Internal Policy

2019 Elections: white-blue camp

04.07.2018
img1
ICPS Press

Following the annexation of Crimea and the military conflict in the East, the white-blue or conventionally perceived "pro-Russian" electorate has decreased by at least 5 million potential voters, but it remains a solid part of all the voters in the country - not less than 20-25% of voters. For politicians competing for this election niche the key challenge in the 2019 elections will be the development of an updated ideological platform, their consolidation and the ability to organize and accordingly motivate their electorate. Internal squabbles and self-complacency can potentially weaken white-blue camp, while only modernization of its ideology and more active work with voters can ensure their success in the 2019 elections.

“Oppobloc”: uneasy marriage of convinience

"Opposition block" consists of different groups. Each of them has its own center of influence. But due to solid support in society (according to recent polls, 8.5%), these groups keep together, despite constant scandals within a single political force. "Oppobloc" is torn apart by internal contradictions. If earlier the main conflict was between groups of people's deputies representing the main sponsors - the oligarchs Dmitry Firtash and Rinat Akhmetov, now there are misunderstandings within all the groups.

The controversy intensified after an unsuccessful attempt of the odious politician and Vladimir Putin's fellow sponsor Viktor Medvedchuk to enter the "Opposition Bloc". The reasons for the failure of this initiative were different - the toxic personality of Medvedchuk, the reluctance of the Bloc to let to its ranks a strong person who used to control everything, including contacts with Moscow etc. In any case his accession to the “Oppobloc” did not take place, and the "Oppobloc" is now experiencing increased disintegration processes. The most visible sign of disintegration has been establishment of such projects as "For Life!" led by Vadim Rabinovich and Yevgeny Muraev, "Christian Socialists" led by Mikhail Dobkin, together with Medvedchuk's longtime ally Nestor Shufrych, left the "Opposition Bloc". But even those who remained in faction have been preparing alternative platforms for participation in the elections: Peace Party of Vadim Novinsky, Republican Party of Yuriy Boyko, Industrial Party of Kolesnikov, Ukrainian Perspective of Vilkul and others.

In their election programs representatives of "opposition forces" focus on the issues that are now of greatest concern to their voters: to end the conflict in Donbas, revise the budget to enable economic development and social justice, abolish pension reform, develop accessible and high-quality medicine and education, carry out tax reform, lower pressure on taxpayers, more incentives to revitalize the economy, create attractive conditions for investors, provide energy security of the country and ensure heating in Ukrainian homes, restore financial and economic stability, fight corruption, conduct reform of decentralization and local self-government reform, reduce tariffs etc.

And if with the election slogans of the white-and-blue politicians’ positioning is more or less understandable, then the situation with the only candidate for the presidency or the parliamentary election list is much more uncertain. Yuriy Boyko has the highest rating: according to the latest polls, 8.4% - mostly voters of the East, the South and Donbas. Another possible candidate may be Vadim Novinsky supported by the Ukrainian Orthodox Church and business partners, primarily by Rinat Akhmetov. Another longtime associate of Akhmetov Boris Kolesnikov, who "manages" the oligarch's political projects, is unlikely to run at the elections, and will most likely support Novinsky. Kolesnikov has already revived his "shadow" government and will probably soon become politically more active.

Despite the moderately critical rhetoric towards the government, the analysis of the "Opposite Bloc" actions allows experts to conclude that it cooperates with authorities and might lose the position of the main opponents of the current regime. In addition, such actions and moderate opposition rhetoric open a wide field for maneuvers for more radical forces - for example, "For Life!" Rabinovich and Muraev, who can take a significant part of the electorate. All this, together with internal conflicts in the faction, can deprive "Opposition Bloc" from the role of main opponent of the acting government and worsen the results at the election race.

“Party of Peace” of Vadim Novinsky

A potentially strong player in the white-blue electoral field will be Vadim Novinsky and his movement "Party of Peace". He can strengthen the “Oppobloc” split. Given the close relationship between Novinsky and Akhmetov, with whom they remain business partners, his group (Olexander Vilkul, Borys Kolesnikov and other "Akhmetov people") can go to parliamentary elections as a separate group.

The main electoral effort of "Party of Peace" most likely will be focused on controlled areas of Donbas. Here, in addition to a fairly large electorate of the Party of Regions, Akhmetov's charitable foundation, which has for a long time and systematically worked with the population, will help them. The family of Vilkul will be able to ensure good result of the elections in the Dnipropetrovsk region. Novinsky has good chances in the Mykolaiv region, where he owns ship-building yard "Ocean", Mykolaiv machine-building factory and many other companies. It is not easy for Novinsky's party to win in the Kharkiv region, which is actively dominated by "For Life!" with the support of the Dobkin’s Christian Socialists. However, trump card of Novinsky for nearly the whole country is the support of the Ukrainian Orthodox Church of the Moscow Patriarchate.

Novinsky made a good shot by naming his political project "Party of Peace". According to all social surveys, more than 40% of respondents consider the chievement of peace as the priority task. And this issue is especially actual for the residents of eastern Ukraine. Besides peace, Novinsky promises working places and care for the socially disadvantaged groups, while rigorously criticizing the current government, which increases the support of voters.

“Who is whose Rabinovich?”

On the background of conflicts within the "Oppobloc", the party of Vadim Rabinovich and Yevgeny Muraev "For Life!" is rapidly gaining popularity. According to the latest social studies, 8.1% of Ukrainians support it. Although both parties are of pro-Russian nature, they have financial and personal contradictions. Thus, they are unlikely to choose a single candidate for the presidential election.

Vadim Rabinovich will obviously run for the elections separately. He is now supported by 5.5% of voters. He divides his main electorate with Yuriy Boyko - in the East, South and Donbas. Rabinovich tries to position himself as a "third force": he did not hold high government posts and, like many Ukrainians, is dissatisfied both with opposition and with the authorities. He blames the authorities for inefficiency, economic crisis, decline in the living standards, and the opposition - in flirting with authorities and lacking a constructive position. In foreign policy, he advocates Ukraine as "Switzerland of Eastern Europe", in other words, he supports the ideas of neutrality and independence.

After leaving “Oppobloc” Rabinovich has strained relations with Sergyi Lyovochkin. Politicians continue to exchange compromising materials, accusing each other of the game in the interests of Bankova. "For Life!" and "Oppobloc" today are fierce competitors in the white and blue camp. Since both parties have a rather high rating, they are unlikely to unite before the elections, although under Moscow's pressure this option is possible.

Inside the party "For Life!" there is also no agreement and trust between its founders. Muraev does not like unipersonal PR of Rabinovich and the way his is  making decisions without consulting with his partner. Muraev even suspects Rabinovich in obtaining funding from Bankova. He is also against the split of the opposition camp. The situation is still not critical, but, nevertheless remains rather intense.

One can not help noticing the rapprochement of the party "For Life!" with Viktor Medvedchuk. Nestor Shufrych, Medvedchuk's loyal associate who left “Oppobloc” has joined Rabinovich's political project. The truth is, however, that Shufrych has not left the faction yet not to lose the mandate of the MP. Medvedchuk is advantegous for Rabinovich. He has serious financial resources, and also, he can create a good PR on the topic of war through close ties with the Kremlin, for example on the issue of the hostage release, and so on.

The phenomenon of Murayev and Rabinovich is not so connected with media resources and significant investments of Medvedchuk, rather as with the fact that they took on a radical critique of the government. By doing so, they can get ahead of "Oppobloc" which is more playing at giveaway with Bankova than really criticizes it. In its current form "Oppobloc" is more a part of the ruling establishment than the opposition to it. All this can lead to significant losses in their rankings while their electorate being taken away by more radical and determined political forces from the white and blue camp.

“Osnova” of “technocrat” Taruta

Partly Serhiy Taruta and his party "Osnova" will fight for the votes of the white and blue group. He and his party declare themselves as a constructive opposition to the system of state power in general, while offering alternative ways of development for the country. This party favors the idea of liberal market: state non-interference in the economy; maximum freedom of trade and competition; individuals are responsible for their own destiny, however important issues for the whole society should be resolved together; the government is equally distant from all religious confessions. The party leader positions himself as a technocrat, and his associates as people of action. The frame of his party consists of those who worked for serious positions under former President Yanukovych - Andriy Nikolayenko, former chairman of the Kirovohrad RSA, Yaroslav Arsiriy, deputy minister and director of the department in the Ministry of Culture and deputy chairman of the Kirovograd Regional State Administration, and Volodymyr Polochaninov, ex-deputy from “Batkivshchyna”.

Taruta is a frequent guest on TV with his party being actively advertised on billboards. Serhiy Oleksiyovych tries to present his power as a progressive, liberal, non-populist and intelligent "third force". "Osnova" tries to play on two electoral fields. Reported ideas are closer to the liberal-democratic camp, but personalities are more understandable for the white and blue electorate. Taruta criticizes the Minsk process and Kiev policy for reintegration of Donbas.

As for now neither Taruta nor his party have sufficient rating. "Technocrat" Taruta is looking for more influential allies. He has good relations with oligarchs Victor Pinchuk and Rinat Akhmetov, in politics - with Yulia Tymoshenko. Experts even discuss a possible alliance under the format of Tymoshenko being the president and Taruta - the prime minister. Prospects for such cooperation are rather dubious. But Taruta, obviously, may be useful for Tymoshenko in her struggle for the presidential post, for example, as an antagonist to Anatoliy Hrytsenko.

“Our Land” (“Nash Krai”)

"Our land" will also fight for votes of supporters of the white and blue. Vitaliy Kovalchuk, deputy head of the presidential administration, was engaged in its creation at one time. "Our land" basically includes former non-disbursed deputies of the "Party of Regions" "(Anton Kisse, Olexander Feldman and Sergiy Kaltsev) who position themselves as managers and patriots of their small homeland.

 “Our land” does not have traditional ideology and can be hardly connected with either right or left political forces. It focuses on local issues planning to raise public support among voters for whom a beautiful school on a nearby street or an asphalted road is a top priority. Representatives of “Our Land” as a rule are loyal to the authorities, but at the same time adhere to moderately oppositional rhetoric in order not to lose the white and blue electorate.

The given party has a number of problems. First, Igor Kononenko and Vitaliy Kovalchuk compete for control over it under the entourage of Poroshenko. Secondly, the party does not have a charismatic leader, therefore it will not probably reach the national level.

Party “Revival” (“Vidrodzhennia”)

Another political project, which publicly claims its opposition nature, but in fact, plays in favor of authorities and can take the votes of supporters of the white and blue is the party "Revival". Like "Our land", this party became a shelter for deputies from the Party of Regions who did not want to associate themselves with the former beneficiaries of the Party of Regions - Lyovochkin, Akhmetov, etc.

The most well-known people in the "Revival" are Viktor Bondar, Anton Yatsenko, Viktor Ostapchuk, Volodymyr Pylypenko and Vitaliy Khomutynnyk. The main political messages of the party are limited to economic reforms (proposed introduction of the principle of economic nationalism) and changes in the taxation system. The party wins from having a deputy group in the parliament, but obviously loses in support of the population. In the upcoming elections, the "Revival" will bet on majoritarian candidates, while Bankova can help it with financing through the state budget.

“Left Opposition”: risen from the ashes

Among the white-and-blue electorate in the East and Donbas there is some support for the movement "Left Opposition". The given all-Ukrainian public association of left and center-left forces consists of five parties and 13 civic organizations. It is headed by the leader of the forbidden Communist Party, Petro Symonenko and his colleague, prominent veteran communist Georgy Kryuchkov, leader of the Progressive Socialist Party Nataliya Vitrenko, former director of the Ukrainian Institute of National Remembrance Valery Soldatenko, as well as athlete Rudolf Povarnitsyn.

After the prohibition of the Communist Party of Ukraine and the collapse of the SPU on the left ideological flank, there emerged a vacuum, which the left-wing politicians would try to fill up with "political insurgents". The rhetoric of their "Left Opposition" is marginal, being pro-Russian and anti-Western.

They call the revolution of dignity a coup d’état, after which Ukraine lost economic and political sovereignty. Normal development of Ukraine is possible only together with Russia and Belarus while the course towards Euro integration will lead to the degradation of the Ukrainian state. Thus, the movement "Left Opposition" proclaimed its purposes to be the restoration of good relations with Russia, the entry into the Customs Union, the recognition of Russian as the second state language. Using such a rhetoric, this political project will probably not receive many votes, but nevertheless will be able to take a certain percentage of votes from the “Oppobloc” and “For life!”

The struggle between the opposition white and blue forces is disastrous to them and plays in the favor of Bankova. It is very important for President Poroshenko not to allow a single candidate for this part of the electorate. It is advantageous for him that they go apart and compete with each other. Poroshenko is also advantageous to play the scenario in the second round with a sparring partner Boyko or Rabinovich. When Ukrainian voter is offered a choice between two evils, Poroshenko will look obviously better and it is unlikely the voter will now choose a candidate from the white and blue.

Despite the conflicts in the white and blue camp, the politicians who represent it are distinguished by some discipline, which is primarily based on the economic interests. Therefore, it is likely that most of the white and blue, including Novinsky and Rabinovich, will support Yuriy Boyko in the presidential elections in 2019. Others have weak ratings. Taruta, with his "Osnova", will most likely speak on behalf of Tymoshenko. Dobkin will act in the way Medvedchuk will direct him, and the new old "left" will move in the direction indicated by Moscow.

In general, the white and blue politicum is a reflection of several oligarchic groups. First of all, there are big groups of Firtash-Lyovochkin-Boyko and Akhmetov, as well as small groups of Pinchuk and Kolomoisky. It is these shareholders who decide everything and determine the architecture of the relationship between the political groups and forces under their control. There is great controversy between these shareholders, as they cannot agree on distribution of their place in the Ukrainian economy, or concerning the person who should be the president - the arbiter in the relationship between the oligarchs and the guarantor of the implementation of the agreements reached between them. In addition, Poroshenko is able well enough to play upon differences among them. Previously, he clearly dented the position of the strongest oligarch after the Revolution - Igor Kolomoisky, while others are now precarious to enter into direct confrontation with him.

All this is extrapolated directly to the white and blue opposition politicum, which is very versatile and unlike Tymoshenko, Hrytsenko and other politicians, has not decided the format for going to the elections (single candidate or several, united political force or several different). They could be an alternative to the current government, but because they are scattered and do not show proper activity, unlike the others, it may happen that in the second round of the presidential election they will not oppose Poroshenko, and there will appear completely different political figures. As a result, the situation may emerge when "Oppobloc" from the main opposition of the current government will turn into outsiders. And this will be the price they will pay for failure to negotiate, for targeting not the voter, but the sponsors and the expectation that they will win on the wave of dissatisfaction with the authorities, which, however, can currently pick up other players.

Publications with tag «Internal Policy »
Internal Policy

Еconomic and banking reforms towards Ukraine’s European integration

On behalf of the Henry Jackson Society and the International Center for Policy Studies (ICPS), we invite you to participate in an expert discussion on the topic “Еconomic and banking reforms towards ukraine’s european integration”, which will take place on the 20th of December 2021 at 17:00 (Kyiv time) in online format in Zoom.   The link for participation is the following: https://us06web.zoom.us/webinar/register/WN_imT6teDhS7W6O0euLvFcMg   Background Since Ukraine signed an Association Agreement with the European Union (EU) in 2014, the country has introduced a wide range of reforms towards its integration into a Deep and Comprehensive Free Trade Agreement (DCFTA) and achievement of a visa free regime with the Schengen Zone. However, despite positive achievements, there is a number of “blind spots”. The banking sector was also an important area where these reforms took place and its overhaul contributed towards Ukraine’s fight against corruption. Increasing the capacity of banks to effectively prevent financial crises and to provide services is seen as a necessary prerequisite for successful economic policy. At the same time, the impact of problematic factors of the global pandemic, in particular the slowdown in the world economy and the quarantine restrictions in the country have affected the banking sector of Ukraine. The panel will discuss what areas of reforms need to be improved as part of Ukraine’s European integration. The invited experts, representatives of the banking sector and interested organizations and institutions will outline the current state of state of reforms and will cover the following points: What are the main successes and failures of key economic reforms in Ukraine on the road to the EU? What are the main economic achievements of the year 2021 and the forecast for 2022? Are there any "blind spots" of the current reforms? What are the results of long-term banking reform? Is the current NBU management effective and independent? Will banks be able to become a driver of the Ukrainian economy and help bridge the gaps in economic development?

16.12.2021
Internal Policy

ICPS issued an assessment of local/regional measures for August - September 2021

In this bulletin, the experts collected interesting materials about the measures that were implemented in different parts of Ukraine and analyzed their impact on the community and regions. In particular, they assessed an important measure that will bring Ukraine closer to energy independence and reduce the dependence from the Russian Federation: the opening of a storage facility for used nuclear fuel in Chernobyl by the 30th anniversary of Ukraine's independence. Measures in the field of education are important for Ukraine's approach to intellectual independence. Experts positively assessed the launch of the public budget for schools in order to involve students in the development of public space and in the cooperation with local governments in Ternopil. This practice is being picked up and implemented by other cities in Ukraine. These measures will have a positive effect in the future. Also, given the lack of schools in large cities and the lack of good conditions in educational institutions in many regions of the country, the renovation of the school in Odessa with the support of the European Investment Bank will affect the quality of education of schoolchildren and increase the level of education in general. An expert from the city of Khmelnytsky tested on her own experience whether a rail bus was launched on the route "Shepetivka - Kamyanets-Podilsky", which the residents of Khmelnytsky region were waiting for and the launch of which, according to the official website of Khmelnytsky Regional State Administration, is the first example of successful cooperation between local authorities and JSC “Ukrzaliznytsia”. The text is supplemented by author's photos of the train. The development of the new "Open Data Portal" in Dnipro was positively assessed, however there is a number of comments and questions from experts. It was also interesting to analyze the work of the Institute of Commissioners for Prevention and Detection of Corruption in Local Self-Government Bodies and its impact on corruption. The measure has received the lowest evaluation from experts; however, such cases are worth considering to work on errors and to develop effective action plans for the future.   RANKING OF BEST AND WORST MEASURES Case Quality [-3; +3] Relevance [0%; 100%] Final score [-300; 300] Ranks Opening of a storage facility for storage of spent nuclear fuel in Chernobyl 2.5 88.33 220.83 I Involvement of students in the development of the territorial community in Ternopil 2.67 81.67 217.78 II Odessa: renovation of the school with the financial support of the European Investment Bank 2.5 85 212.5 III The suburban train connected the north and south of Khmelnytsky region 2.33 71.67 167.22 IV A new "Open Data Portal" has been developed in Dnipro 2 60.83 121.67 V The work of the Institute of Commissioners for Prevention and Detection of Corruption in Local Self-Government Bodies -2.2 60.6 -133.32 VI   In addition, this publication summarizes the policy evaluation results for 2020-2021.   The final rating of the 2020-2021 measures is as follows:   Ranks Case Final score [-300; 300] Summary edition* 1 The first open auctions for the sale of amber were held in Volyn region 257,36 3rd edition 2 Malashivets landfill degassing 228,89 3rd edition 3 Opening of a storage facility for storage of spent nuclear fuel in Chernobyl 220,83 5th edition 4 Involvement of students in the development of the territorial community in Ternopil 217,78 5th edition 5 Implementation of the first automatic cameras for recording violations of traffic rules in Western Ukraine 217,78 2nd edition 6 Odessa: renovation of the school with the financial support of the European Investment Bank 212,50 5th edition 7 Development of tourist infrastructure of Ivano-Frankivsk region 208,33 2nd edition 8 Airport renewal in Chernivtsi 192,80 1st edition 9 All Transcarpathian wood will be sold through the ProZorro-Sale system 189,60 1st edition 10 The airport in Zhytomyr is preparing for the reconstruction and acceptance of international flights 175,00 4th edition 11 Implementation of the investment plan in the Berdyansk port 169,72 2nd edition 12 Interactive panels for schools of Stanychno-Luhansk district 169,17 2nd edition 13 The suburban train connected the north and south of Khmelnytsky region 167,22 5th edition 14 Organization of the educational process during a pandemic 162,50 4th edition 15 Dnipro city program to promote condominiums 140,56 3rd edition 16 Challenges towards implementation of local reforms 140,00 3rd edition 17 Creation of a GIS portal in the Kherson region 130,00 2nd edition 18 Approval of co-financing for the Katerynopil Center for Primary Health Care (Cherkasy region) 128,30 1st edition 19 Kryukiv Wagon-Building Plant: difficulties and further prospects 122,22 4th edition 20 A new "Open Data Portal" has been developed in Dnipro 121,67 5th edition 21 Development of tourism in Kropyvnytskyi 118,80 4th edition 22 Rivne territorial community and e-ticket 100,00 4th edition 23 Loan and grant agreement for the Solid Waste Infrastructure Modernization Project was signed between "Spetskomuntrans" and the EBRD (Khmelnytsky city) 96,00 1st edition 24 Mykolaiv region: QR-codes for tourism development 80,97 2nd edition 25 The largest state flags with flagpoles 40,83 3rd edition 26 About the creation of the municipal non-profit enterprise of the Mariupol city council "Hockey club" Mariupol" -27,20 1st edition 27 Kharkiv region: payments to doctors in case of COVID-19 illness -70,00 3rd edition 28 500 million loan for Odessa -80,70 1st edition 29 The work of the Institute of Commissioners for Prevention and Detection of Corruption in Local Self-Government Bodies -133,32 5th edition 30 Sumy region: abolition of wastewater control of enterprises -204,44 4th edition     The analysis of measures implemented by local governments is a relevant and important factor in determining their effectiveness - both economic and social. In addition, it provides an opportunity to identify different aspects of the measure and to build a strategy for further decision-making and elimination of shortcomings. The detailed evaluation and the full document can be found here: Monitoring of Local and Development Policies in Ukraine (August 2021 - September 2021)     *The first publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/ua_local_measures_oct_2020_eng_.pdf The second publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/ua_local_measures_jan_2021_eng_.pdf The third publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/local_measures_apr_2021_eng.pdf The fourth publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/local_measures_jul_2021_eng.pdf   **The current summary was developed within the project “Strengthening democratic resilience of key public institutions in Ukraine”. The initiative is being implemented by the International Centre for Policy Studies (ICPS) in partnership with the Institute for Economic and Social Reforms in Slovakia (INEKO) and is financially supported by the Embassy of the United States in Kyiv, Ukraine. The project aims to improve the efficiency of the state administration, self-government and civil society in the area of creation and oversight of regional policies. It also aims to increase transparency and independence of key regulatory and judiciary institutions as well as transparency and financial stability of the biggest state-owned enterprises and local authorities in Ukraine. The main objective of this publication is to improve the quality of regional and/or municipal regulation and legislation through publishing a regular expert assessment of the socio-economic measures proposed or implemented by local governments in Ukraine. The purpose of the evaluation is to describe and promote reform and anti-corruption practices that can be transferred to other localities as well. At the same time, the critical assessment of non-transparent and inefficient measures should discourage representatives of local and regional authorities from their implementation. The policies included in the current summary were identified and analyzed with the support of the Evaluation Council experts who were selected by the International Centre for Policy Studies on the basis of their experience. In this bulletin, experts collected 6 measures implemented by local governments during August - September 2021. window.dataLayer = window.dataLayer || []; function gtag(){dataLayer.push(arguments);} gtag('js', new Date()); gtag('config', 'UA-122353741-2');

28.09.2021
Internal Policy

ICPS issued an assessment of local/regional measures for May - July 2021

The current summary was developed within the project “Strengthening democratic resilience of key public institutions in Ukraine”. The initiative is being implemented by the International Centre for Policy Studies (ICPS) in partnership with the Institute for Economic and Social Reforms in Slovakia (INEKO) and is financially supported by the Embassy of the United States in Kyiv, Ukraine. The project aims to improve the efficiency of the state administration, self-government and civil society in the area of creation and oversight of regional policies. It also aims to increase transparency and independence of key regulatory and judiciary institutions as well as transparency and financial stability of the biggest state-owned enterprises and local authorities in Ukraine. The main objective of this publication is to improve the quality of regional and/or municipal regulation and legislation through publishing a regular expert assessment of the socio-economic measures proposed or implemented by local governments in Ukraine. The purpose of the evaluation is to describe and promote reform and anti-corruption practices that can be transferred to other localities as well. At the same time, the critical assessment of non-transparent and inefficient measures should discourage representatives of local and regional authorities from their implementation. The policies included in the current summary were identified and analyzed with the support of the Evaluation Council experts who were selected by the International Centre for Policy Studies on the basis of their experience. In this bulletin, experts collected 6 positive measures implemented by local governments during May - July 2021. Selected cases of this issue show the lack of in-depth analysis before making a decision by local authorities, ignoration of the interests of various participants in the process, as well as lack of strategic planning and vision of the results of decisions, absence of financially sound indicators and other problems. The decision of the Sumy City Council to abolish the control over wastewater of enterprises has significant risks for the environmental situation in the city and region (and the health of citizens), as well as for the financial condition of the utility company engaged in wastewater treatment. The adoption of such a serious decision by deputies without proper justification does not comply with the principles of proper public and accountable governance, exacerbates the problem in the field of environmental protection and defends a small number of stakeholders. The introduction of an electronic fare system is a very important task for all municipalities in Ukraine. However, in Rivne for a long time the city authorities cannot decide on the choice of provider to implement an electronic ticket system. The lack of explanation for the delay by local governments and the non-transparency of the decision-making process regarding the selection of a contractor (that is beneficial to the city) is a source of distrust and concern for the community. During the period of the pandemic spread, the issue of providing quality educational services throughout Ukraine is also acute. In this bulletin, experts evaluated the decision to purchase laptops for teachers. The solution is good; however, such an initiative should have been introduced after the first wave of the epidemic. Tenders will stretch the buying process in time and it will not be completed until the beginning of the third wave of the epidemic. It is also important to implement a comprehensive approach to ensure the quality educational process. Almost every bulletin contains material on the development of tourism in a particular region. This bulletin contains a block dedicated to the tourist forum held in Kropyvnytskyi. The city and Kirovohrad region have a good potential to attract tourists, which will contribute to the formation of a positive image of the region and increase the interest of tourists and business. At the same time, the management's decision-making (especially regarding the direction of budget funds) should be preceded by the calculation of the economic effect of implementation of measures and evidence that the interests of the community are be taken into account in the first place. The presence of the airport significantly increases the capabilities of any region, and, therefore, the desire of the Zhytomyr authorities to reconstruct their airport is quite understandable and logical. However, from the point of view of expediency, the priority of state support for the reconstruction of this airport may raise questions due to there are two airports in Kyiv (150 kilometers away) and the airport in Rivne (200 kilometers away), which also have international status. The decision to open the new airport should be made only after a careful analysis of the fact that this airport indeed covers an area where it can generate significant volumes of passenger traffic and can be profitable in its activities. Also, this bulletin reviews the problem of government procurement, which constantly arises in PJSC "Kryukiv Carriage Plant". The enterprise is an important object of industry of Poltava region. However, its operation depends on government orders and timely payments for the execution of orders. Due to there is no clear plan at the state level to upgrade the country's railway depot, the company cannot plan the operation of its own production facilities. This situation should direct management forces to find new ideas for the company or to find potential customers who can ensure the stable operation of the plant.   RANKING OF BEST AND WORST MEASURES   Case Quality [-3; +3] Relevance [0%; 100%] Final score [-300; 300] Ranks The airport in Zhytomyr is preparing for the reconstruction and acceptance of international flights 2.33 75 175 I Organization of the educational process during a pandemic 2.17 75 162.5 II Kryukiv Wagon-Building Plant: difficulties and further prospects 1.67 73.33 122.22 III Development of tourism in Kropyvnytskyi 2.2 54 118.8 IV Rivne territorial community and e-ticket 1.5 66.67 100 V Sumy region: abolition of wastewater control of enterprises -2.67 76.67 -204.44 VI Thus, a detailed analysis, calculation of the economic and social impact of the measures will help to make better use of available resources, to consider more effective decisions and to ensure the interests of the majority of the community, which in turn will increase the trust and support of the local government and will ensure sustainable development. The detailed evaluation and the full document can be found here: Monitoring of Local and Development Policies in Ukraine (May 2021 - July 2021) window.dataLayer = window.dataLayer || []; function gtag(){dataLayer.push(arguments);} gtag('js', new Date()); gtag('config', 'UA-122353741-2');

31.07.2021
Internal Policy

Ukraine’s Customs Service vs. Smuggling: Shadowboxing?

One should not underestimate the role of customs in the Ukrainian economy. In 2020, its contribution to the budget amounted to 360 billion UAH, constituting 33% of the budget’s total revenues. According to the latest data, in January-June 2021, the State Customs Service contributed 207.5 billion UAH to the Ukrainian budget, thus exceeding the revenue plan by 108%. However, these figures fall short of the potential that customs could bring to Ukraine’s economy. To improve its efficiency, the State Customs Service began work in the format of a single legal entity starting from July 1, 2021. However, it remains to be seen whether the changes will solve systemic problems of the customs. Following the present-day needs and the memorandum concluded with the International Monetary Fund, the customs was reformatted into a single legal entity – the State Customs Service subordinate to Ukraine’s Ministry of Finance. However, the new format may fail to change the substance. As per the ICPS’ recent study on the independence of state institutions, the State Customs Service and the State Tax Service of Ukraine proved to be the least legally protected from interference and external influence, having a plethora of legislative loopholes and shortcomings. In the study, they were negatively underscored in the areas of the appointment and dismissal of senior management, sovereignty, the transparency of the appointed management’s income, as well as the transparency of the competition for the position to head these institutions. The lack of changes in the legislative field regarding the State Customs Service only confirms the fears that the change of form may not lead to the change of its content. This, in turn, is just a part of the problem. Overall, according to various data, losses from gaps in legislation, the "inefficiency" of customs and smuggling reach over 4-5 billion USD per year. These figures were named by Ukraine’s Minister of Internal Affairs Arsen Avakov, former head of the State Customs Service Maksym Nefyodov, and Minister of Finance Serhiy Marchenko. The numbers are rather impressive, as these funds could be used to address key economic and social issues of the Ukrainian economy. The money could also diminish the need to attract loans from the IMF, the EU and the World Bank, which now serve as a burden to the Ukrainian budget. With this, it’s quite easy to evaluate the extent of the institution’s "inefficiency". It’s enough to compare official data on exports and imports from Ukraine with the corresponding statistics on Ukraine coming from the state’s trading partners. For example, in 2020, according to Ukraine, the country’s exports to the EU amounted to $18.66 billion. As per the EU data, the figure was $19.57 billion. Similarly, as per Ukrainian statistics, imports amounted to $23.74 billion, while European statistics showed $27.43 billion. Surely, akin discrepancies could arise for various reasons; however, smuggling is one of the key problems accounting for the said differences.  According to the State Border Guard Service of Ukraine, cars, tobacco and alcohol predominate among the smuggled goods. It’s worth noting that the scale of smuggling and the scale of the shadow economy are interrelated. At the same time, the volume of the latter ranges from 30% to 50%. This, in turn, may be a "normal phenomenon" during the economic recession (creating a "safety cushion" and smoothing the "sharp corners" of public policy, but it’s a highly negative occurrence during economic growth. It hinders the prospects for development and creates asymmetries. At the same time, no systemic solutions to combat the shadow economy and "gray" imports have been proposed. Reformatting, hiring new staff, dismissing chairmen and employees has not led to the desired effect. Moreover, the Economic Security Bureau was invented to deal with smuggling. There is also Bill № 5420 on establishing criminal liability for smuggling and inaccurate declaration of goods. Nevertheless, the bill is rather ambiguous, as it provides for higher fines on goods worth 50-100 thousand UAH. This, in turn, may affect regular citizens of Ukraine. Unfortunately, all the measures described above target "small fish": they deal with symptoms rather than causes of the problem.  With this, it’s worth highlighting the recent decision of the National Security and Defense Council to impose sanctions on top smugglers, even though its results will not be felt immediately. Moreover, it remains unclear whether high-ranking officials involved in smuggling would be affected by the decision. As a result, smuggling shall remain one of the main causes of Ukraine’s budget loss for quite a while. The problem is rather multifaceted: on one hand, there are efforts of small businesses to survive and compete; on the other hand, big businesses strive to minimize the costs.  Customs officers and officials, in turn, desire to make money in the face of weak institutions and relative impunity. The solution is simple – minimizing the human factor.  Additionally, some of the recommendations are: • To strengthen interdepartmental cooperation; • To synchronize import-export databases, conducting information exchange with major trading partners; • To introduce the New Computerised Transit System (NCTS); • To strengthen diplomatic ties and accelerate the above-mentioned cooperation process; • To diminish legislative loopholes in the functioning of customs; • To accelerate the implementation of the Law "On Economic Operator" and the Law "On Joint Transit"; • To annul the decriminalization of smuggling on a particularly large scale; •  To develop domestic production of substitutes and complementary goods; • To review the customs tariff grid (the higher the duty or excise duty, the greater the "gray" imports); • The issue of illegal export of forests and natural resources deserves special attention. Surely, the list is not exclusive. In general, the attempts to solve current problems (such as combatting cross-border small-scale trading and the restrictions imposed on individual entrepreneurs) fall under the Pareto principle, though not in the best way.  According to the principle, roughly 80% of consequences come from 20% of the causes. In the case of Ukraine, 80% of work – requiring significant effort and time – may lead to merely 20% of the results. Clearly, the 20% of work should be targeting “big fish”.  However, there is not enough political will to do that. Large-scale smuggling cannot exist without political protection. While the Security Service and the Ministry of Internal Affairs divide the spheres of influence in regards to customs, Ukrainians shall face another peak of debt payments in the fall. Having customs as a single legal entity – or not – will not solve the major problem.

02.07.2021