Government reports on 100 days
31 March 2008
Published in
Inform
issue #67
See the full issue here.
The government of Prime Minister Yulia Tymoshenko has released a report that examines its first 100 days in office. The document, which keeps a promise the premier made to the people to report back on the progress of her government, reveals a startling amount of activity.
What follows are some of the achievements undertaken during the three-month period:
WTO: On 5 February, the WTO General Council agreed to Ukraine joining the 151-member organization. The decision came after Vice Prime Minister, Hryhoriy Nemyria negotiated a bi-lateral trade agreement with Peter Madelson, EU Trade Commissioner, in London, that removed the final obstacle to membership. Notwithstanding that the short-lived Tymoshenko-government of 2005 passed much of the difficult legislation for WTO, Mr Nemyria was quick not to claim all the credit. “This landmark decision is the culmination of 14 years of hard negotiation,” said the minister responsible for European integration.
EU Talks on Free Trade Agreement: On 18 February, talks began with EU officials to establish a free trade agreement (FTA). Under discussion is a deep and comprehensive FTA that goes beyond the standard trade and import tariffs to include the liberalisation of services and the harmonisation of the regulatory environment. The FTA will lower the cost of EU imports for Ukrainian businesses and consumers, and provide improved access to the EU market.
See the full issue here.
The government of Prime Minister Yulia Tymoshenko has released a report that examines its first 100 days in office. The document, which keeps a promise the premier made to the people to report back on the progress of her government, reveals a startling amount of activity.
What follows are some of the achievements undertaken during the three-month period:
WTO: On 5 February, the WTO General Council agreed to Ukraine joining the 151-member organization. The decision came after Vice Prime Minister, Hryhoriy Nemyria negotiated a bi-lateral trade agreement with Peter Madelson, EU Trade Commissioner, in London, that removed the final obstacle to membership. Notwithstanding that the short-lived Tymoshenko-government of 2005 passed much of the difficult legislation for WTO, Mr Nemyria was quick not to claim all the credit. “This landmark decision is the culmination of 14 years of hard negotiation,” said the minister responsible for European integration.
EU Talks on Free Trade Agreement: On 18 February, talks began with EU officials to establish a free trade agreement (FTA). Under discussion is a deep and comprehensive FTA that goes beyond the standard trade and import tariffs to include the liberalisation of services and the harmonisation of the regulatory environment. The FTA will lower the cost of EU imports for Ukrainian businesses and consumers, and provide improved access to the EU market.
Anti-Smuggling: The government reintroduced the
successful Contraband Stop! anti-smuggling programme
that was first introduced by the 2005
Tymoshenko-administration. As a consequence, customs
income in January and February amounted to UAH 12.5
billion ($2.5 billion), 108 percent more than the
planned UAH 6 billion ($1.2 billion). A crack down on
value added tax (VAT) fraud saw debt returns reduce
from UAH 8 billion ($1.6 billion) to UAH 2 billion
($400 million).
Social Welfare Reforms: The government introduced a series of provisions and proposals to improve the welfare of citizens. The rationale for the policies was underlined by the premier: "Our priority is to build a fair system in Ukraine. That means in the legal system, in economic activity, in the social welfare system, so that people can feel that the government is treating them fairly. That means that we have to provide a dignified, reasonable standard of living for people. All our priorities revolve around this."
The government undertook a large-scale differentiation of pensions based on length of service and average salary. Consequently, pensions grew by 37 percent. From 1 April, 2008 pensions will increase for 2 million of the poorest citizens to ensure they are in line with the minimum subsistence level. Also, the government announced plans to increase pensions by 1.7 times in event of the death of the breadwinner.
Massive inroads were made into reducing salary arrears, which decreased UAH 30 million ($6 million) to UAH 133 million ($26.6 million) by the end of February 2008. By the middle of the year all the arrears should be paid. In real terms, the government has presided over salary growth of 15.5 percent and, by April, a raise in the minimum wage by 31.3 percent.
Other measures tabled included increased payments for the birth of children to address the declining birth rate. Figures were set at UAH 12,240 ($2,450) for the birth of the first child, UAH 25,000 ($5,000) for the second and UAH 50,000 ($10,000) for the third.
Oshchadbank repayments: The government began the task of compensating millions of savers who lost their bank deposit savings during the hyper-inflation that followed the disintegration of the Soviet Union. Lost deposits amounting to UAH 3.5 billion ($700 million) were repaid during the first 100 days. The 2008 State Budget earmarked UAH 20 billion ($4 billion), comprising 60 percent of the payments the government wants to pay this year. The total value of the debts is believed to be about UAH 120 billion ($24 billion).
Removal of gas intermediaries: The government executed on its pledge to remove shady gas intermediaries from the supply of natural gas to Ukraine. The Russian state gas company, Gazprom, agreed to the removal of RosUkrEnergo and to shift to a direct contractual relationship for the supply of Russian and Central Asian gas with Naftohaz Ukrainy, Ukraine’s state gas company. A price of $179.5 per thousand cubic metres was agreed for the supply of gas in 2008. Negotiations continue for contracts for 2009 and beyond. Also, the government wound up UkrGazEnergo, a 50:50 joint venture between RosUkrEnergo and Naftohaz, which had a chequered history of selling and distributing gas to industrial users in Ukraine.
Attracting Investment: On 24 January, the Tymoshenko Transparency Initiative (TTI) was launched. It underlines the strategic direction of the government to improve the investment climate in Ukraine, and adopted as its baseline principles contained in the European Business Association “Barriers to investment” paper. A product of the TTI was the creation of an Investors Advisory Council – an independent body comprising business professionals, executives, and experts in corporate governance, change management and public policy – to advise the government on the reforms needed to make Ukraine a better place for investment and business. The body has contributed to legislative changes soon to be put before the Verkhovna Rada. The investment climate in Ukraine is improving, particularly in relation to FDI. Ukraine was recently named by Investors Chronicle as one of the seven hottest emerging markets.
Government reforms: The Tymoshenko-government has undertaken a root and branch reform of government institutions. Some 18,000 officials have been replaced and departmental practices and processes overhauled. For example, the way GDP is calculated today is more accurate. The previous government did not account for GDP growth in key sectors but used flexible and easily manipulated indexes such as wholesale trade in its calculations. In January- February GDP grew by 6.7 percent due to growth in production, especially light industry and construction materials. In the first 100 days state revenues increased 62 percent compared with the same period a year ago, while VAT receipts grew by 76 percent.
UEFA Euro 2012: The government put in place a task-force in response to the failing preparations for the UEFA Euro 2012 soccer tournament. Ms Tymoshenko remarked, “there was no effective and balanced plan, no effective approved decision making. In short time, we were able to put together a balanced plan on goals, measures and finances.” On 28 March, Ms Tymoshenko signed an inter-governmental agreement with Donald Tusk, her Polish counterpart. The two host nations will cooperate on a wide range of activities needed for the successful hosting of the event. The focus of major work includes modernising transport links, and building hotels and stadiums.
Inflation: The biggest challenge facing the government is inflation. Government options to exercise control over inflation are somewhat limited, and Ukraine’s National Bank acts independently of the Cabinet of Ministers. Inflationary pressure has been compounded by the hryvnia being pegged to the US dollar and by a huge unauthorised dumping of hryvnia into the money supply. This took place prior to the Tymoshenko-government taking office and was viewed by many as a plot to destabilise the economy. Notwithstanding this, the government is putting in place measures aimed at keeping inflation within single figures by the year’s end. The government estimates it will take six months for its measures to take effect and while inflation slowed in February compared to January, it concedes that more work has to be done.
Kyiv Mayoral Elections: During the election campaign BYuT made a promise to remove allegedly corrupt politicians from Kyiv City Council. Prime amongst these is Leonid Chernovetsky, Kyiv’s controversial mayor. On 18 March, 246 out of 441 registered lawmakers in the Verkhovna Rada voted for snap mayoral and council elections which will be held in May.
Privatisations: In the 2008 State Budget the government estimated $1.7 billion receipts from a series of privatisations of state-owned assets. Top of the list was the privatisation of the Odessa Portside Plant planned for May, and UkrTelecom the state’s fixed-line telephony company. Six regional energy companies were also targeted for sale. Experts believe the valuations put on these companies will net considerably more than the conservative figure allotted in the budget. However the timescales for the privatisations are now in doubt, given stiff resistance from the Head of the State Property Fund, Valentyna Semeniuk. Her objection, on the grounds of the “monopolistic position” of the businesses, is considered a political ploy to thwart the government’s popular bank deposits repayment programme (See article, page 4).
Predictably, the opposition has lambasted Ms Tymoshenko for pursuing policies that are popular and for racking up inflation. However, the premier has pointed out that she is merely doing what politicians in Ukraine have not done: “deliver on our election campaign promises.”
As for inflation, a close examination reveals that the government inherited a perilous situation; although perhaps not altogether unusual as the previous two periods of highest annual inflation was when Mr Yanukovych was prime minister. In 2004 and 2007 the annual inflation rate was 12.3 and 16.6 percent respectively, compared with 10.3 and 11.6 percent respectively under Ms Tymoshenko in 2005 and Yuriy Yekhanurov in 2006.
Perhaps the acid test is not the predictable mud-slinging from the opposition, but what the public thinks. The surge in support for Ms Tymoshenko in recent opinion polls illustrates there is widespread public support for her policies and reforms.
Volodymyr Lytvyn, leader of his eponymous political bloc, described the political activity of the Yulia Tymoshenko’s government as “excellent,” and assessed its economic activity as “satisfactory.”
The last word should go to the premier, “I’m pleased with the progress we have made, and trust that with the support of our democratic partners we will roll back the shadows that have blighted the economic and social well-being of our nation for far too long. The foundations of a new Ukraine are being laid and God willing we will build on this good start and create a brighter future for all of our citizens.”
Social Welfare Reforms: The government introduced a series of provisions and proposals to improve the welfare of citizens. The rationale for the policies was underlined by the premier: "Our priority is to build a fair system in Ukraine. That means in the legal system, in economic activity, in the social welfare system, so that people can feel that the government is treating them fairly. That means that we have to provide a dignified, reasonable standard of living for people. All our priorities revolve around this."
The government undertook a large-scale differentiation of pensions based on length of service and average salary. Consequently, pensions grew by 37 percent. From 1 April, 2008 pensions will increase for 2 million of the poorest citizens to ensure they are in line with the minimum subsistence level. Also, the government announced plans to increase pensions by 1.7 times in event of the death of the breadwinner.
Massive inroads were made into reducing salary arrears, which decreased UAH 30 million ($6 million) to UAH 133 million ($26.6 million) by the end of February 2008. By the middle of the year all the arrears should be paid. In real terms, the government has presided over salary growth of 15.5 percent and, by April, a raise in the minimum wage by 31.3 percent.
Other measures tabled included increased payments for the birth of children to address the declining birth rate. Figures were set at UAH 12,240 ($2,450) for the birth of the first child, UAH 25,000 ($5,000) for the second and UAH 50,000 ($10,000) for the third.
Oshchadbank repayments: The government began the task of compensating millions of savers who lost their bank deposit savings during the hyper-inflation that followed the disintegration of the Soviet Union. Lost deposits amounting to UAH 3.5 billion ($700 million) were repaid during the first 100 days. The 2008 State Budget earmarked UAH 20 billion ($4 billion), comprising 60 percent of the payments the government wants to pay this year. The total value of the debts is believed to be about UAH 120 billion ($24 billion).
Removal of gas intermediaries: The government executed on its pledge to remove shady gas intermediaries from the supply of natural gas to Ukraine. The Russian state gas company, Gazprom, agreed to the removal of RosUkrEnergo and to shift to a direct contractual relationship for the supply of Russian and Central Asian gas with Naftohaz Ukrainy, Ukraine’s state gas company. A price of $179.5 per thousand cubic metres was agreed for the supply of gas in 2008. Negotiations continue for contracts for 2009 and beyond. Also, the government wound up UkrGazEnergo, a 50:50 joint venture between RosUkrEnergo and Naftohaz, which had a chequered history of selling and distributing gas to industrial users in Ukraine.
Attracting Investment: On 24 January, the Tymoshenko Transparency Initiative (TTI) was launched. It underlines the strategic direction of the government to improve the investment climate in Ukraine, and adopted as its baseline principles contained in the European Business Association “Barriers to investment” paper. A product of the TTI was the creation of an Investors Advisory Council – an independent body comprising business professionals, executives, and experts in corporate governance, change management and public policy – to advise the government on the reforms needed to make Ukraine a better place for investment and business. The body has contributed to legislative changes soon to be put before the Verkhovna Rada. The investment climate in Ukraine is improving, particularly in relation to FDI. Ukraine was recently named by Investors Chronicle as one of the seven hottest emerging markets.
Government reforms: The Tymoshenko-government has undertaken a root and branch reform of government institutions. Some 18,000 officials have been replaced and departmental practices and processes overhauled. For example, the way GDP is calculated today is more accurate. The previous government did not account for GDP growth in key sectors but used flexible and easily manipulated indexes such as wholesale trade in its calculations. In January- February GDP grew by 6.7 percent due to growth in production, especially light industry and construction materials. In the first 100 days state revenues increased 62 percent compared with the same period a year ago, while VAT receipts grew by 76 percent.
UEFA Euro 2012: The government put in place a task-force in response to the failing preparations for the UEFA Euro 2012 soccer tournament. Ms Tymoshenko remarked, “there was no effective and balanced plan, no effective approved decision making. In short time, we were able to put together a balanced plan on goals, measures and finances.” On 28 March, Ms Tymoshenko signed an inter-governmental agreement with Donald Tusk, her Polish counterpart. The two host nations will cooperate on a wide range of activities needed for the successful hosting of the event. The focus of major work includes modernising transport links, and building hotels and stadiums.
Inflation: The biggest challenge facing the government is inflation. Government options to exercise control over inflation are somewhat limited, and Ukraine’s National Bank acts independently of the Cabinet of Ministers. Inflationary pressure has been compounded by the hryvnia being pegged to the US dollar and by a huge unauthorised dumping of hryvnia into the money supply. This took place prior to the Tymoshenko-government taking office and was viewed by many as a plot to destabilise the economy. Notwithstanding this, the government is putting in place measures aimed at keeping inflation within single figures by the year’s end. The government estimates it will take six months for its measures to take effect and while inflation slowed in February compared to January, it concedes that more work has to be done.
Kyiv Mayoral Elections: During the election campaign BYuT made a promise to remove allegedly corrupt politicians from Kyiv City Council. Prime amongst these is Leonid Chernovetsky, Kyiv’s controversial mayor. On 18 March, 246 out of 441 registered lawmakers in the Verkhovna Rada voted for snap mayoral and council elections which will be held in May.
Privatisations: In the 2008 State Budget the government estimated $1.7 billion receipts from a series of privatisations of state-owned assets. Top of the list was the privatisation of the Odessa Portside Plant planned for May, and UkrTelecom the state’s fixed-line telephony company. Six regional energy companies were also targeted for sale. Experts believe the valuations put on these companies will net considerably more than the conservative figure allotted in the budget. However the timescales for the privatisations are now in doubt, given stiff resistance from the Head of the State Property Fund, Valentyna Semeniuk. Her objection, on the grounds of the “monopolistic position” of the businesses, is considered a political ploy to thwart the government’s popular bank deposits repayment programme (See article, page 4).
Predictably, the opposition has lambasted Ms Tymoshenko for pursuing policies that are popular and for racking up inflation. However, the premier has pointed out that she is merely doing what politicians in Ukraine have not done: “deliver on our election campaign promises.”
As for inflation, a close examination reveals that the government inherited a perilous situation; although perhaps not altogether unusual as the previous two periods of highest annual inflation was when Mr Yanukovych was prime minister. In 2004 and 2007 the annual inflation rate was 12.3 and 16.6 percent respectively, compared with 10.3 and 11.6 percent respectively under Ms Tymoshenko in 2005 and Yuriy Yekhanurov in 2006.
Perhaps the acid test is not the predictable mud-slinging from the opposition, but what the public thinks. The surge in support for Ms Tymoshenko in recent opinion polls illustrates there is widespread public support for her policies and reforms.
Volodymyr Lytvyn, leader of his eponymous political bloc, described the political activity of the Yulia Tymoshenko’s government as “excellent,” and assessed its economic activity as “satisfactory.”
The last word should go to the premier, “I’m pleased with the progress we have made, and trust that with the support of our democratic partners we will roll back the shadows that have blighted the economic and social well-being of our nation for far too long. The foundations of a new Ukraine are being laid and God willing we will build on this good start and create a brighter future for all of our citizens.”