Reform Index. Release 25

Reform Index aims to provide a comprehensive assessment of reform efforts by Ukraine’s authorities. The Index is based on expert assessments of changes in the regulatory environment in five areas. Reform Index value for the 25^th monitoring period (December 7 – 20, 2015) stood at +1.4 points out of the possible range from -5.0 to +5.0 points, marking the highest level since end-August 2015. 

Contributing to the Index increase were (i) cancellation of a number of outdated national technical standards, (ii) the sharp increase in salary cap for managers of state enterprises, (iii) decentralization of government functions such as registration of real estate and enterprises, and (iv) some anti-corruption initiatives from “EU visa-free package”.

The highest grade in the monitoring period of +3.0 points was assigned to the abolition of 12 776 outdated national technical standards (orders of SE “Ukrainian Scientific-Research and Training Center of Standardization, Certification and Quality Problems” 175 of 10.12.2015, 182-188 of 14.12.2015) that took place in the framework of broader reform of the system of technical regulation. Formally, the use of standards- all developed before 1992 – was not mandatory by law, but secondary regulation forced many companies to continue applying them in a mandatory manner. Most of the canceled standards will remain in force for two years, which gives enterprises enough time to adopt new rules. The decision is consistent with Ukraine’s obligations under the EU-Ukraine Deep and Comprehensive Free Trade Area.

The largest number of regulations fell into Governance and Anti-Corruption sub-index. The 20-times hike in cap of salaries of the state enterprises management (CMU decree 1034 of 11.11.2015) received +2.0 points. Brining salaries closer to market level should improve governance of state-owned enterprises, provided fair competitive selection of management team. Olena Bilan from Dragon Capital said:

The measure was absolutely necessary to cut incentives for corruption and involve professionals in the management of state enterprises. It is unclear why it was delayed for so long.” Still other experts expressed caution. Ilona Sologub from Kiev School of Economics mentioned: “On the one hand, the introduction of market-level salaries is the right thing, on the other, fixed salary will amount to only 25% of the total compensation, while 75% will come as a bonus, which is wrong and allows ministries or other authorities influence the management.

Also, experts assigned quite high grades to the decision to transfer some functions from central to local authorities. Transfer of state registration of real estate to local authorities received +2.0 points and that of legal entities and individual entrepreneurs scored +1.5 points (laws 834-VIII, 835-VIII and 836-VIII of 26.11.2015). In addition, the law on National Agency of Ukraine for identifying, tracing and management of assets derived from corruption and other crimes (772-VIII of 10.11.2015) adopted within the package of EU visa regime liberalization for Ukraine scored +1.5 points.

A significant number of important and positive decisions over past two weeks caused two sub-indices – Governance and Anti-Corruption and Industrial Organization and Trade Policy – to reach +2.0 points, which corresponds to acceptable pace of reforms. At the same time, three other sub-indices – Public Finance, Monetary Policy and Financial Markets, as well as Energy Independence – stood at + 1.0 point dragging down Reform Index value.

Reform Index aims to provide a comprehensive assessment of reform efforts by Ukraine’s authorities. The Index is based on expert assessments of changes in the regulatory environment in five areas:

1. Governance and Anti-Corruption
2. Public Finance and Labor Market
3. Monetary Policy and Financial Markets
4. Industrial Organization and Foreign Trade 
5. Energy Independence

For details please visit reforms.voxukraine.org

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