The survey conducted by Vox Ukraine last October showed that even in the conditions of a full-scale war, Ukrainians understand the importance of continuing reforms. Although crucial economic and social changes might get lost in the daily news flow, Reform Index data allow us to take stock of the “transformations of the year” and remember which areas have undergone the most significant reform in the past year and what these reforms entail.
Among all the regulations adopted from January 1, 2022, to January 1, 2023, Reform Index experts singled out 164 significant ones impacting the economy and society. It was nearly the same as in 2021, when we identified 165 such changes. Among this year’s reforms, 159 were assessed positively by experts, one law received zero points, and four more were anti-reform. In 2022, 29 significant reforms were spotted, exceeding 2 points in the range from -5 to +5. Two – the law on ratifying the Istanbul Convention and the European Network of Transmission System Operators (ENTSO-E) decision on synchronizing the Ukrainian power system with the European network – received the experts’ highest evaluation (+3 points).
The rectangle’s size is arbitrary; the numbers next to the names mean the number of points that the law received from experts
We recorded the most remarkable progress (over +10 points per area) in nine areas: business regulation, social policy and the labor market, medicine, the financial system, law enforcement and judiciary, governance, tax system, education, and countering Russian aggression. Next, we will consider each of these areas in more detail.
- Business regulation: 25 reforms. European integration
- Social policy and the labor market: 17 reforms. Modernizing legislation
- Law enforcement and judiciary; anti-corruption: 11 reforms
- Healthcare: 11 reforms. Continuation of medical reform
- Financial system: 13 reforms. Developing the markets
- Governance: 12 reforms
- Tax system: 12 reforms. E-residents and benefits for volunteers
- Education: 8 reforms. Digitization and flexibility
- Countering Russian aggression
- Changes in other areas
Most of last year’s reforms concern the business environment, with most of the 25 regulations providing for the deregulation and convergence of national and European legislation. In the conditions of a full-scale war with Russia, such changes are especially useful, facilitating the work of entrepreneurs and exporters and supporting trade between Ukraine and the countries of the world. In addition, in 2022, Ukraine joined a number of international agreements in the logistics and customs sphere.Ratifying the so-called “transport visa-free regime” by the agreement between Ukraine and the EU on freight transportation by roads (Issue 185, +2.5 points) will allow for Ukrainian carriers’ bilateral and transit traffic in European countries without the need to obtain special permits and international driver’s licenses. Ukraine and the EU will now recognize each other’s driver’s licenses. Another essential step in transportation was adopting European dimension and weight standards (Issue 180, +1 point).
Another step in simplifying trading conditions with the EU states was joining the “customs visa-free regime,” i.e., a common transit regime allowing a vehicle to have a single declaration and guarantee for the export, import, and transit of goods. At the same time, the exchange of information at all stages of customs interactions will occur in real time in electronic form. To make the “customs visa-free regime” possible, the Verkhovna Rada adopted and the President signed three laws: on accession to the Convention on the Simplification of Formalities in Trade in Goods (Issue 187, +2 points); on accession to the Common Transit Convention (Issue 187, + 2 points); and on amendments to the Customs Code harmonizing customs and the development of a common trade environment with the EU (Issue 187, +2 points).
An equally important European integration document is the Common Aviation Area Agreement (Issue 183, +2 points). Thanks to this agreement (after coordinating all necessary aviation standards and regulations), Ukrainian airlines will have the right to make domestic and complex flights within the European Union, and EU airlines can carry out the same flights in Ukraine. Also, in 2022, Parliament adopted amendments to the Air Code of Ukraine (Issue 180, +1 point) to develop and implement aviation rules in line with the standards and recommended practices of international aviation organizations and EU civil aviation laws.
The number of countries with which Ukraine has a free trade zone increased by one last year after Turkey joined in. Therefore, Ukraine currently has free trade agreements with 45 countries (Russia and Belarus have de facto withdrawn from the arrangements). The document signed with Turkey (Issue 179, +1 point) will contribute to the liberalization of the Turkish market for Ukrainian manufacturers and, therefore, to growing exports, exchange of technologies, etc.
Another four laws enhance national property rights protection legislation, which is a priority for the European Union. Two documents deal with the protection of property rights for geographical brands, i.e., products partially or fully produced in a particular region, which gives them a unique quality or taste. It is the law on the protection of geographical brands (Issue 189, +1 point) setting the conditions for granting legal protection to geographical indications, and the law on geographical indications of alcoholic beverages (Issue 195, +1 point). Two more laws regulate relations in the area of copyright protection, with the first updating the protection mechanisms for copyrighted items and the second strengthening copyright protection and increasing the fines for their violation (Issue 195, +1 point). Last year, Ukraine also adopted new rules for advertising tobacco products in line with European ones. The law (Issue 177, +1 point) provides for placing a text and graphic medical warning about the harm of smoking on 65% of the area of a pack of such products, prohibiting the advertising of electronic cigarettes and vapes and their use in public places.
Finally, a number of reforms aimed to deregulate and streamline business operations. For example, the law on liability insurance (Issue 191, +2 points) will allow a reduction in the number of fire inspections for small- and medium-degree risk companies. The law enhancing the regulation of subsoil use (Issue 195, +1.5 points) makes obtaining permits for this activity easier by removing duplicates. The law implementing a transition to electronic reporting for companies in the mining industry establishes a requirement for full disclosure of all these companies’ contracts with the government (Issue 177, +1.5 points). The law (Issue 194, +1 point) aligns the issuance of permits for nuclear energy use with European regulations. The law abolishes mandatory approvals by the Cabinet of Ministers to change the designation of land plots of up to 0.05 hectares to install mobile operators’ towers (Issue 188, +1.5 points). The law speeding up small privatization (Issue 187, +1 points) is designed to speed up the relocation of enterprises in wartime and reduce bureaucracy during small privatization after the war’s end.
Although most business regulation laws received positive assessments from the Index’s experts, some were anti-reform. We found three such regulations in 2022.
Experts negatively assessed the laws introducing customs (Issue 185, -2 points) and tax benefits (Issue 185, -1.3 points) for industrial parks. They exempt their participants from value-added tax (VAT) for importing new equipment for their own use and from income tax for ten years. They also grant local authorities the right to set preferential rates of property tax and land fees. Such changes have been consistently criticized for over a year as creating unequal “rules of the game” for Ukrainian companies and reducing budget revenues in the conditions of a full-scale war without guaranteeing a positive outcome.
Another controversial innovation is the law on localization for the machine-building industry (Issue 177, -1.5 points). The law stipulates that the share of products’ components produced by national manufacturers and subject to procurement (the so-called degree of localization) must increase from ten to forty percent within ten years. For example, a bus purchased with state money must consist of at least 40% of Ukrainian parts in ten years. Experts and businesses are concerned that implementing this law might violate such fundamental principles of public procurement as fair competition, maximum economy and efficiency, and openness and transparency.
A meaningful change in labor market regulation was the law (Issue 186, +2 points), which is the first to enshrine the concept of “freelance” in legislation. It introduces an employment contract with non-fixed working hours for freelancers allowing such employees to work for several employers simultaneously. However, companies must employ no more than 10% of such employees. Large companies (with over 250 employees) are prohibited from hiring freelancers.
The next important law is on combating workplace bullying (Issue 194, +1 point), introducing the concept of “mobbing” (bullying or harassing employees) into legislation and obligating employers to protect employees from it. When instances of mobbing have been established in court, the harassed employee can quit at any time. The employer must pay the employee severance pay equal to at least three months’ average salary. Mobbing towards colleagues (as established by the court) is considered the reason for dismissing employees by their employers. Another law is also designed to strengthen employee protection (Issue 184, +0.5 points) by forbidding the texts of job vacancies to make demands regarding race, age, gender, health, sexual orientation, religious beliefs, etc., if not related to work performance. However, if specific jobs require employees in good health or with a high level of education, such requirements will not be considered discriminatory.
This law is designed to make it easier for employers to dismiss employees if it is impossible to ensure working conditions due to the destruction of business facilities because of hostilities. It also applies if employees have not shown up at their workplace for over four months or nothing is known about the reasons for their absence (Issue 185, +1 point).
Several changes adopted last year concern military personnel and veterans. One of them (Issue 190, +2 points) obliges women with medical or pharmaceutical training, physically fit for military service, and being of a particular age to undergo military registration. Women with different specialties related to military skills (whose list is defined by Ministry of Defense orders) can register at enlistment offices voluntarily. The law (Issue 186, +1.5 points) guarantees social and professional adaptation to service members and war veterans, tasking the Ministry of Veterans Affairs with it. It is assumed that the transition from military to civilian life will include medical and psychological rehabilitation, assistance with retraining and employment, social protection, and support for veteran entrepreneurship. In November, the Cabinet of Ministers also approved changes to organizing social and professional adaptation of combat veterans and the procedure for using budget funds for this purpose. The changes provide a single mechanism for the social and professional adaptation of ex-service members and the introduction of various levels of professional retraining.
Last year, Parliament also adopted three laws regarding foreigners. The presidential law provides legal and social guarantees for Polish citizens (Issue 187, +1 point). A different regulation facilitates hiring foreign specialists (Issue 190, +1 point) by abolishing the provision on foreign specialists’ minimum wage being 5 or 10 minimums to obtain permits and the higher cost of foreigners’ work permits.
Another vital European integration law is the law on national minorities (Issue 195, +1 point), enshrining the concept of “national minorities” in legislation. It provides its representatives with all civil rights and freedoms defined by the Constitution of Ukraine: civil, political, social, economic, cultural, and linguistic. Therefore, national minorities have the right to self-identify, freedom of public associations, peaceful assembly, freedom of expression of views and beliefs, freedom of speech, opinions and beliefs, and religions. They also have the right to education in the language of their national minority and the preservation of their national community’s identity (there are some restrictions for the national minority of Russians during martial law and six months after lifting it).
Eleven critical changes took place in healthcare in 2022. In particular, three laws were adopted to improve the national healthcare system. The law on the public health system (Issue 189, +2 points) aims to enhance the effectiveness of disease prevention among the population. However, the Index’s experts think the system design as laid down in the document might be ineffective because, instead of decentralizing and entrusting coordination to the Center of Public Health, it concentrated the powers in this area within the Ministry of Health. Another law (Issue 185, +2 points) abolishes the outdated “Soviet” healthcare division into primary, secondary, and tertiary care. Instead, it introduces primary, specialized, emergency, rehabilitation, and palliative care in line with European legislation. An exciting innovation of the law is the changes to the Civil Code: from now on, criminal offenders must compensate the state budget for treating their victims.
Another law (Issue 177, +1.5 points) was adopted to create the prerequisites for transforming state hospitals into state non-profit enterprises (as was the case with communal hospitals) and regulate the use of the electronic health record sharing system (eHealth). Later, the government approved the resolution (Issue 180, +1.5 points) obliging medical institutions of all forms of ownership to switch to eHealth within five months from the law’s entry into force.
Several laws were passed regarding patient access to medicines. One of the essential laws (Issue 184, +2 points) is the regulation regarding the free provision of drugs for rare diseases applicable in two cases: a) if they are not registered in Ukraine but are registered or undergoing at least the second phase of clinical trials in the USA, Eurozone countries, Australia, Canada, Japan, Great Britain, Israel, or Switzerland, and b) upon completion of a clinical trial in which the patient participated and began taking such medications. As for other significant changes, the law on medicinal products (Issue 187, +1.5 points) implements European practices and introduces uniform terminology and rules on the pharmaceutical market. The law prohibits doctors from prescribing drugs without providing a prescription and pharmacies from selling them in case of no prescription or its expiration (Issue 191, +1.5 points).
One healthcare regulation was anti-reform, namely the changes to the law on medicinal products (Issue 189, -1 point) positioned as restrictions on importing drugs from enemy countries (i.e., Russia and Belarus). The law might seem valuable and necessary during a full-scale war, but its broad interpretation creates problems. It makes it possible to ban particular medicines if it comes to light that at least one production stage or manufacturers’ contractor is directly or indirectly linked to Russia and Belarus. Moreover, the exact criteria for banning them or grounds for canceling the license are not prescribed. According to experts, such blurred wording creates unfair competition between pharmaceutical manufacturers and can even deprive Ukrainian patients of access to vitally necessary medicines manufactured in Europe.
Five essential financial laws were adopted last year. The Index experts gave the law on financial services and financial companies the highest score (Issue 179, +2.5 points). The law continues the 2020 reform that made the National Bank of Ukraine the regulator of non-banking institutions (the “split” reform). The law, among other things, significantly facilitates the licensing and market entry procedure for non-bank financial institutions, allowing them to engage in other activities besides their main line of business and outsource part of their services. This law is vital for ordinary consumers because from now on, all non-banking institutions will be obliged (like banks) to report complete information about their services, reducing opportunities for fraud with interest rates and fees and misleading customers.
Another long-awaited regulation is the law on including the state-owned Oschadbank in the general deposit guarantee system (Issue 182, +2 points). Oschadbank used to be the only bank guaranteeing depositors a refund of their entire deposits if withdrawn from the market. This distorted banking market competition, making this state-owned bank more attractive than commercial banks. However, now Oschadbank will be part of the Deposit Guarantee Fund (DGF) and start paying deductions to it, increasing the Fund’s sustainability. In turn, the bank’s clients will have a transition period after the war’s end, during which the state will guarantee deposit amounts exceeding the limit for the Fund’s guarantees. Deposits are fully secured in wartime.
The other two laws regulate audit activities. One of them establishes requirements for a single electronic format of submitting reports based on the audit results of financial statements (Issue 192, +1 point). The other one regulates audit activity during martial law and post-war economic recovery and prohibits auditors and auditing companies linked to Russia from operating in Ukraine (Issue 191, +0.5 points).
Last year, Ukraine’s National Bank adopted several essential resolutions facilitating non-residents’ access to Ukrainian state securities (Issue 182, +1 point), including military bonds. It also updates the procedures for licensing and registering financial service providers, including tighter requirements for these firms’ business reputations to make it impossible for those connected with Russia to operate in Ukraine (Issue 189, +1 point).
One of the most important and anticipated human rights events was the Istanbul Convention’s ratification (Issue 185, +3 points). Although the Convention primarily aimed to prevent gender-based violence and ensure equality between men and women, its ratification was necessary to further European integration. It had been constantly postponed due to a lack of political will of Parliament’s previous convocations and opposing conservative organizations (in particular, the All-Ukrainian Council of Churches).
A number of changes also took place in the judicial system. Parliament adopted the law (Issue 181, +2 points), enabling transferring cases to territorially close courts with the consent of the High Council of Justice or the Supreme Court head. It can be done if the court supposed to consider such issues under territorial jurisdiction cannot do it for objective reasons (e.g., hostilities, natural disasters, etc.).
Two international cooperation laws were adopted in the judiciary: on Ukraine’s accession to the Agreement for the Establishment and Statute of the European Public Law Organization (Issue 190, +1 point) and on the principles of cooperation with the International Criminal Court (Issue 183, +2 points).
The law, which should become one of the key elements in judicial reform, received conflicting expert assessments. It concerns a change in the procedure for selecting candidate judges of the Constitutional Court of Ukraine (Issue 195, 0.5 points). The expert environment immediately demanded that the law be changed because it contradicts international partners’ requirements and therefore endangers European integration. Secondly, it opens the way to electing CCU judges, acting not in the interests of justice but in the interests of the government or individual politicians.
Twelve governance reforms were adopted in 2022. The most significant change is the updated law on official statistics (Issue 187, +2 points). It modernizes legislation in this area incorporating the best international practices: ensuring equal user access to data, minimizing the burden on respondents, and ensuring the confidentiality of information. This law allows researchers to access microdata as soon as the State Statistics Service has relevant procedures in place.
Parliament also adopted the law on developing a local voluntary fire protection network in communities, i.e., public associations participating in fire prevention and extinguishing (Issue 193, +1.5 points). It is assumed that such measures will reduce the burden on fire services and the time rescue units need to come to the fire scene.
Two crucial changes occurred in administrative services. The law on the administrative procedure (Issue 184, +2 points) implements uniform rules for the interactions of citizens and businesses with authorities and the process for appealing the authorities’ decisions, actions, or lack thereof. In addition, the Cabinet of Ministers approved the procedure for declaring and registering the place of residence (Issue 181, +1.25 points). From now on, citizens with two or more permanent places of residence are free to declare only one of them.
The law introducing electronic declaration of international postal and express shipments received the highest rating from the Reform Index experts (Issue 183, +2 points). It also exempts postal items for individuals with a value of up to 150 euros from VAT and customs duties.
Two regulations concern volunteering and charitable assistance: the law exempting from taxation the funds raised by volunteers as charity assistance, provided they are recorded in a special register of volunteers (Issue 187, +1.5 points) and the changes to the Tax Code (Issue 187, +1 point).
In 2022, Parliament adopted the law allowing foreigners to obtain electronic resident status for doing business in Ukraine (Issue 191, +1 point). Foreigners can get this status remotely, after which they can open bank accounts (also remotely) and pay a tax of 5% of income within limits for individual entrepreneurs of group III (According to the Tax Code, the limit is 1167 minimum wages, or about UAH 7.8 million in 2023). If the limit is exceeded, the tax will be 15%, but only for external contracts with the export of services.
The Verkhovna Rada also allowed the privatization of state and communal property in a tax lien without the consent of the Tax Authority if the buyer repays the tax debt within six calendar months from the moment of transfer of the object’s ownership (Issue 193, +1 point).
Several of last year’s significant changes had to do with education. In particular, Parliament passed the law allowing for another professional or vocational and technical training (free of charge) if at least three years have passed since the first training and if one has two years of pensionable service records (Issue 185, +2 points). The Cabinet of Ministers addressed the issue of academic mobility by enabling students to be credited with the results of their studies at other higher education institutions after returning to their universities and allowing scientists to keep their positions at their principal place of work for up to two years.
Three regulations concern digitalization in the educational sphere. Parliament adopted the law on creating an Automated Information Complex of Educational Management (Issue 177, +2 points) containing registers of educational entities, education seekers, training documents, certificates of external independent evaluation, student cards, etc. The Cabinet of Ministers also approved provisions regarding the National Scientific Information System designed to manage Ukrainian educators’ and scientists’ activity data (Issue 189, +1.3 points).
Among other vital changes in education, there is the law enhancing the management of military higher education institutions (Issue 177, +2 points) and the changes to the Customs Code allowing state scientific institutions and universities to import equipment, devices, consumables, etc., for their own scientific activities without paying import duties (Issue 183, +1 points).
Although decisive steps to overcome the Russian threat inside the country had to be taken after the occupation of Crimea and parts of the Luhansk and Donetsk regions, unfortunately, only the full-scale war gave a real impetus to implement them. In 2022, we recorded nine regulations on countering Russian aggression to remain in force even after the end of the full-scale war or the lifting of martial law.
Crucial in the conditions of a full-scale war is the law establishing criminal responsibility for aiding Russia, representatives of its occupation administrations, or armed formations (Issue 183, +1 points). According to it, collaborationism is punishable by imprisonment for 10-12 years and a ban on holding certain positions (engaging in certain activities) for 10-15 years with possible confiscation of property.
Two more laws were related to cyber security: the law protecting state information resources (Issue 185, +2 points) and the law (Issue 181, +1 points) facilitating the acquisition of digital evidence during pre-trial investigations (information retrieved from personal devices, video cameras, etc.). Parliament also adopted the law to improve the mechanism for combating raiding. It eliminates the possibility of blocking the Ministry of Justice’s review of complaints about registration actions and publication of decisions regarding the complaints on the official website.
Last year, the Verkhovna Rada also adopted the law implementing provisions of the Geneva Convention relative to the Protection of Civilian Persons in Times of War (Issue 186, +1 point). It authorized the State Service for Special Communications and Information Protection to implement state policies in actively countering Russia in cyberspace (Issue 187, +1 point).
In order to reduce Russian influence on Ukraine’s public life and economy, Parliament passed laws enabling the ban of the activities of parties justifying or denying Russian armed aggression against Ukraine, calling the war “internal” or “civil conflict” or “civil war” in court (Issue 183, +2 points). It banned Russian symbols and public organizations promoting Russian propaganda (Issue 184, +0.8 points) and prohibited songs by Russian artists supporting Russian aggression from being publicly performed. It also increased quotas for Ukrainian performers on the radio to 40% (Issue 185, +1.5 points).
The full-scale invasion drove change in construction. Last year, numerous reforms in this area were a long-term response to wartime challenges. Thus, a separate law now obliges developers to design and build bomb shelters in every building housing 50 people permanently or over 100 temporarily (Issue 187, +1.25 points). The Cabinet of Ministers approved the procedure for developing programs to comprehensively restore territories (Issue 190, +1.5 points). It simplified permitting and registration procedures in construction during martial law and within a year after lifting it (Issue 185, +1.8 points). Also, last year, a law was passed to introduce minimum requirements for buildings’ energy efficiency (Issue 186, +1.5 points).
European integration changes in agriculture include a law strengthening the fight against counterfeit pesticides and agrochemicals and aligning the requirements in this area with international regulations (Issue 195, +1.13 points). The long-awaited law on developing irrigation systems (Issue 183, +1 points) creates prerequisites for developing the land melioration in Ukraine, whose reform the Ministry called second in importance after land reform.
Fundamental changes took place in ecology. In 2022, waste management reform began with adopting the respective law (Issue 185, +2 points), introducing a waste management hierarchy similar to the European one (prevention, reuse, recycling, recovery, and disposal), and establishing the “polluter pays” principle. In addition, Parliament passed a law (Issue 195, +2 points) to build a European-style national chemicals management system deregulating the production of particularly hazardous chemicals. Another law adopted by Parliament creates an electronic system and an online map showing all polluting entities and information about them (Issue 189, +1 point). These tools are expected to enable prompt monitoring of emissions and more effective decisions to reduce industrial pollution.
Reforms also continued in digitalization, with the adoption of four laws. One law introduces electronic ID cards for veterans (Issue 177, +1 points). Another law addresses the peculiarity of using cloud services (Issue 181, +1 point). A European integration law allows businesses to submit information about the ultimate beneficiaries without mandatory notarization of document copies (Issue 189, +1 point). Another regulation implements the EU provisions regarding electronic identification (Issue 195, +1 point). Last year, the Cabinet of Ministers also approved the procedure for providing public services via the Diia app (Issue 186, +2 points). The Ministry of Internal Affairs signed an order to create a Unified Register of Weapons to ensure control over licensing and use of weapons (Issue 181, +1 point).
One of the areas that proved stable in 2022 was energy. 2022 marked Ukraine’s entry into the so-called “Energy European Union,” meaning the national power system merged with the European one (ENTSO-E) (Issue 183, +3 points). This makes it impossible to exchange Ukrainian electricity with Russia and Belarus (and therefore eliminates the aggressor countries’ energy blackmail power) and integrates the Ukrainian energy market into the European one.
Several significant changes occurred in culture. We are primarily talking about the law on media (Issue 195, +2 points), a controversial regulation necessary for European integration. For the first time, it regulates online media activities, including their voluntary registration. However, critics of the law say it gives the regulator (the National Council for Television and Radio Broadcasting) excessively broad powers. It stipulates that Parliament can cancel media outlets’ state registration or even ban their activities due to violations, e.g., providing false information about the owners, drug propaganda, or Russian propaganda. Last year Parliament also adopted the law implementing the goal and principles of state policy in the area of national and civic identity as part of national security for the first time in independent Ukraine (Issue 195, +1 point). The regulation introduces the integration of Russian-Ukrainian war veterans into civic education activities, including national and patriotic education and forming in society the tradition of commemorating Ukraine’s fallen defenders.
After Ukraine received EU candidate status last year, the authorities intensified the European integration process. Ukraine joined new international agreements with the European Union, took steps to harmonize national legislation with European regulations, and implemented some of the seven blocks of reforms necessary to continue accession to the EU. It approved the head of the Specialized Anti-Corruption Prosecutor’s Office (SAP) and adopted the laws on media and national minorities. There was even modest progress in judicial reform that had stalled in previous years. On the one hand, we have a significant victory – the liquidation of the scandalous District Administrative Court of Kyiv. On the other hand, there is a feeling of complete uncertainty about the new court that risks repeating the fate of its “predecessor” and controversial changes to the procedure for selecting CCU judges, whose revision the EU already demands.
Work on adopting and implementing reforms must be accelerated because a lot depends on it – the country’s increased defense capability by developing open and stable institutions, the European integration movement, and further funding from Ukraine’s international partners. The latest loan agreement signed between the Ministry of Finance and the EU for $18 billion provides four blocks of conditions for interest-free funding, including “structural reforms and effective governance” and “rule of law.” The Ukrainian people also demand the continuation of reforms even despite the war. According to the October survey by Vox Ukraine, the top three priority reform areas for Ukrainians in 2023 (apart from defense: we wrote about the danger of reforming it during the war earlier) are healthcare, education, and the judicial system.
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