UkraineAlert

In January, Ukraine’s parliament passed a new privatization law that simplifies the process of selling off state-owned companies. The law reduces existing categories of assets (e.g. buildings, land) and equity (company ownership) into small and large objects. Small objects are assets or companies worth less than 250 million UAH (about $1 million). Everything else is defined as large privatization. The government will retain ownership of some assets deemed strategic and will undertake some restructuring, most importantly at the state gas company Naftogaz.

Almost all small privatization objects are to be sold through ProZorro, an online public procurement platform. The idea is that changing the process by which these assets and companies are sold will improve transparency and introduce market pricing by through online bidding. The government also hopes to greatly accelerate privatization activity.

Large objects will be sold with the help of advisers who will recommend a starting price for the auction and attempt to attract investors. Advisers will help the government set price and sale conditions that are achievable for a large state-owned company. In some cases, the government will try to sell equity in large state enterprises through ProZorro using a bidders’ opening price as the starting point.

Although the new law represents an improvement in efficiency and transparency, using an online platform does not guarantee a reduction in corruption or an increase in economic benefit for the nation and may or may not raise additional revenue. The government’s approach to privatization remains strategically flawed.

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A successful entrepreneur, graduate of the prestigious Le Cordon Bleu in Paris, winner of a popular cooking show, social media influencer, and brand chief at several Kyiv restaurants, it would seem that thirty-one year old Ievgen Klopotenko has it all. However, few know that his most ambitious plan isn’t about business. He wants to change the food culture of Ukraine. And the first step, he believes, is reforming the catering system in Ukrainian schools.

“One could wonder why I don’t use time devoted for this project for leisure or doing business,” laughs Klopotenko. “But I still remember the horrible taste of goulash at the school canteen. Eating at school was pure torture. Besides, I really hate the Soviet Union and everything about it. The school catering system in Ukraine is nothing but Soviet.”

As a child, Klopotenko was exposed to international cuisine when his grandmother moved to England and he spent a few weeks in Italy on an exchange program.

After his travels, he returned to the “world of harsh reality,” or the school cafeteria. Klopotenko admits he used to sprint across the street to grab a sandwich at home, but his mother, the head teacher, sat next to him, forcing him to eat “hateful liver” instead.

Klopotenko is absolutely right. It is hard to imagine, but in the twenty-seven years since Ukraine became independent, no one has made any changes to the recipes governing school canteens. Even worse, the official cookbook that school cooks are obliged to follow hasn’t changed since 1957.

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On July 25, the United States reaffirmed its rejection of Russia's annexation of the Ukrainian peninsula of Crimea. In the Crimea Declaration, the United States recognizes that by annexing Crimea, Russia violated the fundamental principle of the United Nations Charter by using force against the territorial integrity and political independence of Ukraine, and calls on Russia to end its occupation of Crimea.

This strong restatement of support came on the heels of the Defense Department’s July 20 announcement that the United States will provide Ukraine with an additional $200 million in security cooperation funds to build the defensive capacity of the Ukrainian army, bringing the US total up to $1 billion.

Both announcements brought welcome relief after much worry arising from the Trump-Putin Helsinki summit earlier this month. However, despite their good intentions, neither are sufficient to bring an end to Russia’s multi-vectored war against Ukraine, now in its fifth year.

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Ukraine’s Soviet-based national security framework has finally been replaced. Ukraine’s Rada passed the bill on June 21 and its passage was greeted with a mix of praise and skepticism. The US State Department publicly welcomed Ukraine’s new national security law, noting that the framework will increase cooperation with NATO, and its full implementation will deepen Ukraine’s Western integration. “The law is consistent with Western principles,” the State Department wrote. Others, were less impressed, parliamentarian Svitlana Zalishchuk, noted,

“This law could have looked good in 2014. Today it looks like a stopgap that’s not sufficient to really bring us closer to NATO,” Zalishchuk wrote.

Indeed, now is not the time to celebrate since the new law leaves many things out.

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Ukraine just got a big win. On July 25, the International Monetary Fund signaled its support for Ukraine’s amended plans to create an Anticorruption Court. The Rada passed the original bill in June and amended it on July 12 to address concerns subsequently raised by the IMF.

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Editor's note: On July 27, it was announced that implementation of the gas transportation system code has been delayed until October 1. The problems that Kharchenko outlines below with the new code still apply. 

Christmas comes early this year for Ukrainian oligarch Dmytro Firtash. On August 1, the tycoon may pocket about $1 billion through a new change to the gas transportation system code (GTS Code). It sounds arcane, but Ukraine’s elites need to act fast to avoid awarding a giant windfall to an oligarch with ties to the Kremlin.

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This month, the Ukrainian magazine Novoye Vremya interviewed fifty experts to assess President Petro Poroshenko’s achievements after four years. The result was a score of just six out of twelve.

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Ukraine should have been a prosperous, middle-income country by now. Instead, it is one of the poorest in Europe. Ukrainians are only slightly richer than Moldovans.

Since Ukraine’s independence, we, as members of the diaspora, have had a keen interest in the country’s development. With the disintegration of the Soviet Union, there were great expectations that the economic stagnation imposed on Ukraine by the Communist system would be a thing of the past. With its abundance of natural resources and human potential, we thought that Ukraine would evolve rapidly into a prosperous European nation.

However, while other countries who found themselves behind the Iron Curtain have been able to substantially raise their living standards and integrate into Europe, Ukraine continues to stagnate. Its living standards which were once equal to those of neighboring countries like Poland, Slovakia, or the Baltics, have fallen far behind.

We are not blameless. The diaspora’s views are generally misguided and counter-productive when it comes to moving Ukraine’s economy forward.

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Exposing corrupt Ukrainian judges and prosecutors might sound dangerous, but for Kate Butko, it’s nothing compared to what she's previously dealt with. Butko runs PROSUD, an eleven-person project founded in 2016 by activists from the Automaidan, an anticorruption nongovernmental organization that organized car owners during the Euromaidan. Funded by the National Endowment for Democracy and the United Nations Development Program, PROSUD focuses on exposing corrupt judges and prosecutors.

But back in March 2014—days after Russian "little green men" had fanned out across Crimea—judicial corruption was the last thing on Butko's mind. Butko had journeyed to Crimea to see the situation first-hand but instead found herself kneeling in a ditch suffering beatings from former Berkut officers who had pulled her and a colleague from their car once they recognized Butko as a Maidan activist. Butko ended up in a jail cell in Sevastopol guarded by men with balaclavas and denied all contact with relatives or a lawyer. As the experience of the Kremlin's Ukrainian hostages like Oleg Sentsov demonstrates, things could have ended far worse; she was allowed to return to mainland Ukraine after three days of interrogations and threats.

Her experience in Crimea and a subsequent experience in Luhansk in May 2014, where she was dragged from a hotel by armed militia and interrogated for several hours, steels Butko against the frequent threats she and her colleagues receive.

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It’s no surprise that public opinion polls show that Ukrainians are largely disappointed with the same old faces and choices in politics. The candidates expected to run in the 2019 presidential election aren’t new. Out of frustration with the unaccountability of the current parliament, there was a big push this spring to switch to an open-list proportional election system for parliament. However, due to vested interests, the status quo is likely to prevail. What options do Ukrainians have for a better selection of candidates and a more democratic electoral system?

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