This presentation goes over Ukraine's reform progress through 2015, identifies successfully implemented reforms important from the standpoint of economic development and points to outstanding problems
1. 78th East Jour Fix of the ONB and WiiW
“Ukraine-Progress of Reforms and Challenges Ahead”
February, 26, 2016
Vienna, Austria
Reform Progress and
the Way Forward
Olena Bilan
2. 2
Reform Agenda
• After years of mismanagement, nearly
every aspect of economic and political life
in Ukraine needs reform
• The key question is not whether the
country must implement reforms but
where the authorities should start the
process
5. 1.2
1.5
1.0
1.2
1.3
0.8
-5 -4 -3 -2 -1 0 1 2 3 4 5
iMoRe
Governance & Anti-corruption
Public Finance
Financial Sector
Business Regulation
Energy Independence
- 5 -
…in Key Economic Areas
Average
score since
end-2014
6. - 6 -
Successfully Implemented Reforms
Banking Sector
Energy Sector
Public Procurement
Patrol Police
7. - 7 -
Banking Sector Reform: Key Steps
Clean-up
Ownership
Transparency
Related Party
Lending
NBU Independence
Deposit
Guarantee Fund
restructuring
IFRS
67 out of 180 banks (25% of
system assets) recognized as
problematic
Legal
loopholes
closed, NBU
authorized
to punish
violators
Enhanced criteria, tighter control,
Big-4 audit for top-20 banks, RPL
reduction plan
8. - 8 -
Banking Sector Reform: Impact
More Stable System
More Transparent System
Efficient redistribution of resources
Support economic growth
9. - 9 -
Energy Sector Reform: Key Steps
•Household gas prices
hiked 3-5 x in Apr-2015
•To reach import price
parity by 2017
•Naftogaz corporate
governance
•Electricity tariffs hike
•Phase-out pf price
discounts on oil sold by
state owned companies
•Opens sector to
competition
•Brings regulation in line
with EU Third Energy
Package
•
Import
diversi-
fication
Gas
Market
Law
Gas
Tariffs
Other
92%
75%
37%
0
10
20
30
40
2013 2014 2015
Gas Imports (bcm)
EU Russia
10. - 10 -
Energy Sector Reform: Impact
Lower dependence on Russia
Less corruption in gas and oil sectors
Smaller burden on state budget
Energy-savings technologies
11. - 11 -
E-Procurement: Key Steps
Pilot Project
In Feb-2015 Economy
Ministry partnered
with a group of
volunteers to launch
pilot e-procurement
project ProZorro.org
12-18% price
reduction
EUR 20m savings
Access to WTO procurement market
Domestic legislation
harmonized with with
WTO rules
Local businesses can
access $1.7trln WTO
public procurement
market in 2016
New legislation
New public
procurement law
requires expanding
pilot project to all
state institutions by
Aug-2016
12. - 12 -
E-Procurement: Impact
3.0% GDP
annual
savings
Lower
corruption
More
Competition
Exports
promotion
Access to WTO
public procurement
market
13. - 13 -
New Patrol Police
Key fact
• New people selected by rigorous testing
• Three-month training, incl. by American instructors
• Decent salary (3 times that of old “militsia”)
• Change in philosophy: protection, not punishment
Achievements
• Brand new institution that enjoys strong public support:
3rd most trusted after army and local authorities
• Perceived to be least corrupt state agency, while old
“militsia” was perceived to be the most corrupt
14. - 14 -
Way Forward
Judicial system and prosecutor office
• Most corrupt institution based on popular opinion
• The major bottleneck for investment and business
development
Civil service
• New reform-minded people at the top level only
• Most of the civil servants are incompetent/corrupt and low-
paid people
• Overlapping and redundant functions
State-Owned Enterprises
• One of the major sources of corruption and waste of state
funds
• Reform and privatization stalled by vested interests