How (not) to reform Ukraine: Jaresko advisor roasts government over slow pace of change

How (not) to reform Ukraine: Jaresko advisor roasts government over slow pace of change
By Ben Aris December 1, 2015

An advisor to Ukrainian Minister of Finance Natalie Jaresko delivered a scathing critique of the national leadership's failure to fulfil on the promise of reform, in a paper released this week titled "How (not) to reform Ukraine".

"Over the past year and a half, Ukraine has achieved more in terms of political and economic transformation than in the previous 20 years combined. These achievements, however, fall short of what is possible and what is necessary. What is worst, the current state of affairs provides only few reasons for optimism regarding Ukraine's – reformed – future," Ivan Miklos, a former Slovak finance minister and like his boss one of the phalanx of outside advisors hired by Kyiv, said in the article published by the Central European Policy Institute. 

Miklos' criticism comes on the back of a growing chorus of disapproval over Ukraine's slow progress in enacting reforms. The Carnegie Endowment Ukraine reform monitor team's latest memo came to a similar conclusion: "The outcome of the reform process remains uncertain, and a broad consensus on key issues could prove elusive."

The 'voice of Euromaidan' Ekaterina Kruk, a political activist and political scientist who was prominent during the recent protests, was even more outspoken, expressing her bitter disappointment with the "missed opportunity" following the ouster of former president Viktor Yanukovych in her "Ukraine needs a plan B" op-ed in the latest issue of bne IntelliNews.

There has been a lot of talk about helping the Ukraine, but Western donors are becoming increasing reluctant to lend Ukraine any more money unless it delivers on reform – especially on stamping out endemic corruption. Ukraine ranks 142 in graft watchdog Transparency International's corruption index, below Russia at 136. Likewise, press freedoms are decaying, as most of the press is owned by the leading oligarchs, including President Petro Poroshenko who has refused to sell his TV5 broadcaster. Along with the authoritarian regimes in Russia and Belarus, Macedonia and Ukraine have the worst press freedoms in Europe, and its internet freedom was going backwards fast, according to Freedom House.

The upshot is that any further financial help is increasingly being linked to dealing with corruption. The IMF has delivered only $6.8bn out of the $10bn earmarked for Ukraine this year under its stand-by programme. Head of strategy at Nomura Intenational, Tim Ash, said on November 30 that the last tranche for this year would probably not arrive in December, but would be put off until the new year after an important debate on reforming the tax system, due to be debated in the Rada this December. The problem is the old oligarchic-political client system remains in place even if the top tier has been changed.

"The successful enactment of reforms is much more a political challenge than a technical one, a fact that is often underappreciated. The dual power system at the highest levels of authority, in particular, may be one of the reasons for insufficient leadership and drive. The ownership of reforms is weak; the main driver of necessary reforms is external pressure," writes Miklos. "Campaigning against reforms, even by some politicians within the ruling coalition, is much more visible than efforts supporting reform."

Risible Rada

The Rada has been more concerned with infighting than building a new system. During the first nine months of the current coalition, only 36% of the legislation proposed by the government was passed. This compares to a rate of around 100% in the first few years following a change in government in countries that have successfully implemented reform programmes, reports Miklos. "The Rada is certainly not the only culprit, but this result is simply unacceptable," Miklos writes.

The lack of political will to tackle the thorniest of problems is epitomized in the person of Prosecutor General Viktor Shokin, who has been accused of actively blocking investigations into corruption and refusing to arrest anyone, thus perpetuating the status quo. The reason he remains in office is that he is a close ally of Poroshenko, who is unwilling to give up de facto control over such a powerful office.

However, some progress appears to have been made after Shokin appointed Nazar Kholodnitskiy as the Anti-Corruption Prosecutor on November 30 – the last possible day according to the legislation that created this crucial new post. Shokin has been dithering over this appointment and delaying it for as long as possible, but yet again it seems external pressure (the foot dragging over loans and tranches of money by the Europeans, US and IMF) has had some effect.

Rather than rushing into the arms of the "European values" espoused by the protestors on Maidan last year and repeated parrot fashion by the new administration, Ukraine is being dragged towards them kicking and screaming. However, having apparently passed the bottom of the economic collapse according to the last macroeconomic data, 2016 could provide a much more conducive environment for change. The tax debate that is about to start will be another litmus test the country needs to pass.

"Partial reforms are worse than no reforms. Irresponsible and populist reforms are worse than no reforms. Ukraine needs to inject more responsibility and realism into its reform efforts in order to make them more successful and sustainable," Miklos concludes his article.