EBRD and Ukraine in breakthrough agreement to strengthen corporate governance

By Olga Rosca
@olgarosca

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State roads agency Ukravtodor commits to anti-corruption reform.

  • State roads agency Ukravtodor commits to anti-corruption reform
  • Focus on procurement, internal controls and staff development
  • Good governance in road sector is litmus test for broader anti-corruption programme

The European Bank for Reconstruction and Development (EBRD) and the government of Ukraine are launching a joint initiative to improve the corporate governance of state-owned enterprises, starting with a pilot programme to transform Ukravtodor, the state roads agency.  

In a Memorandum of Understanding (MoU) signed at the sidelines of the EBRD 2020 Annual Meeting today both parties commit to supporting efforts to enhance Ukravtodor’s procurement system and to strengthen its internal controls, policies and procedures that aim to prevent bribery and corruption.

Denys Shmyhal, Ukraine’s Prime Minister, said: “The partnership between Ukravtodor and the EBRD on corporate governance and anti-corruption practices is another indication that Ukraine has the political will to remove opportunities for any corruption. In addition, such cooperation with our partners will increase the efficiency of public investments in infrastructure projects. The government is continuing its corporate governance reform in line with OECD best practices and is considering the application of this reform in 15 state-owned enterprises in the near future.”

Matteo Patrone, EBRD Managing Director for Eastern Europe and the Caucasus, signed the agreement on behalf of the Bank and said: “This cooperation to strengthen anti-corruption measures in the road sector will serve as a pilot – and a litmus test – for a broader anti-corruption and good-governance programme backed by the EBRD and targeting all Ukrainian state-owned enterprises and public sector entities.”

As part of the MoU, Ukraine is committing to implementing the OECD Guidelines on Corporate Governance of State-Owned Enterprises and to adopting an overarching state ownership policy.

Work to promote good corporate governance in state enterprises and state agencies will include an overhaul of risk management systems, compliance and internal audit systems, and the replacement of existing structures with independent and qualified professionals. Staff will be trained to act ethically and with integrity. In the future, third parties such as contractors and suppliers will also have to commit to the same anti-corruption principles.

In addition, the government of Ukraine and the EBRD will work to align the procurement systems of state-owned enterprises and agencies with the Global Standard for Procurement and Supply of the Chartered Institute of Procurement and Supply and to help them receive internationally recognised procurement certification. The reform will include staff development programmes and the introduction of comprehensive e-procurement systems covering the investment cycle from start to finish.

The EBRD is a key supporter of reforms in Ukraine. Its financing for state-owned enterprises is conditional on improvements in corporate governance. To date, the Bank has worked with the state-run oil and gas company Naftogaz, national energy firm Ukrenergo, the postal service UkrPoshta, national nuclear power company EnergoAtom and Ukrzaliznytsia, the Ukrainian railways firm. The Bank’s investments, coupled with work to improve corporate governance, have helped to strengthen the rules, practices and processes by which these companies are directed and controlled, enhancing their performance and accountability.  

As a leading institutional investor, the EBRD has invested more than €14.4 billion across 479 projects in Ukraine to date. The Bank is focusing on energy efficiency and energy security, unlocking Ukraine’s agricultural and industrial potential, providing quality infrastructure and strengthening the financial sector.

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