Expert: EU Suggests a State Building Formula for Ukraine

For the first time Ukraine commemorated the International Anti-corruption day on December 9 with a number of important achievements: the parliament approved an anti-corruption package of laws and the National Anti-Corruption Bureau is to be created next soon. The EU was one lobbying these changes providing substantial financial support for reforms implementation. In her interview Tatiana Kovtun, sector manager of the EU Delegation to Ukraine, is sharing views on how the EU is evaluating these steps.

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Tatiana Kovtun, sector manager of the EU Delegation to Ukraine

– In addition to the Association Agreement, the EU and Ukraine signed another momentous, though less publicised document: a State-Building Contract. Why is it so important? Does it fill the gaps present in the Association Agreement, i.e. public administration reform?

The State-Building Contract is a grant of untargeted budget assistance to Ukraine. Totalling €355 million, this is the largest budget support grants ever provided by the EU. The first tranche of €250 million was provided in May 2014 and the second is scheduled for June 2015.

This grant is unique in its ambitious conditionalities. By accepting this budget support from the EU, Ukraine commits to fulfilling eight sets of conditionalities before it will receive the second tranche of €105 million. These requirements focus on the fight against corruption, transparency and increasing the integrity and accountability of public service and judiciary, which is explained in detail in the contract. Other conditionalities include reform of verification of asset declarations of public officials, transparency of constitutional reform, sound public financial management, electoral legislation, improved access to information and public registers, civil service and administrative procedure reform, and public procurement. The grant essentially aims at institutional and procedural state-building. In this context, state-building means, for example, stabilising the public service and human resource practices in line with EU best practices, and ensuring that systems of public procurement meet European norms.

– What are the key points of the anti-corruption part of the state-building contract?

– The section of the contract concerning the fight against corruption outlines detailed mechanisms that will help reduce corruption. Conditionalities will be assessed against certain criteria defined in the contract. In particular, the contract envisions the creation of an Anti-corruption Bureau, to ensure all the standards of independence (i.e., competitive selection of a director and employees, sufficient remuneration etc). But more importantly, the bureau must be able to provide some statistics on its investigations by mid-2015. The Bureau’s responsibility is to investigate corruption in the highest ranks of government or if the level of damage is substantial. For example, the anti-corruption law is targeted at ministers, prime-ministers and theirs deputies, governors, judges, and members of parliament.

Another contract requirement is the verification of an open access to asset declarations of public officials and criminalisation of illicit enrichment. This is a difficult problem for Ukraine to tackle, because corruption crimes are not easy to prove. A public servant with a fixed salary may suddenly acquire expensive property, like cars, houses or yachts. This unexplained increase in wealth is illicit enrichment, and due to changes to the law, is now considered a crime.

All officials will also be required to submit declarations of their assets, property, income and expenses electronically via web-portal which would be open to the public. The preventive agency will verify these declarations and apply sanctions for non-declaration or submitting false information.

The requirements specified in the state-building contract have been partly implemented through the anti-corruption laws adopted on October 14. These established the Anti-Corruption Bureau and the Agency on Corruption Prevention, which will work on prevention of conflict of interests, inspection of declarations of public servants, etc.

– How does the EU evaluate Ukraine’s steps to fight corruption, namely the anti-corruption package of reforms and plans to establish the national Anti-Corruption Bureau?

– We believe that the anti-corruption package was indeed revolutionary. The laws have been needed for a quite a long time in Ukraine, but there was no political will to adopt them. Today, these laws have been adopted as a result of public pressure in the lead up to the parliamentary elections.

The question still remains of whether there is political will to implement these laws. We will have an answer by mid-2015, when the laws are scheduled to enter into force. For instance, the law establishing the Anti-Corruption Bureau enters into force on January 25, 2015, and the law on prevention of corruption on April 25, 2015. Both require concrete action plans for implementation. Now, the law calls for immediate launch of competitive recruitment of the Director of the Bureau. The recruitment process is going to be held openly with the involvement of journalists. The law stipulates that the selection panel must be transparent and include three representatives of the President, the Cabinet of Ministers, and the Parliament. These representatives should have untainted reputation. So, now Ukrainian society and the international community will be able to see whether there is political will to implement these planned reforms.

– Corruption in public procurement is considered as one of the biggest problems for Ukrainian society. A new law on public procurement has been adopted recently. How does the EU evaluate Ukraine’s ability to cut corruption in this sphere?

– Indeed, Ukraine adopted a new law on public procurement in April 2014. EU experts noted that its provisions are mostly in line with the European standards compared to previous versions of the law.

In particular, a very positive element is that the number of exceptions to this law has been reduced. Exceptions are a big problem, and there are currently several bills being proposed to increase the number of exceptions to the law on public procurements, which means there is a significant risk of backsliding into the old schemes.

Another matter requiring attention is the implementation of the law, because not the entire necessary framework for it is yet in place. This is particularly a concern with e-procurement, which requires additional e-governance instruments.

– Do you expect Ukraine will receive the second tranche within the contract on a full scale? Will the government fulfil all the conditions foreseen?

– The amount of the second tranche is to be disbursed based on fulfilment of conditionalities. The EU defined eight sets of conditionalities to be met by June 2015 if Ukraine is to receive the money. Each of the eight conditionalities has a certain weight (a ratio). For example, the EU will provide €13 million to Ukraine if it is successful in implementing the reform of declaration of income, expenditures and property status for public servants. This should include a web-portal for online declaration, where all citizens will be able to view and track this information. EU experts and civil society will jointly assess whether Ukraine has fulfilled this requirement.

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In my opinion, there may be a risk that Ukraine won’t get the full amount of the second tranche. It is failing to fulfil some of the reforms by the established deadlines. For example, the law on corruption prevention enters into force only on April 25, 2015, while public servants must submit their declarations earlier, on March 31. This means that in 2015, public servants will submit their declarations under the old system, without public access and reliable verification. But a miracle may happen if there is political will. When the MPs understand that Ukraine may lose the funds, they may decide to bring this law into force earlier. They may create the web-portal and design the regulations in February. But that scenario seems very unlikely.

– Can the civil society make a difference in this situation?

– Of course it can. Nearly a month ago, the Reanimation Package of Reforms provided the EU Delegation with its assessment of the fulfilment of the State-Building Contract. If there is public awareness of the problems, the situation can change. But there is little time left for that.

– The contract relies on civil society monitoring of the fulfilment of the conditionalities. Are there any particular NGOs or activists involved in the assessment of Ukraine’s progress toward fulfilling the contract?

– I haven’t noticed any serious monitoring or media coverage of these issues. The European Pravda published an article with an analysis of the contract, but it was missing key points. There are now messages in the society regarding Ukraine’s failure to implement the reforms in a timely manner.

But there has been cooperation with NGOs. For instance, Reanimation Package of Reforms actively lobbies for the anti-corruption laws. The package of laws is an important step toward disbursing the second tranche. Indeed, the particular changes, envisaged by the grant, were adopted. But the society should push this issue.

Obviously, the EU supports Ukraine and is monitoring the implementation of the reforms. But this should primarily be a concern for Ukrainian society. The government should work on the reforms and the people of Ukraine should monitor and control its activities. All conditinalities are available on the websites of the Ukrainian Ministry of Economy and the EU Delegation.

– How should Ukraine spend this EU grant?

– The EU doesn’t make any requirements on how the grant funds should be spent; it is untargeted budget support. According to its budget laws, Ukraine makes amendments to the budget and allocates the funds as budget revenue. Then the funds are distributed according to priorities. This may include financing the pension fund, government, or the defence sector. The government is not obliged to report to the EU on how the funds are used. However, before the second tranche is disbursed, the EU assesses the extent to which Ukraine has fulfilled the requirements specified in the contract. It is up to the Government of Ukraine to prioritize the funds, but it must ensure the fulfilment of conditionalities.

A shortened version of this interview was published in Ukrainian on European Pravda website.