New Ukraine government pledges to 'utterly transform' economy

By bne IntelliNews December 10, 2014

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Prime Minister Arseny Yatsenyuk announced on December 9 that his new government would embark on a programme of sweeping reforms to "utterly transform" Ukraine's economy. "Our answer is decentralisation, deregulation, de-bureaucratisation and responsibility of each government official," he said when presenting his Action Programme at a government meeting on December 9.

Yatsenyuk said that  - first up -  the number of state officials would be slashed by 10% in 2015, following the 28,000 officials he claimed had been fired in 2014.

"Reducing the quantity [of state employees] and increasing efficiency and wages - this is the path we have chosen," he said. In return, he promised that the remaining public sector workers would receive salary boosts. "This concerns not just officials, but all people who work in the public sector - teachers, doctors, all those who receive funds from the budget and serve the country," he promised.

The intended shake-up will affect all walks of public life, Yatsenyuk assured. "Making changes at the level of the government is not enough. Similar changes must be carried out in each ministry, in each department, in each administration both on regional and district levels, and in all authorities in general." In early 2015 the government will also introduce transparent competitive appointments to the civil service, Yatsenyuk added.

As part of its drive to deregulate the economy in a similar way to reform poster boy Georgia, only "28 out of 56 regulatory authorities will remain after the first stage of reforms," and the number of supervisory functions will be slashed from 1,032 to 680, Yatsenyuk said, with the required laws to be passed in early 2015. 

At the same time, Ukraine will embark on the complex transition from Soviet industrial standards to European standards, introducing 1,500 new standards for goods in 2015. 

The government's plans also encompass radical fiscal decentralisation, handing over fiscal and taxation powers to local self-government. "With the money we will give them responsibility, as rights always imply responsibility," Yatsenuk said.

Yatsenyuk announced a string of new anti-corruption initiatives: the establishment of a National Anti-Corruption Agency, a National Anti-Corruption Bureau, a State Bureau of Investigation, expenditure and income monitoring of civil servants,  and the creation of a national police force, as part of a reform of the Interior Ministry. Yatsenyuk also said that the judiciary would be completely reformed, with recertification of all judges.

Yatsenyuk promised that armed forces spending would be boosted to 5% of GDP. 

Regarding the internationally crucial energy sphere, Yatsenyuk said he would set up two public-private corporations to manage Ukraine's natural gas transit and storage systems and that 49% stakes in these firms would be sold to investors from the EU and the US as early as 2015, with Ukraine’s energy system to be fully integrated into the European energy system by 2017. 

Yatsenyuk proposed privatising 1,200 out of the currently 1,500 state-owned firms currently excluded from privatization, but only after prices had recovered from the current economic downturn, he said.

Ukraine's nuclear power generation will also be upgraded, said Yatsenyuk, with two new nuclear reactors for Khmelnytskiy power station to be completed by 2018 and others enhanced, as measures to lessen Ukraine's energy dependence on Russia.

"Our biggest concern is whether they [the reforms] are part of a larger strategic plan, which seems to be lacking. A random, patchwork implementation of reforms – particularly applying those that come easier than others – simply won’t be effective," writes Concorde Capital analysts in a research note. "The announced reforms are a substantial step forward (…). But we can’t foresee the hurdles that will emerge in the state bureaucracy apparatus, as well as the always tumultuous parliament," the note concludes.

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