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The Difficult Road to Reform

By Nick Krawetz

Ukraine has at last signed the Association Agreement (AA) with the European Union (EU), which aims to accelerate the deepening of political and economic relations between Ukraine and the 28-member bloc. By signing this agreement, Ukraine has agreed to respect common values (e.g., democracy, respect for human rights and fundamental freedoms, and rule of law), and to pursue legislative convergence with EU standards and norms.

At the signing ceremony in Brussels, Ukraine’s newly-elected president Petro Poroshenko declared June 27, 2014 the “most important day” in the history of Ukraine after independence. Indeed the significance of this comprehensive and ambitious agreement cannot be understated as the accords potentially provide Ukraine (along with Georgia and the Republic of Moldova) a path towards economic modernization, higher standards of living, and building more robust democratic institutions.

Signature of the AA, however, is not the end but rather the beginning of a difficult road to reform. There should be no illusions that Ukraine will transform overnight. For this dream to become reality much will depend on the AA’s proper and full implementation, which will require constant attention and resources from both Ukrainian and EU officials.

Ukraine’s new leadership will also have to demonstrate competence and political will, as previous leaders mismanaged the economy while administrations were plagued by nepotism, clientelism, and cronyism. “Integration without Europeanization” or “integration by declaration” will not suffice. The declarative nature of Ukraine’s European integration strategy can no longer be tolerated. Immediate ratification of the AA and adherence to its text is required.

The time has come for Ukraine’s leaders to actually become, in fact, leaders. They need to focus on growing the Ukrainian pie for the benefit of all rather than traditionally dividing it amongst themselves. They owe it to the people who sacrificed their lives on the Maidan, to those living in occupied Crimea, and to the roughly 200+ soldiers and 250+ civilians who have been killed in eastern Ukraine. Ukraine’s leaders also owe it to the millions of Ukrainians who yearn to live in a democratic country with an accountable and transparent government.

Words can no longer be followed by inaction. Leaders must finally demonstrate their willingness to conform to EU standards and norms. Ukraine’s leaders must also stop evading effective commitments on the grounds that no explicit EU membership perspective has been sent from Brussels. In fact, other countries such as Poland started implementing wide-ranging structural reforms in the early 1990s, and received a clear membership perspective only in 1997. As the AA clearly conveys, EU assistance is inextricably linked with Ukraine’s reform agenda and progress.

The dire need for a qualitative breakthrough in Ukrainian policies and reforms is strikingly apparent. For instance, Ukraine’s economy is extremely fragile and cannot afford to wait for a membership carrot to be granted. Wide-ranging structural reforms need to be implemented immediately and sustained over the long-term. Naturally, this will entail some economic dislocation in the short-term. Complying with IMF conditionality will also be initially painful, particularly for lower and middle-income Ukrainians. Whether citizens will be willing to suffer short-term pain for long-term gain remains to be seen.

Corruption is one of the largest contributing factors to Ukraine’s stalled transition. According to Transparency International (2013), Ukraine is the most corrupt country in Europe ranking 144th out of 177 countries. Out of the former Soviet republics, only Kyrgyzstan (150th), Tajikistan (154th), Turkmenistan (168th), and Uzbekistan (168th) rank lower. Despite government rhetoric, anti-corruption efforts and legislation to date have been largely ineffective due to the weak rule of law, selective enforcement, and inadequate oversight. A comprehensive national anti-corruption strategy to increase transparency, accountability, and integrity in the public and private sectors has also been absent. This has contributed to a trickle-down effect, perpetuating tolerance and apathy allowing corruption to flourish. Below you can see graphs showing Ukraine’s stalled transition and level of corruption.

Stalled transition graph           Corruption graph

 

The tentacles of corruption in Ukraine run deep in all directions, affecting all spheres of Ukraine’s economy and political system. No industry or sector has been left unscathed. As a result, economic growth and foreign investment have been restricted while poverty and inequalities continue to exacerbate. Moreover, public trust in state institutions has eroded as corrupt business elites circumvent weaknesses in government institutions to influence court rulings, law enforcement structures, and regulatory organizations. In regard to government bureaucracy, it is imperative that an effective, efficient, and competent civil service be built while lustration initiatives are carried out based on the rule of law, human rights, and an individualized review process.

Reforms need to be sweeping. They cannot be tactical, divisive, or piecemeal. Rather they need to be strategic, inclusive, and comprehensive. Institutions need to be forged through societal consensus and built upon a foundation that effectively steers public policy towards long-term goals that generate requisite levels of trust within society and the business/investor community. Additionally, public administration needs to be service-oriented and the government’s role in fostering value-creation in the economy for the benefit of all rather than the privileged few needs to be emphasized. The longer these types of reforms go unaddressed, the longer Ukraine’s development and transition will be delayed.

In relation to the ongoing Anti-Terrorist Operation (ATO) in the Donbas, the best deterrent against future violence is the implementation of reforms that demonstrate to all Ukrainians that a brighter economic future lies with the EU. Even if the Ukrainian military is successful, issues such as poverty, the lack of opportunity, and economic inefficiencies will continue to persist and flame resentment if left unaddressed. The solution is to reform, and reform now! It will not be easy, but the fact remains that the majority of these reforms should have been gradually implemented following Ukraine’s independence. The Ukrainian government will now have to implement reforms in dramatic conditions while trying to deal with long-standing internal political divisions, global economic transformations, and geopolitical uncertainties.

Ultimately, it is up to Ukraine to improve by measuring up to EU political and economic standards; after all, it is Ukraine that needs the EU more than the other way around. Ukraine’s adherence and commitment to the EU’s Copenhagen Criteria as well as its ability to accelerate its domestic transformation will determine the pace, depth, and scope of its EU integration.

May Ukraine seize this rare second chance and finally break from the past to become a modern European country!

 

 

Useful links and resources:

EU-Ukraine Association Agreement (Complete Texts):
http://eeas.europa.eu/ukraine/assoagreement/assoagreement-2013_en.htm
Relevant information materials and brochures regarding EU-Ukraine relations:
http://eeas.europa.eu/delegations/ukraine/eu_ukraine/association_agreement/index_en.htm
Lecture by Nicholas Burge, EU Delegation to Ukraine (Head of the Trade and Economic section):

In Transition Facebook page:
https://www.facebook.com/pages/In-Transition-Challenges-Obstacles-and-Opportunities/1436436459946172

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