taking to improve its economy

Ukraine faces unprecedented threats to our territorial integrity and to the very existence of our nation. Ukraine willingly gave up the 3^rd largest arsenal of nuclear weapons in the 1990s and since Russian troops first appeared on the Crimean peninsula, we have been living in a world in which national security tops everyone’s agenda. It is in this context that we have to succeed on the economic front, reform our institutions, root out corruption, and meet the expectations of the Ukrainian people.

When I joined President Poroshenko’s team in July 2014, many pundits described our economy as “pre-default.”  Doomsayers continue to grab headlines, but are their assessments fair? The current situation is dire, but given the circumstances, our economy has shown remarkable resilience.  As we continue on the path of reform, what gives me comfort is not just the progress we’ve made, which goes under-reported, but also a society-wide commitment to change.

Our Revolution of Dignity has given birth to new grassroots leadership.  Ukraine’s civil society came to the fore attracting progressive and energetic young people and has been setting the reform agenda. Momentum was increased by free and fair Presidential and Parliamentary (Verkhovna Rada) elections. Ukrainian voters, for the first time in our recent history, have given a clear mandate to the governing coalition to take the country towards our European future.

Participatory democracy is Europe’s hallmark, and with the EU-Ukraine Association Agreement now signed, we have committed to a framework of checks and balances. The Ukrainian people and the international community expect a fundamental shift in the way the country is governed.  And the litmus test for many will be our success in defeating corruption.  At the same time, implementing our ambitious reform agenda requires cooperation across all branches of government and the Central Bank.

Our approach, exemplified in the creation of a National Reforms Council (NRC), is qualitatively different from past efforts. We have committed to full transparency and inclusion — the Council is led by the President but includes all Cabinet Ministers, the parliamentary leadership, and representatives of civil society. The EU delegation to Ukraine is supporting a Ukraine Reforms Monitoring Framework, helping the government communicate progress to citizens and the international community.

A progress report has recently been published by the Cabinet of Ministers on the implementation of EU-Ukraine Association Agreement.  Financial support from Ukraine’s friends and partners is truly valued, but what we also need is their confidence in Ukraine’s ability to succeed. Ransom payments to keep our economy afloat would be counterproductive; co-investment in Ukraine`s future is what will deliver real results in the long run.

One of the most critical issues on our agenda is decentralization: this year Parliament will vote to give local communities real budgets and local self-governance, modeled after Poland’s successful 1990’s decentralization program. And we continue to build on the key achievements thus far:

1. The EU-Ukraine Association Agreement, with legislative implications across all sectors of the economy.
2. The creation of an independent Anti-Corruption Bureau. Its Director is to be selected by transparent procedures, based on global best practice.
3. Restructuring of the Ministry of Interior to separate the political branch from policing functions and to bring Ukrainian policing practices and procedures closer to western, democratic standards.
4. Making it much harder for judges to act corruptly, whilst protecting judges’ independence from politicians through the “Law on Ensuring the Right to Fair Trial”
5. Building a suitable environment for foreign investors, particularly through the creation of a business ombudsman supported by the EBRD to defend the interests of business, and a national investment council to channel feedback on the investment climate.

In March, Ukraine agreed to further revise its “austerity” budget for 2015. We have reduced funding for the state oil & gas company (Naftogaz) shifting towards more transparency in our energy market, and we have streamlined some antiquated social programs in line with IMF loan conditions. This together with other legislative changes unlocked the IMF’s extended fund facility and created fiscal space for continued reform.

Going forward, the demand for accountability from the people of Ukraine and our international partners will maintain the impetus to transformative change. Drawing on our history, the Ukrainian people are guided by the values we share with Western democracies. And I’m convinced, now more than ever, that we will overcome the immense challenges we face and that Ukraine will emerge as a net contributor to peace and prosperity in the region and the world.

Author: Dmytro Shymkiv, Deputy Head, Administration of the President, Ukraine and Presidential envoy on the Economic Reform efforts

Image: People hold a giant Ukrainian flag as part of celebrations to mark Constitution Day on the Potemkin Stairs in Odessa June 28, 2014. REUTERS/ Yevgeny Volokin