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18 April, 2011  ▪  Zhanna Bezpiatchuk

EU: Anticipating Progress

“A willingness to carry out reforms is a good sign, but such reforms should not be carried out by sacrificing quality”, EU Ambassador, Jose Manuel Pinto Teixeira

U.W.:  During one round of negotiations about a free-trade zone between the EU and Ukraine, you expressed the opinion that there is no real reason for the EU to support a country which accounts for such a small share of the EU’s foreign trade. If not for economic reasons, what is motivating the EU to cooperate closely with Ukraine?

Ukrainehas a market that represents about 1% of our exports in the world. Therefore, it is not a significant market for the EU. However, Ukraine is a very important country because it is located in Europe. It is a large country and it borders four European member-states. And the core of our policy for our neighbors is to promote stability and prosperity. And we believe that these free trade agreements - if they are implemented - will bring reform to Ukraine and that we will harmonize the legal framework and fundamental principles in Ukraine with those of the EU. This will contribute to stability and prosperity in Ukraine. Prosperity will mean improved living standards in Ukraine. And, of course, there will be more capacity to purchase not only European goods, but also any kind of goods. That is why we have such a strong interest and commitment to negotiating and completing this agreement. This will bring stability and prosperity as it has to all other countries that have followed the same processes.

U.W.: In March you met the head of the Chairman of the Supreme Court of Ukraine. There you raised questions about reforms in the judicial system. Some experts (such as Hanne Severinsen) consider this system to be fraudulent. What changes in the Ukrainian judicial system does the EU expect from Ukraine?

Our support for reforming the justice system in Ukraine dates back about 10 years. What are we trying to promote in Ukraine is the establishment of the essential elements of a judicial system, which are independent of political and other influences. Because as you know, today the Ukrainian judicial system is not independent of political power and it is subject to high-level corruption. Consequently, the rule of law in Ukraine is practically non-existent. So, the main objective is to guarantee that justice will be delivered by independent and professional courts without any interference.

The EU is contributing to this reform process in many ways, namely, by supporting training and awareness campaigns to promote better education and the application of the European Convention of Human Rights by Ukrainian judges and prosecutors in their daily work. As far as the future is concerned, we have adopted new funding of €10 million to continue to strengthen reform of the justice system. The assessment of this reform of the justice system was made by the Venice Commission of the Council of Europe. Our main message to our Ukrainian partners is the following: ‘A willingness to make reforms is a good sign; however, such reforms should not be done by sacrificing quality’. We are still far from reaching our objectives in Ukraine, but we will continue to support them.

U.W.: The World Bank and the EU decided to stop funding consultancy projects in drafting state procurement legislation and thus showed that they are disappointed with failed attempts to amend it. What steps are expected from Kyiv today?

We are working with the World Bank and Ukrainian counterparts in this process. No changes in cooperation have yet been made. We have to wait until the law is passed and see what it looks like. Your government is not allowed to use public money from tenders without competition, transparency or access to full information about suppliers as well as equal participation on an equal basis. Tenders have to be carried out practically and cannot be subject to corruption – there should be no other pressure on decision-makers. Under these conditions, public funds could be used in the most efficient ways and guarantee the best quality. Any tender with just one participant must be excluded from the start. Only a few exceptions might be approved.

U.W.: Experts note that there are problems with European aid programs in Ukraine, namely a lack of transparency and the inefficient use of funds. How does the EU propose to solve them?

Transparency and efficiency are key priorities for the European Union. European aid programs are managed jointly by the EU and Ukrainian counterparts, but they follow European financial regulations. And EU funds are managed by EU bodies. And it is not correct to say that money is allocated to Ukrainian government agencies. They do not manage them by themselves. In the case of budget support, which is a special type of assistance, Ukrainian authorities are indeed involved in managing these funds. This is why we require very high standards in terms of the financial management of public funds. There is a link between the adoption of public procurement law and managements of these types of assistance.

In terms of the efficiency of our programs, the majority of our aid programs assist reforms in Ukraine in order to move them closer to the Association agreement. The objective for the last few years has been to prepare Ukraine in this process. If the reform process does not match the assistance we provide, the efficiency of our program is not met. For example, as far as reform of the justice system is concerned, if reforms do not go in the direction of harmonizing them with European legislation, we question the efficiency of the work. Industry reforms in which we provide assistance have to be carried out comprehensively, not just in word, but in deed.

There is also the issue of the way the government organizes itself to be our interlocutor to manage our assistance program. Here again we have seen the reduced capacity of the government, the Ministry of Economic Development and Trade of Ukraine, and other respective units that deal with cooperation with the European Union cooperation. We see staff being reduced and the time needed for approving and accepting various programs increased. This issue is a subject of our dialogue with the Ukrainian authorities, particularly over the last months. This situation needs to be substantially improved.     

FREE TRADE

U.W.: Russian Prime Minister Vladimir Putin recently said that if Ukraine signs a free-trade agreement with the EU, Russia will be forced to create a customs border with Ukraine. Does this statement influence negotiations between Kyiv and Brussels?

The EU is not pressuring Ukraine to negotiate on free trade and association agreements. It was the Ukrainian government which made the step five or six years ago. Today the EU supports the Ukrainian initiative to maintain these objectives. With regard to the comment made by the Russian Prime Minister, the EU does not accept others interfering in the processes of other countries – which have their own free will – interacting with the European Union. Moreover, I would note that the EU and Ukraine are both members of WTO. In terms of world trade they are more advanced than some countries which are proposing Ukraine enter certain types of economic trade relations. The Association Agreement with the EU does not contradict any free trade agreements that Ukraine might have with other countries. When it comes to the customs union, it makes a difference. Ukraine as a member of WTO can not have a customs union with countries that are not members of that organization.

U.W.: Last year negotiations on the free-trade zone came to a standstill. Neither the Ukrainian, nor European parties would concede on customs duties on farm products. Is there any progress now?

There are a number of conditions that were established by the European Union when the negotiations started. All the limits have been very clearly and transparently presented to our Ukrainian partners for certain types of products for which the EU does not fully open its trade markets. This includes agriculture. Agriculture is closely related to demographic and social policy inside the EU. Its development has to assure that the EU population will continue to sustain a decent life. In this context, only a small percentage of agricultural products will be a subject to quotas. In any case it is important to note that at the moment Ukraine is requesting quotas that are disproportionately higher than its production so far. When you have an agreement that establishes quotas for certain products, these quotas should correspond to the capacity to produce this good. The quotas have to be adjusted to a certain degree of realism. That does not mean that these quotas cannot be reviewed in the future. If Ukraine gains the capacity to produce more, the quotas will be reviewed.

IN CONCLUSION

U.W.: Some say that rescheduling the Eastern Partnership Summit for the second half of the year was due to some problems with the program.

There is absolutely no problem with rescheduling the summit for several months. This is normal. The Summit was agreed to take place in the time between the Hungarian and Polish presidencies. Neither the EU, nor the partner-countries are hesitant to have the program develop not only on the basis of bilateral cooperation, but also on multilateral levels on topics related to civil society, free trade, energy projects, capacity building and other. This year we informed the Ukrainian prime minister and other counterparts that we are starting a new area of cooperation in the Eastern partnership – regional development – another very important area for our partners. 

U.W.: Two years have passed since Brussels and Kyiv signed a declaration on modernizing the Ukrainian gas transport system. How do you evaluate current reforms in the energy industry? Are all the articles of this declaration still valid?

Two years ago we made commitments on modernizing the Ukrainian gas transport system. This is a key priority not only for Ukraine, but also for the EU (for the European Investment Bank, the European Bank for Reconstruction and Development), and also for the World Bank. These institutions continue working with Naftogaz to support implementing energy reforms. The EU is currently examining the possible environmental and social impact modernizing the Ukrainian GTS could have. We’ll start with reconstructing the Urengoy-Pomary-Uzhgorod gas pipeline. An examination of its feasibility is currently underway. So, there is progress.

In terms of energy reforms, it is stated in the declaration that sufficient progress has to be made by the end of this year. Based on such reforms, international financial institutions will make a decision about the first loan for the actual rehabilitation of the GTS.

Ukrainehas already achieved certain progress by adopting the law on the natural gas market and by joining the Energy Community. Corporatization and the financial transparency of Naftogaz remain priorities. This work has not been accomplished yet. The EU and the World Bank proposed to support the restructuring of this company according to EU standards. The EU has also helped to form a plan for developing the Ukrainian coal industry.


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