The negotiations between Ukraine and the European Union on the Association Agreement and the Deep and Comprehensive Free Trade Agreement (DCFTA) have reached the final stage. Russia is opposed to Ukraine signing this agreement. Ukraine's main oligarchs can neither push forward nor impede the conclusion of the DCFTA as on the whole it does not directly affect their interests.
International financial institutions have improved their assessment of the Ukrainian economy. The European Bank for Reconstruction and Development (EBRD) has raised its forecast for economic growth in Ukraine in 2011 from 4.5% to 5%, and the ratings agency Fitch has changed its assessment of Ukraine’s implementation of its credit commitments from ‘stable’ to ‘positive’. This means that these financial institutions have assessed the Ukrainian government’s economic policies positively, and have recognised that the risk of the country going bankrupt is falling, despite the increased level of state debt.
On 7 July Verkhovna Rada, Ukraine's parliament, voted in a new pension system law which does not change the present pension system – based on what is called the ‘solidarity of generations’, i.e. disbursing pensions from the fund’s current revenues, meaning contributions made by people currently in work – but only makes certain corrections (the most important one raises the retirement age for women). The introduction of individual pension accounts in the State Pension Fund was postponed until the deficit of the fund is remedied, which cannot be expected without a radical reform of the pension system. By raising the retirement age for women Kyiv fulfilled one of the key demands of the International Monetary Fund (IMF) but they are still to reform the pension system.
A new holding group has been created in Ukraine; HarvEast will trade on the agriculture and food market. Its creation on 7 June was announced by System Capital Management (SCM), the largest corporation in Ukraine, owned by Ukraine’s richest man Rinat Akhmetov and Smart Holding’s Vadim Novinsky (Akhmetov’s partner, and himself one of the wealthiest businessmen in Ukraine). The HarvEast Group will be one of the biggest players on the market, and with appropriate financial outlays over the next few years, it could become a market leader. The creation of this holding demonstrates the growing interest among big business representatives in agriculture, which is considered the most promising branch of the Ukrainian economy – a branch which to date has not been overrun by any of the oligarchic groups.
The difficulties with fulfilling the obligations made to the IMF reflect the wider problem with implementing reforms in Ukraine, as the Party of Regions promised after taking power. Changes which do not affect the interests of influential lobbies are quite easy to carry out. Often, however, these changes are not conducive to the economy's liberalisation; moreover, the influential lobbies are successful in blocking reforms that could harm their businesses.
Last week, the Supreme Administrative Court judgement passed a ruling confirming the mysterious Livela company’s right to the untaxed import of crude oil and fuels. This company is most likely linked to politicians belonging to the Party of Regions. The Court’s judgement may form the basis for the resumption of the company’s activities; it has led to multi-billion losses for the Ukrainian budget and harmed the profitability of the oil processing industry.
The privatisation of Ukrtelekom, the monopolist on the Ukrainian telecommunications market, will take place without a tender, because the only bid was submitted by the Austrian investment fund EPIC. The sale was conducted in a hurry, and under conditions which excluded most of the major players on the European telecommunications market; the price obtained was exactly the reserve price. The lack of transparent conditions for the tender has meant that the budgetary receipts from the privatisation have been much lower than planned.