Zelensky outlines reform agenda with decree

Ukrainian President Volodymyr Zelensky signed on Nov.
8 a decree “On urgent measures to reform and strengthen the state,” outlining
his reforms agenda in different areas with the deadlines for the government to
introduce the respective measures or draft legislation.

In particular, Zelensky ordered the Cabinet by the end
of 2019: to complete the unbundling of Naftogaz (NAFTO) and create an
independent operator of the natural gas transit system; create conditions for
boosting natural gas and oil production; advance the privatization process and
select five large state assets; prepare infrastructure for the introduction of
a land market; create a competitive freight railway market and approve a plan
for the restructuring of Ukrainian Railways (RAILUA), as well as approve
measures to upgrade its locomotive fleet; liberalize the alcohol production
business; settle amber mining issues; and take measures to repay debts on
wholesale electricity markets accumulated before the new market was introduced
in July 2019.

He also ordered the government to work out measures
for Ukraine to further advance in the World Bank’s annual Doing Business
rating; to introduce a two-year moratorium on inspections of SMEs regarding their
state-issued cash registers; and to develop the rules of green energy auctions
for 2020-2025.

The decree also orders by end-March 2020 to create an
agency that will exclusively investigate financial offenses; and develop
mechanisms of farmer support. By end-April 2020, the government should approve
a plan for reform of the coal industry; approve a concession list of
transportation infrastructure sites by end-June and attract investment in some
ports by end-August.

By the end of 2020, the government should develop and
implement a plan of reducing NPLs at state banks. Separately, Zelensky said
that he, the cabinet, the central bank and the deposit guarantee fund will do
all their best to return government money spent for the repayment of deposits of
failed banks, as well as for the bailout of state banks, according to the press
release published on the president’s website.

Alexander Paraschiy: With
deadlines included, this document looks more concrete that the Cabinet’s five-year activity program, released in
late September. Still, from the document it’s not clear what will be considered
as its implementation, because “taking measures to do something” is still a
vague statement. What we can conclude from the document is there will be some
plan to reform Ukrainian Railway, and there is a clear intention to complete
the unbundling of Naftogaz, initiate large privatizations and attract
investments though concessions of state property. Such measures will be
positive for Ukraine’s economy and investment case.

Also, it looks that there is an intention to settle
debt issues on the electricity market, which should benefit DTEK Energy
(DTEKUA, whom the state wholesale market operator owes almost UAH 6.9 bln).
Also, the intention has been declared to recover losses to failed banks and
Privatbank in particular, which sounds encouraging but is not easy to
implement. What’s not encouraging is little attention paid to liberal land
reform in the document.