Ukraine needs to speed up pace of economic change

Ukraine needs to speed up pace of economic change

Mari Kiviniemi, deputy secretary general at the Organization for Economic Co-operation and Development: "Ukraine needs the financial resources to keep its government body effective — money that it ...

“We started cooperation (with Ukraine) already from the 1990s, but really the EuroMaidan (Revolution) events reinforced our willingness, from the organization’s side, to support the development of this country,” said Kiviniemi, who served as the prime minister of Finland from 2010–2011.

Since the revolution, the OECD has produced a range of reports reviewing key areas for Ukraine to reform. Right now, the organization is concentrating on making sure Ukraine has a more effective and efficient decentralization process, and that government bodies have clear responsibilities, as institutions tend to shift responsibilities back and forth.

“Responsibilities should be clear really, so that everyone knows where the responsibility is, and that is not the case so far,” Kiviniemi said.

Ukraine’s government still needs to improve its effectiveness, accountability and integrity at all institutional levels from national to local.

And though the government has been boasting that with its decentralization reform, initiated in 2014, local and regional governments now have control over most of their budgets, in reality this is not the case.

“More must be done to build local budgets, because now subnational authorities control only about 30 percent of their revenues, while almost 80 percent of their expenditures are made on their behalf by the central government,” Kiviniemi said.

And to achieve this, Ukraine needs the financial resources to keep its government body effective — money that it does not have.

The lack of human resources is another problem, “an enormous challenge at all levels of government here.” Government salaries are low, and those who do have the necessary skills will either find the private sector more financially rewarding or simply move abroad.

Kiviniemi would give a firm answer on whether she sees Ukraine’s reforms improving. “It has been challenging, and in certain areas it has been easier, and in certain not so easy,” she said.

“But we also want to be an organization that gives a bit of a push, as well as support.” Overall, she sees the country moving in the right direction “but it’s very difficult to say if we’re now able to speed up, or if we’re going into a slower phase.”

Part of her visit was to reconfirm OECD’s commitment to Ukraine, with both parties resigning a memorandum of understanding first signed in 2014.

Kiviniemi sees this as a good signal coming from Ukraine. Another part of her visit was to launch OECD’s 295-page report on Ukraine’s decentralization process, which takes a detailed look at progress in Ukraine’s regional development, territorial reform and decentralization since 2014. The report can be found at

The OECD has also supported the creation of anti-corruption institutions in Ukraine, including the Business Ombudsman Council, the National Anti-Corruption Bureau, and reforms in the civil service, public procurement, and the management of public finances.

“But really, our message is that more needs to be done — there really is room for accelerating the reform process,” Kiviniemi said. This includes increasing the pace of reform of state-owned enterprises, she said.

Ukraine’s privatization of more than 3,000 state-owned enterprises — many of which are inefficient cash cows for corruption—has been delayed for over three years. And in addition to battling with a bloated public sector, Kiviniemi says that Ukraine should continue reforming its tax system.

Gender equality

Kivinemi has an impressive background: as well as being Finland’s prime minister, she held various ministerial positions. She was elected as a member of parliament for the first time when she was 26. In addition to all of that, she is a mother of two children.

Kiviniemi has also been a strong advocate for equal employment rights between men and women.

“This is actually one of the areas where we would like to support Ukraine’s development,” she said.

“We have many tools also in that area that could be implemented, for example in the public sector.” Kiviniemi comes from a country that has long led the fight for gender equality.

In 1906, Finland was the first country to give women the right to vote and stand for public office.

“But it took a long time before Finland reached the 40 percent level of women in parliament,” Kiviniemi said. The figure is about 12 percent in Ukraine.

To improve matters, Ukraine needs to take care of some basic steps. For instance, its government needs to ensure there are good daycare services for children.

However, the general attitude in Ukraine towards women’s responsibilities also needs to change, she said. Often, for example, it is assumed that women are the only ones who can and should take care of children. But men should also be eligible for family leave, and not only women, Kiviniemi said.

“But really it’s… in the women’s hands, in the sense that we have to be active, and we have to stand for office, and we should not think that this isn’t something for us to do.”

OECD reports have also shown that with more women in government, people trust their governments more, she said. And there’s also a tendency for “healthcare and social security services to be better in those countries,” Kiviniemi added.

OECD - UKraine

Brain drain

Better living and employment conditions for both women and men would also help Ukraine stop its brain drain — the flight of Ukrainian professionals looking for a better life abroad.

In addition to good social security and healthcare, Ukraine also needs to improve its education, investment climate and governance, “so that people really have the feeling that they can fully make use of all of the potential that they have in their own country.” “Finland was a very poor country 50–60 years ago, after World War II, but it has since become one of the most developed countries in the world,” Kiviniemi said.

“It’s possible for any country to follow the same path — if you are committed to reforming the country and really putting the right policies in place.”

OECD - UKraine FDI 2016 / 2017



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