Foreign Policy

Electing President of the European Parliament: what matters?

January 17, 2017 the European Parliament elects the president. Seven candidates from different factions compete for the position. But the best chances of winning have candidates of two largest factions of the European Parliament - Antonio Tajani of the European People's Party and Gianni Pittella of the Progressive Alliance of Socialists and Democrats. President of the European Parliament is elected for 2.5 years. The President of the European Parliament is one of the highest political positions in the EU.There is such an informal practice that the President of the European Parliament in turns is elected of the two biggest factions - the European People's Party and the Progressive Alliance of Socialists and Democrats - to simplify the procedure of adopting the EU legislation. But this time because of Brexit, the growth of nationalist parties and other issues there is no mutual understanding between the major European factions. In particular, the candidate of the Socialists and Democrats Gianni Pittella opposed the monopolization of power in the EU by the EPP, as the representatives of the latter now hold the post of President of the European Commission and the President of the European Council. As a result, without the support of other factions, including sceptics, neither Tajani nor Pittella can expect to win. This year's presidential elections demonstrates the European crisis of management in the EU institutions, which takes place against the backdrop of Brexit, migration challenges, financial challenges and strengthen anti-European forces. The political struggle for the post of President of the European Parliament becomes acrimonious, as this is the only EU body, whose members are directly elected by the EU citizens. Elections of the President of the European Parliament may have an indirect impact on relations between Ukraine and the EU. The political battle for the presidency of the European Parliament once again demonstrates how difficult it is for the EU institutions to take decisions in turbulent times. The lack of consensus in the European Parliament is one of the reasons for the EU delay with visa-free regime for Ukraine.

Yevgeniy Yaroshenko
17.01.2017
Foreign Policy

Results of the foreign policy of Ukraine for 2016

Ukraine’s foreign policy agenda has been defined by post-Maidan challenges: Russian aggression, conflict in Donbass, European integration aspirations, economic decline of the country. During 2016, Ukraine managed to strengthen its positions in national security area and increased its military capacities but failed to advance any of its priorities in foreign policy. Moreover, there is a deadlock on Minsk, increasing hostilities with Russia, growing challenges with the EU, uncertain US future policy on Ukraine, more problems with neighbors in the region. In 2017, Ukraine’s international situation may change for the worse if Kyiv will continue with its current rich militaristic rhetoric and poor reforms records. Minsk process In 2016, Ukraine appeared at the crossroads of the Minsk process and has been facing an uneasy dilemma: either to continue implementing political provisions of the Minsk agreements under external pressure or withdraw from such unpopular obligations under public pressure. Kyiv opted for imitating implementation of the Minsk agreements that allowed the government to balance its dependence on foreign and domestic factors, buy time and prolong sanctions against Russia. As a result, there was no significant progress in the Minsk process throughout 2016. Meanwhile, the war in Donbas remains a low intensity conflict. First of all, there were no changes in implementing the political provisions of the Minsk agreements. Conducting local elections in uncontrolled Donbas, deploying an OSCE police mission in Donbas and elaborating a roadmap on implementing the Minsk agreements were the most frequently discussed issues during the meeting of heads of state in Berlin (October 2016) and several meetings of foreign ministers in the Normandy format (Ukraine, Russia, Germany, France). The members of the Normandy Group did not meet a deadline to agree on roadmap (November 30, 2016) due to divergent views on the sequence of implementing political and security provisions. In early 2016, Ukrainian diplomacy demanded that conducting elections in uncontrolled Donbas shall be proceeded by deploying OSCE armed police mission along the disengagement line, uncontrolled part of the border and future polling stations. Despite a preliminary agreement on the OSCE police mission, the members of the Normandy Group did not agree on its mandate and areas of presence. Besides, a pressure by Russian, French and German diplomats did not convince Ukraine to adopt a law on local elections in uncontrolled Donbas before necessary a security environment is met. Just as elections in uncontrolled Donbas, changes in the Constitution of Ukraine and amnesty for pro-Russian insurgents were not on the agenda in Kyiv due to a lack of parliamentary support and a risk of public anger. However, regular meetings of the Trilateral Contact Group (Ukraine, OSCE, Russia) produced some results in implementing the security provisions of the Minsk agreements. In particularly, the parties agreed to withdraw troops and hardware in Zolote, Petrivske and Stanytsia Luhanska, which has already taken place in the former two settlements. Moreover, a number of Ukrainian POWs were released from Russian prisons or DPR/LPR capture and subsequently exchanged, including Nadiya Savchenko, Yuriy Soloshenko and Hennadiy Afanasiev. At the same time, 109 Ukrainian citizens are still held in prison (as of November 2016). Their future is dependent on Russia’s position that binds prisoner exchange with Ukraine’s political concessions. The changing international environment will make it harder for Ukraine to resist the pressure from Russia and the West in 2017 with regard to a new composition of the Normandy Group following presidential elections in France (François Hollande will not run for a second term) and parliamentary elections in Germany (Angela Merkel may lose the battle for chancellor). Ukraine-Russia relations There were no grounds for mitigating Ukrainian-Russian confrontation in 2016 as a result of the annexation of Crimea and the war in Donbas. Despite maintaining diplomatic relations, Kyiv and Moscow attempted to compromise mostly by means of multilateral channels (Normandy Group, Trilateral Contact Group, Ukraine-Russia-EU negotiations) or some individual contacts between Ukrainian and Russian politicians. Ukraine managed to revive the Crimea issue on the international agenda. It was preceded by tougher political persecutions by Russian authorities in Crimea (namely, banning Mejlis of the Crimean Tatar People) and stirred-up efforts by the Ukrainian diplomacy. The militarization of Crimea and violations of human rights in the annexed peninsula were mentioned in the European Parliament resolution ‘On the human rights situation in Crimea, in particular of the Crimean Tatars’ (February 4, 2016), two PACE resolutions ‘Political consequences of the Russian aggression in Ukraine’ and ‘Legal remedies to human rights violations on the Ukrainian territories outside the control of the Ukrainian authorities’ (October 12, 2016) and the annual Report on Preliminary Examination Activities by the Office of the ICC Prosecutor (November 14, 2016). Moreover, the UN General Assembly is expected to vote on the draft resolution on human rights situation in Crimea in the near future that was approved by the Third Committee, which may become the first UN document where Russia is recognized as an occupying power. Besides, higher attention was paid to Crimea due to an incident in Armiansk in August 2016 and the Russian parliamentary election in September 2016, which was held in the annexed peninsula. A number of documents covering the conflict in Donbas were also adopted. Namely, the above PACE resolutions and ICC Report are the only multilateral documents so far that provide that the situation in Eastern Ukraine has features of international armed conflict involving Russia. The Ukrainian-Russian enmity has naturally affected Ukraine’s foreign economic activity. There was a higher drop in trade between Ukraine and CIS countries in 2016. It cannot be ruled out that the Ukrainian-Russian conflict may face a transformation in 2017 after Donald Trump is sworn in as US president, the EU becomes increasingly involved in domestic disparities and early parliamentary elections are held in Ukraine. Ukraine-EU relations In 2016, Ukraine expected to benefit from the advantages of European integration that were achieved after 2014. However, such expectations were not delivered due to increasing ‘Ukraine fatigue’ in Europe and the unprecedented systemic crisis in the EU. As a result, Kyiv and Brussels came closer to a crisis of mutual trust. Ukraine lacks efficient incentives to continue necessary reforms. At the same time, EU domestic problems made relations with Ukraine secondary to Brussels. First of all, the ratification of the Ukraine-EU Association Agreement was not completed due to the Dutch advisory referendum in April 2016, in which 61% of voters were against ratifying the agreement. As a result, the agreement continues to be provisionally applied, while its formal entry into force depends on negotiations between the Dutch government and EU leaders. A way-out of this situation is likely to be postponed until Dutch parliamentary elections in March 2017. Amid the drastic decline in Ukraine-EU relations in 2014-2015, the Ukrainian economy has not benefited from the Deep and Comprehensive Free Trade Area (DCFTA) so far applied from January 1, 2016. Trade turnover between Ukraine and the EU (both export and import) started to increase in Q2 2016 for the first time since 2013. Though Ukraine carried out all requirements pursuant to the Visa Liberalization Action Plan (VLAP), including launching e-declaration of incomes, the EU has not granted a visa-free regime to Ukrainian citizens. Migration fears in some EU member-states have made granting the visa-free regime to Ukraine dependent on revising the visa suspension mechanism. In November 2016, Brussels held the EU-Ukraine summit, which brought modest achievements amid Ukraine’s European aspirations. Ukraine managed to receive € 170 mln totally in support for public administration reform, fighting corruption and strengthening the rule of law. During the summit, the parties also signed the Memorandum of Understanding on a Strategic Energy Partnership which assigns Ukraine a role of EU key transit partner. However, the EU-Ukraine summit did not bring any progress in completing the ratification of the Association Agreement and granting the visa-free regime for Ukraine. Ukraine-EU relations are expected to become even less intensified in 2017 with regard to turbulent political developments in Europe: Brexit talks, elections in the Netherlands, France and Germany as well as far-reaching consequences of the Italian referendum on constitutional changes held in December 2016. Ukraine-US relations Though Ukraine has been secondary to US priorities, Washington remains Kyiv’s key strategic partner in countering Russian aggression. Under the presidency of Barack Obama, the US never hesitated over prolonging sanctions against Russia. Furthermore, in 2016, the US provided $335 mln of military-technical assistance aimed at training Ukrainian soldiers, non-lethal weapon and advisory support for reforming the defense sector. Besides, Ukraine held US-led Rapid Trident and Sea Breeze multinational exercises involving a number of NATO member-states. However, the US has been distanced from conflict resolution in Donbas since 2014, shifting responsibility for European security to Germany and France. At the same time, the ‘Ukrainian crisis’ was an agenda item during Russia-US channels – Lavrov-Kerry and Surkov-Nuland talks. The US presidential elections have become a primary source of uncertainty regarding further Ukraine-US relations. The Ukrainian political elite mostly favoured Hillary Clinton over Donald Trump, who has been perceived as the ‘pro-Russian’ candidate given several controversial statements on developments around Ukraine. Such incautious acts will complicate bilateral relations under the Trump administration. Ukraine and the whole world await the first steps taken by the 45th US president to understand how Trump’s foreign policy will coincide with his election program. The future US president is unlikely to pay higher attention to Ukraine than his predecessor. This may result in diminishing US financial and military assistance to Ukraine under Trump. Moreover, a possibility of ‘geopolitical deal’ between Trump and Putin is also a subject of debates.

ICPS Press
30.12.2016
Economic Analysis

Economic Analysis: Economic Trends and forecast for 2017

  According to preliminary calculations, Ukraine managed to tackle recession in 2016 and demonstrated little economic recovery. Annual GDP growth for 9 months amounted to 1.2%. A gradual way-out of economic recession is proved by the fact that a negative gap in GDP has been narrowing since the second half of 2015. It is expected that a positive dynamic in GDP will continue in 2017 since a risk of the armed conflict escalation has decreased and economic agents have become increasingly inclined to investment and long-term consumer-oriented decisions. GDP The IMF – Ukraine’s key creditor – predicts that Ukraine’s GDP will grow by 1.5% in 2016 while inflation rate will amount to 15.1%. The World Bank expects that that GDP will grow by 1% while inflation rate is estimated at 15%. The EBRD predicts GDP growth at 2%. According to government forecast, Ukraine’s GDP growth will amount to around 1.5% at the end of the year. According to the State Statistics Service of Ukraine, the GDP has grown by 1.8% in Q3 2016 in comparison with 1.4% demonstrated in Q2 2016. Thus, a period-to-period GDP has grown by 0.4% in comparison with Q2 2016. According to ICPS calculations, annual GDP growth for 9 months will amount to 1.2%. In Q2 2016 a real GDP growth has reduced to 1.4%. Key factors that contributed to economic recovery were a domestic demand for investments and a positive dynamic of household consumers. The reasons for increasing investments are little improvement in business expectations and increasing capital expenditures of integrated budget. In its turn, a net export resulted in negative contribution to GDP dynamics. A transit potential remains limited in Eastern Ukraine. Besides, Russia strengthened transit restrictions. Meanwhile, a high harvest resulted in high agricultural production. In Q3 2016 an economic growth was restricted by a net export. There was a negative balance of current account in Q3 2016 ($ 1.7 mln) due to a higher than expected deficit in trade of goods. Reduction in export of goods was facilitated by deteriorating economic state of affairs. Meanwhile, there was a resumption in import of goods resulted by increasing purchases of natural gas and domestic demand. Inflation The National Bank of Ukraine predicts that inflation in Ukraine will amount to 12% at year-end of 2016, the World Bank - 15%. State Budget of Ukraine for 2016 provides for annual inflation at 12% and currency rate around 24.1 UAH per USD. The ICPS forecasts the inflation rate at 12% under the currency rate at 26.1 UAH per USD. In October 2016, consumer prices rose by 2.8%, accelerating the annual growth in consumer prices in October to 12.4%. CPI growth has been 9.4% since the beginning of 2016. The main factors that contributed to inflationary pressures in Q3 2016 was a significant increase in heating tariffs, increase in water prices, a slight increase in excise duties on alcohol and tobacco products as well as an accelerated seasonal rise in prices of dairy products in October 2016. There were signs of recovery in economic activities in Q3 2016 in countries that are Ukraine’s main trade partners. However, global price environment for Ukrainian exporters deteriorated primarily due to significantly lower prices for agricultural products - grains and oilseeds. In line with a seasonal increase in demand for foreign currency and reinforced uncertainty in obtaining official external financing from the IMF, this resulted in devaluation pressure on exchange rate in August and early September 2016. ICPS expects that consumer inflation will be within 12% at year-end of 2016. However, there are several factors that can cause fluctuations in inflation. The main risks include the following: the abolition of state regulation of social value products, a significant correction in prices for raw foods, increase in administrative and regulatory prices. Foreign trade In 2016 Ukraine’s foreign trade continued rather radical transformation. It was primarily caused by the military conflict and trade war with Russia that resulted in the loss of Russian market, the economic crisis and the consequences of severe devaluation in 2014-2015. Subsequently, there were changes in the structure of foreign trade, namely a shift from traditional Russian market (and CIS market in general) and an increase of EU countries in a foreign trade share. Generally, this trend is considered to continue in the medium term. These trends were observed amid the fall in foreign trade, especially export. In January-September 2016 export of goods and services has decreased by 7.8% and import by 0.9%. In particular, in Q3 2016 exports fell by 5% while import increased by 8.7%. Ukraine’s export mostly fell to CIS countries reaching by 18.7% for 9 months and by 14.4% in Q3 2016. Meanwhile, import from CIS countries fell by 21.8% in January-September 2016, and only by 9.5% in Q3 2016. Export to the EU for nine months has increased by 3.3%, while import from the EU has increased by 4.9%. In G3 2016, export rose only by 0.2%, while import had a considerable growth by 13.1%. In Q3 2016 trade deficit with the EU was 1.317 billion USD and 2.394 billion USD totally for three quarters. Deterioration of Russian-Ukrainian economic relations affected trade between Ukraine and other CIS countries, resulting in a relatively high reduction of export-import operations with these countries. First, it proved that such countries as Belarus and Kazakhstan are affiliated with the Customs Union, where Russia plays a leading role. Second, deteriorating of Russian-Ukrainian relations hampered Ukraine’s economic relations with countries in the South Caucasus and Central Asia, which are carried out by transit through Russia. Over three quarters of 2016, export of goods decreased by 8.7%, including by 4.9% in Q3 2016. Export of plant products fell by 1.2%, but there was an increase of its share in total exports (up to 21.3% in January-September 2016 from 19.7% in January-September 2015). Key products in this group are grains and sunflower seeds. Export of sunflower oil increased by 21.3% and amounted to 10.6% of total export. Export of ferrous and non-ferrous metals and its products fell by 17.6% (its share in total export decreased to 23.9% from 26.5%). In particular, exports of ferrous metals decreased by 16.4%. Export of mineral products decreased by 20% (its share reduced to 7.5% from 8.5%) and while export of machinery and equipment declined by 9.1% (its share remained unchanged - 10.2%). In January-September 2016 import of goods has not changed in comparison with the same period of the previous year, but in Q3 2016 import has significantly increased by 10.2%. In the structure of import, vehicles showed an excellent dynamic increasing by 71.6% (its share increased to 7.4% from 4.3%). This was due to the increase in import of cars after a sharp reduction in 2015. Import of machinery and equipment has also significantly increased by 27% (its share increased to 20.3% from 16%). Import of chemical products increased by 11.7% (its share increased to 15% from 13.4%). In particular, import of fertilizers rose by 11.6% (its share increased to 2.3% from 2.1%) due to a reduction in domestic production. Import of mineral products fell by 38.6% (its share totally fell to 20% in January-September 2016 from 32.5% in January-September 2015). The drop was caused by a decline in world oil prices. A physical volume of energy import has also decreased, though it has significantly increased on a year-on-year basis at the end of the period - in August and September 2016. It is also important to note a high concentration of Ukraine’s foreign trade (18 countries provide for over 70% of export of domestic products and over 80% of import). There is a significant untapped capacity for geographical trade expansion. However, it must be precisely based on diversified goods structure of foreign trade in order to make such expansion efficient and sustainable. Forecast for 2017 According to a majority of forecasts, it is expected that Ukraine’s economy will recover and its GDP will continue growing. However, such expectations are rather modest given the fact that Ukraine’s economy has already survived deep recession at 1.5-3%. Organization     Expected GDP growth in 2017 Ukraine’s MEDT     3% NBU     3% IMF     2.5% World Bank       2% ICPS     3%   Recovery of domestic demand is among key factors contributing to economic growth. Private consumption will moderately recover in the medium term as a result of pent-up demand and rising incomes. It is also expected that business investments will rise. However, a substantial increase in investment activity in the near future will stimulate a respective increase in investment imports, including machinery and equipment, which will largely increase in a negative contribution of net export to GDP. A revival of credit activity amid expected reducing interest rates will be an additional factor contributing to growing domestic demand. A net export will slow down the GDP growth. Slow global economic growth, including a slowdown in China’s growth, will curb increase in Ukraine’s export. Thus, the ICPS expects that a moderate economic recovery will continue in 2017-2019 (3%, 5% and 4% respectively). Despite further growth, Ukraine’s macroeconomic indicators will remain below the level of 2013. Key factors containing inflation in the long-term perspective are external support for reforms (in cooperation with donors, especially the IMF), an absence of negative shocks in foreign markets and of escalated fighting in Eastern Ukraine and, as a result, a further improvement in inflation expectations. The absence of these factors will cause additional depreciation and inflationary pressures. In this case, a return of inflation to a target level will require tighter monetary policy. According to the NBU, a positive shock may result in a faster increase in world commodity prices, more substantial increase in external demand for Ukrainian products and speed-up of reforms. Under these conditions, a recovery of economic activity will be accompanied by strengthening UAH due to increased export revenues and capital inflows in financial terms. This may increase pressure on prices by consumers, but the effects of strengthening UAH will be more significant. Domestic assumptions: The overall public sector deficit (including deficit of Naftogaz) will amount to 4% of the GDP in 2016 Tax reform will continue. The use of a simplified tax system will continue to shrink. Territories controlled by Ukrainian authorities in Donbas, has not significantly changed, and will not be returning of the active phase of military operations. In other regions of Ukraine "hot spots" will not appear and massive military intervention by Russia will not be occured. Sabotage on the whole territory of Ukraine is possible throughout the forecast period. Significant increase in administratively regulated tariffs will not cause a significant increase of debt for housing and communal services. Dissatisfaction of the population because of falling real incomes did not transform into mass protests. There will be a gradual transition to inflation targeting and subsequent purification of the banking sector. The exchange rate will remain relatively floating. Because of significant amounts of assets in foreign currency a lot of banks cannot provide the level of capital in accordance with Basel III conditions. External assumptions: The world economy will grow at around 3.5% during the forecast period. There will be a gradual slowdown in China, falling in Russia and a slight increase in the EU. Loans will come from the IMF and other macro-financial assistance promised by superstate organizations and the governments of particular countries, which will provide service of external payments, but it is possible substantial delays in obtaining funds. Access to capital markets remain very limited World oil prices will fluctuate within 40-60 dollars per barrel There will be a deepening of cooperation between Ukraine and the EU, in particular in the framework of the Association Agreement, the increase of the EU share in foreign trade and increased investment flows and financial assistance from the EU. It will further decrease trade and other economic ties with Russia It will continue the diversification of natural gas supplies to Ukraine, but Russia will remain the main supplier (directly and through re-export). Gas price will drop because of falling oil prices. It will decrease the flow of funds to the markets of developing countries, and gradually will increase interest rates by curtailing the program of quantitative easing of US Federal Reserve. The main risks of the forecast include the following factors: possible escalation of military conflict, blatant Russian intervention, the suspension of cooperation with the IMF and other international organizations, populist increase of social expenditures without an adequate increase in revenues, organized mass protests, the collapse of the coalition, early elections, a sharp change in prices on main export or import goods as well as adverse weather conditions in 2017, with a significant impact on harvest. State budget and taxes  In 2016 the state authorities took measures towards increasing of state revenues through fiscal incentives. The state budget for 2016 is likely to be performed in accordance with its figures. Performance of the state budget Restoration of economic activity of enterprises had a positive impact on the state and local budgets. Overall, the budget will be performed by the end of the year, which means that the fiscal and regulatory incentives having used during 2016 showed a certain efficiency. However, it should be remembered that the increase in revenues is also associated with inflation processes, including annual inflation at 12%. According to the State Fiscal Service of Ukraine, following the results of 11 months revenues to the consolidated budget of Ukraine amounted nearly 677 billion UAH, whereas last year – 522 billion UAH, the difference compared to last year constitutes nearly 155 billion UAH. or 6 billion USD. The State Fiscal Service of Ukraine reported that following the results of 11 months of this year the state budget received 545,4 billion UAH, whereas last year – 431,9 billion UAH, 113,5 billion UAH more compared to the previous year. According to the Ministry of Finance of Ukraine during January-November 2016 the general fund of local budgets (without transfers) received 131,9 billion UAH, constituting 104,6% of annual revenues, approved by local councils. Increase in revenues to the general fund during January-November 2016 (in comparable terms, excluding areas which are not controlled by Ukrainian authorities) amounted to 49,6% or +43,7 billion UAH. The growth rate of actual income tax revenues in January-November 2016 constitutes 147,9%, land tax – 161,7%. Thus, the growth rate was above the average level in 6 regions – Kyiv, Odesa, Zakarpattia, Volyn, Zaporizhia and Rivne regions. Budget for 2017 For the first time in recent years, draft state budget for 2017 was submitted to the Verkhovna Rada of Ukraine on time in accordance with the Budget Code. According to government of Ukraine, draft state budget for 2017 provides for economic growth and raising incomes. Social expenditures, in particular, increases by 23%, and the minimum wage is doubled (from 1600 to 3200 UAH). For this purpose, state budget provides for additional costs in the amount of 28.3 billion UAH. This decision of the government aimed at reducing the shadow economy, but the Ministry of Finance didn’t carry out public consultation on this matter. There is a risk that in fact a substantial increase in minimum wages will lead to shadowing of wages and increasing expenditures will result in inflation, although the Ministry of Finance has denied such a possibility. According to the government, in average the salaries of the government employees increase by 50% since the new year. The level of pensions will increase by 10%. Main budget shares in 2017: defense and security sector expenditures – 132,9 billion UAH, general fund expenditures – 117,4 billion UAH, consolidated budget expenditures on education increased by 35,7% comparing to 2016 and amounted to 168,4 billion UAH, overall spending on health care increased by almost 26% (18.2 billion UAH) to 88.7 billion UAH. Budget expenditures in 2017 will be spent to support agriculture – next year for support of agriculture producers it is provided 5.5 billion UAH directly from the general fund or 1% of GDP in production agriculture. To ensure sustainable financing of road infrastructure in 2017 it will be created a Road Fund (funding from the budget 14.2 billion UAH). Additionally it is planned to attract 27.2 billion UAH from international financial institutions, first of all, from the World Bank. In general, there is a likelihood that the budget in 2017 will be performed. Political processes, the general deterioration of the economic situation and business activity, further shadowing of the economy, inflation and devaluation processes could prevent performing the state budget. Tax reform In 2016 major tax changes were characterized by a decrease in the social fees to 22%, increase in excise taxes. In general, significant institutional change and improving of tax administration was not observed, but state revenues was provided in accordance with plan. At the end of the year it is began actively discussions regarding further tax changes that become the basis for the state budget for 2017. Committee of the VRU on taxation and customs policy together with the Ministry of Finance of Ukraine has prepared a so-called “anticorruption bill” No. 5368. Key changes: - introduction of the full electronic cabinet of taxpayer – it will increase the transparency of the administration; - introduction of tax holidays for new enterprises (for 5 years) – it will promote the development of small business; - introduction of the United register of tax consultations – it minimizes the number of tax disputes by effectively clarification of the law. - administration of all databases by the Ministry of finance – it reduces opportunities for abuse; - Acceleration of depreciation for 2 years for manufacturing equipment – it stimulates investment; - single public register of requests for VAT refund – it increases VAT refund transparency; - introduction of a mechanism of blocking the registration of tax bills, which is subject to the risk criteria – it eliminates opportunities for abuse of the VAT; - Suspension of penalties, exemption from local taxes – it will settle the issue of tax payments on the territory of ATO. The bill is likely to be adopted and will be the basis for fiscal changes in 2017. The greatest achievement is not the preparation of the bill, and establishing of cooperation after a long confrontation of two government bodies, since the absence of the common position prevented carrying out effective tax reform in 2016.  

ICPS Press
28.12.2016
Reforms implementation

Public dialogue is the foundation of constitutional process

The ICPS with the support of the International Renaissance Foundation continues its activities within the project ‘The use of world expert experience and public consultations in the process of amending the Constitution of Ukraine’. Its goal is to use the best international practices and expert experience to raise the public awareness that the Constitution shall be established by the citizens themselves without the influence of political forces. The majority of regional events have been already conducted: project coordinators and regional representatives have conducted over 100 events in Ukrainian cities and urban-type settlements in all of the 24 regions. In particular, ICPS legal expert Veronika Kharuk said on the radio that a public problem is that many people even are unaware of the rights which are entitled to. If they were aware of their rights, they would try to ensure that the constitutional rights should be exercised. This project is aimed at informing the public of their rights. We are working with students and senior pupils in all regions. Over 5,000 have already attended our lectures where we explain what are the Constitution and its purpose. ‘A major problem in Ukraine is that citizens do not perceive that they are involved in framing the Constitution which has rather declarative character. All constitutional amendments were being made behind closed doors. Following the revolution people started to realize its involvement. Now it is important that the constitutional process should put down roots and citizens should realize its attitude towards this process and how they may influence on the state’, said the project manager Serhiy Kishchenko. Initialing dialogue at local level is an important achievement since the regions hosted public discussions with regional representatives and local expert being involved. We hope that such a wide public discussion will make citizens feel responsible, unveil their willingness to participate in the constitutional process and assert the provisions of the Fundamental Law.

ICPS Press
26.12.2016
Reforms implementation

Interaction in communication: how media and government may jointly contribute to developing pluralistic society in Ukraine

The International Centre for Policy Studies continues its activities to bring Ukrainian society closer to European democratic institutions. A project ‘Interaction in communication: how media and government may jointly contribute to developing pluralistic society in Ukraine’ is a part of ICPS activities in the sphere of strategic communications, supported by the German Federal Foreign Office and the US Department of State in partnership with Cultural Vistas (Germany). This year the ICPS focused on Ukrainian media by providing Ukrainian journalists with an opportunity to learn German experience in efficient system of communication. In late 2016, 15 nationwide and local journalists took a weeklong internship in Berlin where they learnt the communication process between media and society and the German Federal Government. A number of meetings contributed to sharing experience between Ukrainian media with German officials and journalists working for popular newspapers in the world, such as Der Spiegel, Der Tagesspiegel, Frankfurter Allgemeine Zeitung, Deutsche Welle, Reporters without Borders and public broadcasters ARD, ZDF and Rundfunk Berlin-Brandenburg (RBB). These communications are successful since all German state authorities perceive ‘communications as services’. An efficient communications system provides German population and media with an opportunity to receive first-hand information on policies of the German Federal Government, and explanation of its purposes and actions. How many funds does the German Federal Government allocates for communications? The 2017 budget provides for EUR 109.3 mln for the Federal government press office. This amount also covers learning public opinion as an important component of external interaction. German authorities are open to media and constantly accountable before journalists who initiated a tradition of weekly audiences with politicians in 1949. Representatives of all German ministries take part in the Federal press conference (Bundespressekonferenz) where they three times per week respond to hardball questions by media and present a state authorities strategy. Mutual respect and adherence to ‘rules of the game’ between government officials and media helped Germany to establish an efficient interaction in the system ‘media-government-public’.

ICPS Press
22.12.2016