Ivanna Klympush-Tsintsadze: "Ukraine would like to switch from loans to grants in relations with EU"
An exclusive interview of Ukrainian Deputy Prime Minister for European and Euro-Atlantic Integration Ivanna Klympush-Tsintsadze with the Interfax-Ukraine News Agency.
Question: Kyiv hosted the Ukraine-EU summit not long ago. How do you assess its results?
Answer: Summits are a high-level working tool. They are to sum up intermediate results, outline certain plans. This is what exactly happened at the 19th Ukraine-EU summit in Kyiv. We had much to present, as we'd been doing a lot of work in advance for several years. The work yielded results just before the summit.
In particular, we are talking about granting visa-free travel for Ukrainians as a result of fulfilling our obligations, the final ratification by the Netherlands of the Association Agreement between Ukraine and the EU, and, accordingly, the completion by all EU institutions of the ratification procedures – all this makes it possible for the Agreement to enter into force in a full-fledged mode from September 1, 2017. In general, this is the recognition of the progress Ukraine has achieved in many areas of reform.
We also discussed plans for the future. For example, an agreement has been reached that we must develop a joint road map for the implementation of the Association Agreement. The government has already taken certain steps in that direction.
Also, issues relevant both to the EU and Ukraine were raised: our common stand and coordination of cyber security efforts, counteraction to information threats, coordination of work in strategic communications. We also discussed issues that may have a direct impact on citizens, in particular, joint border and customs control. Although the border with the EU has ceased to be a barrier to our citizens, it still creates queues that could be avoided if our procedures were more synchronized with the EU.
The issue of joining the pan-European airspace has long been discussed, but now it does not depend on Ukraine's position at all, but it is related to disagreement between Britain and Spain over Gibraltar and on Brexit. At the same time, we have assurances from the European side that they are ready to meet us halfway even there is no concrete solution to the situation.
Question: Ukrainian President Petro Poroshenko said at the end of the summit that it had been focused on the digital market and energy cooperation. Is that so?
Answer: Yes, Ukraine's entry into the emerging digital market of the EU was discussed. This means our country is already at the current stage involved in shaping the vision of how these processes should develop. We also discussed Ukraine's energy independence and the energy future of the EU, Ukraine's participation in the integrated energy system of Europe. Of course, we raised the issue of the Nord Stream 2 construction. To hear the views of the EU side on the further development of this situation was important to us. There is hope that it is the position of the European Council on this issue that will be decisive, as well as the fact that our comment about the political, rather than economic basis of this project will be taken into account.
Question: Was the creation of a joint consortium for the management of the Ukrainian gas transportation system discussed at the Ukraine-EU summit? If yes, what was the feedback of the European officials? When will it become a reality?
Answer: The interest that really exists can become a reality after unbundling, i.e. splitting gas production, transportation and sale, has been implemented by NJSC Naftogaz of Ukraine.
Question: Is it bad that there has been no final declaration after the summit?
Answer: Unfortunately, there was no consensus among the European countries on the final wording for the declaration to be adopted. But the absence of the declaration is not a tragedy at all, because we have a protocol of the joint summit and there are developments in priority areas for cooperation. At the same time, the main principles of our relations with the European Union, which give us tasks for today, are contained in a legally binding document – the Association Agreement. These are the directions we could follow. Nothing more important could be provided by the declaration. It is a pity we haven't got it, but it's not a problem.
Question: Was the Netherlands the main opponent of including the clause about the recognition by the EU of Ukraine's European integration aspirations in the final declaration of the summit?
Answer: It was difficult for the Netherlands to agree with such wording.
Question: Earlier, the Netherlands received guarantees from the European Council that the implementation of the Association Agreement does not automatically mean that Ukraine has become a candidate for membership in the EU.
Answer: Yes, this is the case, and the Agreement does not have the clause that Ukraine could automatically obtain such status. At the same time, it says that the European Union welcomes the European aspirations of Ukraine. The agreement has been ratified and is a binding document for all EU countries, and even if some countries now want to "play around with the wording," this will not work out, as the Agreement stipulates all the wordings. We orient ourselves towards this Agreement. Any statement of the summit will not have more weight than the Agreement.
Question: The Association Agreement has already been ratified, and will come into force from September 1. What opportunities does the full effect of this document open?
Answer: The full entry of the Association Agreement into force gives us full opportunities for full-fledged work within all the bilateral structures of the association. They already work, but after September 1, our negotiations within such bilateral structures can concentrate, if necessary, on clarifying or adjusting the amendments to the agreement. We can also bring some or other directions of our cooperation in line with the schedules we are moving along.
Question: This means this is quite a symbolic date, isn't it?
Answer: From the legal point of view, the Agreement could continue to operate in a limited mode for good. Now we will have the legal framework and increased responsibility of the parties for the fulfillment of the terms of the Agreement. As we move towards the adaptation of our legislation to the European one, we also expect that our partners in the EU will be ready to provide technical, expert, financial support for the implementation of certain tasks of the Agreement.
Question: Speaking about the Agreement, what challenges are there in its implementation?
Answer: An overwhelming majority of the measures that we need to take under the Agreement go through the parliament very slowly. Here we are talking about a thorough review of the widely practiced but not always transparent rules. For example, we should conduct deregulation, but this is about the abolition of obsolete Soviet regulations, while the EU rules imply just regulation. Thus, there is a certain conflict, when society might interpret the introduction of regulations as a potential source of corruption. Often this is manipulated, and such a perception is an obstacle.
Question: Which reforms stipulated by the Association Agreement have been most successful?
Answer: The energy sector. I am talking about the adoption of bills on gas market, electricity market and the work on relevant bylaws. I am glad that there has been some progress in passing certain draft laws, which have been developed and improved for several years, in particular those on commercial metering of heat and water supply, on energy efficiency of buildings and on the Energy Efficiency Fund.
Important steps have been made in reforming phytosanitary control. The bill on food products safety, which is aimed at creating a system of controlling cattle fodder, conditions livestock is kept in, up to controlling the quality of products of food and processing industry, has been adopted. Now we need to pass many bylaws.
Progress has also been made in ecological matters, in particular in environmental impact assessment. However, so far our citizens, who do not always have enough money to buy essentials, often don't realize that these essentials should be safe and of good quality.
I could also mention many anti-corruption steps, but these were taken as part of the implementation of the Visa Liberalization Action Plan.
Question: In which areas have reforms been less successful?
Answer: I have to admit there are several areas where we haven't made any progress, namely, bringing our customs legislation closer to European standards, in intellectual property protection, and in transport. As for the transport sector, there are many issues with sea shipments and automobile transport. The bills which were sent to parliament by the previous government and then re-submitted by us were sadly turned down by lawmakers. Some of those bills deal with the safety of passenger transportation, which concerns many citizens.
We also still need to pass a bill on the authorized economic operator, which has been returned by parliament back to government, though it could have been improved and submitted for a second reading.
Question: Those problems concern parliament. What about the Cabinet of Ministers?
Answer: There are problems in all the ministries. We are lagging behind the implementation plan for the Association Agreement in virtually every area. In some more, and in others less. For example, the regional development, construction, housing and utility services minister and his team together with other government agencies have gotten laws through parliament. But there are ministries where progress is less evident, though there is willingness to push the European integration agenda through the Rada, as in the case of the Infrastructure Ministry. The Finance Ministry and government as a whole have been successful in switching for the first time to planning the budget for three-year periods as was required by the agreement. I believe this is revolutionary for Ukraine.
Question: Does the government intend to step up work on implementing measures stipulated by the Association Agreement?
Answer: In late May, the Cabinet passed a resolution to launch an electronic system that would ensure the uninterrupted implementation of the agreement and monitoring over the execution of the designated tasks. In addition, they decided to create a system of approval of translation of European legal acts in order for us to efficiently bring our legislation in line with the European one. We are updating our governmental plan of the implementation of the Association Agreement in order to adopt it at a Cabinet meeting and then to introduce it into the monitoring system in order to keep track of its implementation. We want to agree this plan with parliament. Several years ago the Rada passed the plan of legislative coverage of the Association Agreement. Some of the identified tasks have been fulfilled, but now this plan needs to be updated. The parliament has publicly pledged to do certain work.
Question: Are there enough qualified experts to translate the European legislation in order to bring our laws in compliance with European ones?
Answer: The government doesn't have any staff translators who specialize in European legislative acts. However, employees of the government office for European and Euro-Atlantic integration can work with translators from the Association FOR YOU project which is being implemented by the EU using its own funds. At present, under a resolution passed by the Cabinet of Ministers the government committee will be able to approve such translations as official ones and make them open for public.
Question: Vice President of the European Commission Valdis Dombrovskis said last week if Ukraine fails to fulfill a number of conditions of the European Union by November, it may fail to receive the third tranche of the macro-financial assistance from the EU in the amount of EUR 600 million. What are these conditions?
Answer: The list, which Ukraine agreed upon when making a deal on the macro-financial assistance, includes a number of steps starting from creation of conditions under which it would be impossible to violate the obligations of Ukraine in the free trade area with the EU (such as a moratorium on the sale of round wood or the introduction of additional export duties), ending with the creation of an automated system of preliminary verification by the National Agency on Corruption Prevention (NACP) of electronic declarations using access to all registries, including those of the State Fiscal Service.
Question: Is there no such access?
Answer: The NACP already has access to the registries, however they are provided only after relevant requests. In order to make this issue automated, it is necessary to make changes to laws, and we'll start working with lawmakers on this matter in fall. At the same time, the NACP still needs to hold preparations for launching the operation of such an electronic system and have an opportunity to hold preliminary automatic checks of declarations.
Question: In February, after a decision to provide the second tranche of the macro-financial assistance was made, the EU talked about the need to settle the issue of social payments to IDPs.
Answer: Yes, there is such a requirement. The Social Policy Ministry was able to establish the system, to re-register and verify identities of all the IDPs. Payments are carried out monthly, as required. The information about the payments is submitted weekly to the EU.
Question: Is the EU satisfied with the resolution of this matter?
Answer: I believe here we have a constructive cooperation. There are some problems with the electronic registry of IDPs, because the requirement description for its developer was prepared not by the Social Policy Ministry, but by the International Organization for Migration, while the system itself was developed by the Miranda company, which also worked on the electronic declaration system.
There are also some issues regarding the banking sector.
Question: What sort of issues?
Answer: Ukraine has a large share of unreturned loans. We need to create an open registry of unreturned loans. This is also a requirement for getting the macro-financial assistance. There are many tasks and they are diverse. On June 14, consultations chaired by Prime Minister Volodymyr Groysman were held, which addressed the execution of these tasks. They are being implemented already.
Question: The EU agreed to make concessions for Ukraine on the allocation of the previous tranche, and agreed the government will only introduce a bill to parliament to abolish the moratorium on the export of round wood. Will the adoption of this law be a condition for allocating funds now?
Answer: The European Union is ready to work with us over a systemic approach to forest conservation, the functioning of the forestry sector, control over illegal forest clearing, and the development of our woodworking industry. We agreed with the EU about active cooperation at the expert level in order to gain a final understanding of the solution of this issue.
Question: The bill on the cancellation of the moratorium is already submitted to the parliament. Can we expect the introduction of an alternative bill? Is there enough time for the expert advice and finding a solution, for it is necessary to cancel a moratorium until November?
Answer: Only after developing a joint position. And there is not much time, since parliament is now on vacation, not the government.
Question: How will the extension of the export duty for scrap of ferrous metals for another year affect the relations with the EU?
Answer: As for scrap metal the situation is as follows: even during the period when the additional duty of EUR 30 per tonne is in effect, scrap metal was exported to the EU at the duty of EUR 9.50 per tonne in line with the Ukraine-EU Association Agreement.
Question: Why was that?
Answer: The increased duty did not apply earlier and would not apply now, as the Association Agreement is an international agreement and it is more important from the point of view of legal efficacy. Thus, the bill does not violate free trade requirements.
Question: So, it concerns other countries, except for the EU member states? This principle was not applied to the moratorium on the export of round wood?
Answer: Yes, the law applies to other countries, except the EU. This principle of the supremacy of the Association Agreement could not be applied, since here it is a question of a moratorium, and not increased duties.
Question: All of the above conditions must be met before November, and if it fails? We understand that the very parliament may not find consensus on some issues.
Answer: If Ukraine does not fulfill these conditions before the end of October in a format acceptable to our partners, at least for some issues to be at the final stage, we will not be able to receive the last tranche of macro-financial assistance. This assistance program from the EU ends on 4 January 2018, and if Ukraine does not have time, it will be necessary to conduct new negotiations.
Question: Is the idea of negotiations on a new financing program of Ukraine from the EU considered after the completion of the current one?
Answer: It's too early to talk about this. We have several spheres of negotiations on assistance to Ukraine from the EU and its structures. We would like not to receive loans as assistance. We put on the issue of irrevocable grant assistance on the agenda in some spheres where we can speak about possible common money spending supervision tools. But it is necessary to take into account that our need for external loans depends on the success of our economy and, if the economy develops, the need for credit funds will also decrease.
Question: The decision to grant the previous tranche of EU assistance was tied to the decision of the International Monetary Fund to provide a tranche under the EFF program. What is the current state of affairs?
Answer: Both the EU and the IMF are absolutely unambiguous about the fulfillment of our tasks and this process is synchronized.
Question: Much is said about the positive impact of the FTA with the EU on trade in goods. What is the state of things with services? How great is the potential for growth and further liberalization?
Answer: These are the main tasks for us - agreeing on road maps for liberalizing the access of our services to the EU market and vice versa. It is necessary to agree on road maps for telecom, postal, financial services, and transportation by sea.
Question: What are the prospects for the development of a visa-free regime, perhaps in the context of supplementing the FTA with the norms on the free movement of labor?
Answer: One of the tasks we set is the start of a dialog on Ukraine's joining the Schengen zone. This is the next ambitious task that we set and would like to begin discussing this issue. Regarding work, it seems to me that here we must concentrate our efforts on creating opportunities for our citizens at home. We have no task now to start negotiations specifically regarding the employment of Ukrainians in the EU. After all, if now our citizens are invited to work somewhere, they are free to do this, simply by obtaining permission and a visa.
Question: Why didn't the partial entry into force of the Association Agreement between Ukraine and the EU and the FTA lead to an increase in foreign direct investment in the country?
Answer: The signing or entry into force of the Association Agreement is not in and of itself a reason for investment. This is a definite signal for investors, but significant work is needed to improve the investment climate. A few years ago we took the 153rd place in the Doing Business ranking, and now we are the 80th in this ranking. Deregulation and the automatic refund of VAT payments should result in something. And at the end of the year, when the new rating of Doing Business will appear, I'm sure, we will see that Ukraine has climbed a few steps up and this is an important signal for business. I think many people will agree with me that as long as we do not have new courts that are always guided by the rule of law, business will not have enough security to work in Ukraine. At the same time, we have increased the inflow of foreign direct investment, although not on the scale that we would like. Without transparent rules and the ability to defend ourselves in court, we can not count on a massive influx of foreign investment.
Question: Recently Ukraine, like a number of other countries, has undergone a massive cyber attack and, in connection with this, the issue of enhancing cyber security has become a very urgent one. NATO has a corresponding trust fund for Ukraine ...
Answer: There is a ministry or agency on the part of Ukraine in each trust fund, which performs the coordination function. At the moment Ukraine, namely the Security Service of Ukraine (SBU) as the agency responsible for cooperation with this fund, should assess the country's needs in the field of cyber security. We've approached the end of the first stage of the fund's work. During the meeting of the Ukraine-NATO commission on July 10, the allies expressed their readiness to move to the second stage of the fund's operation. This means that together with them we can, on the basis of an analysis of the threats faced, identify the needs, and then the country responsible for this fund (Romania) will coordinate with other countries to implement the jointly identified task. We now need to clearly define what we need to strengthen cyber security. Then we will calculate how much is needed and will collect it among the member countries of the organization.
Question: How long will this collection of information take, and then the necessary funds?
Answer: Obviously, it is in our own interests to make an assessment quickly, and then jointly with Romania to negotiate the allocation of funds for these purposes. It's difficult to talk about terms, as we understand that the sooner the better. At the first stage, all this took a year, now some things must go faster, because the mechanism has already been developed. In addition, guaranteeing security in cyberspace is a vital issue for us and we will try to do everything as quickly as possible. I think NATO members will do the same. But it's not a matter of weeks.
Question: What is the estimated amount of money of the equipment which had been transferred at the first stage?
Answer: I can name the total amount that was accumulated in the trust fund – EUR 1.05 million. These funds have been spent, but they also include payment for the services of experts who conducted the required analysis.
Question: There is much talk about the need for a global coordination of cyber defense efforts. Is Ukraine ready to participate in this?
Answer: Ukraine and NATO are actively cooperating in the field of cyber security. And there is a mutual interest in the exchange of experience, for example, with NATO countries for the improvement of defense systems. The NATO headquarters invited our experts in this field to visit it to learn more about the cyber defense system and exchange experience.