Ukraine is a rich country resource-wise, but unfortunately, it is not using its potential to the full. Subsoil use is one of many areas that if liberalized could bring economic prosperity to Ukraine.
In the case of natural resources, there is also an important geopolitical corruption aspect to it. Russia is making it impossible for Ukraine to extract titanium. Every time a Ukrainian or foreign company wants to do it, Russian-paid corrupt officials organize protests to try to block it.
At the same time, Ukraine can achieve gas self-sufficiency in about five years, if the resource is extracted. But, once again, corruption has been getting in the way. Almost every Ukrainian leader was bribed by Russia through gas and transportation deals in order to prevent the extraction of gas in Ukraine.
Natural resources management is, therefore, a matter of our national independence and self-reliance. But the good news is that it is attainable. Ukraine has amazing resources such as beryllium, lithium, and 20 percent of the world’s reserves of titanium. With pro-active private space exploration being undertaken and small nuclear reactor projects launched globally, it is extremely irrational of us not to utilize them.
Currently, mining is carried out only on 35% of all explored deposits of industrial significance in Ukraine. The subsoil user’s path to the immediate start of mining is a complex and bureaucratic process that takes 1–2 years and involves obtaining several permits from eight bodies. Trillions of hryvnias are buried in the rich lands of Ukraine, and we need to let businesses extract minerals and pay taxes, and that would be a win-win situation for all.
The existing procedure for providing subsoil plots is complex and overburdens subsoil users. Because of the shortcomings of administrative processes, it can take several years to go through all the steps and actually start to mine.
Together with the Ministry of Environment and the Environmental Committee of the Parliament, the Office of Simple Solutions and Results has developed a comprehensive reform in the form of a draft law that would enable miners to obtain a special permit in a 2–4 month period through one government body under a single permit. Additionally, we believe that it is necessary to digitalize the relationship between the state and subsoil users.
For potential investors, the information collection stage presents multiple challenges. In Ukraine, there is no online library of geological information, and access to primary geological data is unregulated. Furthermore, the initial price of subsoil at auction and the amount of compensation for exploration work is calculated in a complex and non-transparent way. All available geological information of the state should be placed on the interactive map of minerals, and all documents will ideally be submitted through the electronic office of the subsoil user in electronic form.
With the introduction of the experimental procedure for conducting electronic auctions in October 2018, obtaining permits has become significantly more competitive. However, there are still a number of issues that have been turned a blind eye to. In particular, there is no deadline by which the decision to prepare for the auction should be made and when the start of the auction should be announced in the first place. As a result, such preparations are delayed indefinitely, and there is no way to effectively challenge the body organizing the auction and speed up the process. In 2019, according to the State Service of Geology and Subsoil of Ukraine in 2019, 65% of applications for the auction were returned with a refusal.
We propose to have a single body responsible for issuing permits that could assist prospective subsoil users throughout the bureaucratic process. Fast, convenient, and transparent provisions in the law of subsoil use would allow Ukraine to attract over 1500 new special permits by 2023.
Another problem is the heritage that lots of valuable deposits have been obtained through corruption schemes in an unfair way by interest groups. These are so-called sleeping permits, and about 30% of issued special permits are not used. In order to incentive tax measures based, we propose to opt for the “use-or-drop” principle which implies that if no subsoil use is carried out, then no rent is paid. This would allow us to activate the subsoil use market, increase budget revenues, and create new jobs.
Although our draft law has been turned down in the Verkhovna Rada, another one that adopts 70 percent of our solutions is currently undergoing a second reading.
As part of the mining reform, we are also helping the president with the Ukrainian economic passport reform.
President Volodymyr Zelensky previously proposed introducing a Ukrainian economic passport, and we have been helping him bring that noble idea to life. The concept goes as follows: every child should have the right to accumulate in his account part of the state’s sale of natural resources (subsoil, land, etc.). And after reaching adulthood, the child will receive these savings as start-up capital. This would allow children to have some certainty about the future. Our experts have examined relevant international experience to develop the most economically viable solution.
Overall, we at the Office of Simple Solutions and Results have been determined to stress the importance of Ukraine’s astounding economic potential that needs to be utilized. Subsoil use would be an important step in that direction.
Mikheil Saakashvili has been the chair of the executive committee of the National Reform Council since May 7, 2020. He served as governor of Odesa Oblast from May 30, 2015, to Nov. 9, 2016. He was president of Georgia from Jan. 25, 2004, to Nov. 17, 2013.
