Reform Index 44. Dismal Performance: the Rate of Reforms Has Dropped Almost to Zero

Today, extremely low financial incentives for state bailiffs is one of major reasons for weak performance of the State Executive Service. Low remuneration causes many problems in the State Executive Service in the country. This factor is the reason for understaffing (about 20% of vacant positions across the country), for high workload of current staff (over 160 cases per officer per month) and sometimes leads to relatively low qualification of enforcement officers, high attrition rate and low interest in quality of their work. Clearly, we cannot expect improvements within the system without changing remuneration rules.

Hence, the Decree aims to resolve this problem by increasing remuneration (the variable component of it) that will directly depend on the performance of each bailiff. The result-based remuneration grounded on market economy principles is expected to significantly increase efficiency of the State Executive Service. It is important that remuneration will be distributed between a bailiff and his/her supervisors. It will guarantee the aspiration to achieve the best results at each level of the Service structure and significantly reduce corruption risks.

10% remuneration for a private bailiff ensures equality between state and private enforcement systems. This remuneration for the private bailiff besides the honorarium should cover the cost of performing his professional duties (rent and office supplies, recruitment, registry services etc). For a public enforcement officer all expenses are covered by the state and should be compensated from the enforcement fees set at the same 10%  level. Hence, in our opinion this remuneration system will be balanced and fair.”

“Good news is that a state bailiff can get remuneration even in case of partial recovery of assets. There are cases when a state bailiff conducted all necessary enforcement measures, but a debt and an enforcement fee were recovered only partly. Previously in such a case no remuneration was paid as the court decision was not implemented. At the same time, a remuneration payment procedure remains bureaucratic envisaging writing both a remuneration request and a payment submission which de-facto duplicate each other. This procedure should be streamlined and improved.”

“The new regulation adjusting the procedure for granting housing and utility subsidies is an ad-hoc measure aimed at fraud reduction. The revision of total income taken into account when assessing the eligibility of a household for the subsidy is expected to reduce fraud. However, it might also hurt those who are in a real need (e.g., because of unemployment). A restitution of special commissions for subsidies’ decisions is doubtful taking into account that traditionally these commissions do not work very well (and a little has changed in the local social policy departments).

Overall, this decision again raises the issue of importance and urgency for the full-scale social welfare reform, including provision of social assistance, subsidies and privileges. The government should finally propose a modified social welfare system that will become a  long-term solution to its current problems.”

“It is important to consider the situation within the time perspective. Previously, all contracts for export of metal scrap had to be registered. It  was an implicit mechanism for export quotas. This approach was unpredictable, non-transparent and created opportunities for corruption. In fact, the total annual export quota as well as its distribution between exporters were defined at the discretion of officials.

These and other norms have actually led to the destruction of the scrap-metal industry.

Law 1455-VIII of 12.07.2016 cancels this corruption scheme, simultaneously introducing an increase in the duty for one year. Temporary duty increase is aimed at softening the transition period for the scrap-metal market.

The market becomes predictable, and the level playing field is created for all of its participants. It is very important that a duty increase is indeed a temporary measure,  is not  extended after its expiration date and is  reduced to the level foreseen by Ukraine’s international obligations.”

“In fact, the country has violated its obligations not only to the EU but to the WTO as well, since it promised not to raise export duties on ferrous metals scrap. Metal producers will benefit from this law. They are now suffering from low global metal prices and are not ready to pay the world price for raw materials. The decision was justified, in particular, by a critical shortage of raw materials for the industry and its critical importance for the economy (Article XI GATT). However, the strategic nature of these raw materials raises certain questions. One of the arguments for the duty increase was the needs of military machine-building, but then it is not clear why metal export is not prohibited.”

“The law #1455 covers not only an increase in an export duty for scrap metal. The main purpose of the law is a deregulation of the scrap export (namely via cancellation of export licensing). During the draft law development, it was recognized that the increase in export duties is a controversial measure as for the membership of Ukraine in WTO and its obligations under the Association Agreement with the EU. However, the temporary nature of the duty increase is a compromise between the interests of the industry and Ukraine’s trading partners. Therefore, this law is reasonable. However, the attention of all interested parties will be focused on how to avoid speculations on the necessity to prolong an increased duty.”