Driven by the passion and determination of a new generation of young reform-minded leaders, since 2014 Ukraine has undergone a profound transformation emerging from deep crisis to achieve macroeconomic stabilization
In the last five years, Ukraine accomplished more reforms than in the previous 28 years combined. It launched unprecedented structural reforms with EU convergence policies to create a solid platform for future sustainable growth.
Following the Revolution of Dignity, Ukrainians affirmed their desire to live in a free, democratic, western-oriented and economically stable country. Indeed, they amended Ukraine’s Constitution to set a strategic course to obtain full membership in the EU and NATO.
Anti-corruption infrastructure created:
- Anti-Corruption Court
- National Anti-Corruption Bureau
- Special Anti-Corruption Prosecutor’s Office
- National Agency on Corruption Prevention
- National Agency of Ukraine for finding, tracing and management of assets
Due to the measures taken since 2015 to prevent corruption in the gas market, public procurement, automatic VAT refunds and access to data, the Ukrainian treasury saves around $6 billion, or 6% of GDP, annually.
The Ukrainian Government’s decentralization reforms have begun transforming Ukraine’s regions, increasing their investment competitiveness and attractiveness.
As a result, the budgets of local authorities in Ukraine almost doubled in the four years between 2015 and 2018.
Prior to decentralization, economic and administrative control of the country was concentrated in the hands of the central government.
Today, municipalities, cities and regions have direct responsibility for their development, as 60% of tax receipts remain in the localities.
Ukraine’s energy sector has been deeply transformed and liberalized since 2014. The government eliminated illegal schemes, leading to a transition from large budget deficits to healthy profits from the state gas company, Naftogaz. Steps are also underway to boost Ukraine’s domestic energy production and increase gas extraction as part of efforts to reduce the country’s dependence on energy supplies from Russia – a dependence that has previously left Ukraine particularly vulnerable to blackmail by Russia.
In 2018, the Government abolished the controversial and non-transparent mechanism for the issuance of special permits for subsoil use. Instead, the practice of open auctions was introduced for the granting of licenses for natural resource extraction, which provides unique opportunities for increasing oil and gas production in Ukraine.
In 2014, the National Bank of Ukraine (NBU) started a massive campaign to “cleanse” the banking sector, as a result of which more than 100 banks were closed. The results are already evident – in 2019 Ukrainian banks collectively made a $2.3 billion profit – an historic level for the sector.
A new currency law came into effect in Ukraine in marking the start of the most radical overhaul of currency regulations in over a quarter of a century.
The new rules continue the NBU’s direction towards currency liberalization that included the simplification of opening, use and closing of accounts, and changes in the procedure of obtaining loans by non-residents.
In a recent wave of currency liberalization, the NBU canceled the requirement for the mandatory sale of foreign currency income and all limits on dividend repatriation.
Deregulation and ease of doing business improvement
An ambitious deregulation program was launched in 2014 aimed at achieving regulatory compliance and convergence with European Union standards and global best practices. The reforms positively impacted the business environment in key sectors, including agriculture, telecommunications, infrastructure, construction, taxation, as well as state customs procedures, sanitary and veterinary controls.
Regular quarterly government deregulation meetings, often including input from the private sector have resulted in repeal of more than 1,300 outdated regulations.
Key regulatory reform achievements:
- Tax administration reform (automatic VAT refund system, e-cabinet for tax administration, etc.)
- Simplified procedure for the opening and operation of representative offices of foreign companies
- Simplified customs clearance procedure of goods in sea and river ports
- Launch of transparent e-sales of special permits for oil & gas extraction
- Open access to geological information
- Risk-based approach to state supervision of business
- New modern building rules
- Port charges reduced by 20% starting from 2018
Privatization and management of state-owned enterprises (SOEs)
There are more than 3,600 mostly loss-making SOEs in Ukraine. 40% of these enterprises are inactive and operate only on paper. Every third enterprise makes a loss and is a potential source of fiscal risks. SOE operations are a source of corruption risks and create losses to the state budget because of a lack of quality control mechanisms and inadequate transparency.
The reform of SOEs reform involves the introduction of transparent corporate governance at strategic SOEs and the privatization of all other companies.
In 2018, a new privatization bill was adopted by the Ukrainian parliament. The law divides companies into three categories: those to be privatized, liquidated, or retained. The new law replaces numerous and often contradictory regulations, cuts the privatization timeline, and makes the online Prozorro electronic system mandatory for the privatization of small SOEs.
A modern SOE governance model involves introducing OECD-compliant corporate governance instruments, including strategic planning, having the Government as the shareholder approve ownership policies for each enterprise, and the competitive appointment of independent supervisory boards.
The government has already approved independent professional supervisory boards at a number of strategic SOEs, including:
- Naftogaz (State Gas Company)
- Ukrzaliznytsia (Ukrainain Railways)
- Ukrposhta (Post Office)
- Ukrenergo (Electricity Grid Operator)
Land market reform
After almost 20 years of archaic moratorium on the sale of the agricultural land, the land market is finally going to be launched in Ukraine. Ukraine abolished the moratorium on agricultural land and the opening of the farmland market starts from July 1, 2021.
Ukraine is one of the few nations with a full cycle capacity to design, produce, and operate civil, military and cargo aircraft, as well as supply space technology. A law No. 1071 on amending certain laws of Ukraine involving the development of activities in space and attracting investments was passed by the Ukrainian Parliament. The bill brings competition to this sector by allowing private companies to engage in space-related activities, including the launch of rockets.