The International Centre for Policy Studies jointly with the Institute for Economic and Social Reforms (INEKO, Slovakia) presented monitoring results within a project ‘Transparent, Financially Health and Competitive Self-Governments in Ukraine’. Transparency, financial stability and regional competitive advantages are the basic principles of efficient activities by municipalities in the long term. Equilibrium and competitiveness analysis are among important factors in the development of each local municipality. Subsequently, the project contributed to establishing a data platform based on progress reports on the local budgets for the last five years. Thus, it helped to define which cities and regions have the best budget indicators and what are their budget expenditures structures.
According to monitoring results, Odessa, Poltava, Dnipro, Mykolaiv and Rivne have the best performance in budget indicators while Lutsk, Cherkasy, Kherson, Zhytomyr and Chernihiv are at the bottom.
ICPS economists Angela Bochi and Vasyl Povoroznyk explained the details.
The conference "Supporting economic reforms in Ukraine"
Within the cooperation ICPS, Friedrich Ebert Stiftung and deputes of the European Parliament, a senior economist Vasyl Povoroznyk participated in the conference "Supporting economic reforms in Ukraine" which was held in Brussels. The report was dedicated to the informal economy and the decentralization process in Ukraine. In particular, it dealt with the analysis of key factors influencing the growth of the informal economy in the country. Because according to the data, segment of the informal economy is about 50% of GDP. Among the major, it is primarily inefficient system of state regulation and tax burden. As for the decentralization reform, the most topical issue is the legislative regulation and making appropriate changes to the Fundamental Law. Also pursuant UTC`s creation process that should occur on a voluntary basis, but in some cases the features of a particular community are not captured.
Transparent budget and investment: how to ensure the financial transparency of united community
The International Centre for Policy Studies supported by the Embassy of the Netherlands within the project “Financial Transparency of united communities” holds seminars in all 24 regions of Ukraine for representatives of local governments that make decisions on engagement and use of financial resources of regional business representatives and NGOs. The project is aimed at increasing the economic capacity of united communities that will more effectively address the issues of local development, enhance the competitiveness of territorial communities, combating corruption at the local level and ensuring the welfare of the local population. “The main goal is to tell stakeholders about how to form their own financial resources, to improve the “financial health” of united communities and to act at new legal conditions”, - the Director of the Department of ICPS Angela Bochi said. The issue of sustainable development at the local territorial level is extremely important given the need to stabilize the socio-economic situation in the region during the economic crisis and the decentralization reform. "Currently, budget legislation is changed again, the expenditure responsibilities of local budgets are changing and the Tax Code still remains unchanged. Additional sources on increased funding of tax resources to local budgets are not received. It is therefore necessary to raise funds from other sources and search for available opportunities in our time of grant support and financing”- the expert on budget and management issues Tetyana Ovcharenko explains. In addition, ICPS experts told community members about the need to raise additional funds in their budgets, because to manage money, first of all, such communities should have them. Also they called on the public to get involved in control over the use of budget funds to prevent corruption, stressing that this community should play an important role in this process, because it is talking about money which focused directly in the specific UTC.
The causes and consequences of delaying IMF tranche
The International Monetary Fund decided to postpone the allocation of the next tranche of $ 1 billion to Ukraine. First of all it is important to identify the root causes of postponement. The official version is the Donbas blockade. But it is important to clarify that it is not about blockade participants, but about the actual decision of the NSDC about the governance effectiveness as for 2 months after the blockade there hadn`t been done any quality calculations and plan out of the crisis. Director of the Economic Department Angela Bochi notes that it is obvious that the IMF decision cannot be fully associated with the Donbas blockade. One of the important tasks posed by the IMF is the anti-corruption reform. Particular attention was paid to the implementation of anti-corruption courts in Ukraine that hasn`t been started, as well as the election of the NACB auditor was called into question. Formally, our reform of anti-corruption bodies means only their creation because the international business and investors don`t see changes in the country's anti-corruption field and don`t feel the pressure reduction. In fact, postponement of the fourth tranche in March hasn`t become the news, because we had to get this tranche in December 2016. I remind that the third tranche was delayed because it has already been clear that the issue of the next tranche will be postponed. In addition, the third tranche would still be an advance because Ukraine formally didn`t fulfil the requirements concerning implementation of pension reform (the retirement age raising), land reform (the introduction of land turnover), launch of anti-corruption courts. Speaking in fact, we have only fulfilled 3 of the 11 structural lighthouses in the last period. Preliminary requirements – the budget and "Privatbank" nationalization - our country is ostensibly satisfied but, for example, SFS reform hasn`t been carried out since 2015. In other words, the second tranche was given in advance to Ukraine and the third, most likely, won`t be given in advance. The expert also noted that it is likely that IMF program for Ukraine will be stopped altogether, as in 2009, and then the main issue for the government will be curbing the exchange rate. And this question is not in gold and forex reserves which are enough now, but in another factor - the panic among the population. This situation could further deepen the political crisis in the country. Senior economist Vasyl Povoroznyk also noted that the IMF is often a signal for foreign partners: is it worthily to trust the country or not. If the assistance stops, it is a red light for other international partners.
ICPS held a conference "Transparency, financial health and competitive municipalities: presentation of online platforms"
Within the project “Transrarent, financially healthy and competitive local governments in Ukraine” which is implemented by the Institute for Economic and Social Reforms in Slovakia (INEKO), in partnership with the International Centre for Policy Studies (ICPS) and with financial support of the Official assistance for development of the Slovak Republic – SlovakAid there was held a presentation of online platforms. "The transparency of 50 largest cities in Ukraine” (http://transparency.icps.com.ua), its purpose is to increase the transparency of local governments by developing and implementing appropriate recommendations and monitoring of current level transparency of municipal councils in 50 major cities of Ukraine. Transparency rating of 50 largest local governments in Ukraine is based on data which are obtained from the following sources: The responses to the questionnaire were sent by ICPS to 50 city councils. Each questionnaire contained 23 questions. The responses to the requests for information were sent by ICPS informally - through a third person ("secret client request"). Each request contained three questions and was intended to detect city councils` reactions to requests from citizens. Information is publicly available on official websites of local councils. “Transparency of local budgets and their capital cities in Ukraine” (http://budgets.icps.com.ua), portal target is promoting the financial health of regions, cities and towns. Whereas, the transparency, the financial stability and the formation of regional competitive advantages - all these are the basic principles for the effective functioning of local authorities in the long term. The site contains data on local governments` budgets of all 24 regions of Ukraine and their administrative centers. According to Slovak experience, the data are divided into the following types: geographical data, short description of areas, indicators of the financial stability and financial health. "The competitive capability of regions and measuring regional business environment in Ukraine" (http://competitiveness.icps.com.ua/) Analysis of the competitive capability of regions should provide stakeholders the information on business environment current state in the regions, as well as the specific problems of economic development in the regions. The project will provide the local government representatives a useful tool for regional development and eliminating the local barriers of business environment. The assessment model of the competitive capability of regions in Ukraine covers 24 regions of Ukraine (all areas excluding the Crimea). Regional Business Environment Index (RIDS) is calculated on the basis of 103 independent indicators that are calculated on the basis of two sources of information: statistical data for 2014-2015 and companies` survey concerning assessment of business conditions in the regions. Project partners Robert Kičina (Business Alliance of Slovakia), Peter Golias (Director of the Institute for Economic and Social Reforms) and Michal Piško (Project Coordinator of Transparency International Slovakia) presented the implementation experience of the project in Slovakia. National Deputy Oksana Prodan as representative of the Chairman of the Cities Association of Ukraine in the Verkhovna Rada on behalf of the community noted about the local governments` transparency factor as an important prerequisite for creating a favorable business environment and investment climate in general. Advisor to the Mayor of the Dnipro city, Yanika Merylo in her speech focused about the necessity to introduce online services that will allow every citizen to keep track of their city, from the procurement to the infrastructure facilities map. Presentations: Guarding financial health of local governments in Slovakia How to improve the transparency level in municipalities MEASURING REGIONAL BUSINESS ENVIRONMENT IN UKRAINE Відкрите Дніпро.Яніка Мерило ПРОЗОРІСТЬ 50 НАЙБІЛЬШИХ МІСТ УКРАЇНИ. Вероніка Харук Конкурентоспроможність регіонів та регіональна оцінка ділового клімату в Україні. Василь Поворозник Прозорість бюджетів регіонівта їхніх регіональних центрів в Україні. Ангела Бочі
"Competitiveness Index of Ukraine depends on the pace of reforms" - Vasyl Povoroznyk
During the World Economic Forum in Davos was presented the global competitiveness ranking - Global Competitiveness Index 2016-2017. Ukraine has lost six positions, fallen to 85th place among 138 countries. This year it was the worst result for the last four years. Switzerland became the leader (5.81), second one - Singapore (5.72). Also the top ten included: USA, the Netherlands, Germany, Sweden, United Kingdom, Japan, Hong Kong, Finland. Nearest neighbors of Ukraine became Namibia (84th place) and Greece (86th place). What exactly should be implement in order to improve the position of Ukraine in the ranking of global competitiveness - the commentary of senior economist Vasyl Povoroznyk: "We need to re-raise the topic of reforms. There are small accomplishments as system Prozorro, deregulation in certain sectors. But we need to do a lot: protection of property rights, judicial reform, deregulation, anti-monopolies reform. Without all this things, we will not soon go up in the ranking."
The probability of IMF tranche for Ukraine
Media has published new requirements of the International Monetary Fund to Ukraine to be done in order to receive the next tranches. For the moment the document is at the stage of approval. On the one hand, this is only a recommendation, but not the implementation guidelines for the Ukrainian government. On the other - considering the requirements of the IMF as the advices only, it is unlikely to receive any tranches. There are 12 benchmark targets set in the memorandum, seven of them are new. Director of the Economic Department Angela Bochi has some comments concerning the benchmark task implementation, especially: Subsidy adjustment and its monetization, which implies that customers should receive money for saving resources. Pension reform – the Parliament will approve legislation relevant to: gradual adjustment of the statutory retirement age; further reduction of the scope requirements for the early retirement; review of the eligibility criteria for the minimum pension; consolidation of pension legislation and application of a single principle without pension privileges for any profession (exception for the military); expansion of the base for the social security contributions; equitable tax treatment of pensions; better link between the income and the contributions, and encouragement to declare actual incomes. Land reform, which will be difficult to carry out due to a moratorium until 2018. Audit of PrivatBank and implementation of the restructuring plan. A single register of social benefits, which will contribute to their revision Anti-corruption courts Privatization – the 2017 budget again foresees the sum of 17 million UAH from privatization but the task is challenging considering the situation with Odessa Portal Plant. There are 2 scenarios for further cooperation between Ukraine and the IMF: Optimistic – the IMF will offer concessions and Ukraine will receive the next tranche of 1 billion USD in February 2017. Ukraine will continue to meet structural benchmarks and there will be a chance to get 3 more tranches in 2017 – 1.9 billion USD in May, 1.3 billion USD in August, and 1.3 billion USD in November. It is an unlikely scenario because meeting most of the structural benchmarks entails political risks due to populist decisions in the government. Pessimistic – most of the structural benchmarks will not be met and others will be delayed. Hence the situation of 2016 may recur (Ukraine received only one tranche of 1 billion USD). IMF loans do not only provide support for international reserves and external payments but also serve as an important indicator of the country’s stability for other potential investors. If Ukraine does not fulfil all the commitments under the IMF arrangement, the next loans will not be granted, which may discourage cooperation with other donors.