Ukraine’s transition to a market economy has been a difficult process. While dismantling a command economy deeply integrated with the Soviet system has presented serious challenges, USAID programs have made a substantial difference in several key areas.

Agriculture

Agricultural Policy, Legal and Regulatory Reform

• This project succeeded in convincing the government to place the following provisions in the 2008 budget: a) further diminishing special agricultural VAT regimes for meat and milk producers; b) replacement of indirect subsidies (special VAT) with direct subsidies; c) lowering direct subsidies and redirecting government resources to WTO approved green box subsidies; d) amendments to fixed agricultural tax. All these proposals were adopted in the Yanukovich government proposed Tax Code and GOU program for agricultural development.

• Regulatory reform requirements were met through: 1) adoption of a Cabinet of Ministers Resolution to implement the grain market development program, proposed in the President’s decree on grain market development, 2) adoption by the GOU of a program to increase the role of private insurers in agricultural risk management, and 3) acceptance by the Ministry of Agricultural Policy of a comprehensive review of role of government regulators in the agricultural market.

Business Development

Business Investments and Loans

In 12 years, Western Enterprise Fund (WNISEF) has invested $162 million in over 40 companies. Opportunities remain positive; Ukrainian companies are experiencing acquisition interest from foreign investors.

Financial and Private Sector Development

Capital Markets Project

• Coordinated and worked with the Securities and Stock Market State Commission (SSMSC) on passage of the Law on Securities and the Stock Market leading to support an internationally compliant legislative framework for the capital market.

• Laid the groundwork for information systems, necessary to support financial sector development, and institutional assessments of IT capacity at the Financial Services Regulator and the SSMSC leading to development of an effective information system for exchange of information between regulators.

• Repaired and re-launched the website at the SSMSC, which serves as the major source of financial disclosures in Ukraine.

• With project support, the SSMSC successfully launched the new Ukrainian Electronic Disclosure System (EDS) and tested it with 12 pilot companies. As of June 30, 2008, 20 companies filed their annual reports, quarterly reports and special information at the EDS website.

• An Agreement of Cooperation with electronic keys certification center ART-MASTER, selected by the SSMSC/Stock Market Infrastructure Development Agency (SMIDA)/Capital Markets Project team on March 26, 2008 was negotiated and signed on May 21, 2008, with the aim to develop, test and implement a cost effective program for electronic signature which is required for issuers to submit prospectuses, regular and special information through electronic disclosure system in a format that complies with Ukrainian legislation and regulations on electronic signature.

• Provided assistance to the Ministry of Labor and Social Policy on pension reform draft laws, including completion of a draft Pillar II Mandatory Accumulation System Law, which passed the first reading in the Parliament.

• Completed assessments of all key market institutions, signed Protocols on Cooperation on the assistance which followed, and incorporated key conclusions into a new USAID/World Bank Programmatic Technical Assistance Partnership (PTAP) to help the capital markets to accommodate private pension investment.

Accounting Reform

• The CIPA Examination in Ukraine Project assisted the Cabinet of Ministers with development of a strategy for implementing International Financial Reporting Standards for all listed joint stock companies, banks, and insurance companies starting 2010.

• The project assisted the Ministry of Finance in completing its license agreement with International Accounting Standards Board allowing the Government of Ukraine the rights to publish IFRS in Ukrainian.

• Two professional associations of accountants and auditors established with project support: 1) the Ukrainian Federation of Professional Accountants and Auditors (UFPAA) and 2) the Ukrainian Association of Certified Accountants and Auditors (UACAA). UACAA membership has grown from 42 members (in 2004) to 1,112 today. UACAA has become a center of excellence among practicing accountants and auditors, and is self-sustaining.

• 41 local training providers in 17 oblasts offer CIPA courses on a commercial basis without USAID support.

• CIPAEN/Ukraine, an independent Ukrainian NGO, has demonstrated exemplary performance and is in the forefront of examination advancements in the region.

Access to Credit

• The Project advised Ukrgazbank on issuance and placement of a pilot mortgage-covered bond (UAH 50 million, 10.5% over three years), which signaled Ukraine’s entry into a $2 trillion European mortgage covered bond market.

• Established the Certified Mortgage Lender program with 96 professionals being certified in 40 Ukrainian banks. Outstanding mortgage issuances increased to $9 billion from $500 million in 2005.

• Trained key regulatory Securities and Stock Market State Commission personnel in the fundamentals of mortgage lending and mortgage bond issuance.

• Assisted in establishing two credit bureaus by providing business plan and selected internationally recognized operator.

• Assisted the cities of Ivano-Frankivsk, Lviv, Luhansk, and Berdyansk on issuance of pilot municipal bonds.

• Established the Certified Leasing Specialist program with 67 professionals now certified; established a new NGO, the League of Certified Leasing Specialists, to administer the CLS program and ensure sustainability.

Commercial Law 

• The Commercial Law Center (CLC) assisted with preparation of the new Civil Code, (passed by Parliament in 2003 and took effect on January 1, 2004); drafted Book IV (Intellectual Property Rights - IPR) of the Civil Code in accordance with international IPR protection and enforcement.

• In collaboration with the World Bank, assisted in improving a new Secured Transactions Law, passed in November 2003. The law expanded the concept of security interest and rights that can be used as collateral; defined proper registration procedures and priority provisions; improved the mechanisms for enforcement of collateral; and decreased the opportunity for court interference with enforcement of collateral.

• Provided assistance in drafting a new Bankruptcy Law, which was passed by the Parliament and became effective in January 2000; facilitated the evolvement of capital markets in Ukraine by providing technical assistance in the drafting and adoption of the laws “On Mortgage”, “On Mortgage Securities”, “On Securities and Stock Exchange” and “On Financial Leasing”.

• Took part in the drafting of the Law “On State Registration of Legal Entities and Individual Entrepreneurs” that provided for effective protection of third parties’ rights in business deals, simplified and shortened the business registration procedure to 3 days with the introduction of a one-stop shop approach.

• Initiated the drafting of a Credit Bureau Law in Ukraine that laid the ground work for the establishment of credit bureaus. Credit bureaus serve as the primary tool to expand the use of credit for home ownership, SME development and job creation, reduce bank losses, insurance and credit card fraud, and collection costs - further bolstering confidence in the banking system and the overall economy.

• Provided assistance in drafting, adopting and implementing a law on access to court decisions, which laid the legal foundation for the operation of the Unified State Registry of Court Decisions. USAID sponsored the procurement of hardware and upgrading of the Registry software for the High Economic Court that made decisions of economic courts of all instances available on internet. The Registry opens up opportunities: 1) for the general public to study court decisions; and 2) for the court administrations to input their respective data more efficiently.

• CLC trained more than 7,000 public and private attorneys, approximately 3,000 bailiffs and 1,500 entrepreneurs.

Good Governance

Local Economic Development (LED) Project

• LED has worked with 54 cities throughout the country on Strategic Plans for Economic Development, with the goal of helping cities add jobs and private investment to their economies over the next 5 to 10 years.  37% of those cities are located in Eastern Ukraine, 27% are located in Southern Ukraine, 13% are located in Central Ukraine and 21% are located in Western Ukraine. Of those cities, 40 have adopted Strategic Plans for Economic Development

• LED has helped partner cities attract more than $400 million in direct investment as a way of accelerating economic growth. 

Expanding Training and Advocacy Services of the Association of Ukrainian Cities

• Membership in the AUC has now grown to some 540 municipalities.

• More than 5,600 local officials have attended AUC training sessions on local government operations and intergovernmental relations using distance learning technologies.

• The AUC has increased its capacity to deliver legal assistance to local government officials in the field, expanded its training services through diversified training activities and tools, and established the technical capacity to quickly adjust to the training needs of its city-members. This has helped expand AUC membership and improved its financial stability through increased membership dues.

Municipal Budget Reform Project

• Eighty-five cities have received Performance Program Budgeting (PPB) software; developed and adopted their budgets in a PPB format; established PPB policy advisor groups; and trained a total of 4,700 policy level officials.

Infrastructure

Efficient Water Supply in Alchevsk

• The Local Economic Development (LED) Project had helped the city to complete work on a five-year economic strategy that is currently working to attract new business to Alchevsk.

• The Municipal Budget Reform (MBR) Project had helped the city to develop 100 programs to resolve local issues as it introduced performance program budgeting in 2008. Budget resources helped to purchase 5,449 new energy-efficiency sodium lamps, each saving $1.05 per hour compared to the old-style lamps, resulting in $13,000 in annual savings.

• The Municipal Development Institute helped the city to put in place an operations improvement plan for the Alchevsk Water Company.

• Ten Alchevsk sewage disposal experts visited the United States, as part of USAID’s Community Connections Program, to better understand current waste disposal practices in the U.S.

Cooperation in Research and Education in Science and Technology (CREST) Center for Energy Efficiency

• This new program has just announced a competition to select and establish a major research and education center for energy efficiency in Ukraine.

Trade and Investment

WTO

Ukraine received WTO membership on February 5, 2008. USAID provided technical assistance for much of the accession package through its Trade, Investment and Business Acceleration (TIBA) project:

• assisted in preparation of seven key documents for harmonization reflecting 30 International Codex, World Organization for Animal Health (OIE) and Integrated Pollution Prevention Control (IPPC) standards.

• prepared a manual on Sanitary and Phytosanitary (SPS) Notifications and Enquiries; eight sublegal acts to implement SPS laws have been prepared, of which seven have been adopted.

• assisted in reducing list of goods subject to mandatory certification.

• prepared a Master plan for reducing corruption in government procurement and draft proposals to amend the law on government.

• assisted with adoption of ISO 22000:2005 on Hazard Analysis Critical Control Points (HACCP) and development of a manual for dairy industry adjustment to HACCP

Regulatory Reform

• The Trade, Investment and Business Acceleration (TIBA) Project assisted in drafting amendments to the Regulatory Policy Law (RPL) that are designed to broaden its application by eliminating loopholes; to tighten public notification requirements when regulatory acts are proposed; to clarify requirements for Regulatory Impact Analysis (RIA) and Regulatory Impact Evaluation (RIE) in order to improve the effectiveness of the analysis; and to provide for harsher penalties for violations of the RPL.

• TIBA assisted in drafting amendments to 21 laws and to the Rules of the Cabinet of Ministers to bring them into compliance with the RPL.

• In collaboration with SCRPE, prepared a comprehensive Regulatory Policy Law Manual that covers all aspects of RPL implementation and provides extensive instruction on conducting RIA and RIE, using examples taken from actual State agency practice. The manual is aimed at the educated non-specialist, and will be distributed to State agencies, business associations and NGO’s. It will also be available on SCRPE’s and TIBA’s websites.

• TIBA is providing training to national and regional State agency officials and to private sector representatives on the RPL and RIA/RIE.

• In collaboration with SCRPE, developed a proposal to carry out quick deregulation in problematic areas that are directly relevant to Ukraine’s preparations for hosting the European Soccer Championship in 2012, i.e., in construction and land; permitting; licensing; and tourism. The program is designed to include the effective participation of the business community. Quick deregulation has been included in the President’s national agenda to improve the business environment, and the proposal is awaiting final approval by the Cabinet of Ministers.

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