Keynote Speech — Oleksandr Danyliuk. 14th Annual Ukraine Investor Conference

Dragon Capital held its 14th Annual Ukraine Investor Conference on March 1-2 in Kyiv. As in previous years, the event gathered close to 300 guests, with top speakers addressing the audience of international and local investors including Prime Minister Volodymyr Groysman, other government members, top management of leading Ukrainian companies, representatives of international financial institutions and western diplomats. Over 25 Ukrainian and foreign TV channels, news wires and other print and online media covered the event.
Below please find highlights from the keynote speech delivered by Oleksandr Danyliuk, Finance Minister of Ukraine.
Having survived Russia’s military aggression and associated sharp economic downturn, Ukraine returned to growth and turned on a path of structural transformation. The goal is to make Ukraine a diversified economy growing at 6%+ per year with low inflation of around 5%, a small budget deficit, large FDI and, most importantly, a happy population feeling confident about the future.

• Key challenges ahead: low popular trust in state institutions and fatigue with slow reforms; deteriorating demographics (lowest birth rate over the past 15 years, intensifying labor migration); 2019 presidential and parliamentary elections; vested interests; unreformed institutions, especially law enforcement and judiciary.

• Most of these challenges cannot be addressed quickly, but Ukraine is moving forward with a clear plan focused on the completion of key structural reforms (land, energy, healthcare), privatization, and anti-corruption efforts.

• Land reform is crucial for economic development, with the government finalizing the development of an optimal land market model. Timing is important, as well as a strong communication program, as populism will rise ahead of elections. Energy reform is not limited to gas tariffs, it aims to bring competition to the sector and includes an overhaul of Naftogaz Ukrainy (unbundling). Healthcare reform will bring market principles to the inefficient Soviet-era healthcare system while making it capable of delivering high-quality and affordable services to people.

• In the anti-corruption area, IMF-required legislation on the anti-corruption court will hopefully be adopted by end-April. Reform of the State Fiscal Service (SFS) is a priority for the Finance Ministry, as the SFS closely works with business. Several initiatives have been launched (transparent VAT refunding, “single window” at customs), but deeper institutional reforms, including changing people, are required to bring visible change. Despite resistance, the government is committed to creating an analytically focused financial investigations service in place of multiple departments at existing law enforcement agencies which routinely pressure business. The Ministry plans to adopt the minimum BEPS requirements by the end of this year.

• In the privatization area, the recent passage of a new, streamlined privatization law marked a major milestone. The government approved its strategy for state-owned banks just a week back, aiming to reduce the state’s presence in the banking sector to around 25% from current 55% of total assets in five years. A law on concessions is likely to be adopted soon.