Reform Index 232: Law on medical cannabis, corporate governance of state-owned enterprises, and the trademark "made in Ukraine"

Reform Index 232: Law on medical cannabis, corporate governance of state-owned enterprises, and the trademark “made in Ukraine”

Photo: unsplash.com / Esteban López
13 May 2024
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Five regulations made it into the 232nd issue of the Reform Index. Among them, three garnered a rating of 2 points, a distinction made by the Index’s editorial board to highlight more substantial reforms from lesser ones. These encompass laws regarding medical cannabis, enhancements to the corporate governance of state-owned enterprises, and a resolution permitting Ukrainian entrepreneurs and authorities to utilize the “Made in Ukraine” trademark free of charge. Thanks to these legislative measures, the Reform Index saw an increase to +1 point during the period spanning from February 12 to February 25, 2024. In the previous issue, the Index stood at +0.8 points.

Graph 1. Dynamics of the Reform Index

Graph 2. Values of the Reform Index and its Components in the Current Assessment Round

The law on medical cannabis, +2 points

In February 2024, the president signed a law regulating the circulation of hemp for medical, industrial, educational, and scientific purposes. This bill was drafted by the Ministry of Health and submitted by the Cabinet of Ministers for consideration by people’s deputies in the summer of 2022. After its first reading, 894 proposals and amendments were made to the bill, thus prolonging the legislative process.

This law amends the law on narcotic drugs, psychotropic substances, and precursors by adding definitions related to the permitted uses of hemp. A key condition for obtaining permission to grow hemp for the purposes above is the traceability of cannabis plants and products throughout the entire supply chain. Thus, to receive a license to grow hemp for pharmaceutical production, entrepreneurs must ensure round-the-clock video surveillance of plantations, police access to them, and the coding of each plant. The fate of each plant will be traceable in the electronic accounting system through an identifier.

Additionally, the law allows the import of hemp seeds, substrates for the production of cannabis medicines, and plants for use in scientific activities into Ukraine. 

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

The law on corporate governance of state-owned enterprises, +2 points

Law 3587-IX continues the reform of state property management in Ukraine. To ensure that state-owned enterprises (SOEs) are more independent from the government’s populist desires, MPs have strengthened the powers and responsibilities of supervisory boards.

The government retains high-level management of state-owned enterprises  and is tasked with approving the State Property Policy, which will outline the goals and objectives of SOEs, establish criteria for identifying strategic enterprises, and determine which SOEs to retain and which to privatize. 

Furthermore, with the assistance of the Ministry of Finance, the government and other ministries responsible for managing SOEs will now establish profitability and solvency requirements for state companies through letters of expectation. Meanwhile, determining the steps needed to achieve these goals and appointing and dismissing state enterprise management will solely be the supervisory board’s responsibility. In order to ensure these boards’ independence, the law establishes an exhaustive list of reasons for the dismissal of its members—meaning it will not occur for political reasons. Additionally, mandatory assessments of their performance have been introduced to monitor the effectiveness of supervisory boards.

Furthermore, to increase transparency in SOEs’ operations, they will be required to establish an internal control system comprising compliance, risk management, and internal audit.

This law aligns Ukrainian legislation with the OECD Principles of Corporate Governance and is part of harmonizing it with European standards. 

The “Made in Ukraine” trademark can be used free of charge, +2 points

To promote Ukrainian-made goods, the government has developed the “Made in Ukraine” trademark and adopted a resolution allowing Ukrainian enterprises and government bodies to freely use it on their products. Subsequently, the Ministry of Economy should develop a brand book based on this imagery.

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

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