Foreign Policy Research Institute

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Foreign Policy Research Institute

tel. +38 (044) 287 52 58

Prime Minister’s visit to Brussels: money in exchange for "homework"

On 23 July, Prime-minister of Ukraine Denys Shmygal held his first official foreign visit to Brussels. The main goal of his trip was the conclusion of the EUR 1.2 billion Macro-Financial Assistance Agreement. It is a cheap loan with low interest. First of all, the credit is intended to address the effects of the crisis caused by the COVID-19 pandemic and to improve macro-financial stability. In general, the first official foreign visit of Dents Shmygal was successful, but there were some problematic issues to discuss.

Indeed, the Ukrainian prime-minister has brought a few unpleasant `gifts`. On 21 July, shortly before the visit, the Ukrainian Parliament had adopted in first reading the draft of the law on government procurement that contradicts the Association Agreement between Ukraine and the EU. De facto this document could remove European manufacturers of machine-building products from participation in state tenders. As a result, the EU stated that the draft law could breach the international agreement. In early July the media-outlet ‘Nashi groshi’ published the letter of Ambassador of the European Union to Ukraine Matti Maasikas to Chairman of the Verkhovna Rada Dmytro Razumkov and Prime-minister of Ukraine Denys Shmygal. Hereby European official expressed its deep concerns about the draft of the law on government procurement: ‘It not only undermines the key principles of equal approach and non-discrimination but taking into consideration the scale of localization, that is demanded by the law (up to 60%), de facto deprives foreign products of possibility to participate in procurements in these areas’[1]. Being in Brussels, the Ukrainian prime-minister promised to prevent an adoption of the document in as it is. In particular, Kyiv considers an option to adopt a government order that would temporarily give benefits to Ukrainian manufactures of machine-building products.

Anyway, it would be difficult to find an elegant solution to this situation. The point is that such steps of Ukraine undermine the trust of Western partners to the state in general. For now, the EU agreed to provide macro-financial assistance, but it could make it harder to negotiate about other important issues. In particular, Ukraine wants to achieve a review of the Association Agreement with the EU. According to the information of ‘European Pravda’, Brussels has already sent warning signals to the Ukrainian authorities: ‘The government has received signals from the EU (so far not official) that review of the Association Agreement, that does desirable for Ukraine, will be unlikely, if Ukraine violates the current provisions of the agreement’[2]. Moreover, the situation with government procurements could slow down the negotiations about the so-called ‘industrial visa-free regime’ with the EU.

The provisions of the draft Memorandum agreed with the European Commission provide additional obligations of Ukraine. The first part of macro-financial assistance will be possible at once after ratification of the document by the Parliament. To receive the second part Ukraine promised to provide reforms. In particular, Kyiv obliged to:

  1. Strengthen the independence of the judiciary. It includes the re-launch of the High qualification Commission of Judges of Ukraine. As well it should be established the Virtue and Ethics Commission. Its main task will be to renew the High Council of Justice.
  2. To reform tax and customs administration. In particular, the Parliament should adopt in the first reading of the draft law on the establishment of a new agency (body) for the investigation of serious economic and financial crimes.
  3. To increase the transparency and efficiency of medical procurement.
  4. To strengthen the transparency and efficiency of the public administration system and the independence and efficiency of the work of anti-corruption bodies and the prosecutor's office.

It is only the part of commitment Ukraine should implement within the year. The countdown will begin in autumn at the end of summer when the Parliament ratifies the Memorandum, and it takes into action. The conditions of the document are realistic to be quickly implemented. But, it depends on the political will of the Parliament and the profile ministers. It is at stake not only 600 million euro, but EU`s trust to Ukraine.