Reforms in Ukraine: Progress and Priorities - International
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International Ukraine Reform Reforms in Ukraine: High-Level Meeting Progress20th and Priorities February 2018, Kyiv J u n e 2 0 1 8 International Ukraine Reform High-Level Meeting
02 Foreword by the Prime Minister Dear Colleagues, We also continue implementing the ongoing reform There are significant positive results of our reforms, of decentralization. To build an effective system which allowed us to secure macroeconomic Today Ukraine is undergoing a period of of governance we have paid significant attention stability in the country and create conditions for transformation, which, by its scale and complexity, to public service reform, which will enhance the further economic growth. At the same time, we is unprecedented. We are not merely implementing management and administrative abilities of the have a clear understanding we cannot stop now – a number of reforms in different spheres, we are state apparatus and will give impetus to new the country is in need of accelerated economic essentially building a new Ukrainian modern state. And standards of state policy strategic planning. growth and we have everything to make it happen. we do this facing Russia’s ongoing hybrid aggression. The improvement of the business and investment With this in mind we’ve set our priorities for Despite these challenges, we’ve started systemic climate in Ukraine remains one of our Government’s 2018: privatization and good governance of and institutional reforms never before seen in top priorities. To this end, we prolonged state-owned enterprises, improvement of the our history of independence. We’ve started a full deregulation measures which we consider not only business climate and attracting investment, buildup repair of our state with the main objectives being as a means of business stimulation and economic and modernization of infrastructure, reform of economic growth, good governance, human capital growth, but also as an effective anti-corruption tool. energy sector and energy-efficiency reform development, rule of law and fighting corruption, implementation, reform of the agricultural sector as well as the security and safety of the country. A milestone event for the future of Ukraine was and strengthening farm households, implementation These objectives are outlined in Medium-Term the adoption by the Ukrainian Parliament the High of innovative and new technologies, rule of law and Government Priority Action Plan to 2020, prepared Anti-Corruption Court law, the establishment of fight against corruption, as well as the continuation and adopted by our Government last year. which marks the final stage of anti-corruption of reforms launched in 2017. organization development in Ukraine. I am While presenting last summer at the Ukraine convinced this step, along with a number of I am convinced the key task today is to secure Reform Conference in London, I outlined 5 priority institutional changes already implemented by us, will consistency and irreversibility of these changes. reforms that we would start implementing – allow to overcome this destructive phenomenon. The continuity of reforms and protection of the pension, education, healthcare, privatization national interests of Ukraine by military and non- and reform of agricultural sector. The Government firmly and consistently military means will allow us to build a successful implements state policies to align further and Ukrainian state, with a decent place in the European Since then, with support from the Ukrainian deepen cooperation with the European Union. The family and international community. Parliament, we’ve approved the legislative basis for EU has become a key partner for Ukraine: DCFTA 4 of these 5 reforms, and we have now prepared increased EU member states share in Ukrainian the basis for the fifth. Currently we are actively foreign goods trade to 41.3%. In 2017, more than implementing these reforms. 14,000 Ukrainian companies were exporting to EU.
04 Table of Contents 02 06 10 Foreword Medium-Term Government Reform Priorities by the Prime Minister Priority Action Plan to 2020 and Progress is a Roadmap for Reforms and Changes 6 Key Reform Priorities Progress at a Glance������������ 11 Pension Reform�������������������������������������������������������������������������� 14 Education Reform��������������������������������������������������������������������� 16 Healthcare Reform�������������������������������������������������������������������20 Public Administration Reform��������������������������������������������22 Privatization and State-Owned Enterprises (SOE) Reform��������������������������������������������������� 26 Agriculture Sector Reform���������������������������������������������������28
05 32 56 64 66 Reform Priorities Reforms Ukraine Now Reform and Plans for 2018-2019 Partnership Brand Architecture Reform Priorities for 2018-2019 at a Glance��������������33 Implementing the EU-Ukraine Privatization and State-Owned Association Agreement���������������������������������������������������������57 Enterprises (SOE) Reform��������������������������������������������������� 34 Ukraine Reform Conference����������������������������������������������� 62 Business Climate Improvement�����������������������������������������35 Logistics and Infrastructure Development������������������38 Energy Reform��������������������������������������������������������������������������� 39 Agriculture Sector Reform�������������������������������������������������� 42 Innovation Development������������������������������������������������������44 Anti-corruption and Rule of Law�������������������������������������46 Public Administration Reform������������������������������������������� 47 List of 35 Priority Bills Focused on Economic Growth����������������������������������������� 48 Continuing the Reforms Initiated in 2017�������������������50
06 Medium-Term Government Priority Action Plan to 2020 is a Roadmap for Reforms and Changes ABOUT THE PLAN The introduction of medium-term the capacity of responsible bodies, || achievability (i. e. clearly framed budget planning as an integrated and improve on synchronization and implementation phases and Ukraine keeps moving towards part of government strategic coordination of the reform activities of resources); deep structural reforms and by planning ensures a clear connection the Government. || simple and transparent evaluation mid‑2018, this activity has produced between financing of policies, their of achievements (against clearly positive economic and social implementation and their results. In its annual priority action plans, the defined measurement criteria); results. Government sets out specific actions, || coordinated development Ukraine has benefited from this those responsible, deadlines and (through inter-related reforms Early 2017 saw the Medium-Term system of strategic planning, performance indicators in more detail. in progress and strategic policy Government Priority Action Plan to monitoring and assessment, including documents). 2020, a document discussed among the framework used to evaluate The principal framework used a wide range of experts, with public the performance of ministries and in drafting the Medium-Term The Government is focusing on and international partners. other government departments, in Government Priority Action Plan to improving citizen’s lives and implementing their planned policies. 2020 and Annual Priority Action achieving the following five The Medium-Term Priority Action Plans for 2017–2018 includes: strategic objectives: Plan defines the main objectives New priority reforms continue with this for the Government’s activity for coordinated approach, as they result || systemic approach (i. e. choosing 1. economic growth 2017–2020 and forms the basis for in more effective cross-ministerial priorities with greatest impact 2. effective governance budget planning, the Government’s collaboration towards reforms. on the country’s socio-economic 3. human capital development annual operational planning, Implementation was deployed in the development, drivers for change 4. rule of law and fight against strategic planning at the ministerial Medium-Term Government Priority across other spheres of activity); corruption level, donor assistance targeting Action Plan to 2020 to accelerate || feasibility (i. e. setting viable 5. security and defense and various other activities. overall reform progress, increase objectives);
07 PURPOSES STRATEGIC GOALS AND KEY ACTIONS IMPLEMENTATION OF THE MEDIUM-TERM ACTION PLAN: || Execution through annual Action Plans of the Identification and adoption of Government key objectives and priorities for || Action Plan for 2018 includes the Government for 2017–2020 Economic Growth Effective Governance 583 detailed actions || Policy coherence Maintaining macroeconomic stability, agriculture Public administration (615 in 2017) || Strategic view sector reform, privatization, deregulation, energy reform, public finance || Daily monitoring of the Plan is || Long-term planning reform, tax and customs reform, increasing management reform, done online by the Secretariat exports and attracting investment decentralization of the Cabinet of Ministers Foundation for mid-term budget of Ukraine and the Reforms and ministerial plans Delivery Office of the Cabinet || 2018-2020 budget resolution of Ministers of Ukraine. || Annual budgets || Effective use of limited resources Human Capital Anti-corruption Defense and Security Development and Rule of Law Protection of Coordination of resources Development of Effective anti-corruption sovereignty and and donor support people through better policies and institutions, territorial integrity, || Priorities education, healthcare, protection of property securing a safe || Assistance social security rights, equal access environment || Commitments and culture to justice for citizens
THE GOVERNMENT’S MEDIUM-TERM PRIORITY ACTION PLAN TO 2020 IS A ROADMAP FOR REFORMS AND CHANGES 08 MEDIUM-TERM BUDGET PLANNING ALIGNMENT OF BUDGET PLANNING AND THE MEDIUM-TERM To provide a sufficient foundation of resources for The main elements of the medium- term PRIORITY ACTION PLAN implementation of key initatives amendments to budget planning model: the Budget Code will be implemented, launching medium-term budget planning on a regular basis || An aggregated ceiling of expenditures and Macroeconomic and at all levels of the budget system. the provision of loans as the maximum Forecast possible amount of budget funds that The changes to be introduced to the Budget can be obtained under certain economic Code include a number of innovations in the conditions; ceilings for each main manager Reforms area of medium-term planning at the state level: of budget funds || Goals for main managers and tracking of || Introduction of the Budget Declaration activity results within the defined ceilings for the mid-term period || Assessment of fiscal risks || Replacement of the budget calendar || Expansion of budget rules Expected results of this approach: Budget || Coordination between strategic and budget planning || Consistent and defined fiscal policy that will enhance financial stability The approved budget declaration is a strategic || Predictable and efficient budget document based on the Medium-Term Priority expenditures to improve the quality of Action Plan and defines the direction of public public services finances for priority reforms. This will support the || Strengthened budgetary discipline and plan for the country’s economic development and establishment of clear rules that all budget create the basis for deep and systemic reforms. process participants will adhere to, for the sake of the common result – development Key innovations of the document: of the country || Control and effective management || The planning horizon extended to 3 years of public debt || A list of medium-term budget parameters || Change in the focus of budget planning, was developed from maintaining budget institutions to delivering quality public services
09 THE GOVERNMENT’S MEDIUM-TERM PRIORITY ACTION PLAN TO 2020 IS A ROADMAP FOR REFORMS AND CHANGES FOCUS ON ECONOMIC GROWTH Despite tremendous challenges, stabilization was reached and economic growth began From 2014–2016, Ukraine navigated the 2014-2015 2016 2017 2018 - 2019 challenging road of macroeconomic stabilization and transformation. During these • LACK OF A CLEAR VISION • MACROECONOMIC • MACROECONOMIC GROWTH • FOCUS ON SUSTAINABLE FOR CHANGES NEEDED AND STABILIZATION REACHED ECONOMIC GROWTH years, the country also developed a clear DESIRED RESULTS • INITIAL IMPLEMENTATION OF STRUCTURAL CHANGES vision for change and deliverables, and grew in • INSTITUTIONAL WEAKNESS • INCREASE IN QUALITY institutional strength to execute on its vision. • FIERCE RESISTANCE FROM OF LIFE THE ‘OLD SYSTEM’ • RUSSIAN AGGRESSION Economic indicators for 2017 (more than +2% GDP growth) show that Ukraine has entered a phase of economic growth. According to the Cabinet of Ministers, the estimated forecast of economic growth for 2018 is +3% and Ukraine is well placed to achieve more than 3% of GDP growth in 2019 according to the IMF; this growth is the key goal of the Government and the major economic target for the coming years. The main drivers of economic growth will be the revival of Ukraine’s industrial sector and development of innovative industries. 2014 2015 2016 2017 2018 - 2019 GDP GDP GDP GDP GDP PROJECTION -6.6%* -9.9% 2.4% 2.2% 3.0% CPI CPI CPI CPI CPI 12.1%* 48.7% 13.9% 14.4% 10.9% * Annual change
10 Reform Priorities and Progress
11 6 Key Reform Priorities Progress at a Glance In line with the Medium-Term Government Priority In early 2018, the Government and the Parliament Action Plan to 2020 and the Government’s Annual cooperatively embarked on the elaboration Action Plan, the Prime Minister defined 6 key and passage of a new, groundbreaking law to priority areas for Government reforms: ensure effective and transparent privatization. The Parliament has made another important 1 Pension reform step towards completion of anti-corruption 2 Education reform infrastructure by adoption the law on the High 3 Healthcare reform Anti-corruption Court. This would significantly 4 Public Administration reform impact the improvement of business and 5 Privatization and State-Owned investment climate of Ukraine. Enterprises reform 6 Agriculture Sector reform Despite the extension of the moratorium on agricultural land sales into 2019, the work on Stabilization of the economy and the economic comprehensive reform of the agriculture sector growth achieved by the Government in 2016–2017, is ongoing and remains a priority for 2018. with assistance from the international community, allowed for the mobilization of resources for the Taken together, these steps made as part of the implementation of these key reforms and social efforts to implement reforms will continue to initiatives. contribute to stable economic growth, and the improvement of social protection and the well- 2017 was also a year of success in laying the being of citizens. groundwork for human capital development and greater social well-being, as the Parliament of Ukraine passed laws proposed by the Government and the long-awaited education, healthcare and pension reforms were launched.
6 KEY REFORM PRIORITIES PROGRESS AT A GLANCE 12 1 PENSION REFORM 2 EDUCATION REFORM 3 HEALTHCARE REFORM || Introduction of pension calculations based || The Law of Ukraine “On Education” was || Legislation on “State financial guarantees on duration of pensionable service for adopted in 2017 and has launched the for the provision of health services and all employee categories and increased development of special legislation for medicines” was adopted as of July 2018, the pensions for 10.2 million pensioners. improving general secondary education, National Health Care Service of Ukraine will || The Cabinet of Ministers of Ukraine vocational education and changes to launch initial services for primary care Decree as of 21 February 2018 No.103 on higher education financing || Full implementation of healthcare reform for recalculation of military pensions became || The draft law on general secondary primary care will occur in 2019 the basis for increasing the pensions of education has been developed in || Test registration of hospitals and doctors 463,400 pensioners the first half of 2018 in the electronic system has begun, with || Adoption of “The Action Plan for 2017–2018 || Implementation of the New Ukrainian 1,200 hospitals, 20,799 doctors and 5,116,774 on the Introduction of the 2nd stage and School concept has started with primary patients registered. In February 2018, eHealth Improvement of the 3rd stage, of the education, and will continue until 2029 with software was rolled out for the state system Pension System” successive levels of secondary education administrator || The Decree № 1101 on “Creation of the National Health Service of Ukraine” was adopted by the Government
13 6 KEY REFORM PRIORITIES PROGRESS AT A GLANCE 4 PUBLIC ADMINISTRATION REFORM 5 PRIVATIZATION AND STATE-OWNED 6 AGRICULTURE ENTERPRISES (SOE) REFORM SECTOR REFORM || Approval of the new strategic planning approach for the Medium-Term Priority Action Plan to 2020 || The new law “On Privatization” was adopted || The concept of a national || Reorganization of the ministries was initiated, with the aim by the Parliament in early 2018. It simplifies land market model has been to increase Government capacity for policy development the procedure of privatization with only developed by the Government and strategic planning; in 10 ministries and 3 other 2 groups of objects for privatization – in conjunction with experts from government bodies, 50 directorates with 1,305 new reform small scale privatization and large scale the World Bank staff positions (RSP) in civil service were established privatization – instead of 6, and only two || The concept of the State || A modern, human resources portal – www.career.gov.ua, types of auctions instead of 5. Going forward, Program of Development of launched for civil service and RSP vacancies. all small-scale privatization will be conducted Farming for 2018–2020 was With 42,000 users per month and 15,000 candidates exclusively through online auctions approved applied for initial positions, resulting in an average || The separation of the SOEs into groups for || A draft law “On Amendments 29 candidates per vacancy further action “triage” was completed and to the Law of Ukraine On State || 35 online e-services were launched in various agencies and published Land Cadastre” was approved ministries, including business registration services, social || New independent directors were appointed at the meeting of the Cabinet services, and permits and licenses to the Supervisory Boards of NJSC of Ministers of Ukraine, and || The open data portal www.data.gov.ua launched with Naftogaz and PJSC Main Gas Pipelines. The registered at the Parliament more than 30,000 data sets and more than 2,000 data Supervisory Boards of PJSC Ukrzaliznytsia (No.8049) in February, 2018 administrators, catapulting Ukraine into 24th place in the and PJSC Ukrenergo are expected to be Global Open Data Index 2017 (up 30 positions) appointed in June 2018. || Ukraine rose 34 positions to 65th place in 2017, for || The State Auction Platform ProZorro.Sale “Transparency of Policy Making” in the World Economic Forum was launched, allowing for easy, fast and Global Competitiveness Report, and increased, on average, transparent sales and leases of small scale 25 positions in other governance effectiveness indexes state property online
14 Pension Reform ABOUT THE REFORM ACHIEVEMENTS Implementation of pension reform is among The “Law On Amendments to Some Legislative The pension reform was launched with the adoption of the top priorities of the Government. The goal Acts of Ukraine on the Increase of Pensions” the Law of Ukraine “On Amending Certain Legislative of reform is to establish a fair approach to the introduced amendments to 29 legislative Acts of Ukraine regarding the Increase of Pensions” calculation of pensions now, and going forward. acts. The provision for pension took effect on No. 2148-VIII as of October 3, 2017, that seeks: October 1, 2017, and on January 1, 2018 the law There are currently 11.7 million pensioners in Ukraine. became fully operational. || Modernization of pensions, recalculation of Eight million (68% of the total number) received the pension amounts, allowances, increments minimum pension amount before the launch of the The first stage of reform is designed to stabilize and other pension payments, which will be reform. This pension amount was not based on the the pension system, eliminate pension levelling determined from the minimum subsistence duration of an individual’s pensionable service or and ensure fair calculation of pensions in the level on October 1, 2017 their pensionable salary. In addition to being unfair, future. The Law also seeks to provide financial || Expansion of categories of people entitled to these calculations did not provide incentive for stability and reliability of the pension system compulsory state pension insurance formal employment or payment of contributions to and lay the basis for subsequent stages of || Increased duration of pensionable service the Pension Fund. A failure to introduce necessary reform including the introduction of a manda- required for calculations of future pensions changes could have lead to the inability of the state tory pension insurance and ensuring the proper || Establishment of flexible conditions for to guarantee pension benefits within 5–10 years. functioning of a voluntary insurance system. retirement, starting January 1, 2018 for the duration of the insurance period || Saving incentives for a later retirement || The CMU Decree on recalculation of military pensions was adopted in February 2018. It stipulated the revision of military service pensions for 463,400 military pensioners. MAIN GOALS The average size of the increase was 1288.98 UAH per month. As of May 2018, the average || Recalculation of pension amounts based on current wage averages size of military pension was 4187.39 UAH || Setting a more fair and unified pension system, creating equal conditions for as compared to 2898.41 UAH in May 2017, calculating pensions for all employee categories based on duration of eligible work indicating an increase of 44.5%. || Mandatory annual indexation || Canceling a special procedure for paying || Addressing the Pension Fund’s deficit pensions to working pensioners
15 IMPACT Since October 2017, pensions have been raised for It is expected that the implementation of the pension reform 10.2 million pensioners. The average size of the increase was will eliminate the Pension Fund deficit over a 10-year span. 561.17 UAH. As of January 2018, the average size of pension Reduction, and then elimination of the deficit in the first level was 2,480.46 UAH as compared to 1,828.31 UAH of the pension system will also support the macroeconomic in January 2017, reflecting a 35.7% increase. and financial stability of the country. During 2018–2021, the nominal deficit of Pension Fund should remain stable, and amount to 141.3 billion UAH. The gradual reduction of the SIZE OF RISE IN UAH NUMBER OF PENSIONERS IN MLN nominal deficit is estimated to start from 2022. UP TO 100 2.3 The introduction of the 2nd level, and improvement 100-500 of the 3d level of the pension system will provide a more 4.5 sustainable basis for larger pensions for current and future 500-1000 generations, and act as a national, long-term investment 1.3 resource that accumulates with the saving component 1000-1500 of the pension system. 0.8 OVER 1500 It is expected that the comprehensive pension system reform 1.3 launched in 2017 will stimulate youth and middle-aged people to legalize their current income which should result in better pensions in future. || Pension scheme coverage 43.4% of population aged 15–64* The Action Plan for 2017-2018 on the introduction of the 2nd and improvement of the 3rd || Public social protection expenditure towards levels of the pension system adopted by the Government. those who are of retirement age is 7.9% of GDP* || Public social protection expenditure towards || A draft law has been prepared, amending legislation that consolidates functions of those who are of working age is 2.4% of GDP* regulation and supervision over institutions of the pension saving system || A draft law on recalculation of pensions for military service personnel has been prepared * Source: ILOSTAT
16 Education Reform ABOUT THE REFORM MAIN GOALS Reform of the education sector is of The educational process in vocational and || Nurturing new, high-quality education at all levels, from paramount importance, as the quality higher education institutions is no longer elementary schools to higher education institutions of teaching greatly impacts the future aligned with the needs of the labor market || Introducing new standards of education that will teach of the country’s young generation. and the economy as a whole. Today we 21st Century skills The country and the world have have the determination to change that. || Improving material and the technical base of educational changed, society has evolved, the and scientific institutions needs of the economy have grown, The education reform envisions a || Attracting the best teaching and scientific staff but many approaches to education systemic transformation of the Ukraine’s || Building a fair and transparent system of funding in education have remained far in the past. education sector into an innovative and the science sector environment in which students develop || Improving the occupational prestige of the teaching and In Ukrainian schools and colleges, skills to independently acquire and apply scientific professions students generally acquire the scope knowledge to real world situations, and of knowledge needed, but without where scientists have the opportunities a full understanding how it can and resources to conduct research and contribute to their personal – and directly influence the country’s socio- Ukraine’s – fulfillment and growth. economic situation.
17 ACHIEVEMENTS The education reform launched with the adoption of the Law of Ukraine Increased coverage for pupils “On Education” (No. 2145-VIII) on September 5, 2017 provides for: with special educational needs in inclusive classes in general, || Introduction of competence-based education with high-quality, secondary education institutions contemporary content NUMBER OF PUPILS || Equal access to education for all || New incentives for teachers’ continuous professional development || Enhanced financial transparency and accountability of educational 6445 institutions and new multi-channel financing opportunities 4180 || Modern system of education management || Putting academic integrity at the core of education 2720 The draft law on general secondary education has been developed in the first half of 2018 and posted on the web for public discussion. Implementation of New Ukrainian School (NUS) concept has started with primary education and will continue until 2029 for further levels of secondary education. Starting from the 2018/2019 academic year, all first-graders of Ukraine will be taught in the format of the New Ukrainian School. 2015-2016 2016-2017 2017-2018 UAH 1,385.2 mln has been allocated in the 2018 State budget to support the implementation of NUS (including UAH 998.7 mln for educational materials and resource, and UAH 386.5 mln. for professional development of primary school teachers). Teachers’ salaries have also been raised; increase in 2017 was 50% and additional 25% increase will be in 2018.
EDUCATION REFORM 18 IMPACT The impact of the education reform will General secondary education Number of higher Staff involved in scientific take decades to play out, however expected in Ukraine covers: education students: research and development long-term benefits include: in Ukraine: 3.9 208,600 || The New Ukrainian School concept 94,274 implemented across the secondary education sector: school children will gain competencies, skills and values IN ESTABLISHMENTS OF I-II ACCREDITATION needed for the development of today’s MILLION PUPILS IN TOTAL, OF WHOM LEVEL generation and the growth of Ukraine || Modernized vocational education and training will contribute to a competitive labor force that meets the needs of Ukraine’s economy and labor market || Improved quality of higher education 441,000 1,330,000 IN ESTABLISHMENTS 59,392 ARE RESEARCHERS means that graduates of higher TEACHING STAFF OF III-IV ACCREDITATION education institutions will fulfill the LEVEL needs of the contemporary professional market and will be positioned to compete in global labor markets 9,144 || A novel system for the management ARE TECHNICIANS and funding of science R&D means that National science will be able to Vocational education in Ukraine: contribute to Ukraine’s technological 25,738 269,400 advancement and socio-economic development || The principles of decentralization, STUDENTS ARE SUPPORT STAFF deregulation, institutional, academic and financial autonomy of education institutions, and accountability will guide the system of education management SOURCE: Official data of the Ministry of Education and Science of Ukraine, excluding the temporarily occupied territory of the and funding. Autonomous Republic of Crimea, the city of Sevastopol and temporarily occupied territories in the Donetsk and Luhansk oblasts.
19 EDUCATION REFORM 51 47 89 5.9% 2015 2016 2017 31 26 24 OUT OF 124 OUT OF 130 OUT OF 130 OF GDP GOVERNMENT COUNTRIES COUNTRIES COUNTRIES OUT OF 130 COUNTRIES OUT OF 130 COUNTRIES OUT OF 130 COUNTRIES EXPENDED ON EDUCATION IN 2016** Ranking of Ukraine Ranking of Ukraine Ranking of Ukraine Ranking of Ukraine by the Global Human Capital by the quality of by the quality of by the extent Index is on a steady uptick education system primary schools of training in 2017* during 2015-2017* in 2017* in 2017* Business leader’s Business leader's Business leader’s perception about perceptions on the perceptions on the the degree to which degree to which the level of excellence companies in the education system in of primary schools country invest their country of in their country of in training and residence trains residence. employee develop- students to the ment. skill levels required in a competitive economy. * Source: World Economic Forum, Executive Opinion Survey. ** Source: World Bank, World Development Indicators.
20 Healthcare Reform ABOUT THE REFORM ACHIEVEMENTS Healthcare reform affects every person in Ukraine. Healthcare reform brings benefits both to || Law of Ukraine on financial guarantees of Its key objective is to enable equal access for patients, who will receive services without healthcare services passed Ukrainian citizens to good quality healthcare queues and bribes, and to doctors, who will || On April 2018, 4 key Decrees of the CMU and to work towards an overall patient-centric work under a more professional system and be were adopted, stipulated by Law No. 2168, healthcare system. able to continually improve their skills. regarding the implementation of primary care reform beginning in the second half of 2018: Ukraine’s healthcare reform will improve the The current inefficient use of healthcare āā “On Issues of Contracts of Medical Care quality of healthcare services and ensure the funding has a dramatic impact on patients. for the population under the Program of transparency of healthcare costs. Ukraine’s total Despite the fact that Ukrainians’ annually Medical Guarantees” healthcare expenditures, both government and contribute around UAH 3 billion to healthcare āā “On Approval of the Procedure for patient financed, are near the EU average. through taxes, 640,000 Ukrainian families Implementation of State Guarantees for suffer financial hardships due to illness and Medical Care of the Population under However, in contrast to European countries, in having to pay for expensive medical treatment the Program of Medical Guarantees for Ukraine, patients’ out-of-pocket contributions out of their own pockets. Primary Healthcare in 2018” make up more than a half of the total amount āā “On Approval of the Procedure for the spent on healthcare. Provision of Medical Aid to Foreigners and Stateless Persons Who Are Permanent Residents or Temporarily Stay on the Territory of Ukraine …” MAIN GOALS āā “Addressing issues of the eHealth system” || Introduction of the State Guaranteed Benefits Package || The Law of “On Improving the Availability || Setting up a national insurer, the National Health Service of Ukraine (NHSU) of Medical Services in Rural Areas” was || Introducing the “money-follows-the-patient” funding model also passed, enhancing the development of || Providing hospital autonomy medicine in rural areas. The joint order of || Introducing an online eHealth system the Ministry of Health and the Ministry of || “Affordable Medicine” Program Regional Development on “The Procedure for || Simple and transparent medicine procurement procedures Forming Capable Networks for Provision of || Creating an enabling environment for the exercise of healthcare powers by local authorities. First (Emergency) Medical Aid” was approved.
21 IMPACT The MOH has begun work on the approval of plans for capable || Foundations for Ukraine’s new healthcare financing system were laid networks of First Medical Aid provision. || The reimbursement program increased the availability of medicines for major || Fundamentals for setting up the National Health Service of chronic diseases and reduced out-of-pocket expenses for patients Ukraine as a designated national purchaser of medical services || Savings made by international organizations resulted in 70% increase were outlined. In February 2018 a competition for the position of in procurements chairman NHSU was successfully held. || Another expected impact of the health financing reform is the reduction of || On May 2018, the NHSU legal entity was registered. There are out-of-pocket payments (OPP), which currently constitute 52% of total health already 12 employees in NHSU and the first wave of applications expenditures. The share of OPP is expected to drop by at least 20% for positions were accepted. after 10 years of full-scale implementation (by 2030). || A program for reimbursement of pharmaceuticals through || With the eHealth system in place, the 20-40% of time that doctors currently pharmacies was deployed spend on paperwork will be cut in half within three years (by 2021) || Public procurement of pharmaceuticals through UNICEF, UNDP and Crown Agents gained traction || 13 new critical-care cardiac centers prepared for launch in 2017 and an additional 14 are planned to be launched in 2018 || The first Okhmatdit Neonatal Complex was awarded a certificate of readiness and was launched in April 2018. Development of plans for the launch of a 2nd Complex has started. PUBLIC PERCEPTION || Basic functions of the eHealth system, combining records of healthcare facilities, doctors and patients, were launched || Healthcare reform approval rate by the public aware of the reform: || Results for the “Affordable Medicine” program include: āā 89% of citizens support the need for radical healthcare reform* āā 7,692 pharmacies in the program (out of 20,000 existing āā 91% of citizens support the reimbursement program** pharmacies) āā 69% of citizens support the introduction of national āā In 2018 about 7.4 million prescriptions were written, 5.8 million healthcare insurance plan** prescriptions were reimbursed for total of UAH 276.62 mln (27.66%) āā 81% of citizens support the “Money Follows the Patient” model** āā The Government’s resolution on December 27, 2017, allowed for āā 72% of citizens support all ten key components of the reform** additional 12 medicines that provide 100% reimbursement āā The Government issued a resolution to launch an electronic * SOCIS, Oct 2017 prescription pilot program starting in Q3 2018. ** Rating group, Aug 2017
22 Public Administration Reform ABOUT THE REFORM MAIN GOALS Effective governance is essential for efficient government operations and is a || Improving policy development and precondition for achieving the broader government objectives of economic coordination mechanisms growth and human development. || Updating strategic planning, monitoring and evaluation approaches Good and efficient governance at the national level, combined with || Optimizing functions, organizational structures empowered local authorities, will also contribute to better service delivery to and procedures within public administration citizens and sustainable public funding. || Introducing of modern human resource management practices in civil service Public Administration Reform (PAR) is being implemented according to the || Implementing of cutting-edge e-governance comprehensive PAR Strategy of Ukraine 2016–2020. tools and solutions. PAR’s main objective is to develop an effective system of public administration, capable of developing and implementing coherent state policy, focused on social sustainable development and quality public services delivery. This will include restructuring line ministries and strengthening the role of the Cabinet of Ministers of Ukraine in providing strategic guidance for the development of a professional and ethical civil service that has the skills needed to deliver reform and change.
23 PUBLIC PERCEPTION || 50% of respondents indicated that they would respondents answered that they were satisfied work as civil servants for the idea of service with the quality of service at the Ministry of to society, 20% stated that they are ready to Justice and the State Labor Service. work for the civil service as it provides a stable || The majority of respondents indicated that workplace* corruption, bureaucracy and paperwork || More than half of respondents believe that are the major problems of the civil service. today’s civil service top priorities include About half of respondents believe that the creating jobs, ensuring economic growth, main concerns that exists in the civil service citizens’ security and the sovereignty is irresponsibility of civil servants (48%) and of the state poor performance (47%). || The majority of respondents who had to apply to either the Pension Fund, the State Employment Service, or the Migration and Fiscal Services, indicated that they were fully or rather satisfied with the quality of * Source: TNS survey for National Reforms Council, service provided by these institutions. Half of February 2017 Number of civil servants as of 1 January each year THOUSANDS OF EMPLOYEES 2016 295 2017 268 2018 242
PUBLIC ADMINISTRATION REFORM 24 ACHIEVEMENTS || 10 pilot ministries, 2 state agencies and || Implementation of an electronic document of a sole proprietorship, with more than the Secretariat of the Cabinet of Ministers, management system is well underway, with 4,000 sole proprietors registered and established 50 new policy development and more than 80% of correspondence between more than 1,000 deregistered online; strategic planning directorates with 1,305 new the Central Executive Bodies (CEB) and the āā in the social sphere: 5 services, including civil servant reform staff positions (RSP) Regional State Administrations (RSA) taking access to childbirth benefits, with more || Government Rules of Procedure were place in electronic form than 6,000 families receiving such updated with the aim of strengthening policy || The Ukrainian online auction system of seized assistance online; development and coordination property “СЕТАМ” became the first in the āā in the construction sector: 14 services, || “Government as a competitive employer” world to switch over to using blockchain to including announcements of the principles were introduced for RSP protect data commencement of preparatory work, recruitment: requirements for reforms || 746 Centers for Delivery of Administrative with more than 3,000 works started and staff positions were strengthened, total Services (CDAS) were set-up as at year-end more than 500 projects put into operation remuneration levels were unified and increased, 2017, including 64 new CDAS. online. and recruitment procedures were significantly || 71 CDAS already operate within amalgamated updated. All current vacancies available can be territorial communities, including 50 new || A single portal for the Cabinet of Ministers found at www.career.gov.ua where candidates centers in 2017 of Ukraine providing updated information on can submit job applications online. || The Government created a single administrative and electronic services open government data web-portal – www.kmu.gov.ua/ua/services āā Total candidates applied – 15,300 www.data.gov.ua – designed to provide access āā Average candidates per vacancy – 29 to public information: 2017 saw more than āā Maximum candidates per vacancy – 84 16,000 sets of open data placed and more than 1,200 new information administrators registered || A comprehensive, unified HRM Information || The concept of e-Government development System concept was approved by the was prepared, which includes all core Government, and its implementation should elements of an electronic documentation start in 2018 with support from the EU and system, implementing the system with full World Bank interoperability, additional e-services and the || Online monitoring tools were implemented for open data portal monitoring of Government decisions and plans || 35 online, e-services were implemented: || The coordinated system for the state registers (TREMBITA) was launched and the first state āā in the field of registration services: registers were integrated 9 services, including state registration
25 PUBLIC ADMINISTRATION REFORM INTERNATIONAL RANKINGS:IMPROVING POSITIONS +45 +34 +25 +23 +7 IN 2 YEARS IN 1 YEAR IN 2 YEARS IN 1 YEAR IN 1 YEAR E-participation Global E-governance Global Open IKT Development Index, United Competitiveness Development Data Index 2017 Index, Global Nations Index 2017–2018, Index (EGDI), 31st position in 2017 information E-Government Transparency UN Study 2016* – Technology Survey 2016 – of Government 62nd position Report 2016–64th 32nd position Policymaking in 2017 position in 2017 in 2017* ranking – 65th position in 2017 * UN E-Government Survey 2016
26 Privatization & State Owned Enterprise (SOE) Reform ABOUT THE REFORM MAIN GOALS The Government is Ukraine’s largest asset holder. Reform in privatization and || Strengthening transparency and oversight SOEs has been long awaited, as this sector of the Ukrainian economy has || Improving corporate governance remained largely unchanged since 1991. Lack of reporting and operational || Setting clear business objectives transparency, poor financial and operational performance and ill-suited || Separating commercial and non-commercial functions corporate governance of state-owned enterprises are only some of the issues || Implementing ownership policy Ukraine has to address by bringing about fundamental changes. || Introduction of global best practices in asset sales The reform’s primary objective is to ensure that assets are effectively managed for the benefit of Ukrainian people as their main stakeholder. The ACHIEVEMENTS Government must act as a professional and responsible owner of enterprises and concentrate on adding value to the assets. Privatization There are more than 80 governing bodies in Ukraine that manage public || New law “On Privatization of State and Municipal Property” was property and state-owned enterprises. These public property governing adopted on January 18, 2018. bodies are responsible for more than 3,500 enterprises of different legal The new law simplifies the procedure of privatization with only 2 groups forms that for the most part don’t conduct any real business operations. of objects for privatization – small scale privatization and large scale The majority of these enterprises operate at a loss and present potential privatization – instead of 6, and only two types of auctions instead of 5. fiscal risks. Poor-quality control mechanisms and lack of transparency make the operations of state-owned enterprises a source of corruption risk and || The separation of the SOEs into groups for further action “triage” financial losses. was completed, approved by the Cabinet of Ministers of Ukraine, and officially published. The ultimate goal of the reform is to sell state-owned enterprises to private The “triage” approach allocates SOEs into the following groups: investors, with the exception of those enterprises deemed as having strategic located in occupied territory, recommended for concession, for importance to the country. Strategic assets will be restructured to implement liquidation, privatization, to be preserved in state ownership. Public corporate governance rules that are OECD compliant for companies disclosure of the “triage” results will reduce the list of enterprises operating in the public sector. banned for privatization.
27 || The 2018 list of large-scale SOEs, ownership rights of SOEs, IMPACT PUBLIC PERCEPTION enterprises scheduled for dividend policy for SOEs and privatization was approved by their subsidiaries, and requires The reform’s ultimate goal is to || 12.4% – positive attitude the CMU. Several oblenergos’ approval of SOEs’ financial plans. minimize political interference regarding Privatization (regional energy operations) in the corporate performance of and SOE reform minority stakes were privatized. || The Nomination Committee state-owned enterprises, thereby Large SOEs including charged with the selection reducing state intervention || 49.9% – negative Centrenergo, Odessa Port Plant and nomination of CEOs and in their matters, fostering and oblenergos with major Supervisory Boards of large-scale competition in relevant sectors || 12.0% – indifferent public stakes are being prepared SOEs was re-launched in April (which would have a positive for privatization in 2018. 2018 after a 1.5 year hiatus. New effect on consumer well-being) || 25.7% – no answer* Supervisory Boards of PJSC and re-shaping the competitive || ProZorro.Sale will be used to NAK Naftogaz of Ukraine and edge of Ukraine’s economy. || Privatization and details pilot small scale privatizations PJSC Main Gas Pipelines of Additionally it will generate of this reform have not through e-auctions for the Ukraine were appointed, with revenues from the sale of these been widely communicated efficient and transparent sale independent board members enterprises/ assets and future and it is the least known or of smaller companies and holding the majority. The taxes will be generated by these understood of the reform properties of SOEs. qualifying criteria for choosing enterprises. priorities. service providers for the selection SOE Reform of management and members of The transfer of the asset supervisory boards of SOEs were management from the || The new law on corporate developed and approved. Government to the board of governance was developed, hired managers will raise the approved by the CMU and || SOEs started using ProZorro.Sale effectiveness of the SOEs submitted to the Parliament. platform for non-core asset sales to market level. After the New corporate governance and for lease auctions. Leasing corporatization and privatization legislation is intended to create is an important component of these SOEs will operate on the a level playing field for SOEs and successful Privatization and SOE same playing field as private private enterprises, identifying Reform. Post offices of PJSC enterprises. the instances of created Ukrposhta as well as railway discrimination between SOEs stations and railway cars of PJSC and private enterprises, offers Ukrzaliznytsia are only a few proposals to remove gaps and examples of assets to be leased solves the political issues of on ProZorro.Sale. * According to Razumkov Centre survey
28 Agriculture Sector Reform ABOUT THE REFORM DISTRIBUTION OF AGRICULTURAL LAND IN UKRAINE Land is one of the cornerstones of any society – both literally and metaphorically. This is particularly true for NOT UNDER MORATORIUM LAND SHARES (PAI) Ukraine. The state of land affairs not only determines development of the agricultural sector and rural areas, 1.7 27.7 but also impacts legal forms of agricultural enterprises and economic development. The ultimate goal of the AGRICULTURAL LAND agriculture sector reform is to create a sustainable IN STATE AND middle-class in rural area. COMMUNAL OWNERSHIP MLN HA MLN HA 10.5 MAIN GOALS || Establishment of rules for agricultural land turnover FOR COMMERCIAL AGRICULTURAL PRODUCTION || Establishment of new financial support mechanisms (EXCEPT FOR LAND SHARES) || Further development and fulfillment of the State UNDER UNCLAIMED LAND SHARES 0.02 Land Cadastre MORATORIUM 1.5 41 NON-AGRICULTURAL LAND IN STATE AND || Launching a land market based on a model COMMUNAL OWNERSHIP 1.3 acceptable to citizens and discussed at a national level || Improving the regulatory framework for government The scale and impact of the moratorium on agricultural land sales is far reaching. It was introduced control over land use and protection moratorium as a temporary measure in 2001 but still exists today. Of more than 42 mln ha of agricultural land || Building up and aligning the State Land Cadastre’s (or 70% of Ukraine’s territory), about 41 mln ha or 96% of all agricultural land in Ukraine is under databases moratorium. 68% of land that under moratorium is land shares in private ownership held by 6.9 mln || In December 2017 Ukraine’s Parliament voted to people or 16.2% of Ukraine’s population. The majority of them live in rural areas. extend the moratorium through to January 1, 2019 and once again restricted the rights of landowners Source: Picture and text VoxUkraine article “Beyond lifting the Moratorium: Preconditions for success” MAY 31, 2017 to freely dispose of their property. www.voxukraine.org/en/beyond-lifting-the-moratorium-preconditions-for-success
29 ACHIEVEMENTS IMPACT PUBLIC PERCEPTION || The Government passed a of Ministers approved several The new State Land Cadastre Land market reform approval rate by number of resolutions on programs for supporting the meets international standards and the public aware of the reform*: land use monitoring and agricultural sector. The total best practices. Reduced corrup- maintenance, which will be amount of support from the tion and registration time resulted || 32.4% – approve done via a modern, blockchain- 2018 State Budget is about in a two-thirds decrease of land || 64.6% – disapprove based State Land Cadastre 6.3 billion UAH for: registration costs. || 3% – not sure || New electronic service āā Support of development for online registration of of farm households Support of possible options for agricultural land lease (1 billion UAH) opening the land market: agreements launched āā Support of stockbreeding || New online service for (4 billion UAH) || 33% approval – restricted opening registration of land plots āā Support of hopping || 27% approval – phased-in opening launched (300 million UAH) || 18% approval – Government || In February 2018 the Draft Law āā Support of agricultural purchasing land from plot of Ukraine “On Amendments producers holders using budget money* to the Law of Ukraine On (UAH 945 million) State Land Cadastre”, which provides for simplification of || In February 2018 the the procedure for registration Resolutions of the Cabinet of land plots, was approved of Ministers No. 106, No. 104, at a meeting of the Cabinet of No. 107 “On Approval of the Ministers and registered in the Procedure for the Use of Parliament under No.8049 Funds” were adopted. || In February 2018, the Cabinet of Ministers adopted Resolution No. 105 “On conducting a Ukrainian- wide normative monetary * Source: Research of GfK Ukraine for the assessment of agricultural lands” project “Critical Thinking against Populism” || In February 2018, The Cabinet managed by Center of Economic Strategy
AGRICULTURE SECTOR REFORM 30 OWNERS OF LAND SUBJECTED TO THE MORATORIUM 27.7 PRIVATELY OWNED LAND SHARES MLN HA 10.5 STATE AND 0.02 MUNICIPALLY OWNED UNCLAIMED AGRICULTURAL LAND SHARES LAND 1.3 1.5 OTHER STATE AND LAND FOR COMMERCIAL MUNICIPALLY OWNED AGRICULTURE (OTHER LAND (OTHER THAN THAN LAND SHARES) LAND SHARES) 28% OF THE WORLD’S CHERNOZEM RESOURCES ARE LOCATED IN UKRAINE
31 AGRICULTURE SECTOR REFORM UKRAINE’S LAND REFORM* WITHIN THE MORATORIUM’S 25 FRAMEWORK: YEARS LAND REFORM UNDERWAY 15 15 YEARS MORATORIUM IN EFFECT Allowed || Land share lease 27 8 || Exchange for other same value land share || Bequest of land 27 MLN HA TIMES MORATORIUM SHARED LAND EXTENDED 96% 42.7 Prohibited || Sell, pledge or change the designated use || Contribute to equity ARE SUBJECT MLN HA TOTAL capital TO MORATORIUM AGRICULTURAL LAND 6.9 1.6 MLN ADULTS AGED 70 AND OVER * A GRIBUSINESS OF UKRAINE 1.4 MLN DECEASED, OF WHICH MLN LAND SHARE 2016/2017 HANDBOOK www.agribusinessinukraine.com OWNERS OF WHICH: > 0.5 MLN HAD NO SUCCESSOR
32 Reform Priorities and Plans
33 Reform Priorities for 2018-2019 at a Glance GOAL PRIORITIES KEY TASKS To ensure sustainable || Move from Public administration reform economic growth, with stabilization a target of 5-7% GDP to sustainable Energy sector Anti-corruption economic reform and Rule of Law growth || Eliminate the institutional foundations of corruption || Continue the implementation Privatization of previously Agriculture and State-Owned initiated reforms Sector Enterprises Reform Reform Favorable business climate Innovation development development Logistics and infrastructure development
34 Privatization and State-Owned Enterprises Reform NEXT STEPS IMPACT || The updated version of the “triage” is expected in the second half of 2018 Privatization will provide more efficient use of state funds and allow for their || According to the State Property Fund of Ukraine Plan for 2018, utilization and reallocation for other Centrenergo is expected to be sold in autumn, Odessa Port plant and priority needs. It will also free the state oblenergos with majority shares are to be sold by year-end of having to support unprofitable companies. || New law on corporate governance is expected to be voted in the second half of 2018; in addition, the state ownership policy is expected to be The reform will minimize the risk of developed and approved by year-end corruption in state property and will increase funds into the state budget via || The Supervisory Boards of PJSC Ukrzaliznytsia and SE NPC Ukrenergo the sale of unprofitable ventures. (to be further transformed into PrJSC) are expected to be appointed in June 2018. Selection of the Supervisory Board for PJSC Ukrposhta is in process. Ukrposhta, SE NPC Ukrenergo and SE NAEK Energoatom are undergoing corporatization. KPIs: || Large-scale privatization includes the sale of large SOEs including Centrenergo, Odessa Port Plant, and oblenergos with majority shares || State Auction Platform ProZorro.Sale will manage the privatization process of small-scale companies. Approximately 1,000 SOEs with assets up to 250 mln UAH are expected to be sold through transparent state e-auctions. || Selection and nomination of CEOs or supervisory boards in up to 10 selected large scale SOEs.
35 Business Climate Improvement ABOUT THE REFORM NEXT STEPS The level of entrepreneurial || Setting up a SME Support Office as || Adopt draft law No. 8060 “On || Setting up Financial Investigation activity is strongly correlated an advisory body to the Ministry of Bankruptcy” which was drafted with Service as a single agency for with an increase in economic Economic Development and Trade contributions from the World Bank, combating economic crime; growth, production efficiency, (MEDT). It will enhance MEDT’s Independent Bank Association of moving away from force-based higher employment rates, capacity to implement the SME Ukraine and an expert community. to analytical methods in financial stronger social policy, and a development policy priority actions, This law: 1) provides for the initiation investigation. competitive advantage of the with a focus on SME regional of bankruptcy proceedings at || Implementing the State Super nation in the global marketplace. infrastructure and support programs an early stage in the insolvency, vision Reform Strategy by for dedicated SME groups. when the debtor is not financially developing an Action Plan for the Deregulation is one of the crucial || Launch the Small-Medium Enterprise distressed; 2) protects the rights State Supervision and Control components in implementing (SME) web-portal to improve SMEs of creditors that have failed to Reform Strategy and implementing the new development model for access to information and guidance. correctly lay their claims; 3) cancels a risk-based and service approach Ukraine and is an integral part || Business Support Centers program the right of secured creditors to by regulatory bodies. of European Union integration. to be prepared for the Centers of block resolution on rehabilitation; 4) || Extending the moratorium on It will improve the business Administrative Services to reach and simplifies and adds transparency to business inspections. and investment climate, and be support SMEs across the country with foreclosure auction process. || Further deregulation of the a driver of job creation and a respect to regional and local needs. || Adopt draft law No. 8124 aimed payment transaction registers higher quality of life. A solid and || Draft laws to improve SME access at the improvement of the to enable new, smart and more sustainable deregulation policy to finance by removing unnecessary business environment in the areas affordable solutions. is an important prerequisite for barriers to allocating budget funds marked by the World Bank Doing || Addressing problems related the introduction of a European to provide financial support to SMEs. Business Index. to mistreatment of businesses, business model in Ukraine. || Adopt draft law on Business || Adopt draft law No. 8152 “On in particular foreign investors Additionally, deregulation will Ombudsman No. 4591 to enhance Currency” that provides for liberali and foreign-owned companies, allow for a set of measures business protection through an zation of foreign exchange control, by law enforcement agencies. to modernize the registration unbiased third party institution that streamlined outbound investment Implementing Law No. 2213-VIII to system, simplify the licensing helps business entities protect their procedure (partial abolishment of enable business entities to protect and permits systems, alleviate rights in entrepreneurial activity and licenses), and removal of sanctions their rights and legitimate interests, inspections, and improve tax and improve transparency in government imposed for breach of foreign and improve protection during the customs administrations. and business operations. exchange regulations. course of pre-trial procedures.
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