When parliament’s majority gathered on April 4 after splitting from the minority opposition, the 244 members rubber-stamped a number of laws that experts say will fuel corruption and cronyism.
Apart from
a number of populist laws designed to appease the electorate (such as
increasing pensions to large families), the majority dominated by the Party of
Regions and Communist Party amended the law on the budget and public
procurement, the two major laws which govern distribution of public money in
the nation.
The status
of these laws is still unclear: while the pro-governmental majority considers
them good pieces of legislation, the opposition argues that the whole
parliamentary session was illegitimate, and so the laws have no legal power.
This dispute will most likely end up in the Constitutional Court.
In the
meantime, experts say that the most damaging change during that session was
made in the public procurement procedure.
The bill, initiated by the Cabinet of Ministers acting under the
president’s instructions, introduced new requirements for participants of
government tenders. From now on, they must have “manufacturing facilities
and/or service centers” in Ukraine.
Economic Development and Trade Minister
Anatoliy Maksyuta explained in the note attached to the bill that the changes
were aimed at supporting domestic manufacturers. But many lawmakers and experts
think it creates new opportunities for corruption.
It means,
for example, that the Ministry of Health will reject bids from foreign drug
manufacturers, if they do not have manufacturing plants in Ukraine, says Viktor
Chumak, a lawmaker from Vitali Klitschko’s Ukrainian Democratic Alliance for Reform.
“In
practice, this will mean the triumph of intermediaries that will import foreign
drugs, repackage them using their ‘own facilities’ and sell to the state at 10
times the price. Goodbye, free market,” Chumak wrote in his op-ed on Ukrayinska
Pravda website.
If the law
is signed by the president and comes into effect, the Health Ministry will be
able to more actively lobby the interests of domestic intermediaries selling
drugs, says Viktor Taran, director of the Center
for Political Studies and Analysis in Ukraine.
“We forecast that in this case the Ukrainian market will get about 8,000
substandard (types of) medicines,” he believes. Taran estimates that this scheme alone will allow public officials
and associated businesses to siphon off Hr 3-5 billion per year.
At the same time, such terms as “manufacturing facilities” and “service centers
on the territory of Ukraine” are not defined by law, thinks Yuriy Nikolov,
editor of Nashi Groshi, a website that specializes in reporting on and analyzing
public procurement. Basically, this means that decisions on public procurement
will be custom-produced to fit a company profile.
Another law
that was adopted on the same day freed Ukraine’s notoriously corrupt and
inefficient state road company Ukravtodor from some types of obligations for
getting state-guaranteed loans. For example, the company will no longer have to
provide collateral for bank loans taken under state guarantees. And if it fails
to pay back, the bill will simply be handled by the taxpayers.
The parliamentary majority also amended the production sharing law, an
important piece of legislation that governs the relationship between the
government and private investors in some industries, such as extraction of
natural resources. Royal Dutch Shell, for example, signed such an agreement
with Ukraine in January to extract gas from shale in Kharkiv and Donetsk
regions.
The new bill establishes an interdepartmental commission, which
consists of governmental agencies representatives, local officials and
parliament members, to coordinate preparation of such deals.
If enacted, this law might become the main authority for the regulation
of the development of gas fields and other natural resources in Ukraine. As a
coordinator of the Energy and Projects practice at the Kyiv office of CMS
Cameron McKenna Vitaliy Radchenko says the bill renews a legal norm on an interdepartmental
commission that existed until 2012.
At the same time, it enlarges commission’s influence and provides an
opportunity to communicate with investors not only on public procurement
procedures, but also during their extraction activities. The bill’s author,
Party of Regions lawmaker Oleksandr Onyshchenko, has a vested interest in
Ukraine’s gas extraction. He owns several gas extraction companies, including
Gazkontinental, Nadra Geotsentr and Plast.
Kyiv Post staff writer
Kateryna Kapliuk can be reached at [email protected].
