COMMENT: Reform in Ukraine - mixed progress

By bne IntelliNews June 28, 2011

Olena Bilan of Dragon Capital -

This report presents our first comprehensive attempt to quantitatively assess the reform program put forward by Ukraine's new leadership last year. Using global investment attractiveness rankings as benchmarks, we analyse the country's recent achievements and potential progress over 2010-14.

Though Ukraine is unlikely to replicate the results that top global reformers achieved in the past five years, we think that with elections in the country becoming less frequent and the political will in place, progress on the most pressing issues would enable Ukraine to somewhat improve its position in global rankings, offsetting the poor track record of previous years.

Comprehensive reform agenda, yet controversial first steps

• In June 2010, newly elected President Viktor Yanukovych laid out a five-year reform agenda which became one of the most comprehensive action plans produced by any Ukrainian administration in recent history. Working on their 2010 priority action plan, the authorities made progress in a number of areas including those outside of International Monteary Fund (IMF) oversight, such as tax legislation, energy sector privatisation and business deregulation. But underperformance on other fronts overshadowed the early achievements, with increased corruption, customs delays, slow VAT refunding, imperfections of the new Tax Code and non-transparent distribution of grain quotas all adversely affecting investors' perception.

Measuring recent reform progress

• However, the local business community seems to assess the first steps largely positively, at least according to the Investment Attractiveness Index compiled by the largest business association in Ukraine. Going forward, Ukraine's progress in different reform areas will be revealed by its position in key global rankings including the Doing Business, Corruption Perception Index, Economic Freedom and Global Competitiveness.

• Analyzing the government's first steps, we think upcoming ranking releases will show a mixed picture. Assuming the business climate in the rest of the world has undergone no major change over the past year, Ukraine may move up 23-33 points in the World Bank's Doing Business ranking. Yet the survey-based Corruption Perception Index will likely show Ukraine staying where it was, if not falling.

What's next?

• The government's 2011 priority list centres on pension, land and healthcare reforms. The authorities also plan to move forward with energy sector privatisation and business deregulation. Despite the 2011 action plan being another step in the right direction, the timeframe for its implementation is shortening as the October 2012 parliamentary elections approach. The IMF-required pension reform and energy tariff hikes will likely become the last "brave deed" for the authorities this year.

• The political landscape should again become conducive to reforms after next year's parliamentary elections, giving authorities another window of opportunity to move forward. Analysing the experience of Georgia, Rwanda and Qatar - the most successful reformers over the past five years - we think Ukraine's reform progress will be more modest, especially in fighting corruption.

• Yet progressing gradually in selected areas such as investment and property rights protection, financial markets development and business deregulation, Ukraine may see its 2016 Economic Freedom score improve by 5 points to 51. Despite looking small in absolute terms, this will mark a notable achievement for a country whose rating has been declining since 2005. It remains to be seen, however, if the current administration has the political will to continue to deliver on its reform programme, ultimately reducing the economy's exposure to the global commodity cycle.

Related Articles

Ukraine's largest PrivatBank faces down nationalisation fears

Graham Stack in Kyiv - Ukraine's largest lender PrivatBank has survived a stormy week of speculation over its future, but there are larger rocks ahead, with some market participants anticipating the ... more

bne:Chart - Russia begins to steady the ship according to latest Despair Index

Henry Kirby in London - Ukraine and Russia’s latest “Despair Index” scores suggest that the two struggling economies could finally be turning the corner, following nearly two years of steady ... more

Austria's Erste rides CEE recovery to swing to profit in Jan-Sep

bne IntelliNews - Erste Group Bank saw the continuing economic recovery across Central and Eastern Europe push its January-September financial results back into net profit of €764.2mn, the ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.