Today, on 14 April 2017, the Government of Volodymyr Groysman turns one. It will lose its immunity, meaning that it is now possible to dismiss it, something that could not have been done over its first year of work. The ministers headed by Groysman gave an unofficial report on the results of their year work. They presented it in the format of hard-talk during Forum “Government under the Microscope: Yearly Results and Challenges” in front of the representatives of Ukrainian NGOs and journalists. The forum was organized by the Reanimation Package of Reforms (RPR).
According to the opinion poll conducted among the expert community by Ilko Kucheriv Democratic Initiatives Foundation in partnership with RPR, the most successful steps of the Government of Groysman are introducing of e-declarations for civil servants, the launch of health care reform, introducing the Prozorro public procurement system, and increasing the minimum wage.
What Groysman’s government did right
Introduced e-declarations for property and income of civil servants. Since September 2016, state officials in Ukraine are obliged to declare their property. In case an official provides the information with a delay or if there are differences between the property on paper and in real life, the civil servant will be punished. There will be administrative penalties if the difference is equal to 100 to 250 minimal wages and criminal penalties if the difference is more than 250 minimum wages. After the introduction of e-declarations, the National Anti-Corruption Bureau opened its first criminal proceedings against civil servants.
It has been an important step towards transparency in the country. For the first time, Ukrainians saw the real assets of those who are in power – rumors of their enormous wealth were officially confirmed.
Launched reforms in the healthcare sector. For many years, Ukrainian healthcare institutions had suffered from a lack of resources and were associated with an enormous level of corruption and the so-called medical mafia standing behind it. Quality healthcare became a luxury which is nearly impossible to receive without bribes. After the Euromaidan revolution of 2014, several healthcare ministers had been switched, but substantial changes started taking place when Uliana Suprun took the position of acting Healthcare Minister in July 2016. Her plan of the health care reform has been recently supported by the G7:
“We believe that the passage of this plan, which defines State guarantees for the financing of insured medical services and medicines through the National Health Service of Ukraine, is a sign that Ukraine is ready and committed to moving forward with its vital reforms, in healthcare and anti-corruption, for the benefit of its citizens.”
However, the question of appointing her afull-fledgeddged minister is still on the agenda and her candidature is not supported by the dedicated committee of the Ukrainian Parliament.
Introduced public procurement through the Prozorro electronic system. The system was developed by Transparency International Ukraine with the help of volunteers, NGOs, business community, and state bodies of Ukraine and other partners.
Mandatory procedures through the electronic system were introduced. The first phase applies to the main funds and monopolies, the second to all ordering customers. Also, an electronic auction, which includes automatic evaluation of tenders, has been introduced. The reform was awarded the World Procurement Award 2016 at Public Sector Awards in London for creating and implementing an e-procurement system with a unique architecture and philosophy. It also won prestigious international award – the annual prize of the Open Government Awards 2016
Increased the minimum wage to UAH 3,200 ($119). However, this positive step is also regarded as the government’s major failure, as the burden of paying the raised minimum wages was placed on the shoulders of taxpayers. The small and medium business in particular felt the increase of the tax burden. Also with the bigger minimum wages entrepreneurs can afford less employees and had to look for the ways of avoiding paying taxes for more employees, elevating the risk that the number of shadow employees will increase.
What Groysman’s government did wrong
The poor business climate and unattractiveness of the Ukrainian economy for international investors are named as one of the largest failures of this government. And these two points are related to another government’s failure – the delay with the pension reform. So far the share of retired people in Ukraine is about 30%. The overwhelming majority of them receive retirement payments of UAH 2000 ($74). The situation is critical for people who receive only this payment. Today’s pension system does not ensure equitable pensions based on the period that a person spent working. In most cases, the pensions for people with diverse work experiences are equalized. Moreover, today every working person maintain 1.1 pensioner. In 10-20 years it is expected that the amount will increase to 1.3-1.5 retired per working person. Today’s working generation does not own the paid contributions as the money go to current retirees, which is at the roots of another problem – a lack of motivation to pay social taxes.
A lack of the land reform and failure in the energy sector were among other failures.
Delay with the land reform. More than 7 years ago the moratorium on selling land for citizens was announced as a temporary measure to avoid the situation when the large amount of land would be concentrated in the hands of certain landlords. According to experts, because of this step Ukraine’s economy has not received $40-50 bn. Also by such a step the state violated the rights of ownership for citizens.
Failure of the energy sector reform. None of the 4 ministers who attended the forum had discussed the painful question of the results of the energy blockade of the occupied Donbas. The event became a turning point in the interaction between Ukraine and the occupied territories. It has also uncovered the government’s failure to manage the energy sector. Last year the government undertook steps to reduce Ukraine’s dependence on the coal from the occupied parts of Donbas. However, in the end, it turned out that the steps had not helped to reduce the dependence. Moreover, it raised suspicions on whether the government was in cahoots with Rinat Akhmetov, the richest man in Ukraine and the monopolist of the coal energy sector in Ukraine, as Akhmetov was the one who benefited from the measures undertaken by the government.
Talking about the energy reform, the situation on the gas market was discussed. And the name of another monopolist, Naftogaz, was mentioned during the forum for several times.
“We also put forward the conception of reforming the heat and power energetics. It foresees taking away the monopolist Naftogaz from the market. We created a large market – 15 mn households for the one company in the country which is a monopolist and which today sets a larger price for gas than operators who are ready to enter the market,” said Hennadiy Zubko, the Vice Prime Minister and the Minister of the Regional Development, Construction, Housing and Utilities of Ukraine.
Mr. Hroysman also named his top priorities for 2017:
- To launch the pension reform which according to the Prime Minister should become fair and without deficit. As Hroysman told, the retainment payments should be increased, as today 85% of pensioners in Ukraine live in poverty.
- To sell the state enterprises. “There are 3500 state enterprises in Ukraine. The one who can manage them has not been born yet,” said the Prime Minister.
- The introduction of land turnover in Ukraine, according to the model which has been worked out with the World Bank.
The Prime Minister also stressed the significance of developing IT technologies in Ukraine:
“Our IT specialists are one of the best in Ukraine. However, they do not create products in Ukraine. They create it in the Silicon Valley, in other countries. They do outsourcing work by other companies and create products and added value for them. Our task is to develop a new law which will allow to create conditions for building high tech clusters. We realize that the level of penetration of technologies in the traditional economy is high in the world. We are already behind. And if we do not understand it now, we will lose our competitiveness in the shortßterm perspective.”
Interaction with civil society
Among other questions raised at the forum was the ambivalent Amendments to the Law of Ukraine on Prevention of Corruption. According to it, the anti-corruption NGOs will have to submit e-declarations similar to those for the state officials. The supporters of the legislation stick to the line that today’s fighters against corruption are future politicians so that they should be transparent from the very beginning of this path. However, these arguments befit the ideal world. In reality, it is expected that the legislation will likely result in attacks on those who fight corruption in Ukraine.
NGO representatives also pointed out that the interaction between them and the government is often inefficient:
“For the second year in a row, the Reanimation Package of Reforms provides several pages of suggestions for the Cabinet of Ministers. We did it last year. We also did it this year. However, somebody throws our theses away,” said Sviatoslav Pavliuk, Leading expert of the RPR group on energy sector reform.
The future of this government
On April 11, Groysman delivered his report on the year’s results. According to him and President Petro Poroshenko’s representative in the Ukrainian Parliament, there is no need in the government’s resignation.
However, discussions on dismissing the current Cabinet swirled as its first anniversary approached, bringing the loss of immunity with it, with Yulia Tymoshenko’s party Batkivshchyna being at the epicenter. In mid-February, Batkivhschyna attempted to pass a bill to dismiss the Cabinet. However, then there were no real reasons for such a step.
On April 13, one day before the anniversary Batkivshchyna repeated the attempt. Tymoshenko announced the initiation of the bill on it, however so far there is no text of it on the Parliament’s site.
In the situation of a political crisis, one of the possible scenarios for Ukraine is an early parliamentary election, another one is Groysman’s resignation. According to experts, the politician who was perceived to be “Poroshenko’s man” at the outset of his work as Prime Minister has evolved into an independent figure which may not satisfy the president one year later.
Yet others say that Groysman and the president are preparing for early parliamentary elections in Autumn. Evidence for this are the planned higher pensions, which might be used as a tool to gain the favor of pensioners, who are the most active part of the electorate.
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