KYIV – It’s been four months since Prime Minister Arseniy Yatsenyuk’s second Cabinet of Ministers took over, and there’s no denying they’ve continued down a path of unprecedented reforms.
Never has Ukraine been independent of Russia for natural gas, shifting to cheaper European sources (for the same Russian gas, no less). Revenue from sin taxes have been shifted to starving local governments. State bodies in Kyiv have dismissed hundreds of career bureaucrats and hired dozens of business executives.
All that’s nice but not good enough, said half a dozen political and economic experts contacted by this correspondent. They described the government efforts as fragmented, not reflecting consistent structural reforms with a long-term strategy, and certainly not enough to inspire confidence in Ukraine’s future.
“In order to launch a rocket into outer space, it needs to gain the first level of cosmic speed. If it flies slower, it can’t overcome the pull of gravity. The same applies to Ukraine – if we reform too slowly, we can’t surpass the empire’s pull with which it holds us back. We need to make a leap,” said Ihor Koliushko, the board chairman of the Center for Political-Legal Reforms in Kyiv.
Even the Presidential Administration has admitted the snail’s pace of reforms.
Of the 290 requirements in the parliamentary coalition agreement signed in late November, 15 have been fulfilled, or 5.2 percent, said Dmytro Shymkiv, a deputy head at the Presidential Administration and its reforms spokesman, who previously served as general director of Microsoft Ukraine. Of the 290 requirements, 34 percent don’t have a deadline, he also noted in late March.
A similar estimate was offered by the Committee of Voters of Ukraine. For the first quarter, 14.5 percent of coalition requirements were fulfilled, or eight of 55. Seven were partially fulfilled, and 19 weren’t.
It’s as though Mr. Yatsenyuk and his Cabinet are doing the bare minimum to satisfy the public, both domestically and abroad, numerous leading publications and independent experts reported.
The Cabinet’s prime motivation during its first 100 days was to shield the main corruption schemes, take control of financial streams and fill the treasury exclusively using tax and fiscal measures, the Ekonomichna Pravda news site reported, based on its analysis. That was demonstrated with hiked taxes for private and state enterprises that didn’t take into account the consequences for the respective economic sectors, the news site said.
About 82 percent of 57 bills drafted by the new Parliament that were examined by the Center for Political-Legal Reforms pose “systemic risks of corruption.” All nine of the approved bills that the center examined contain such risks, the center reported.
“The president and the prime minister, with their parties, are not the vanguard of society’s development,” Mr. Koliushko said. “Maybe I don’t know the complications and conditions they face, but months have passed, and these complications haven’t revealed themselves. There’s a lack of knowledge and desire of doing what needs to be done. And that generates distrust in all those around them, which undermines their effectiveness.”
Global organizations recognize the lack of effort, as the International Monetary Fund (IMF) responded with the very minimum in mid-March in the form of a $5 billion tranche of its $17.5 billion loan, reported Dr. Anders Aslund, a senior fellow at the Peterson Institute for International Economics in Washington.
Finance Minister Natalie Jaresko had asked for a $10 billion first tranche.
“Ukraine has a new chance to reform and save itself, but the situation remains precarious,” Dr. Aslund wrote in a column published on March 17. “The risks are many and great. Most notable are Russian warfare, the very poor state of the economy, too little reform, limited funding and the specter of a popular uprising against poverty.”
The rivalries between the most powerful politicians haven’t helped. It took a phone call from U.S. Vice-President Joe Biden to get billionaire Igor Kolomoisky to remove armed forces, allegedly under his control, from Ukrnafta headquarters on his conflict with the president, reported National Deputy Serhiy Leshchenko on his Facebook page.
“According to my sources, Biden called upon Yatsenyuk and his political force to demonstrate unity with President [Petro] Poroshenko in regards to restraining Kolomoisky,” wrote Mr. Leshchenko, who has long accused Mr. Yatsenyuk and his People’s Front party of serving Mr. Kolomoisky’s interests.
While the billionaires battle for assets, average Ukrainians see nothing tangible improving in their lives, said Yulia Tyshchenko, the director of programs to support democratic processes at the Ukrainian Independent Center for Social Research in Kyiv.
Instead their real wages have plummeted following the 57 percent devaluation of the hryvnia and subsequent inflation, which the National Bank of Ukraine estimates is as much as 50 percent in the second quarter alone.
Imports have become exceedingly expensive, particularly gasoline and automobiles. Jobs are being cut, and crime rates are rising. Small businesses are failing at greater rates without the legislative reforms they need to make doing business easier, said National Deputy Oksana Prodan.
Numerous experts expressed concern that Ukrainian citizens, particularly those living in the Russian-leaning regions, will lose patience with the new government and welcome a course that takes them back to the economic stability under Viktor Yanukovych, during which the hryvnia was entirely stable.
Only three political parties have public support at this point, according to a Razumkov Center poll conducted in early March of 2,009 respondents.
About 14 percent of Ukrainians support the Poroshenko Bloc, 9 percent support the pro-Western Self-Reliance party and 7 percent support the Opposition Bloc, which is oriented towards the Kremlin.
“Russia is putting us in a situation in which our economic and social condition is worsening,” Mr. Koliushko said. “That can’t go on forever. Sooner or later, society will get tired and the exhaustion will ripen.”
Structural reforms
Little has changed in terms of organizing government, decision-making processes, the hiring and dismissal of state workers, and relations between state bodies, Mr. Koliushko said.
State bodies were supposed to begin a process of downsizing, but instead they cut costs by eliminating benefits, bonuses and special pensions.
Only Economic Development and Trade Minister Aivaras Abromavicius made significant progress on this front, dismissing 30 percent of his staff and restructuring its operations. “I parted with all my old deputies – the desire among them to reform was close to nil,” he said in mid-March, as reported by epravda.com.ua. “In the reduced structure, not more than half the departments are led by old staffers.”
Last year’s commotion over urgent changes to the Constitution of Ukraine has largely dissipated.
Paradoxically, a 302-vote parliamentary coalition had emerged in late November 2014 – enough to make urgent amendments to the Constitution – and yet the president waited four months to approve a constitutional commission, which he did on March 31, with a motley collection of 72 members, said Mr. Koliushko.
Among the faces are Ukraine’s first three presidents, widely blamed for the nation’s current travails; former Prime Minister Yulia Tymoshenko, the controversial former prime minister widely suspected of corruption; and Serhii Holovatyi, a career politician who in the span of two decades went from the National Rukh of Ukraine to the Party of Regions.
It will be led by the 37-year-old Volodymyr Groysman, the career politician who represents the interests of President Poroshenko. Dozens of judges are also on the commission, some of whom have next to no experience in constitutional law, Mr. Koliushko said.
“A lot could have been voted on three months ago – decentralization and changes to the judiciary – when there was enthusiasm and the coalition agreement was drafted and many deputies were planning to fulfill it,” Mr. Koliushko said. “Today, when everyone sees the attitude of the president and government towards the coalition agreement is that it’s an unneeded document, the enthusiasm of deputies has also elapsed.”
A 15-member temporary parliamentary committee was also formed to prepare bills to amend the Constitution, but it has yet to submit any bills for review, with the deadline extended by a month to May 15.
Also troubling is the fact that eight of the 15 committee members voted for the January 2014 bills severely limiting the rights of Ukrainians, commonly referred to as the dictatorship laws, reported the Center for Legal-Political Reforms.
Decentralization
Decentralization is what can improve the social climate within a few years’ time very significantly and should be the government’s top priority, Mr. Koliushko said. Yet no initiators of decentralization have been included in the president’s constitutional commission, he noted, adding his belief that Mr. Poroshenko might have other plans, despite advocating the need for giving local governments more authority.
In particular, the president’s biggest challenger, Mr. Kolomoisky and his state oblast administration deputy, Gennady Korban, have been vocal about the need for fiscal decentralization.
Yet their recent conflict with the president, in which they allegedly dispatched armed men to Kyiv to maintain control of Ukrnafta, might have prompted the president to think twice about his decentralization plans, said Kyiv political consultant Mykhailo Basarab.
Mr. Poroshenko has repeated since last year that decentralization does not mean federalization, which is being demanded by Russian President Vladimir Putin.
Most Ukrainian leaders believe the proper balance needs to be reached without tipping into federalization, or what Mr. Koliushko referred to as “regionalization.” Mr. Basarab believes that a moratorium must be placed on any decentralization of state authority until the war is over.
All decentralization legislation must be passed by Parliament in two readings by July, before the Constitutional Court reviews them and a final vote can be held in the autumn. Mr. Groysman said in early March.
As for accomplishments so far, the Cabinet of Ministers has simplified the procedure for local governments to access loans.
The Kyiv government has also transferred the collection and spending of numerous revenue streams to local levels, including payments for administrative services, customs fees, real estate taxes that now include commercial property, a tax on large-engine automobiles, a 10 percent profit tax, an ecology tax hiked to 80 percent from 35 percent and a 25 percent tax on minerals.
Local governments will also collect a five percent retail sales tax on alcohol, tobacco and oil products. The measures will transfer 45 billion hrv ($1.8 billion) for local government use, the Finance Ministry estimated in mid-February.
Further reforms in this direction consist of transferring the administration of local roads, and the corresponding funds, to oblast state administrations. The construction and repair of local roads would be transferred from a single state company to several state firms, which would later be privatized, according to the Cabinet’s changes to its plan for reform of the system of state administration of roads, as published on April 3.
The judiciary
No reforms in Ukraine’s notoriously corrupt judiciary will be felt by the public for years, no matter how intensely it works, Mr. Koliushko said. Yet the overall theme of “some reforms, but far from what’s necessary” applies especially to the judiciary, he said.
To the government’s credit, the Verkhovna Rada in mid-February approved the bill submitted by the president, “On ensuring the right to a just court,” which established a contest-based selection of judges and their recertification. New disciplinary charges were introduced with deadlines for criminal prosecution.
For the first time, the selection of judges at appellate levels and higher will take place based on open competitions, rather than on appointments by the president. Independent assessments, rather than presidential appointments, will determine judges’ promotions. Yet the catch in all this is that Mr. Poroshenko retained the right to dissolve or liquidate courts.
“He kept all the levers of political influence on the judicial system with the Presidential Administration and kept the unconstitutional authority of transferring judges from court to court, which was the very instrument used effectively by Yanukovych to maintain control on the judiciary,” Mr. Koliushko said.
“If Poroshenko doesn’t want to refrain from this invented authority that’s not in the Constitution, that means that he or someone in his entourage doesn’t rule out the need to return to a similar tactic, and that’s very bad,” he said.
To the government’s credit, the selection of the Higher Justice Council has become more transparent, on a competitive basis. Yet it hasn’t been active in more than a year.
All judicial rulings will be included in a register, eliminating numerous exceptions. And for the first time, anyone will be able to video record court proceedings without needing permission from the presiding judge.
Yet once again, reform is lacking in addressing the large-scale issues, such as lustration. Legislation passed in May proved insufficient in prosecuting and dismissing corrupt judges, which requires constitutional amendments, Mr. Koliushko said. “Without a doubt, it’s too little, too slow,” he said.