“Ukraine stands at the forefront of the battle between authoritarianism and liberal democracy. The country’s commitment and capacity to progress towards self-reliance are hampered by an ongoing two-front war—against Russia’s full scale aggression on the one hand, and against its internal legacy of corruption on the other.” —USAID 1/13/2020
By Lidia Powirska
The new president of Ukraine has had an eventful nine months, notwithstanding the downing of a Ukrainian airliner by Iranian missiles early this year. After his landslide victory last May, President Volodymyr Zelensky and his majority party moved quickly to implement their promises, such as arranging a prisoner swap with Vladimir Putin and another ceasefire in the Donbass region. But then the impeachment scandal erupted in Washington, and Ukraine was back in the spotlight, its name once again becoming synonymous with corruption. That reputation is exactly what Zelensky had campaigned to change.
While everyone is talking about the Ukraine-linked impeachment scandal in Washington, profound developments have been taking place in Kyiv under the new president. Last fall, Ukraine’s parliament, Verkhovna Rada, approved the government's Action Program until 2024. It sets out ambitious goals for the newly appointed government. Apart from a strong focus on economic development, targets of the plan included improvement of public services, human capital development, support of institutions designed to combat corruption and promote the rule of law, as well as reforms in the energy, security, and defense sectors. The apparent political willingness of the new government to implement change pleases not only Ukrainians, but also international donors. Undoubtedly, their pressure, and offers of financial and technical support, are of high significance for progress.
Overall, since the Ukrainian revolution in 2014, Ukraine has made more progress implementing reforms than in any other period since the country declared independence in 1991. The new government has set ambitious goals—however, there are numerous obstacles which may hamper its achievement.
For example, there is a lot of resistance to implementing anticorruption reforms, in large part from the bureaucrats (who benefit from bribes and fabricated fees), but also from politicians and oligarchs who have long enjoyed favored status and business arrangements. Further hindering the reforms is the destabilization of eastern Ukraine caused by the ongoing war in the Donbass, the region of eastern Ukraine where Russian-backed separatist movements are controlling territory.
Most of the members of the newly elected ruling elite are amateurs in politics but have experience in public administration. It’s now a government of technocrats, who hold expertise in their respective areas of responsibility and who tend to be younger and less beholden to the oligarchs in comparison to the previous government. The majority of the seats in the parliament enable the ruling party to adopt new laws smoothly. However, over time the influence of oligarchs will grow, and some of the new members may even revolt due to the president’s heightened, almost impulsive, demands for fast progress. But overall, these circumstances create a new momentum for progress of the reforms. This is why, especially now, consolidating the efforts of international donors supporting reforms is of the highest importance.
Ambitious plans grounded in achievements of predecessors
The new president of Ukraine, 41-year-old Volodymyr Zelensky, enjoys great public trust. According to a November 2019 public opinion poll, 62 percent of Ukrainians support him. The new prime minister, Oleksiy Honcharuk, is 35 years old, which makes him the youngest head of government in Ukraine’s history as a sovereign state. He holds degrees in economics and law and has working experience in state administration. Honcharuk’s cabinet is made up mostly of technocrats. As there are fewer career politicians in it compared to the previous administration, it raises hope for a pragmatic approach to reform.
Although Zelensky built his electoral campaign on the criticism of his predecessors, this does not change the fact that the previous government achieved some progress in reforms implementation. Within five years after the Ukrainian revolution in 2014, numerous laws regarding reforms of the security sector and judiciary were adopted, and steps were made to combat corruption. In June 2018, the Ukrainian parliament adopted a law on national security, which introduced the principle of parliamentary oversight of the security sector and laid a foundation for profound changes in it. The reception of the latter took place under enormous pressure from Ukraine’s Western partners. However, its actual implementation requires adoption of a number of secondary legal acts. This is why the new Ukrainian authorities should not lose focus on implementing the reforms initiated by their predecessors.
Zelensky’s administration has moved swiftly to adopt the Action Program for its five-year term. The plan consists of three components: human capital development, economic growth, and effective state building. Particular attention is drawn to ambitious plans for the economic development of Ukraine, including a 40 percent increase in GDP, creating a million new jobs, attracting foreign direct investment (in the amount of USD 50 billion), and an increase in foreign trade and development of infrastructure.
The parliament has been working diligently to implement this plan. Since the inauguration of its deputies on August 29, 2019, numerous laws have been passed.
For example, many of the newly adopted laws aim to increase transparency of public services to stem corruption. One of the first important projects was the adoption of the law clarifying the mandate of the High Anti-Corruption Court, a new institution that hears criminal cases about corruption crimes, earlier this year. Work is underway to create the Financial Investigation Bureau to deal with financial crimes. Planned digitization of some public services will facilitate business operations, especially for smaller enterprises. These and other anticorruption regulations aim to attract foreign investors.
Challenges for implementation of the reforms
The action most controversial among Ukrainians is the law which extends the moratorium on trade of agricultural land for a final year, passed in the first reading by the parliament in November 2019. So far, every year since 2001, the moratorium on trade of agricultural land has been extended. It ensures agricultural land remains in the hands of former collective farm employees, who, since 1991, have been able to live on and lease farmland but cannot sell it. The moratorium effectively slows down the development of the agricultural sector. A leasing-only arrangement deprives companies from long-term investments in it. After the moratorium expires in one year, the government will be able to sell the land, and coerce farmers off the land with meager incentives. Although the IMF is in favor of the proposed changes, this project is of great concern to Ukrainians. Among the concerns is possible concentration of the ownership of a large amount of land in the hands of one person or entity. Ukrainians are afraid they will be deprived of their livelihood and that the land will be acquired by foreigners.
Over time, a major challenge for the progress of Ukrainian reforms will be maintaining the ruling party’s numbers in the Ukrainian parliament. The cohesion of the Servant of the People party—a big-tent political party that counts Zelensky as an affiliate—may be jeopardized due to the connections of some of the members with influential oligarch Ihor Kolomoyskyi. Kolomoyskyi, a billionaire and former governor of the Dnipropetrovsk region, owns many businesses associated with systemic corruption. He has business ties with President Zelensky—a former comic and actor who starred in a TV show called Servant of the People, which was broadcast on a Kolomoyskyi-owned TV channel. Since the election of Zelensky as president, Ihor Kolomoyskyi has been seen as the most influential person outside the government.
Another challenge for maintaining the unity of the Servant of the People party in the near future may be the strong position of the presidential office, which has great influence on the members of the government. After all, Ukraine is a semipresidential republic. The concentration of power in the presidential center may lead to rebellion and fragmentation of the Servant of the People party in the parliament. Losing around twenty seats out of their 248 seats would be enough to break their voting block. The frantic pace of work imposed by the government on the parliament during the first weeks of its operation suggests that executive pressure could actually backfire and drive members away.
International support and pressure
After the EU, the United States is among the biggest donors supporting Ukrainian reforms. Among the main areas of financial and technical assistance provided are: anticorruption efforts, energy security, engagement of NGOs in good governance, and strengthened competitiveness of small and medium enterprises. But the US has no delusions about the extent of its influence, as reflected in a report by USAID: “The United States is walking with Ukraine on this journey along the edge of a precipice... In Ukraine, greater self-reliance will not be possible until the country achieves a decisive break with its burdened history of corruption and malign Kremlin influence.” While the US is the largest donor as a country, the EU provides the largest support as an organization. Implementation of the government's reform agenda will not be transformed into effective action without their close cooperation.
From 2014 to mid-2019, the EU and the European financial institutions have provided more than fifteen billion euros in grants and loans to Ukraine. Brussels supports reforms through dedicated projects and instruments like European Commission's Support Group for Ukraine or the EU Advisory Mission in Ukraine. The latter focuses on providing support to the civilian aspects of the security sector reform (CSSR), which entails mainly nonmilitary uniformed services, and rule of law and anticorruption efforts. Moreover, most of the EU states provide Ukraine aid bilaterally and through other organizations, such as the UN. Among the biggest donors are Germany, Poland, and Sweden.
Apart from the EU, large institutions supporting Ukrainian reforms are, among others, the United Nations, NATO, the Organization for Security and Co-operation in Europe, Council of Europe, and the International Organization for Migration.
Most of the donors supporting the Ukrainian reforms are demanding concrete results. The IMF’s loans, which are crucial for the Ukrainian national reserves and budget, are a subject of conditionality. Among the sticking points for the IMF is a dispute by the former owners of PrivatBank, the largest bank in Ukraine: Ihor Kolomoyskyi and Gennady Bogolyubov. In 2016 the bank was nationalized under pressure from the IMF due to its insolvency. The former owners are undermining the legal basis of the nationalization, seeking to regain ownership of PrivatBank or to obtain compensation from the state.
At the beginning of December 2019, the IMF agreed to give Ukraine 5.5 billion dollars in loans for 2020–2023; however, its head, Kristalina Georgieva, highlighted that “economic success depends crucially on strengthening the rule of law, enhancing the integrity of the judiciary, and reducing the role of vested interests in the economy, and that it is paramount to safeguard the gains made in cleaning up the banking system and recover the large costs to the taxpayers from bank resolutions.” Any step back of Ukrainian authorities from the reformative agenda can result in suspension of the loan tranches.
Clearly, the unprecedented reform agenda of the new Ukrainian government requires a cohesive response from international donors. Consolidation of their efforts is not possible without the cooperation of the state authorities, especially in the most sensitive areas, such as the long fight against corruption. In the end, progress will require not only international support but also a new relationship and boundaries with oligarchs. But above all, it requires resolve and perseverance of the government to implement the new reform laws.
—Lidia Powirska, Weatherhead Scholars Program Fellow, Weatherhead Center for International Affairs
Weatherhead Scholars Program Fellow Lidia Powirska is a lecturer at Jagiellonian University and an employee of the Polish Ministry of Foreign Affairs (on leave). She is a former member of the UN and OSCE missions in Ukraine, East Timor, and Kosovo. She published articles on the EU's Common Foreign and Security Policy and the Balkans. Her fellowship at Harvard University is sponsored by the ORLEN–Dar Serca Foundation and the Kosciuszko Foundation. The views and opinions expressed in this article are those of the author and do not reflect the official policy or position of the Polish government and organizations in which she was working.
Captions
-
On May 20, during the solemn session of the Verkhovna Rada in Kyiv, newly elected President of Ukraine Volodymyr Zelensky was sworn in as Head of State. Credit: U.S. Embassy Kyiv Ukraine, flic.kr/p/2g1UFqd, Creative Commons (CC BY-ND 2.0)
-
Rallies Against And In Support Of Land Sales Near Ukrainian Parliament. Farmer's tractors with placards reading 'No of the selling of Ukrainian land!' are seen during two rallies - in support and against of land reform, near the Ukrainian Parliament in Kiev, Ukraine, on 12 November, 2019. Credit: STR/NurPhoto via Getty Images
-
Top Ten Donors of Gross ODA for Ukraine, 2016-2017 average, USD million, OECD Aid at a Glance Charts, Interactive summary charts by aid (ODA) recipients. Accessed on January 17, 2020