Kiev, Ukraine (d1mka vetrov, CC BY-NC-ND)
CE Financial Observer: What real economic benefits could Ukraine obtain from the association agreement with the EU?
Anne Bercio and Richard Steinberg: Thanks to the planned full alignment of the Ukrainian legislation with the acquis communautaire, all non-tariff barriers to trade will be eliminated. In this way, Ukrainian companies will obtain access not only to the EU market, but also to the markets of many other countries. This is a great opportunity, among others, for the aviation industry. We believe that integration with Europe will force the modernization of industries which can compete abroad, and it will improve the quality of Ukrainian goods. The rights of consumers in Ukraine will also be protected better.
In the report prepared by Institute for European Politics together with the Institute of Public Affairs in Warsaw, you wrote that European values are very important for Ukrainians. What does that mean?
One thing that still unites Ukrainians is the so-called values of Euromaidan, which are very close to what we mean by European values. These include freedom, equality, the rule of law, democratization of society and transparency of public institutions. In the latter case, Ukrainians also expect far-reaching financial transparency, also from the partners with whom they cooperate.
We can also see that the EU countries are seen as a certain benchmark, which is due to the European model of social market economy. It is seen by the Ukrainians as an ideal whose realization allows for the economic development of nations, as well as the opposite of the oligarchic system in which they have to live. The freedom of travel is an important value for Ukrainians, and they therefore expect the EU to lift visa requirements. They also hope that in this way they will gain access to the European markets.
Which of these European values and ideas could be transferred to the East and contribute to an increase of living standards?
Transparency is certainly among them. Ukrainian organizations which operate abroad put great emphasis on its role. They accept that at the moment they cannot require full transparency from the state institutions in Ukraine, but they already require and enforce it in cooperation with each other.
Issues related to the rule of law are also important. With the entry into force of the agreement between Ukraine and the European Union on the Deep and Comprehensive Free Trade Area (DCFTA), the European solutions will also be applied in this country. An improvement in the quality of life would certainly contribute to the strengthening of Ukrainian democracy.
Is Europe ready to further open up to Ukraine in light of the unprecedented migration from Africa and the Middle East? How strong is Germany’s willingness to continue to support this neighbour of the EU as well?
It seems that despite everything there is still a willingness to cooperate and to help on the part of the EU. After all, the European Commission recently proposed a visa-free movement regime with Ukraine. Of course, EU citizens may have vague fears that such a decision could further increase the wave of migration to Germany. In our opinion, however, they are not justified. After all, the statistics show that events such as Euromaidan and the dramatic events that followed it did not fundamentally increase the number of Ukrainians settling in our country. Meanwhile, the number of Russians migrating to Germany has increased more significantly.
What are the chances for flows in the opposite direction, especially the flow of capital and investment to the East? Is this an interesting direction for the Germans?
The Germans still remember and highly appreciate the pro-European commitment of Ukrainians during Euromaidan. It made a big impression in Germany. Euromaidan largely supplanted the image of a corrupt country ruled by the oligarchs. Since then, however, there have been new sources of crises and new problems which capture public opinion.
For that reason, public interest in Ukraine is obviously much lower than two years ago. When it comes to the political level, little has changed in Germany and the support of the government in Berlin for Ukrainian affairs is still very strong. This can be seen clearly in different projects led by the German Foreign Ministry. It should be noted that last year many government projects relating to Russia were abandoned.
Are German companies ready to cooperate with Ukraine? So far many entrepreneurs have looked at the East through the prism of Russia.
That is correct. However, there are attempts to change this perspective through various forums and business conferences. We also believe that at some point the entrepreneurs themselves will notice the benefits of greater activity in Ukraine and the opportunities offered by the association agreement and the free trade area.
Would trilateral projects with the participation of local partners, as well as Poland and Germany, be helpful in the East?
Such a Polish-German engine could achieve a lot there. Of course, at this moment it is hard to launch such initiatives at the government level. Social initiatives, however, are very likely. The German Ministry of Foreign Affairs has recently organized a forum on Ukraine, which was not attended by partners from Poland. Meanwhile, their presence would have been highly advisable.
Will the team of Prime Minister Volodymyr Groysman be able to stabilize the situation in Ukraine and to put the country on a path of economic growth? Or should we expect further chaos and increased migration from the East?
It seems to me that the situation in the country is stabilizing and the chances are greater than the risks. The association agreement with the EU creates new opportunities in itself. It is of key importance now to support the Ukrainians in their effort to develop their institutional capacity so that they have the tools that will allow them to build a better future for themselves. This involves specific activities, such as the training of the staff of the Ministry of Economic Development and Trade and its subordinate institutions, in order to establish an efficient state system of standardization, metrology and accreditation, which will ensure an adequate level of quality of goods and services.
An equally important task is the preparation of the government officials and those from the Supreme Council, who be involved in adapting the Ukrainian law to the European solutions. We should also remember that what is happening in Ukraine is not a revolution ordered from the top. It is the people who want the reforms. This is reminiscent of the social and economic changes in Poland in the 1990s.
And where do you see the main threat to the economic development of Ukraine outside of the armed conflict in the Donbass?
The delayed reforms, especially in the justice system, could lead potential investors to withdraw due to the insufficient level of legal security. The political instability is also causing a high turnover in the administration, and even the loss of qualified staff. Ukraine is also suffering due to the continuing brain drain in favour of Poland and Western Europe which will have lasting negative consequences for the local labour market.
The foundation of the success of democracy in Germany after 1945 was the economic miracle which persuaded the Germans to embrace the new political system. What can be done in order for the standard of living of Ukrainians to finally start growing, so that democratic rule of law could obtain a solid foundation?
There are many such activities, but it takes time for them to start to bear fruit. The system of education and training requires improvement, especially outside of Kiev. It is necessary to increase wages and reform the salary system in the public administration. Of course, we still need a constant battle against corruption and the stabilization of the hryvnia exchange rate. In addition, Ukraine should create a more favorable climate for investors.