Reform Index 208: Defense procurement and development of electric transport

Reform Index 208: Defense procurement and development of electric transport

Photo: ua.depositphotos.com / khuntuu1973.gmail.com
8 May 2023
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In issue 208 (issue 201 before the audit) of the Reform Index, 9 decisions of the Ukrainian government have been included for the period from March 13 to March 26. The Index scored +1.1, with possible values ranging from -5 to +5. In the previous issue, its value was +0.4 points.

Chart 1. Reform Index Dynamics

Chart 2. Reform Index and its components in the current round

Law on transparency in defense procurement, +2.0 points

The Verkhovna Rada passed Law 2958-IX on the transparency of defense procurement during martial law to address public demand following a scandal involving overpriced purchases. 

If the procurement’s subject matter is not a state secret, clients must now publish the procurement announcement on the responsible agency’s website and in the electronic procurement system. The Cabinet of Ministers is responsible for setting the maximum prices for state-purchased goods and services and determining grounds for significant contract revisions to prevent suppliers from inflating prices post-contract.

Procurements for goods and services up to UAH 200,000, and defense-related works up to UAH 1.5 million, are permitted to be made without the electronic system. However, customers must publish a report about the contract within ten working days after concluding it with the supplier in the electronic procurement system.

Information about the Reforms Index project, the list of Index experts and the database of the regulations assessed are available here.

Law on compensation for destroyed and damaged property, +1.5 points

In late March, the World Bank estimated that Ukraine needed $411 billion for full-scale invasion recovery, with 17% of the needs attributed to housing. To provide individuals who lost homes due to hostilities with a compensation mechanism, MPs passed Law 2923-IX, which only applies to property located in Ukrainian-controlled territories as of February 24, 2022, that was subsequently damaged or destroyed.

Under the law, citizens of Ukraine, their heirs, co-owners, or managers of residential buildings are eligible for compensation (except for sanctioned individuals and those who have committed crimes against the national security of Ukraine).

Compensation for damaged property will be provided in the form of materials for restoration purposes or reconstruction works.

Owners of destroyed property will receive a housing certificate (state guarantee for a certain amount) that can be used to purchase a new home within five years of receipt. 

Private homeowners can also choose to receive money in their bank accounts; these funds can be used for construction purposes only.

Compensation payments are to be financed from the state and local budgets, international loans, financial aid, and reparations from Russia. However, given the significant amount of housing that was destroyed, the reduction of Ukraine’s budget revenues, the absence of reparations, and the possibility of international aid falling short of the required amount, there is a risk that the payment of compensation could be extended indefinitely.

Law on developing highly efficient cogeneration in Ukraine, +1.0 points

Law 2955-IX was passed with the aim of promoting the efficient production of electric and thermal energy through a single process known as cogeneration. One of its main objectives is to bring Ukrainian legislation and terminology in line with the guidelines set out in Directive 2012/27/EU. The law also establishes the principles of state policy for using highly efficient cogeneration plants for combined electricity and thermal energy production, subject to a cost-benefit analysis during their construction or renovation.

Cogeneration by a single facility is considered highly efficient compared to separate plants if it offers primary energy savings of more than 10% for plants with a capacity greater than 1 MW and at least some primary energy savings for plants with a capacity of up to 1 MW. 

Not only does cogeneration enable more efficient use of fuel for energy and heat production, but it also promotes decentralization of electricity generation.

Law on developing electric charging infrastructure and electric vehicles, +1.0 points

The purpose of Law 2956-IX is to foster the growth of electric transportation infrastructure and facilitate the gradual phasing out of transport powered by internal combustion engines.

Before the year ends, the central and local authorities are required to endorse programs that will promote the development of electric infrastructure, including installing charging stations for electric cars in parking spaces situated on communal or state property. Moreover, in designing high-rise buildings, 50% of parking spaces must have access to charging devices for electric vehicles with commercial electricity rates.

According to the law, it is permissible to install charging stations and energy storage facilities on land designated for any purpose.

By January 1, 2030, in cities with a population of over 250,000 people, at least 25% of the buses must be powered by electricity, liquefied gas, or hydrogen. This percentage should increase to at least 50% by January 1, 2033.

The law also introduced definitions for electric scooters, unicycles, segways, and other electric vehicles. Those with an engine capacity of up to 1 kW and a top speed of up to 25 km/h are referred to as “light personal electric vehicles.” On the other hand, the more powerful electric vehicles with a maximum speed of up to 50 km/h and two or more wheels are classified as “low-speed light electric vehicles.” 

This law harmonizes Ukrainian laws with European legislation and implements the provisions of Directive 2009/33/EU, Directive 2014/94/EU, and the National Transport Strategy of Ukraine 2030.

Chart 3. Value of Reform Index components and number of events

Reform Index from VoxUkraine 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 six areas: Governance, Public Finance, Monetary system, Business Environment, Energy, Human Capital.

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