Read our Cookie policy here.
Search
Search
Ukraine
Major structural reform developments
The bank resolution mechanism was significantly strengthened.
A number of legal amendments, adopted by parliament in May 2020, aim to address regulatory gaps found during the banking sector clean-up in recent years and to ring-fence the decisions taken by the regulator. The law guarantees irreversibility of bank resolution as decided by the NBU by preventing the court from challenging the liquidation procedure, sale of assets and settlements with the bank’s creditors. Further, it changes the procedure for courts to contest decisions by the regulators, namely the NBU, the cabinet of ministers and the Deposit Guarantee Fund, as it restricts the possibility of questioning their technical expertise and judgements. In cases where compensation to the previous owners is warranted, the law stipulates the exact conditions, processes and type of compensation, with the key role given to internationally acknowledged audit firms as unbiased experts. The reform also strengthens the early intervention framework and entry into resolution, and sets clear guidelines for potential nationalization.
Reforms in the gas sector have advanced, but there were reform reversals in the renewables sector.
At the end of 2019 gas production operations of the national oil and gas company, Naftogaz, were separated from gas transmission. The latter was moved to a new state-owned independent pipeline operator. The creation of an independent gas transmission system operator enabled the signing of a new five-year transit contract with Gazprom Russia at the end of 2019. The legislation pertaining to Naftogaz’s unbundling was reviewed by the Energy Community and is deemed in line with Ukraine’s obligations under the European Third Energy Package. After household gas prices were liberalized in January 2019 and the Public Service Obligation Order for the supply of gas to households was terminated in July 2020, household gas prices are now fully market-determined. However, long negotiations between the government, private sector and international development partners on restructuring the feed-in tariff mechanism for renewables in Ukraine did not lead to a consensus. In July 2020 parliament approved the reduction in the feed-in tariffs, thus changing the framework conditions for investing in renewables. While the main motivation was to decrease the burden on the state’s finances, the forced retroactive changes will impair the investors’ legitimate interests and may lead to litigation, with potentially serious future fiscal implications.
The longstanding moratorium on the sale of agricultural land was lifted, albeit with limitations.
In March 2020 parliament adopted a new law on the market circulation of agricultural land, which comes into effect in July 2021. A large number of limitations in the legislation put a tight cap on the productivity gains expected to be realized. In particular, the embargo on the participation of foreign persons and entities remains in place and can be lifted only on approval by a national referendum. The sale of state land also continues to be banned. Among other notable limitations, the law imposes an upper limit on the amount of agricultural land that can be owned by a citizen or legal entity, with the latter being able to make purchases from 2024.
Parliament re-criminalized illicit enrichment.
The law on the prevention and punishment of revenues embezzled by public servants was originally approved in 2015 before it was overturned by a controversial Constitutional Court ruling in February 2019. Approved in November 2019, the current bill envisages filing criminal charges if public officials’ assets, as stated in the asset declaration, exceed their official income by a certain amount. However, in October 2020 the Constitutional Court undermined the fundamentals of the anti-corruption reform by overturning the system of electronic declaration of assets and income of state officials and decriminalizing the act of knowingly submitting fraudulent declarations.
A new law on concessions sets up a clear legal framework for this form of public-private partnership.
Adopted and effective in the last quarter of 2019, the law replaces previous outdated regulations. A clear regulatory framework for concession activities is conducive to attracting investment and upgrading infrastructure. In June and August 2020, the new framework was successfully implemented in the selection and contraction of concessioners of two Black Sea ports.
New wage caps in state-owned institutions may hinder future governance improvements.
In April 2020 the authorities introduced a cap on salaries of all public employees as well as top management and supervisory board members of state-owned enterprises (SOEs) and state-owned banks (SOBs) to match more closely average salaries in the country. The cap was introduced as a temporary emergency measure and it was removed for judges, prosecutors, members of parliament and members of the board of the National Bank of Ukraine in August 2020, and for the managers of state banks in September 2020. However, it stays in place for the board members of SOEs and SOBs, thus risking having a long-term detrimental effect on the ability to attract and retain leaders of appropriate quality and experience at institutions of systemic importance for the country.
Case studies
Ukraine
State Institution 'Profesiyni Zakupivli'
Pilot
Started in April 2021
Use case
- Procurement in e-Catalogues (direct ordering and price quotation)
- Aggregated procurements; framework procurements; open procurements
Key questions
- How incorporating energy-efficient products in e-Catalogues will increase energy-efficient procurement?
- How the new CPB procurement process will relieve CEBs with emergency public procurement?
Background
- Public entities do not have enough tools to procure energy-saving goods quickly, conveniently, and efficiently. Because of this, the public sector cannot effectively increase the global energy efficiency indicator in the country using public procurement.
- Central Executive Bodies (CEB) are overloaded with performing emergency public procurement as an additional task in addition to their main professional responsibilities. At the same time every individual CEBs can’t get additional economic effect during procurement from aggregation and the use of effective procurement practices such as framework agreements.
Aim
- CPB will facilitate the use of energy efficient goods by public customers with a convenient tool such as e-Catalogues, adding environmental-friendly awarding criteria into e-Catalogues.
- The CPB will build an efficient process for working with a large number of applications from CEBs, thus ensuring CEBs relieving from non-core activities as emergency public procurement.
Technology
- The incorporated e-catalogue functionalities enables for public customers to find energy efficient goods in e-Catalogues;
- CPB uses the best procurement practices as well as provides very efficient operational procurement process so CPB conduct a lot of CEB’s procurement orders simultaneously and effectively.
Results
- Within 12 months, Ukrainian Public entities uses environmental-friendly awarding criteria in electronic public procurement in e-catalogue Prozorro Market.
- CPB is responsible for centralized procurement in Ukraine reducing the workload on CEB and provides highly efficient procurement, improving the quality of the procurement itself and using aggregated procurement instruments.
Ukraine
Ministry of Economic Development, Trade and Agriculture of Ukraine
State Agency on Energy Efficiency and Energy Saving
Enterprise ProZorro
Pilot 1
ESCO tender: November 2017
Pilot 2
ESCO Multivariable auction: December 2017
Pilot 3
Data driven ESCO contract implementation monitoring tool: First half of 2021
Use-case
ESCO contracts for public procurement
Key questions
- Which types of contracting authorities can benefit from ESCO contracts?
- What is the market size for ESCO?
- What are the forecasted energy savings of ESCO?
- What are actual energy savings of ESCO?
- How ESCO contract performance changes over time?
Background
- Poor energy efficiency in public sector of Ukraine coupled with lack of Government capacity for energy efficiency improvement incentives kept status quo for years. Energy service contracts (ESCO) law was adopted to enable multi-year energy efficiency investment projects with the Government of Ukraine to improve public sector energy efficiency.
Aim
- Kick-start energy efficiency reforms in public sector of Ukraine with the help of innovative online evaluation tools used for ESCO tendering and monitoring. To support the Law of Ukraine “On Amendments to the Law of Ukraine “On the Introduction of New Investment Possibilities, Guaranteeing of Rights and Lawful Interests of Subjects of Entrepreneurial Activity for Conducting Large-Scale Energy Modernization” with implementation of new regulatory standards in development and piloting of tools for energy efficiency indicator evaluation that would enable conducting electronic reverse auctions in relation to performance indicators of energy performance contracts (EnPC). The CT project also aims to produce an evidence-based monitoring of energy efficiency contract deployment in national public procurement, by developing and adopting an Open data tool for reporting on energy efficiency outcomes of selected goods purchased by the public sector in the country.
Technology
- ESCO tender comprises a new type of auction – a multivariable auction, provides online evaluation tool for investment project payout schedule that is based upon following variables: guaranteed saving schedules, savings sharing proportion and contract duration. The online evaluation tool takes into consideration the money devaluation over longer periods of time (by twenty years) with the help of NPV formula (net present value) elaborated in conjunction with the EBRD. The auctions and procedure evaluation rules allows selection of most beneficial for Contracting Authority ESCO contract. In comparison with previously launched ProZorro procedures, where awarding criteria is the lowest cost, the biggest savings in energy service contract procedures is performance indicators.
Results
- Streamlined and comprehensive legal and regulatory framework to promote energy efficiency in public buildings is developed.
- Pilot project, which demonstrates the energy and cost-saving potential of new energy efficient measures, are implemented.
- Innovative Financing Support Mechanisms is adopted and capacity of ESCOs developed in order to promote investment in energy efficiency in public buildings.
- Use of ESCO contracts by municipalities, utilities, educational institutions.
Ukraine
Ministry of Economic Development, Trade and Agriculture of Ukraine
Enterprise ProZorro
Pilot 1
April, 2021
Use-case
- For Pilot: templated contract in price quotation procurement within 30190000-7 CPV category - various office equipment and supplies
- Use of e-contracts through all procedures in ProZorro system.
Key questions
- How to enhance existing contract lifecycle in ProZorro system?
- How to reduce efforts, time, probability of errors for contracting parties?
- How to engage contracting authorities with e-Contracting?
Background
- ProZorro system supports contract lifecycle in a form of manual preparation, physical signing and uploading of the contract scan‑copy in the system, which is not legally valid document and could not be registered in the State Treasury Service of Ukraine as a part of budget commitments. Ministry of Economic Development, Trade and Agriculture of Ukraine expect that improvement of contracting process to fully digital form will bring benefits & cost/time savings for procurers.
Aim
- Simplified and standardized approach to electronic contracts, with ability to prepare and sign them online
- Digitization of key contract parameters available for public tracking and analysis;
- Effortless and automatic registration for ProZorro e‑procurement platform contracts into the State Treasury of Ukraine;
- Reduced risk of unintentional mistakes and elimination of manipulations.
Technology
- ProZorro e‑Contracting enables Contracting Authority to choose one of ready to use contract templates while preparing tender notice. Primary data source for such contract template is ProZorro tender process. Additional information for the contract is obtained from Contracting Authority and supplier with the best offer provided. ProZorro platform allows Contracting Authority to review the contract at early tendering process stages: before tender notice publishing and before bid submission. After contracts awarding, the final contract is prepared automatically by ProZorro e‑Contracting and signed online by both parties. Each contract consists of legal document and digital document with contract parameters packaged into Associated Signature Container (ASIC) ready to nation‑wide use.
- ProZorro e-Contracting enables Contracting Authority to choose one of ready to use contract templates while preparing tender notice. Primary data source for such contract template is ProZorro tender process. Additional information for the contract is obtained from Contracting Authority and supplier with the help of convenient and simple online forms. Both contract parties have an ability to preview the contract at early tendering process stages: before tender notice publishing, and before bid submission. After contract awarding, the final contract is prepared automatically by ProZorro e-Contracting and signed online by both parties. Each contract consists of legal document and digital document with contract parameters packaged into Associated Signature Container (ASIC) ready to nation-wide use.
Results
- Standardized contract templates for different e‑Catalogue categories
- Accelerated process of contract preparation and signing
- Digital version of contract for registration with State Treasury of Ukraine
- Comprehensive contract data for tracking and analysis
- Reduced paper use and reduced risk of unintentional errors
Ukraine
Antimonopoly Committee of Ukraine
Pilot
10 March 2020 - 09 March 2021
Use-case
Tribunal skills
Digital transformation of the review body
Key questions
- Will the AMCU board have capacity as a tribunal to ensure fair public procurement review?
- Will the AMCU set up online hearings to implement the legal provisions which guarantee the right to have hearings online?
- Will the AMCU launch the database of its decisions to ensure case law uniformity of practice, transparency and efficiency of decision drafting?
Background
- Since 2015, Antimonopoly Committee of Ukraine (AMCU) acts as the Complaint Review Authority in the field of public procurement. Entrusting the AMCU with this role requires its staff having not only competition and procurement knowledge but also tribunal qualifications. In turn, AMCU Review Tribunal needs digital transformation to address system issues, such as high volume of cases, as well as recent needs, such as COVID‑19.
Aim
- Enhance AMCU’s staff capacity to resolve complaints in line with EU and GPA standards as well as with the ECJ case law.
- Assists AMCU in setting up online remote hearings facilities, that is especially actual in light of the COVID pandemic, as well as in developing database of the AMCU Board decisions to ensure consistency of AMCU’s case law.
Technology
- Remote online hearings in public procurement review procedure is envisaged by Ukrainian law since 2015, however it has not been implemented yet due to the number of issues. To resolve those issues, the project helps AMCU with drafting business processes, purchasing necessary equipment, and incorporating online hearings into ProZorro e‑procurement system.
- In turn, as AMCU does not possess the database of its decisions, the project suggests the “to‑be” model for data in public procurement review procedure that is to be used for setting up the database of future decisions as well as review and classification of the historic 22 000 AMCU decisions.
Results
Since mid‑March 2020, the project:
- conducted an audit to define a list of needed technical equipment to set up online hearings
- based on the result of the audit, arranged delivery of needed equipment for online hearings (for total amount of 10 000 EUR)
- localised the EBRD Handbook for Members of Review Tribunal (114 pages) for Ukraine and arranged its presentation before key stakeholders in Ukraine
- delivered three webinars with the training programme for the AMCU review body members and tribunal clerks; on the request of the AMCU, provided expert advice (five written consultation with 100 pages in total) to the AMCU Board on the EU policy standards and the ECJ case law
Kyiv
Capital
44,390,000
Population
603,628SQ KM
Area
Ukrainian Hryvnia
Currency
Highlights
- Structural weaknesses weighed on economic growth even before Covid-19. GDP declined by 1.3 per cent year-on-year in the first quarter of 2020 before plunging by 4 per cent year-on-year in the second quarter, as the pandemic took its toll on the economy.
- A new International Monetary Fund (IMF) programme has been approved. Approval of the 18-month, US$ 5.0 billion Stand-By Arrangement in June 2020 helped ease immediate funding pressures, and the implementation of certain prior conditions unleashed the necessary external financing.
- Progress in energy sector reform has been mixed. The long-awaited Naftogaz unbundling will improve Ukraine’s energy resilience, but a forced retroactive reduction in feed-in tariffs for renewables could damage investor confidence.
Key priorities
- Preserving the independence of the National Bank of Ukraine (NBU) is vital for macroeconomic stability and maintaining access to external funding. Strategic and operational decisions undertaken by the NBU, as regulator of the financial system, need to be governed exclusively by sound principles of macroeconomic policymaking and supervisory prudence.
- Progress is needed in key areas of governance. While the authorities have successfully implemented legal changes in many areas over the past years, they should push forward with privatization, judicial reform, public administration reform and digitalization of public sector services.
- The lack of meaningful progress in the fight against corruption needs to be addressed. More than five years after the Revolution of Dignity, widespread corruption continues to be among the main impediments to doing business in Ukraine.