Reforms in Ukraine: Progress and Priorities - International

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Reforms in Ukraine: Progress and Priorities - International
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
Reforms in Ukraine: Progress and Priorities - International
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.
Reforms in Ukraine: Progress and Priorities - International
03
Reforms in Ukraine: Progress and Priorities - International
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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