By Iryna Kushnir (Staff Writer)
Ukraine’s increasing problems has been wider coverage in recent international political and media debates. Opposition about the territory of the Ukraine between pro-Russian and pro-European supporters has been steadily growing and reached two major climax points – the ‘Orange revolution’ of 2004 and the ‘Euromaidan revolution’ during 2013-2014. The aim of both of these revolutions was to support and facilitate the development of Ukraine in the European direction. In particular, the ‘Euromaidan revolution’ aimed to achieve closer trade cooperation between the Ukraine and the EU, by ousting of the pro-Russian elites from the Ukrainian central governing bodies. It was also meant to push for the membership of Ukraine in the EU. This revolution was followed by explicit involvement of Russia in the Ukrainian matters, and the Crimea peninsula was annexed by Russia just before the start of a war in the eastern part of Ukraine called Donbass.
The aim of this article is to examine local capacities for conflict resolution that already exist in Ukraine in terms of institutional reform and how these capacities could be supported. I will focus on the examination of the so-called Reanimation Package of Reforms [5] as a local capacity for tackling this crisis. This package has already yielded some change in a direction towards peace but still needs significant support if the future of the Ukraine will be written by these reforms.
The idea of setting up the Reanimation Package of Reforms emerged in January 2014 during mass protests. The Reanimation Package of Reforms unites more than 300 experts, activists, journalists, scientists, and human rights advocates from 50 of the most influential Ukrainian think tanks and non-governmental organizations. The participants of the Reanimation Package of Reforms focused on 25 key areas, and drew up draft laws together to address these areas, lobby the adoption of these laws, and monitor their implementation.
The Reanimation Package of Reforms, according to its website, has partners in the central governing bodies of the Parliament and the Government. These are the inter-faction deputy groups called the Reform Platform at the Parliament of Ukraine and the Reform Support Center under the Cabinet of Ministers of Ukraine. The activists of the Reanimation Package of Reforms themselves do not want to be a political party in the Parliament in order not to be, as they say, ‘infected by the political realities’ [5].
The development of the Reanimation Package of Reforms to this level demonstrates a significant local capacity for conflict resolution in Ukraine. The areas for reform targeted in the Reanimation Package of Reforms are all vital to overcome the recent multi-dimensional crisis in Ukraine. However, there are many problems in the development of these reforms. Many changes have been stuck at a declarative level and have not yet managed to have an impact in practice. More internal efforts and external support are needed to instigate further change. Using examples of four areas for reform, I will look in more detail at anti-corruption reforms, tax reforms, the reforms of the energy politics, and the decentralization reforms.
Anti-corruption reform
A growing and widely spreading corruption has been the cause of economic struggles in Ukraine for years since its independence in 1991. Corruption has been at the heart of many crises within the Ukrainian army in the eastern regions of the country and has been slowing many reforms in other areas [2].
There have been certain steps taken towards reducing the high level of corruption on the state level administration. A number of laws that combat corruption have been adopted and have been evaluated positively by Ukrainian and foreign experts. The idea of a special Committee to fight corruption has been introduced, and the process of its formation is underway [5].
Problems
Established corrupt practices turned out to be quite endemic and there is poor implementation of many aspects of the above-mentioned laws in practice. Old problems remain. The Parliament of Ukraine of the 8th convocation has included many representatives of the Parliament of the previous convocation [7]. This is despite the fact that the early Parliamentary elections took place to completely change the individuals in the Parliament. Moreover, frequent cases of corruption among and untrustworthiness of army management significantly weakened the position of Ukrainian army in relation to those representing the insurgents in the east of Ukraine [5].
The issue of the anti-corruption laws and their implementation in practice come with significant delays. I will give an example of the situation with state pharmaceutical procurement from international companies for life-sustaining medication for people living with such conditions as leukemia, hemophilia, and hemodialysis. A special Committee within the Parliament and the new Minister of Health Care of Ukraine agreed it was necessary to change the procedure of state pharmaceutical purchases [7]. The state had to pass its responsibility to purchase medication to UNICEF and the WHO, which would do procurement with the state money. This was agreed to help to avoid corruption mechanisms previously used by state officials responsible for these purchases. The last state procurements of the medication before the law was passed, were done by the state in 2014. The draft law introducing the change was put forward for Parliamentary review in January, 2015. The law was passed after a long delay only on April 9 of 2015. Many patients had run out of their medication supply by then. The President took another 7 days to sign the law – signed on April 16 [7]. The medication was finally purchased and then held for a period of time at the border to pass customs control before it became available for patients.
This particular reform has been evaluated positively by internal and external experts [5]. Many expensive pharmaceuticals are supposed to be purchased by international organizations according to more transparent rules and through direct contracts with manufacturers. This allows the government to fight for the best price and quality assurance of the pharmaceuticals they purchase. However, such a delay in putting forward the reform left many patients without life-important medication, which questions the value of this anti-corruption reform.
A possible key solution
A major necessary solution to the problem might be the prioritization of reforms in terms of timing. If laws pertaining to pharmaceutical purchasing had been dealt with in a fashion indicative of its urgency to people’s lives, patients would not have been left without medication for months. Currently, the establishment of a fully functioning Anti-corruption Committee, the development of which has been underway, is very important.
Tax reform
There was an argument expressed by the promoters of the Reanimation Package of Reforms that the old tax system was built to tax the majority of the Ukrainian population and fail to apply these same regulations to the members of the population who managed the country. This was complicated further by a multitude of different tax types in Ukraine.
Perhaps the biggest achievements of the tax reform within the framework of the Reanimation Package of Reforms is the reduction of the amount of tax types from 22 to 9, and the creation of an electronic profile of each tax payer. These changes are expected to simplify the tax administrative process, to decrease the pressures businesses in Ukraine had been facing, and stimulate the state economy. Indeed, some taxes have been cut and the numbers of groups that have to pay general tax has been reduced. Further, the added value tax for food and medicine has been reduced [5].
Problems
Despite these promising changes, the tax reform is criticized for only bringing limited improvements. Some old types of taxes have been regrouped to become 9 instead of 22. Moreover, new types of taxes have been introduced. For instance, an army tax has been added to the group of taxes which is taken off from salaries. 1.5% is now deducted from all salaries to help the Ukrainian army. This was justified by the initiators of the Reanimation Package of Reforms who calculated that employees would not feel much of a difference in their salary.
However, the 1.5% army tax seems not to be sufficient for providing for the needs of the army. Instead, the army relies heavily on voluntary battalions and charity fundraising, and there are still cases when the state cannot provide soldiers with suitable body armor [7].
The state economy more generally is in a critical situation, despite high taxes and external funding. High inflation coupled with the fact that many banks have gone bankrupt, and people cannot withdraw their money from some of these banks at all. Foreign currency exchange in Ukraine is now done only at the black market [5].
Possible solutions
In order for the Ukrainian economy to survive, continuous external financial support is necessary. Another important step to take is to promptly develop by which to return state money lost in the corruption activities of the ex-President and ex-civil servants to the public. Moving forward, further prevention of the recurrence of similar issues with the new management of the country would be necessary.
Energy politics reform
David Clark, a member of the non-profit organization, Russia Foundation, in London has recently put forward a provocative claim that the ‘energy reform is Ukraine’s best weapon against Putin’ (The Financial Times Ltd, 2016). The conflict between Ukraine and Russia over gas has lasted for a considerable period [3] and spiked in the recent year given Ukraine’s dependence on Russian gas and has at the same time, destroyed relationships between the countries in the context of the Crimea and Donbas events. Ukraine has technically lost Donbas coal because of the war in that territory and Ukraine suffered the loss of electricity supply at the end of 2014 because of the temporary closure of one of the reactors at the Zaporizza nuclear station [7]. A resulting necessity to schedule turning off electricity supply for periods in some towns and villages yielded the necessity of establishing an external electricity supply. The Minister of Power engineering and coal industry stated in December 2014 that Ukraine, besides buying Russian natural gas, would also buy its electricity [7].
Due to the energy reform, a new energy bill has been recently passed. The European Commission also signed a 2 billion dollar loan agreement at the Riga Summit on May 22, 2015 with Ukraine to help finance reforms, including an overhaul of the energy sector [5].
Problem
An evident problem in the energy sector that should be addressed as soon as possible is the multi-layered gas pricing structure. According to Pirani et al [4], more than 10 different pricing rates have been noticed to exist in Ukraine.
Solution
These pricing rates would have to be redefined to achieve a single effective rate and encourage a competitive market. This could resolve the current problem of a gas price for Ukrainians that jumped up 5 times from what it used to be in 2013 [4]. Some critics also speculate that the price jump was a strategic move of the state to facilitative the upcoming pre-elections campaign [5]. However, it should be acknowledged that a high gas price for the population in Ukraine is also largely dictated by the price set by Russia. In the long run, investing in the development of localized Ukrainian energy production could ease gas price dependency and more general geopolitical relations between Ukraine and Russia. For instance, there are gas and oil resources in Ukraine in the Carpathian region in the west as well as in the north-east of Ukraine [3].
Decentralization and regional development
Ukraine has been widely recognized, primarily in policy-making literature, as a country with a persisting legacy of high centralization in all areas of life [1], [8], [3]. The initiators of the Reanimation Package of Reforms have been advocating change. They have been arguing in favor of decentralization by broadening the authoritative power of the local level and harmonizing its cooperation with the central government bodies.
Problems
There are many challenges that need to be solved to smoothen the decentralization process. For instance, the proportion of state versus municipal income from taxes needs to be dealt with. The tax reform, which I briefly explained earlier, actually lowered municipal income by around 2%, while the state tax income increased by around 2%. A different dynamic would have been needed for the decentralization purposes. Apart from this, there are two major problems associated with the decentralization and regional development. They are the Crimea and Donbas questions. Perhaps it would be more logical, time-wise, to focus on the Donbas question now, since this is the territory where the war is taking place, where people are killed and infrastructure is being ruined.
Possible solutions
Possible solutions to this complicated decentralization situation include continuous international negotiations with Russia. The two cease-fire agreements on Sep 5, 2014 and Feb 12, 2015 have not been fulfilled as presupposed [7]. However, the current state of affairs in eastern Ukraine suggests that this type of negotiation may be helpful in resolving the situation. The US Assistant Secretary Victoria Nuland stated that it is very important now that ‘all sides walk the walk, not just talk the talk’ [6]. These talks should go further and switch the focus from trying the find more evidence of Russia’s involvement in eastern Ukraine to actually urging the Russian government to remove its volunteers from this region. Russia has already officially admitted the true work of these volunteers there [7]. Next, international inspection of Russian humanitarian convoys, as suggested at the recent meeting between Victor Nuland and Ukrainian and Russian officials, should be conducted to avoid the supply of Russian weapons to insurgents.
Lastly, the decentralization and regional development reform should go hand in hand with the minimization of the promotion of Russian goods in Ukraine and Russian ideological propaganda, which comes primarily from Russian TV channels. The Polish ex-President Alexander Kvasnevsky, in an interview, said that external aid is important for Ukraine, but Ukraine has to take the responsibility of driving this change, particularly in the area of internal reforms [7]. Ukrainian state officials should not just count on the sanctions that Western countries implement against Russia. Rather, Ukrainian state officials should be encouraged to take responsibility for their actions that pertain to the relationship between Ukraine and Russia.
Conclusion
In this post, I have analysed four types of reforms developed in Ukraine under the initiative entitled the Reanimation Package of Reforms: anti-corruption reforms, tax reforms, the reforms of the energy politics, and the decentralization reforms. The discussion above has demonstrated that the development of the Reanimation Package of Reforms represents Ukraine’s exciting potential to move towards lasting resolution of the conflict that was waged within its territory. Actions deriving from outside its territory are essential, however, Ukraine does not have control of the external realm. Instead, what these reforms allow for is control over the internal, which cannot and should not be underestimated in its power to create positive change. Real, honest implementation of these reforms can strengthen the position and stability of Ukraine within both internal and external fields of conflict. This would also lower the chances of a third revolution, a possibility proposed by some experts [5]. Before looking with fear at this proposed future, it is first important to explore the present and the current potentialities housed within the reforms to build a future that moves away from another revolution and current difficulty and instead, toward a future built on lessons learned and educated hope.
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