UKRAINE

PROGRAMME FOR GOVERNMENT

KEY CHALLENGES FOR UKRAINETHREAT TO THE INDEPENDENCE • Russianmilitary,economicandinformationaggression• DestroyedinfrastructureandindustryinDonetskandLuhanskregions,

thelossofeconomicpotentialofCrimea• Lossofhumanlives,humanitariancrisisandagrowingnumber

ofinternallydisplacedpersons• EnergydependencefromRussia

ECONOMIC LOSSES FROM THE RUSSIAN AGGRESSION• Foreigncurrencyreservesfellunder$10billion• RapiddevaluationoftheUkrainianHryvnia• GDPfellby7%• Deficitofpublicfinancemakesup5%ofGDP,thedeficitoftheNaftogaz

ofUkraine–€5.6billion• Systemicproblemsinthebankingsector• Declineinindustrialoutput• Inflation

CORRUPTION• Badandinefficientgovernance• Corruptionincourtsandinthelawenforcementsystem• Briberyascommondailypractice

ThesovereigntyandterritorialintegrityofUkraineareourkeyvalues

Ourobjectives:toreturnCrimeaandtorebuildDonetskandLuhanskregions

TheimplementationoftheAssociationAgreementwiththeEuropeanUnionisourguidance

Onlyradicalsolutionsandactionscanpreventthecountryfromaneconomicdownslide

Thedonorsupportneededtostabilizetheeconomyandrecovergrowthrequiresspeedysystemicreforms

2

THE NEW SECURITY POLICY

• Upto5%oftheGDP–tofundtheexpendituresondefenceandlawenforcement annually-Toapprovea5-yearstateprogramforArmedForcescapacitybuilding

• Torepealthe“non-block”status 2015• TointroducetheNATOstandards

-ToapprovetheAnnualNationalProgrammeofUkraine-NATOcooperation first quarter of 2015• Tobuildcapacityofthemilitaryindustry 2015 - 2018

-Anewlegislationonstatedefenceprocurement 2015-Internationalagreementsonmilitarytechnicalcooperation 2015-2016

• Toimplementthe“EuropeanRampart”project:constructionofasafeandsecureborderbetweenUkraineandRussia 2015 - 2018-Toestablishastateagencyforborderinfrastructure first quarter of 2015-ToattractfinancialassistancefromtheEUtoensurebordersecurity.AssistanceoftheEUAdvisoryMissionforCivilianSecuritySectorReform annually-ToattractUkrainiancompaniestoparticipateinthebidtoconstructborder annually

• TofulfillthecriteriaoftheVisaLiberalizationActionPlan.Tostartissuingbiometricpassports 2015• Toprovidefundingforthemilitarypersonnelandtheparticipantsintheanti-terroroperation

-TograntthespecialstatustoATOparticipants on constant basis-Tofundallsocialbenefits on constant basis-ToprovidesocialassistanceandmedicalrehabilitationthroughtheStateServiceonveteransandATOparticipants on constant basis-ToapproveaProgrammeofsocialrehabilitationandintegrationoftheATOparticipants first half of 2015-ToupgradetoanewsystemoflogisticstoprovidefortheArmy’sneedsincompliancewiththeNATOstandards first half of 2015

• Toprotectthenationalinterestsininternationalcourts.ToseekcompensationforthedamagecausedbytheRussianmilitaryaggression on constant basis

• Todraftandimplementtheconceptofinformationsecurity 2015-Tolaunchthepublicbroadcastingservice 2015-Tolaunchinternationalbroadcastingservice 2015-Toprivatizethestate-ownedprintmedia 2015

Defencesectorreformanddefencecapacitybuilding

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THE NEW GOVERNANCE POLICY

• DeregulationandreducingthenumberofareasofinteractionbetweenbusinessandGovernment-TointroduceamodelofquantityandfunctionsofregulatoryagenciesincompliancewiththeEUstandardsandwiththeAssociationAgreement-Tocutthenumberofregulatoryfunctionsfrom1032to680,andoftheregulatoryagencies-from56to28 2015Asasecondstage–tobringthenumberofregulatorybodiesandtheirfunctionsinfullcompliancewiththeEUstandards 2016-Anewlegislationonlicensingcertaineconomicactivities first quarter of 2015-Legislationontechnicalregulationsandconformityassessment first quarter of 2015-Toimplementthenewlyadoptedlegislationonmetrologyandmetrologicalactivity,andonstandardization-Toadoptover1500nationaltechnicalstandardsharmonizedwiththeEU,torepealthestandardsoftheformerUSSR 2015-Toformanelectronicdatabaseoftechnicalstandards(about28thousandstandards) 2015

• Decentralizationandcapacitybuildingoftheregions.Delegatingstatefunctionstothelocallevel-ToamendBudgetandTaxCodes(budgetdecentralization) 2014-Topassthelegislationondecentralizationinconstructionoversight first quarter of 2015-Toestablishlocal“transparentoffices”toprovideadministrativeservices 2015

• Downsizingofthepublicsectorby10%,withacorrespondingsalaryincrease 2015-2016

• Toattractnewstateemployeesonthebasisofnewrulesforopencompetitions-Toimplementthelegislationonlustration 2015-2016-Topassanewlegislationoncivilservice first quarter of 2015-Tostrengthenpersonalresponsibilityoftheofficials from 2015 on constant basis

• Introducinge-government 2015-2016-Tointroduceelectronicadministrativeservices-ElectronicIDanddigitalsignature by 2017-Toreducepaperdocumentationflows 2015 - 2016-Topassthelegislationontheunifiedsystemofelectronicinteraction 2015-Topassthelegislationonopendata 2015

De-bureaucratization,decentralization,deregulationandresponsibility

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• Implementationoftherecentlyadoptedanti-corruptionlegislation• ToestablishNationalAgencyforthePreventionofCorruptionasapreventivebody

andNationalAnti-corruptionBureauasalawenforcementagency first half of 2015• Tomonitorthelifestyleofstateofficials on constant basis• Tointroduceelectronicdeclarationofincomesandexpensesofofficials,

andtocreateaunifiedregisterofthedeclarations 2015• Toscreenthegovernmentofficialsundertheprovisionsofthelustrationlegislation by the end of 2016• Todiscloseinformationaboutbeneficiariesoflegalentitiesandinformationaboutregisteredpropertyrights 2015

• ReformingtheInteriorMinistry 2015-toimplementtheprinciple“toserveandprotect”insteadof“topunishandtocover”-newlegislationonnationalpolice-toestablishNationalInvestigationBureau

• Judiciaryreform-newlegislationonthejudicialsystemandthestatusofjudges first half of 2015-Betteraccesstojustice.Simplifiedproceduresforcivilandcommercialcases. 2015-2016

• ToinitiateamendmentsintotheConstitutiontocompletethejudiciaryreform(tointroduceathree-tiersystemofcourts,torecertifyalljudges,toeliminatejudicialimmunity,toeliminatepoliticalinfluenceontheappointment,careerandresponsibilityofjudges) 2016

• ToreturntotheSupremeCourtofUkraineitspowersasthesuperiorcourt 2016-Toamendallcodesofprocedure

5

THE NEW ANTI-CORRUPTION POLICY

THE NEW LAW ENFORCEMENT SYSTEM

THE NEW JUDICIAL SYSTEM

THE NEW ECONOMIC POLICY

• Toreducepublicsectorexpendituresby10%ofGDP 2015-2016-Lawofthestatebudget-AmendmentsintotheBudgetCode

• Tocutthenumberoftaxesfrom22to9 first quarter of 2015-AmendmentsintotheTaxCode 2014-Unificationoftaxandaccountingreporting.HarmonizationwiththenormsofInternationalFinancialReportingStandards 2015-2016

• Legalizationofshadowsalariesthroughreducingsocialburdenonthepayroll-Amendmentsintothelegislationoncollectionandaccountingofthesocialcontribution(gradualreductionfrom41%to15%) first quarter of 2015-Increasedresponsibilityforpaying“envelopesalaries”(amendmentsintotheCodeonadministrativeoffencesandintotheCriminalCode) first half of 2015

• Tofightshadowcashcirculation-AdoptionofappropriateregulationsoftheNationalBanktogetherwiththeFinanceMinistry first quarter of 2015

• Toreducethetaxburdenonsmallandmediumbusiness-Toreduceby50%thesingletaxrate(amendmentsintotheTaxCode) first quarter of 2015-Towithholdallcontrollingvisitsbyregulatorybodies through 2015 – 2016

Cuttingexpenses,simplifyingandcuttingthenumberoftaxes,controlovertransferpricing,introductionofamodernandcompetitivepublicprocurementsystem

6

THE NEW ECONOMIC POLICY

• Tolaunchtheconceptofataxcompromisetoensurefulldeclarationofassetsandintroducemandatorydeclarationofincome

• Controlovertransferpricing-Amendmentsintothelegislationonthetransferpricing 2016-AnewVATadministrationsystem first quarter of 2015

• Completionofthepublicprocurementreform.Introductionofe-procurement-Topasslegislationone-procurement 2015-Toimplementtheco-operationprogramwiththeIMF for duration of the program

• Demonopolizationoftheeconomy-anewlegislationonprotectingeconomiccompetition 2015-toformthenewcompositionoftheanti-monopolycommittee first half of 2015

• Capitalizationofstate-ownedbanks

• Tosupportexportsgrowthandtoprotectdomesticmarkets-FulluseoftheadvantagesofafreetraderegimewiththeEU on constant basis-TodoubletheUkrainianexports by 2019-Toconcludefreetradeagreements,whileprotectingthenationalinterests,withCanada,Turkey,Israel,theCooperationCouncilfortheArabStatesoftheGulf(GCC),theEconomicCommunityofWestAfricanStates(ECOWAS)andothercountries by 2018-ActiveengagementoftheTradeRepresentative on constant basis

7

THE NEW POLICY OF STATE PROPERTY MANAGEMENT

• Tolaunchaninternationalaudit,tointroducecorporategovernanceincompliancewithOECDstandards,toappointrenownedmanagersintokeystate-ownedcompanies

-Tointroduceefficientmanagementprinciplesofstate-ownedproperty 2015

-Toattractinternationalauditingcompaniestocarryoutauditinginkeystate-ownedcompanies annually

-Toremovethebureaucratsfrommanagementofstate-ownedcompanies 2015

• Alarge-scaletransparentprivatizationofthestate-ownedpropertyunderfavourableeconomicconditions

-Toamendthelegislationonthelistofstate-ownedpropertythatareexemptfromprivatization(toexcludeover1200objects) first quarter of 2015

-Tochangethevalueappraisalmethodologyintheprivatizationpreparationprocedure 2015

-Tostartsellingsharesoninternationalstockexchanges 2016-2017

-Touseauctionsasmainprivatizationmethod,toremoveanyrestrictionsforthebidders 2016

• Tochangethemanagementsystemofstrategicallyimportantstate-ownedproperty

-Tocreateholdingcompanieswithinternationalstandardsofcorporategovernance 2016-2017

Internationalaudit,goodcorporategovernance,privatizationofstate-ownedassets

8

THE NEW FOOD AND AGRICULTURE POLICY

• Topreparethereformofthelandresourcesmanagement

• Inventoryanddelineationofagriculturallandsofstate,communalandprivateproperty.Improvementofleaserelations,monetizationofrentalpayments,introductionofeffectiveregulatorymechanismstodeveloplandleasemarket-Anewlegislationonlong-termleaseofland 2015-Tocreatethedatabaseofthestatelandregister 2018

• Supportandcapacitybuildingofsmallandmedium-sizedbusinessinruralareas-Topassthelegislationonlocalagriculturalmarkets 2015-Tolaunchamicrocreditingprogramforsmallruralbusinesses 2015-2016

• Leadingpositionsinglobalmarkets,exportpromotion,openingoftheEUmarketsforUkrainianproducers,increasingthedepthofprocessingtheagriculturalrawmaterial-Creationandpromotionofanagriculturalbrand“ProductofUkraine” 2015-Developmentofportandrailroadexportinfrastructure 2015 - 2019-FulluseofagriculturalquotasontheEUmarketandseekingtheincreaseoftheirvolumes on constant basis

• Foodsecurityinwartime.Stablesowingcampaign-Anewlegislationonthestatesupportfortheagriculture.AnewrolefortheAgriculturalFund-Anewlegislationonstatereserve 2015

• Fundraisingupto$1billionfrominternationalinstitutions 2015

• EffectivesystemofcorporatemanagementoftheStateFoodandGrainCorporationofUkraineandoftheAgriculturalFund

Leadingpositionsinglobalfoodmarkets,removalofbureaucraticbarriersinmanagingtheland

9

THE NEW ENERGY INDEPENDENCE POLICY

• Toattractinvestorsintomodernizationandmanagementofthenaturalgastransportationsystem-Toimplementtherecentlyadoptedlegislationonreformingthemanagementofthegastransportationsystem-Tolaunchaninternationalcompetitiontoattractinvestors 2015-ToimplementthejointprojectwiththeEBRDandtheEIBonmodernizationofthegastransportationsystem by 2020

• ToreformtheNaftogazofUkrainetomeettherequirementsoftheThirdEUEnergyPackage-ToestablishthePJSC“GasPipelinesofUkraine”,andthePJSC“UndergroundGasStoragesofUkraine” 2015-ToachievesoundfinancialstandingoftheNaftogazofUkraine 2017TointegratetheUkrainianenergysystemintotheEuropeanNetworkofTransmissionSystemOperatorsforElectricity(ENTSO-E) from 2017ToimplementtheProgramonreformingcoalindustry.Toprivatize37coalmines,toconserve24mines,toclose32unprofitablemines 2015-2019

• Toupgradetheenergyinfrastructure-Modernizationofnuclearandhydroelectricpowerplants-TocompleteconstructionofnewpowerunitsattheKhmelnytskyNPP 2020-Toconstructa110-kmDrozdovychi-Germanovychigaspipeline 2018 -ToholdnegotiationsonthepassageofLNG-tankersthroughtheBosporus 2015-TocompleteconstructionofthethirdpowerunitontheDnisterHEPP 2015-Toconstructhigh-voltage750KWpowertransmissionlines 2017-ToincreasethecapacityoutputoftheSouth-UkrainianNPPby1600MW,thatofZaporizhzhyaNPP–by700MW-andthatofKhmelnytskyandRivneNPPs-by1000MW 2016-Toconstructastoragefacilityforspentnuclearfuel first stage – 2017-ToimplementajointprogramwiththeEBRDonimprovingsafetyofnuclearpowerunits by 2017

Energyindependence.Marketbasedtariffsforenergy,subsidiesreform,diversificationofenergysupplies

10

THE NEW ENERGY INDEPENDENCE POLICY

-Toextendtheoperationperiodfor9nuclearpowerunits by 2020• Diversificationofsourcesandroutesofenergysupplies(forcoal,gas,nuclearfuel):

-Toincreasedomesticproductionofhydrocarbons-ToextenddirectcontractswithEUcompaniesonthenaturalgassupplies annually-ToconstructanLNG-terminal,tobuildinterconnectors-ToexpandtheprogramofsupplyingnuclearfuelwithWestinghouseCorporation 2016 - 2017-Toprocurecoalattheinternationalmarkets-TomodernizetheelectricgeneratingcapacityofTPPs 2015-2017

• Eliminationofcross-subsidies,transitiontomarketratesforgasandelectricity.Simultaneousintroductionofcompensationmechanismsforthesociallyvulnerable 2017-Toincreasebudgetrevenuesfromenergycompanies-Tointroducetransparentandfaircompetitionrulesforthedevelopmentofnaturalresourcesthroughopenauctions first half of 2015-De-shadowingofminingoperations(coal,turf,amber) 2015-AnewCodeonnaturalresources first half of 2015

• Transitionfromjointactivitiestoproductionsharingagreementsinextractingofnaturalresources-Toamendthelegislationonproductionsharingagreements first half of 2015

• ToensureaspeedyandefficientprocedurefortheclaimagainstGazpromintheArbitrationInstituteoftheStockholmChamberofCommerceregardingconditionsofcontractsforthesupplyandtransitofnaturalgas the first half of 2016

• Tointroduceamixedmodeloftaxationintheenergysectortocomplywithinternationalstandards 2015

• Toimproveenergyefficiencythroughimplementationofalternativeenergyprojects(CleanEnergy)

• Toconstructandreconstructthehousingbynewenergyefficiencystandards(topreparenewstateconstructionnormsandenergyefficiencystandards)

11

THE NEW SOCIAL POLICY

SOCIAL CHANGES• Afairpensionsystem,abolitionofspecialpensions,introductionofsinglepensionaccrualprinciple first half of 2015

-Taxationofhighpensions-Tolaunchprivatepensioninsurance,tocreateconditionstoestablishacumulativepensioninsurancesystem-Thenewlegislationoncompulsorystatepensioninsurance first half of 2015

• Eliminationofinefficientsocialbenefits.Transitiontotargetedbenefitsandtheirmonetization.Amending25relevantlegalacts 2016

• Tomergethestatesocialinsurancefundsandensuretransparencyoftheiroperations 2015-Thenewlegislationoncompulsorystatepensioninsurancetoprotectfromtemporarydisability-Thenewlegislationoncompulsorystatepensioninsurancetoprotectfromaccidentsatwork-Toreduceexpensesforfundmanagementby€30million

• Thereformoflabourlegislation-AnewLabourcode 2015

• Socialprotection,employmentandreintegrationofinternallydisplacedpersons

IMPROVING EDUCATION QUALITY• Toimplementtherecentlyadoptedlegislationonhighereducation 2016

-Newrulesofaccreditationandlicensing-Independentsystemofassessmentofhighereducationquality-Financialindependenceofhighereducationalinstitutions-Tomatchthestatefinancingofstudentswithrealneedsofthelabourmarket

• Reformofpre-school,after-school,secondary,technicalandvocationaleducationtocomplywithEUstandards-Newlegislationoneducationandonvocationaleducation first half of 2015

• Integrationofscienceandeducation,creationoftechnologicalandscientificparks,transitiontoproject-basedresearchfunding-Topassthelegislationonscientificandtechnologicalactivity first half of 2015

AbolitionoftheSovietsystemofsocialbenefits,transformationofhealthcareandeducation,growthofincomematchedwitheconomicgrowth

12

THE NEW SOCIAL POLICY

THE NEW CULTURAL POLICY

THE NEW POLICY FOR YOUTH AND SPORTS

HEALTH CARE REFORM• Eliminationofcorruptionschemesinprocurementsinthehealthsystem,thetransferofthefunctionofpublic

procurementsfromtheHealthMinistrytootherstructures,includingtointernationalorganizations 2015-2016-ProcurementofvaccinesandspecialmedicinesthroughtheinternationalorganizationsoftheUnitedNationssystemandotherinternationalfunds-Directcontractswiththemanufacturersofmedicines

• Transformationandupgradeofthehospitalnetwork.Creationofaunifiedthree-tiersystem(localhospitals-regionalhospitals-nationalreferencecentres) 2017-Topassthelegislationonmedicalcareinstitutionsandonmedicalservices-Legislationonpublic-privatepartnerships

• Deregulationofthepharmaceuticalmarket,asignificantdecreaseinthenumberoflicensesandpermits 2015-2016-RecognitionoftheregistrationofmedicineslicensedintheEU,USA,Canada,Australia,Japan,withsubsequentreciprocity-Thenewlegislationonmedicines

• Topassthelegislationonthehealthinsurance 2015-2016

• ToadoptandimplementastrategyoftheUkrainianhumanitarianpolicy 2015• TosupporttheUkrainianculturalproduct.Topassthelegislationonnationalculturalproduct by 2015• Toattractnewsourcesforfinancingtheculturalsector 2015-2016

• Toadoptandimplementtheconceptofyouthpolicy 2015• Torevivethepatrioticeducation on the constant basis

13

THE NEW POLICY OF INTERNATIONAL ASSISTANCE

• Toimplementco-operationandsupportprogramswiththeIMF,theWorldBank,EBRD,EIBandotherIFIs

• Toholdaninternationaldonorconferenceandtoapprovethe2015-2017internationalrecoveryplanforUkraine

• ToestablishasingleGovernmentcoordinationstructurefordonorsandinternationaltechnicalassistance

• ToattractassistancefromtheUN,theG7andtheEUtoprotectinternallydisplacedpersons,theUkrainiancitizensinDonetskandLuhanskregionsandintheCrimea,includingtheCrimeanTatars

Externalfinancialassistanceispossibleonlywithrapidanddecisiveimplementationofreforms

14

TheProgrammeoftheGovernmentofUkrainewasdraftedonthebasisoftheCoalitionagreement,

whichisanintegralpartofthisProgram,anditisaimedattheimplementationoftheAssociationAgreementbetweenUkraine,ontheonehand,andtheEuropeanUnion,theEuropeanAtomicEnergyCommunity

andtheirmemberStates,ontheotherhand

December11,2014

Kyiv,Ukraine