Now is the time for Ukraine to move forward rapidly to accelerate economic growth through major, market-driven reforms. This is the number one priority for President Volodymyr Zelensky. Economic growth can be accomplished if the government will establish an effective program in cooperation with business and civil society.
Ukraine’s best defense against Vladimir Putin is a strong, growing economy. Such an economy will also keep Ukraine’s Western partners firmly engaged.
The areas that Ukraine needs to reform to accelerate economic growth include:
Private land market
The president needs to move quickly to develop a program that establishes a commercial market for private land in Ukraine. The program must be adopted by parliament early in 2020. A market system for all private land should be in place by 2023.
Also, the government owns hundreds of thousands of hectares of agricultural and other land that should privatized in 2019 and 2020. The government should no longer deny the owners of land their legitimate rights. The lack of a market for private land is one of the most crippling impediments to economic growth.
Energy production
Production sharing agreements, or PSAs, are needed to boost private oil and gas exploration and production. The government must do more to attract private investors. This is critical to Ukraine’s drive for energy independence and private investment.
The winning bidders in the present PSA program should be approved quickly by the parliament and contracts signed by the government by the end of 2019. This is critical. The program should be expanded and bidding for future land plots should be limited only to private investors.
The huge state monopoly, Naftogaz, is expanding and strengthening its powerful monopoly position. Naftogaz seems to be saying: “We love the private business sector as long as they work for us.” The state-owned energy companies must be demonopolized in order to improve energy production and energy security.
Ukrzaliznytsia
Ukraine should allow private companies to own locomotives and operate large commodity trains. The large state monopoly, Ukrzaliznytsia, is also working rapidly to expand and strengthen its powerful monopoly position. The president should recommend, and the parliament should approve, legislation allowing private companies to invest and participate in the railroad industry.
The starting point is to allow private companies to own and operate locomotives to move grain and other commodities on the state railroad system. UZ, like Naftogaz, seems to be saying: “We love the private sector as long as they work for us.” The state railways company must be demonopolized.
Tax loopholes
The president and parliament need to close the many loopholes that allow for massive tax evasion at the expense of the state budget and private business. The government continues raising taxes on legitimate private businesses instead of closing loopholes that allow criminals, monopolists, and others to evade taxes.
Privatize
Ukraine must sell off hundreds of state-owned companies. The government must establish an effective program to privatize hundreds of non-essential state-owned companies that are subject to massive corruption and inefficiency, use monopolistic privileges and practices, and generate losses for the state budget, while blocking private enterprise from entering the market and improving the business environment.
Promotion
The economic and commercial staff of the embassies of Ukraine around the world are employees of the Ministry of Foreign Affairs. They should be employees of the Ministry of Economic Development and Trade of Ukraine. The economic and commercial staff of the United States embassies are not employees of the U. S. Department of State. They are employees of the U. S. Department of Commerce, whose job is not foreign policy but promoting trade and investment.
Law enforcement abuse
The primary job of too many state law enforcement agencies seems to be to harass private business with endless investigations, seizure of assets, block operations, and other harassment activities. The Business Ombudsman Council has stated that law enforcement agencies’ harassment of business is now the leading reason why businesses turn to the council for help. Legislation should be adopted to reform law enforcement agencies that harass business.
Nuclear energy security
Nuclear energy produces over 55 percent of Ukraine’s electricity. All nuclear fuel needed by Ukraine’s nuclear reactors is purchased either from Westinghouse or the Russian government. Ukraine must improve its nuclear fuel security. To do this Westinghouse should be providing 55 percent or more of Ukraine’s nuclear fuel, not Russia. The present program that allows Russia to continue to control 55 percent or more of the nuclear fuel purchased by Ukraine must obviously be changed.
Other steps
There are many additional reforms that the new government must implement. These reforms have been clearly identified and promoted by other business trade associations and international institutions. Zelensky must aggressively advocate and lead a substantial program that will move Ukraine forward rapidly. Such a program should create a truly private, market-driven, competitive economy. After decades of delay, it’s time now to go full speed ahead.
Morgan Williams is the president of the U.S-Ukraine Business Council with more than 200 members, including the Kyiv Post.
