Since the signing of the Association Agreement between Ukraine and the EU, the financial situation of the former has remained weak. Debates about economic, financial, military and political assistance are the major topic discussed with foreign partners. While the military aid is mostly denied, financial help is being granted on a permanent basis. During last year and at the beginning of 2015, Ukraine received vast sums of money from the EU, USA, Japan and Canada. Yet securing the financial assistance is, obviously, not enough. The problem remains: the number of investments – already declining over past two years – lingers at a very low level.
On 28 April, the Ukrainian Government invited international partners and potential investors to the International Support for Ukraine Conference, which was to accelerate the process of securing financial help to Ukraine. Therefore I would like to reflect on the outcomes of the event, more known as the Donors’ Conference, and to evaluate the progress that has been made thus far.
The Conference – planned over half a year ago right after launching the reform process by the newly elected Government of Ukraine – was attended by many Ukrainian and European politicians, representatives of Kazakhstan, Japan, the USA, and more.
Reforms in Ukraine: the major step towards European Perspective
Today, the reform process in Ukraine is based on a set of major documents which govern not only how and when the reforms must be implemented – or, at least, voted for in the Parliament (Verhovna Rada) – but also how money, granted to Ukraine by foreign donors, should be used.
These 5 major documents are EU-Ukraine Association Agenda, Strategic Vision “Strategy 2020”, Coalition Agreement between Parliamentary Fractions, Ukraine’s Government Programme for 2015 and Memorandum with the IMF. All documents are built around the EU-Ukraine Association Agreement and its Agenda.
This set establishes the strategic reforms that must be implemented in next 5 years and mainly include the Constitutional Reform, Elections Legislation Reform, Public Procurement Reform, Anti-Corruption Reforms and Lustration, Judicial Reform, Public Administration Reform, Decentralization, Deregulation and Entrepreneurship Development, Law Enforcement System Reform, National Security and Defence Systems Reform, Health Care Reform, Tax Reform, Energy Sector Reform (with a quite substantial part of the Energy Independence Program), Financial Sector Reform, Education Reform, State Property Management Reform, Agriculture Reform and Ukraine Global Promotion Program.
The Ukrainian government together with the President and Parliament draw a program which embraces almost the whole national economy. This is also mirrored in statements of European experts and international advisors, who have already suggested reforming 85% of its sectors. In the opinion of President Petro Poroshenko, these reforms would be an initial step for Ukraine in its accession to the European Union.
Supporting Ukraine’s Economic Reforms
The basic idea of the Donors’ Conference was to invite European leaders and investors to a platform where they can discuss challenges and perspectives of reforms, and to attract necessary investments.
On the part of the European Union and its member states, Jean-Claude Juncker declared that the EU would grant Ukraine a further package of financial help, which in total amounts to 11 billion USD in the next few years. Slovenia also pledged to provide Ukraine with humanitarian aid, treat Ukrainian soldiers in rehabilitation centers and provide psychological rehabilitation to the children affected by the war. It was echoed by Canadian Minister for Immigration and Citizenship Chris Alexander, who stated that Canada will support Ukraine with 18 million USD of financial help. Kazakhstan, interestingly, joined this cohort of states who gave Ukraine (or rather announced) international financial support during the Conference. The voices of support were also backed by the European Investment Bank, announcing a 3 billion EUR loan for 2015-2016. The Minister for Science, Education and Innovation of the Czech Republic informed about readiness to support Ukraine in education reform and the promotion of free media.
Notwithstanding the fact that some money was granted, international perception of the results of the donors’ conference is to partly pessimistic. Charles Grant and Ian Bond from the Centre for European Reform (London) assert that the EU has not shown the same unity with regard to economic support as it has demonstrated in the case of of sanctions, “EU leaders have not yet shown a similar determination to support the government in Kyiv. At an EU-Ukraine summit and related donors’ conference, on April 27th and 28th, EU leaders failed to come up with any fresh money. The EU should unlock its vaults, while making further money conditional on the continuation of reform.The government in Kyiv is doing enough of the right things to deserve support”.
Another case to be thoroughly considered is investments. Not many proposals were made during the conference, which was generally intended to attract highly needed FDI. I heard open declarations to invest in Ukraine this year from businessmen from Germany and Netherlands, but only in case if Ukraine continued reforms, especially those concerning monetary, financial, tax legislation, as well as law enforcement and judiciary.
Altogether, investment climate in Ukraine has yet to be sufficiently strengthened.
Fortunately, the Donors’ Conference showed that European leaders, at least those who visited Ukraine, are eager to see the country among the EU Member States in the nearest future and still express their readiness to give the country financial help and promote investments. Of course, no one would agree that Ukraine will become a member of the Union in next 5 years; we are still waiting for the full ratification of the Association agreement by all 28 EU Member-States and the Euratom.
Now the next step for Ukraine is the Eastern Partnership Summit in Riga where important decisions about visa regime may be adopted. But the responsibility for the success on the Summit lies exclusively on Ukrainian authorities, who declared their willingness and readiness to make reforms – almost the only condition to attract foreign help, invite investments and achieve a European perspective.
About the author:
Oleksand Yaroshchuk is an editor of the European Space portal, where he writes articles about European affairs, international relations, democracy, civil society trends and human rights. He is a member of the Ukrainian Police Reform Council and holds a BSc diploma in international law, and studies Intellectual Property and International Relations as his MSc.