Is Ukraine really reforming?

I often ask business and political contacts what they think about the progress of reform in Ukraine.  Responses are mixed: some say things are getting better, some that they are getting worse, and others that things are neither better nor worse, but just different.

I recently discussed this with a group of eminent economic and political experts with an interest in promoting economic reform in Ukraine. All said that with some important types of reform, it was hard to measure progress. This applied, for example, to political and constitutional reforms; improvements to the customs administration and tax administration to increase transparency and stamp out corruption; pension reform; and ensuring that the rule of law was enforced and the justice system independent of government.

So what can you measure? Interestingly, the assembled experts came up with a useful list of specific economic-flavoured reforms (or avoidance of anti-reform measures) which would have a big impact and which were also easily measurable. They included for the authorities:

• to adopt finally and conclusively a public procurement law which met EU standards;
• to begin and maintain the automatic refund of VAT payments without new arrears building up (I blogged on this recently);
• to abolish grain export quotas, whose economic purpose was uncertain but which risked potential for corruption, braking foreign investment in Ukrainian agriculture and reducing the income of farmers; and avoid creating a new grain export monopoly (ditto);
• to introduce an anti-corruption law which genuinely scared corrupt people, including in government and parliament.  The goal should be for Ukraine to make it into the top 100 least corrupt countries in Transparency International’s Corruption Perceptions Index by the time it is next published in October 2011 (2010 position: 134th out of 178 countries).  If Ukraine was serious about corruption it should aim for Top 50 status in 2012.
• to improve the business climate so that Ukraine is in the top 50 countries in the World Bank Ease of Doing Business report for 2012 (2011 position: 145th out of 183 countries) or, if that is too ambitious, at least getting into the top 100;
• to sign Ukraine up for the Extractive Industries Transparency Initiative (EITI).

These measures could all boost Ukraine’s overseas image, promote trade, and boost much-needed foreign direct investment (FDI) from its present low levels.  Other ideas welcome.  I’ll do a review in six months or so and see how things are going.