White Book on Reforms 2017

August 14, 2019

During the last four years, was Ukraine reforming or was it mostly talking about reforms? This paper provides food for reflection rather than a straightforward answer to this question. Institutions are important since they shape social and economic interactions. Sound institutions create correct incentives on the micro level – so that overall economic efficiency is improved. Sustainable economic growth cannot be expected if production is less profitable than extortion and lying dominates telling the truth.

Current Ukrainian institutions do this job rather poorly, which should be expected – one cannot reform in a few years what had been cemented for decades, if not centuries. However, we do see important changes – at the central bank, in public procurement, energy sector, on the level of local government. These reforms allowed to stabilize macroeconomic situation and considerably improve public finance management. Yet the most important reforms, our investment into the future – education, health, pension  – lag behind. And most importantly, the quality of Ukrainian education system is low and falling. It does not equip graduates with skills and knowledge required by modern labour market,6 and in the absence of opportunities for lifetime learning skills of current workers quickly become outdated. Thus, Ukraine risks losing its human capital advantage faster than the other two.

Today, the primary task for Ukraine is the establishment of high quality life-long education system – from pre-school and primary school to postgraduate education and career training. If we start working on it today, then maybe in a few decades the majority of people will know that ‘reforms’ mean enhancement of institutions rather than anything else.

White Book on Reforms 2017