Better Regulation Delivery Office officially called on the management of Leroy Merlin to stop all collaboration with russia – the agressor that destroys Ukrainian pieceful cities and kills Ukrainian children. The Office also emphasized on the necessity to stop the company’s enterprises already working on the territory of the terrorist state.

Leroy Merlin has not given any official position on russia’s invasion of Ukraine and has not officially stated that it will follow US and EU sanctions against russia, as many reputable international companies, both large and small, have done.

In Europe, russian goods and services are being boycotted in all cities, and cooperation with the terrorist country and the supply of its products to its territory are being banned. Instead, the media report that Leroy Merlin will continue to operate in Russia bypassing international sanctions, even more so – the company is going to occupy the niche of those suppliers for whom their own reputation is more important than the bloody money of the occupying country and who has left the russian market.

There are many Leroy Merlin stores in Ukraine, as well as customers of this network. If Ukraine wins this war, Leroy Merlin will lose a huge European market that will grow at an unprecedented rate.

However, there is still an opportunity to make the right choice and stop any cooperation with the aggressor country today.

BRDO officially called on the management of Siemens AG to stop all collaboration with russia – the agressor that destroys Ukrainian pieceful cities and kills Ukrainian children. The Office also emphasized on the necessity to stop the company’s enterprises already working on the territory of the terrorist state.

Siemens has been helping russian occupants to circumvent international sanctions since the russian occupation of Ukrainian Crimea. By supplying gas turbines of its own production in Crimea, Siemens helped the occupant to generate electricity after the cessation of its supply from mainland Ukraine.

The company later supplied its pumps to Crimea, which in turn helped provide water to the occupiers’ military facilities.

It is critical to note that both electricity and water supplies of the peninsula were enough for the needs of local residents. Siemens exclusively assisted the occupying forces in providing them with electricity and water, thus supporting the occupation regime with these resources.

As of today, Siemens AG stated that they are putting on hold all new business in and international deliveries to russia. However, local service and maintenance-related activities will be continued, the company said.

At the same time, Siemens AG states that the company have kick-started support for humanitarian aid with donations to Red Cross.

We feel obliged to state in return that in doesn’t work that way – do the business with the killer country with one hand and give humanitarian support money to its victims with another, following global humanitarian trends. The reputation of Siemens AG during WW2 and collaboration with the Nazi regime is widely known. Today the company has an opportunity to save its reputation and do not repeat mistakes of the past.

We call on Siemens AG to:

1. stop the work of its enterprises in russian federation.
2. stop the supply of materials and spare parts to the company’s daughter enterprises in the rf.

We also call on the global community, in particular, the USA and the EU, to introduce sanctions on supplying russia with specific types of products:

• boilers, machinery and mechanical appliances; parts thereof;
• vehicles and parts and accessories thereof;
• electrical equipment and devices;
• energy equipment and machinery;
• automation systems and industry software.

 

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On March 15 Siemens AG replied and stated that the company has stopped all new business, domestic and international deliveries to Russia and also to Belarus. “We will only continue our local service and maintenance activities in strict compliance with the sanctions”, the company’s representative said.

Ukraine is the global leader in exports of grain, sunflower oil, honey, chicken meat and other food supplies. Twenty per cent of Ukrainian wheat is used to produce bread and bakery in the countries of the Middle East, Africa and South-Eastern Asia. In addition, 20% of exported corn is supplied for Italy, Spain, and Portugal’s cattle and poultry farms.  

Should the Russian invasion continue, production and exports of these commodities will become impossible. Moreover, the total share of grain exports of Ukraine and Russia makes up 29% of the global market. However, both countries would fail to maintain these exports, Ukraine due to the war started by Russian invaders on Ukrainian territory, Russia – due to applied sanctions. 

How critical is the situation, and would it lead to the global market of food supplies collapse? Learn more today from Iryna Gruzynska, Head of Sector “Agriculture” of the Better Regulation Delivery Office.

 

Protection of vital interests of citizens and access to food, in particular, is a guaranteed priority of every country. Ukraine, like other civilised countries, on its national level, creates all conditions to provide the population with food accessibility, its quality and safety, and free access to natural resources. But unfortunately, saving humankind from hunger turned out to be an irrelevant task for Russia.

Ukraine is a world leader in production and exports of grain, legumes, and oilseeds and has top positions in the structure of imports of countries such as China, Egypt, Indonesia, EU countries, Turkey, Pakistan, Bangladesh, Morocco, Tunisia, Saudi Arabia, Korea, Libya and others. The harvest of 2021 was a record and reached more than 106 million tons. Other top positions in our exports are sunflower oil, honey and chicken.

The market is influenced by the uncertain political situation and the shipping of products in the Black Sea ports. For example, according to the Food and Agriculture Organization of the United Nations (FAO), only during the last weeks the index of grain prices has risen 3% in the previous weeks. In particular, the cost of wheat increased by 2.1% compared to the last month. If the Russian invasion continues, we will forget about food production and its export from Ukraine.

The same goes for Russian food exports. Sanctions imposed on Russia make it impossible to sign foreign economic contracts, so at least 123 countries will soon be left without their grain. Therefore, Russia has harmed itself by attacking Ukraine seems fair. Still, at the same time, the aggressor threatens the food security of the whole world: the two countries’ combined grain exports account for about 29% of the world market, and the war would prevent securing it. Moreover, given the instability of global climate conditions, it is difficult to predict the harvest level in partner countries, which also have a significant share of the food market and will not wholly replace the Ukrainian market.

The situation could provoke the collapse of global food markets. Due to Russian aggression, the civilised world will not achieve the UN Sustainable Development Goals, including “Overcoming Hunger.” The problems will consist of not only the rise in food prices but also in their shortage. It is difficult even to predict the consequences and social issues it will lead to.

What measures is Ukraine currently taking?

To balance Ukraine’s domestic food demand, the Government has banned the export of cattle, meat and edible offal, rye, oats, buckwheat, millet, sugar and salt to other countries. Automatic export licenses have been introduced to export wheat, corn and chicken meat. All other agricultural products can be freely exported.

Such restrictions are legislative instruments of regulation, which are applied in case of a significant imbalance of certain goods in the domestic market, which is essential for the vital activities of Ukraine. Thus, our country provides itself with food during the war. These actions would not contradict the norms of international obligations under the European Union and the WTO agreements if Ukraine notified the relevant Committee of the World Trade Organization about introducing such measures within 60 days.

Despite the war, Ukrainians are already preparing to begin a sowing campaign under significant threat. The agricultural food market stakeholders define April 1 as a “point of no return” – a critical date for the start of spring fields work.

According to the forecasts of BRDO experts, taking into account the transitional balances and the possibility of sowing at least 30% of the area of ​​Ukraine, our state will be able to meet the need in domestic consumption. However, lack of resources (primarily fuel and grease lubricants which farmers gave to the military), lack of supplies of plant protection products and fertilisers, seeds, logistics problems, increased prices for resources, lack of workers and physical capacity to conduct field works may lead to a food crisis, especially in low-income countries for which Ukrainian market is the food supplier.

 

We call on civilised countries to mobilise all possible resources to stop Russian aggression against Ukraine. The whole world counts on the stable work of the Ukrainian agro-industrial sector, and we rely on the world’s support.

 

Finally, painful economic sanctions and Russia’s total isolation on the international stage are critically important. In particular, the UN body, which we have already mentioned in this text, the Food and Agriculture Organization of the United Nations (FAO), has to react and expel the Russian Federation from its membership. The main task of FAO is to fight hunger, and therefore, a country that threatens the world’s food security should not be in its ranks.

The Energy front is one of the most important at the moment, which allows to support the defence and vital activity of Ukrainian cities. Our allies can help us ensure uninterrupted energy supply.

Coal

Currently, the stability of the energy system is maintained through nuclear power plants, hydropower, as well as thermal power plants and combined heat and power plants.

For stable operation of thermal generation, coal is mainly used. Ukraine’s own production is supplemented by imported coal to completely cover the needs for this type of fuel.

Problem: Coal sources and supply routes are currently unreliable because:

• supply of coal from international partners through sea routes is blocked by the Russian Navy in the Black and Azov seas;
• supply of coal from the Russian Federation and transit from Kazakhstan through the territory of the Russian Federation is impossible;
• the volume of coal supplies from Poland via the railway is insufficient to meet current needs and accumulate strategic reserves;
• the supply of own-produced coal may be suspended at any time due to the approach of battles to mining areas and / or damage to railways.

Decision:

1. Create new transport corridors through EU countries (EU seaports → EU rail network → Ukrainian rail network), ensuring coal supplies.
2. Ensure freedom of navigation in the Black Sea, inter alia – by forcible unblocking of Ukrainian ports.

Petroleum products

Ukraine is import-dependent on this commodity position. In 2021, imports of petroleum products from Belarus and Russia accounted for about 64% of all petroleum products.

During and after the war, Ukraine is likely to no longer import oil products from Russia and Belarus.

Problem: demand for petroleum products exceeds supply.

Decision:

1. Ensure sufficient imports of petroleum products from EU countries not only by rail, but also by other means of transport.
2. Ensure the supply of crude oil and petroleum products from other countries to increase domestic refining.
3. Provide funding for the reconstruction of the Odessa refinery factory, which is currently a state-owned enterprise, or start the process of privatization by a strategic investor from the EU / US / other partner countries, subject to its modernization and guaranteed annual production volumes. The refinery is a convenient logistics hub for the supply of Caspian (primarily Azerbaijani) oil by tankers.
4. Finance works on increasing the capacity of the Shebelynskyi refinery factory.
5. Consider the possibility of reconstruction of existing / construction of new refineries on the site of infrastructure that was previously used by currently closed refineries (Kherson, Lysychansk), in case of return to state ownership of these refineries or their territories.
6. Create minimum stocks of oil and petroleum products for use during a state of emergency or martial law.

Natural gas

Ukraine’s own production of this fuel does not cover the needs of enterprises and the population. The actual consumption of natural gas in Ukraine in 2021 amounted to 26.8 billion m3, while its own production – about 20 billion m3.

To balance demand, Ukraine uses gas imports from the EU, including a virtual reverse. “Virtual reverse” involves the exchange of natural gas between operators of gas transmission systems, when physically the gas does not move across the border, and the parties offset. Technologically possible volume of gas imports to Ukraine from the EU is up to 35 million m3 per day, or about 10 billion m3 per year.

Problem: in case of termination of transit of Russian gas through GTS of Ukraine, gas import can be complicated, and virtual reverse is impossible.

Decision:

1. Ensure uninterrupted gas imports from the EU in case of termination of natural gas transit through Ukraine’s GTS.
2. Create and expand LNG physical supply routes to Ukraine.

The material was published on UBR

The railway is one of the most popular methods of cargo transportation. The share of cargo turnover by rail is 75%. But in recent years, rail transport has lost its capacity and rapidly declined.

While being a dominant player in the market for the provision of wagons for use within Ukraine and a supervisory entity that monitors the compliance with requirements of regulatory acts to guarantee traffic safety in railway transport, their classification, accounting, and analysis, the JSC “Ukrzaliznytsia” acts as a monopolist in the market of cargo transportation by rail. That is, in practice, the JSC “Ukrzaliznytsia” provides services in the market and has the powers of a technical policy regulator, ie it controls itself.

Accordingly, there is no competition and impartial control in the market, and things will never be better without systemic changes. 

For example, in 2021, the cargo turnover of the JSC “UZ” amounted to 180.6 billion tkm. This is only 2.6% more than in the epidemic 2020 year and 1.1% less than in 2019. In contrast, the increase in cargo turnover of road transport is 10.5% compared to 2020. Additionally, compared to 2021, the volume of goods transported by road increased by 16.2%, while it is only increased by 2.9% for railways.

BRDO experts analyzed the freight wagon market, identified its key problems, and outlined possible solutions. The results of the study are available in the Green Paper “Unbundling of the JSC “Ukrzaliznytsia”: liberalization of the freight wagon market”.

What is the problem?

A poor situation in the railway sector is primarily due to the low level of renewal and restoration of fixed assets through their repair and maintenance. Over the past 5 years, the fleet of wagons owned by the JSC “UZ” has not changed too much: its average deterioration level remains critical — 90%. 

73.3 thousand wagons (70%) have exceeded their specified service life, 18.4 thousand — have been used for one and a half terms of their specified service life and should be removed from service for traffic safety reasons. 39,000 wagons, or one in three, should be removed from service by 2025.

According to experts, Ukraine’s railway transport needs to move to a market-based organizational structure that is vertically integrated by main activities. Currently, we have an inefficient and super-monopolized company engaged in all types of activity in the market.

The regulatory framework to reform the market and prepare the company for the launch of a competitive railway market has been already developed — it is set out in the Government’s plans adopted on the basis of decrees of the President of Ukraine and the National Transport Strategy of Ukraine. However, as of the end of 2021, no measure has been taken. 

How to solve market problems?

BRDO experts propose, in particular, the following steps:

1. Ensuring proper implementation of measures provided for in the Government’s plans for the implementation of the National Transport Strategy of Ukraine 2030 and the Association Agreement by the JSC “UZ” the Ministry of Infrastructure of Ukraine.
2. Providing the unbundling of the JSC “UZ” within the deadlines set by the National Transport Strategy of Ukraine 2030, Government programs, and plans. This step will allow to significantly improve the manageability of newly formed business entities within corporate governance procedures, reduce corruption risks and increase compliance with legislation on the protection of economic competition.
3. Identifying freight wagons operators of the JSC “UZ” as separate legal entities. This step will allow to remove them from the natural monopoly’s influence and ensure fair competition between them and private rolling stock operators.
4. Separating organizational and financial functions of the infrastructure operator, cargo and passenger carriers, traction rolling stock operators.
5. Introducing Government target programmes for rolling stock replacement.
6. Ensuring the development and timely approval of regulatory acts on the traffic safety management within the public railway system, which is mandatory for all transportation process participants, set out in the Government’s plans for the implementation of the National Transport Strategy of Ukraine 2030 and the Association Agreement.

BRDO is launching a public consultation to develop effective solutions in the sector, taking into account the views of all stakeholders. Please fill out the online form.

Today, the President signed the law on the National Commission for state regulation in the spheres of electronic communications, radio frequency spectrum, and provision of postal services (#6055). This document was approved by the parliament last December.

There are currently no legal obstacles to creating an independent regulator in e-communications.

The law establishes the legal status of the national commission and special aspects of the organization of its activities as a regulator, its functions and powers, a procedure for drafting regulatory acts.

In turn, the current members of the NCCIR keep working until the end of the six-year period. As different regulator’s members were appointed at different times, there is no single date of expiry of the term of office for the current Commission. But for most members, their term will expire in 2027.

As we wrote earlier, this law gives the green light for further implementation of the reforms provided by the Law of Ukraine “On Electronic Communications”.

Additionally, the document provides a legal basis for fulfilling Ukraine’s obligations under the Association Agreement in this area and integrating into the EU Digital Single Market. But this is not enough — it is very important to ensure compliance with this Law and the Law “On Electronic Communications” to implement the European integration obligations. This process implies not only changing the legal rules, but also practical approaches to their application. This is, in particular, a key condition for improving the protection of end-users’ rights.

We are glad that the long process of adopting a new law on the sector regulator is over! We thank all the people’s deputies, industry associations, and experts involved in the drafting and adoption of this law.

This is evidenced by a recent “borscht index” from BRDO experts. Today, on the back of widespread concerns over rising prices, it seems more important than ever.

In February 2022, a portion of borscht made traditionally for four people will cost UAH 80.92. Compared to February 2021 (UAH 62.06), the price has increased by more than 30%.

All borscht ingredients increased in price to varying degrees during the year: from insignificant 5% to significant 284.4%.

Vegetable prices have risen the most. Compared to February 2021, the prices of beets and carrots have more than doubled and the price of cabbage has almost quadrupled.

The only vegetable, the price of which has risen insignificantly, is potatoes (+5.05%). Pork (+ 12.03%) and sour cream (+ 8.78%) also have not risen in price critically.

Infographics will help to learn more about the dynamics of food prices:

Product	Price in February 2021	Price in February 2022
Pork 400 g +12.03%	103.79	116.28
Potatoes 500 g +5.05%	11.68	12.27
Beetroot 400 g +121.72%	7.69	17.05
Carrots 150 g +131.38%	7.01	16.22
Cabbage 500 g +284.4%	5.45	20.95
Sour cream 100g +8.78%	26.2	28.5
Borscht +30.38%	62.06	80.92

 

Source: online prices from Fozzy, Novus, METRO, Auchan retail chains

prices in UAH/kg

Digitalization of administrative services saves citizens time and money every day: this has saved Ukrainians 14.7 billion hryvnias in the last two years alone. 

This is evidenced by the results of the analysis of the economic and anti-corruption impact of digitalization of public services conducted by experts from the Better Regulation Delivery Office (BRDO) for the Ministry of Digital Transformation with the support of the Swiss-Ukrainian EGAP Program implemented by the East Europe Foundation.  

How much money and time did Ukrainians save by using online services? For 2 years:

UAH 14.7 billion in real savings

UAH 42 billion of potential savings*

*if 100% of public services were received online

58.6 thousand man-years time saved by Ukrainians

If 100% of public services were received online in the last two years, the potential economic effect could be almost UAH 42 billion. 

Although the current level of use of online services does not allow to fully realize this potential, the real savings amounted to UAH 14.7 billion over the past 2 years. After all, citizens do not need to spend money on traveling costs, photocopies of documents, and more. And most importantly, it saves time.

At the same time, in absolute terms, the current time savings of citizens is about 58.6 thousand man-years. That is, it is the amount of time we save by converting administrative services to the online format, as there is no need to go from one office to the next and wait in lines.

Why is this important?

The list of available online services is dynamically increased, and the Ministry of Digital Transformation plans to convert 100% of public services online by 2024.

“The study confirmed that the digitalization of services has a significant economic and anti-corruption effect,” Oleksii Dorohan, CEO of the Better Regulation Delivery Office (BRDO), said. “The benefits for businesses are obvious: simplifying and speeding up the receiving of various certificates and permits, as well as reducing the additional costs that usually accompany these offline procedures. Moreover, digitalization in the provision of administrative services increases the level of trust in government agencies and local self-government bodies, because automation of processes usually makes corruption that may occur in personal communication offline impossible.”

To assess the impact of the introduction of electronic administrative services in Ukraine, BRDO experts have developed an appropriate methodology. The effect was assessed in two main areas: reducing the corruption component and saving user resources. Data for analysis were obtained by surveying 1,817 respondents who used online and offline administrative services.

How to learn more about the results of the study?

The results of the study were partially presented today by the Prime Minister of Ukraine Denys Shmyhal during the Diia Summit conference. The full text of the study is currently being prepared for presentation and will be published on the websites of the Ministry of Digital Transformation and the Better Regulation Delivery Office (BRDO) in the spring. 

Earlier, BRDO experts studied “The Anti-Corruption and Economic Potential of e-Services” with the support of the USAID/UK aid Transparency and Accountability in Public Administration and Services (TAPAS) project.

Subscribe to the BRDO digest not to miss information about the publication of the full text of the study: http://bit.ly/Subscribe_digest.

Corporate financial statements are one of the most popular data sets among businesses, government agencies, and the public. Financial reporting analysis helps to create a transparent business environment, as well as prevent financial and corruption risks.

In 2021, the State Tax Service published a data set containing balance sheets and income statements of more than 430 thousand legal entities. However, this data set was incomplete, as it lacks some fields (chief accountant’s name, average number of employees), as well as data for the years up to 2020. Moreover, data of legal entities registered under the simplified taxation, accounting, and reporting system, the holder of which is the State Statistics Service, were not published.

What prevents making financial statements publicly available in full? Experts and government officials discussed pressing issues during a round table discussion entitled “Why are financial statements still not publicly available?”

“The Ministry of Digital Transformation is ready to help government agencies responsible for publishing financial statements, including the State Statistics Service, to publish these data in all possible ways. There are currently some delays in the process. For example, the State Statistics Service still doesn’t provide the Ministry of Justice with information for publication in the Unified State Registry. The primary task is to develop a mechanism that will help to comply with all the provisions of the legislation on the publication of financial statements. We hope this will happen soon,” Mykhailo Kornieiev, Head of the Open Data Expert Group of the Ministry of Digital Transformation of Ukraine, commented on the current situation.

According to representatives of the State Tax Service of Ukraine, which is one of the holders of information to be published in the open data format, the Service officers are working on possible options and checking the legal basis for the completeness and presentation of all financial statements. “We have to make sure that we do not go beyond the powers given to us by the Tax Code. There are certain nuances of filing financial statements that affect the completeness of the data. The problem of their regulation should be resolved in the future,” Tetyana Barabash, Head of the Electronic Services and Reporting Office of the Electronic Services Department at the State Tax Service, said.

The potential for using the data of financial statements that were made public is high. BRDO experts conducted an online survey on how Ukrainians use financial statements data and what they lack in data sets. For example, 97% of respondents need data on the financial statements of companies under the simplified taxation system. This information will help businesses gain analytics of markets with “simplified” (such as agriculture, retail markets) and additional opportunities to verify counterparties. Additionally, 87% of respondents require to make financial statements publicly available by 2020. 

“The main goal of our analytics is to actualize the need and show what public demand for financial statements data and from whom. We talked to many users, conducted online surveys. All users we interviewed (business owners, journalists, and public activists, representatives of united territorial communities and research organizations) need to have financial statements fully publicly available,” Dmytro Lebedyev, BRDO analyst, presented survey results.

Moreover, state-owned enterprises also need open financial statements. According to Ivan Lakhtionov, a representative of Transparency International Ukraine, about 3.5 thousand enterprises in Ukraine are state-owned, and these financial statements help to manage them effectively and efficiently. Additionally, Ukraine has lost points in the recently published Corruption Perceptions Index. This may be a stimulus for information holders to continue working on making financial statements public.

“Information serves as a brand identity of the state, its asset that provides an opportunity to attract investment funds into the economy. And investors are not interested in the nuances of making financial statements data public,” Danylo Globa, Deputy Director for Legal Affairs, YouControl, said. “Today, the issue of failing to make financial statements public is related to specific persons in the State Statistics Service, not the official position of this agency. And we will work to bring to justice those officials who are constantly making excuses not to publish financial statements in full.”

According to Olena Vyshnevska, Director of the Department of Public Information and Communications, the State Statistics Service supports the position of openness and has done everything that could be done to open financial statements by legal means. “In our activities, we are guided by the law on state statistics that is fundamental to the State Statistics Service. Now the Verkhovna Rada registered a new draft law on state statistics, but it has not been considered yet, and we need help and support to finally consider it,” Olena Vyshnevska said.

Draft law #5886 “On Official Statistics” defines the organizational principles and functioning of the national statistical system, the rights, and functions of state statistics bodies, regulates legal relations in the field of official statistics to provide the state and society with unbiased and objective official state statistical information. In particular, it contains a new provision that directly allows the State Statistics Service to publish financial statements.

“However, it may be a long time before parliamentarians finally consider the draft law. And there are no legal obstacles to publish financial statements now,” Natalia Chornogub, a representative of the Public Council at the Ministry of Digital Transformation of Ukraine, said. “Failure to make financial statements publicly available affects the credibility of the Office of the President, the Cabinet of Ministers of Ukraine, in turn jeopardizing plans to digitalize, increase the country’s investment attractiveness, and violating the rights of Ukrainians to access information.”

All legal grounds for making financial statements public already exist – they are set in the Law of Ukraine “On Access to Public Information” and the Resolution of the Cabinet of Ministers of Ukraine #835. 

Meanwhile, public activists and open data support organizations are preparing another appeal to the Prime Minister to speed up the publication of financial statements and require the State Statistics Service to publish these data in full. You can join the signatories of the letter by following the link: https://bit.ly/Zvernennia_PM 

The round table was organized by the Better Regulation Delivery Office in cooperation with the OpenUp Ukraine community, youcontrol.com.ua – You Control, and the Public Council at the Ministry of Digital Transformation of Ukraine as part of the RAPID project implemented with the support of the Press, Education and Culture Department of the US Embassy in Ukraine, as well as in partnership with the American Councils and the Open World Ukraine program. The views of the participants do not necessarily reflect the official position of the U.S. Government. 

The study based on the BRDO survey is available at the link.

In Ukraine, there were record harvests of grain and grain legumes in the 2021/2022 marketing year (MY, July-June) — 84.6 million tons (+19.7 million tons compared to the previous year). This is the largest harvest of grain and grain legumes since Ukraine’s independence.

The previous record for harvesting grain and grain legumes was set in the 2019/2020 marketing year. 75.1 million tons were harvested that year. But in the 2021/2022 marketing year, this figure was exceeded by 9.5 million tons.

After the grain is harvested in the fields, it should be transported to storage, processing, and export locations (through border crossing points: seaports, road, and rail crossing points). The entire grain and grain legume crop forms a cargo base for transport companies (by road, rail, river, and sea). The greater the grain harvest, the more cargo to be transported by different types of transport. At the same time, transport companies also deliver foreign grain and grain legumes in transit through Ukraine (from one border crossing point to another) and import grain crops to Ukrainian consumers.

Road, rail, sea, and river transports are in close coordination with each other during the transportation of grain and grain legumes. The vast majority of crops grown in Ukraine are exported to various countries around the world through seaports. Grain is usually delivered to seaports by rail, road, and river.

The schematic cooperation of transport types is as follows:

1. Road transport

The leader in the transportation of grain and grain legumes in Ukraine (in tons) is the road transport that delivers grain from fields to elevators, railway stations, and approach lines, seaports, processing plants, and other locations. Most of the grain is delivered to railway loading points (railway stations, approach lines) by road and then it is transported for export to seaports by rail. In such a way, grain and grain legumes are usually delivered to railway stations by road.

Unfortunately, there is no complete and reliable information on the volume of grain and grain legume transportation by road, as most of such transportation operations are not covered by shipping documents or are registered with cargo underweight, or are not included in the statistics at all. However, most grain is transported by road, as this transport type is involved in all logistics chains.

2. Railway transport (Ukrzaliznytsia)

The next largest volume of grain and grain legumes (in tons) is transported by rail. The statistics of rail transportations is more complete and reliable. Information on the volume of transportation of grain and milling products is formed every month based on registered railway receipts for their transportation in wagons and containers.

For example, according to Ukrzaliznytsia, in July-December 2019, 21.2 million tons of grain and milling products were transported by rail, in July-December 2020 — 19.3 million tons (-1.9 million tons compared to 2019), in July-December 2021 — 20.8 million tons (+1.5 million tons compared to 2020 and -0.4 million tons compared to 2019). Given the record grain and grain legume harvests in 2021/2022 MY, Ukrzaliznytsia should also significantly increase grain transportation volumes, but the actual figures do not show a sharp increase in grain transportation by rail. 

Grain and milling products are transported by rail mainly for export (88-89% of total transportation). In July-December 2019, 18.7 million tons were transported by Ukrzaliznytsia for export, in July-December 2020 — 16.9 million tons (-1.8 million tons compared to 2019), in July-December 2021 — 18.5 million tons (+1.6 million tons compared to 2020 and -0.2 million tons compared to 2019).

As for domestic transportation, Ukrzaliznytsia transported 1.6 million tons in July-December 2021, and this is less than in the same period in 2020 (-0.8 million tons) and 2019.

The transit carriage of grain and milling products showed positive dynamics. In July-December 2021, 0.6 million tons were transported by rail, and this is much more than in the same period in 2020 (+0.3 million tons) and 2019 (+0, 6 million tons). Such a significant increase in transit grain carriage is due to the transportation of grain in the amount of 563 thousand tons from Moldova to the port of Reni. In particular, between the following border stations:

Petrostal (exp.) – Reni-port-export (Ukrzaliznytsia’s transportation distance is 48 km): in July-December 2021, Ukrzaliznytsia transported 343 thousand tons of Moldavian grain in transit (59% of Ukrzaliznytsia’s grain transit); 

Bolhrad (exp.) – Reni-port-export (Ukrzaliznytsia’s transportation distance is 35 km); in July-December 2021, Ukrzaliznytsia transported 76 thousand tons of Moldavian grain in transit (13% of Ukrzaliznytsia’s grain transit);

Reni (exp. – Reni-port-export (Ukrzaliznytsia’s transportation distance is 4 km); in July-December 2021, Ukrzaliznytsia transported 67 thousand tons of Moldavian grain in transit (12% of Ukrzaliznytsia’s grain transit);

Frikatsei (exp.) – Reni-port-export (Ukrzaliznytsia’s transportation distance is 24 km); in July-December 2021, Ukrzaliznytsia transported 57 thousand tons of Moldavian grain in transit (10% of Ukrzaliznytsia’s grain transit);

As for the import carriage, in July-December 2021, transportation volumes were steadily insignificant, and during this period, Ukrzaliznytsia transported only 0.1 million tons, which is at the level of similar periods in 2020 and 2019.    

The figures of Ukrzaliznytsia’s transportation of grain and milling products only of Ukrainian harvest (for export and domestic carriage) for the last 3 years are shown per month in the chart. As you can see, Ukrzaliznytsia’s figures for 2021 do not show significant growth and are mostly lower than in 2019 and 2020. Only in September, the figures for 2021 were higher than the figures for 2019 and 2020. It follows that the record harvest of grain and grain legumes in Ukraine has not led to a significant increase in grain transportation by Ukrzaliznytsia. 

3. River transport

In Ukraine, river cargo transportation is carried out along the Dnipro, the Danube, and the Southern Buh. In particular, grain cargo is transported on these rivers.

Unfortunately, there is no statistical information on grain transportation on all these rivers. But more than 70% of all cargo transportation is carried out on the Dnipro River and such information is publicly available.

In particular, in July-December 2019, 3.1 million tons of grain cargo were transported on the Dnipro River, in July-December 2020 — 2.3 million tons (-0.8 million tons compared to 2019), in July-December 2021 — 2.5 million tons (+0.2 million tons compared to 2020 and -0.6 million tons compared to 2019).
Transportation of grain cargo on the Dnipro River didn’t increase significantly compared to 2020 and showed a decrease compared to 2019.  

4. Maritime transport

According to the Administration of Sea Ports of Ukraine, in July-December 2019, 30.1 million tons of grain-producing cargo were handled in seaports (99% of them are grain), in July-December 2020 — 24.7 million tons (-5.4 million tons compared to 2019), in July-December 2021 — 33.1 million tons (+8.4 million tons compared to 2020 and +3.0 million tons compared to 2019). Given the record harvest of grain and grain legumes in 2021/2022 MY, seaports significantly increased grain handling (transshipment) volumes. At the same time, a significant part of the grain-producing cargo is handled for export (95%).

Export of grain crops, grain legumes, and flour

According to the Ministry of Agrarian Policy and the State Fiscal Service, in July-December 2021, Ukraine exported 32.6 million tons of grain crops, grain legumes, and flour. This exceeded exports in the same period in 2020 by 6.7 million tons and exports in the same period in 2019 — by 1.0 million tons.

Almost all grain exports of Ukraine (93-95%) are carried out through seaports, to which 55-60% of cargo are delivered by rail, 30-35% — by road, and 7-10% — by river.

Given that Ukrzaliznytsia transported 18.5 million tons of grain and milling products for export (57% of total exports) in July-December 2021, we can conclude that 14.1 million tons of other grain crops, grain legumes, and flour are transported by road and river. At the same time, there is a significant increase (by 5.1 million tons) in grain transportation for export by road and river, while Ukrzaliznytsia decreased this figure by 0.2 million tons compared to 2019 and showed a slight increase by 1.6 million tons compared to 2020.

Ukrzaliznytsia’s ongoing problems with grain cargo transportation and a significant increase in tariffs for its services lead to a shift of grain transportation to road transport that is becoming more mobile and flexible every year. Ukrzaliznytsia is actively losing its competitive advantages.

**The analytics was prepared by experts of the Center of Railway Transport Research and the Better Regulation Delivery Office.

Source: URM

During the meeting on January 12, the Government approved amendments to the Law “On Transport” that determine the legal and organizational basis for the creation and operation of a National Commission for State Regulation of Transport.

This is the third government version of the law on the NCRT since the beginning of the newly elected Verkhovna Rada’s work. Unfortunately, all these documents contain the same unresolved issues regarding the constitutionality of the creation and independent operation of such a state body.

BRDO experts have repeatedly provided recommendations to ensure the independent and efficient operation of the NCRT. Additionally, they have prepared a comprehensive draft law that takes into account previous experience in creating regulators in other areas, as well as the recommendations of the EU Directive establishing a single European railway area, and conclusions of the Organization for Economic Co-operation and Development (hereinafter — the OECD). 

Zoya Melnyk, Head of the Transport and Infrastructure Sector at the Better Regulation Delivery Office (BRDO), told the MINTRANS more about the risks of the document approved by the Government.

Special body and its tasks

The practice of creating collegial bodies in areas that involved natural monopolies is not new. Such an institution should regulate tariffs, administer consumer access and other conditions for activities in the area. Today, the domestic transport regulator’s functions are performed by the Ministry of Infrastructure of Ukraine, but the introduction of a special body (the NCRT) is essential to the effective functioning of the transport services market. However, attempts to create it have not been successful for 20 years.

The fully controlled and rubber-stamped National Commission for State Regulation of Transport is a loss for all stakeholders. Instead of long-term predictable regulation, businesses will receive new surprises and fundamentally different courses of regulation with each new Cabinet of Ministers.

Instead of approving equal maximum tariff limits for all entities, natural monopolists (both state-owned enterprises and concessionaires) will receive the unreasonable and non-transparent tariff formation practice that will be different for each entity. Individuals will eventually pay for all these unreasonable tariffs as air, water, or rail transport passengers, or as final consumers of goods delivered by this transport.

The state, however, will continue to spend the money, time, and effort of deputies, members of the Cabinet of Ministers, and civil servants at all levels to find quick solutions and address urgent needs from year to year instead of achieving progressively strategic goals that only strong institutions can do.

What’s wrong with the new government decision?

So, what provisions of the draft law approved by the Cabinet of Ministers will currently prevent the NCRT from becoming an independent and effective institution?

1. Regulations on the National Commission, the maximum number of its employees are approved by the President; it is subordinate to the President; the Chairman and members of the commission are appointed by the President.

Such provisions are unconstitutional. As the powers of the President and the Verkhovna Rada are clearly defined in the Constitution of Ukraine, additional empowerment enshrined in the laws is unacceptable, and the Constitutional Court of Ukraine has repeatedly emphasized this fact in its decisions: #5-r/2019 of 13/06/2019 (Decision in the case of the National Commission for State Regulation of Energy and Public Utilities); #21-rp/2008 of 08/10/2008 (Decision in the case of the National Commission for State Regulation of Communications of Ukraine).

2. Lack of independence of the body in decision-making.

Following the above-mentioned EU Directive and recommendations of the OECD, a national transport regulator should be an independent (stand-alone) authority which is, in organizational, functional, hierarchical, and decision-making terms, legally distinct and independent from any other public (government) or private entity. This draft law currently contains provisions that:

— completely undermine the independence of the NCRT regarding the appointment of its chairman and members;

— decision-making, approval, and registration of acts;

— financing of the body from the State Budget.

3. Additional risks:

• unpredictability of regulation for business (the draft law contains some provisions that do not comply with the principle of legal certainty and do not allow to predict the consequences of regulation);
• unclear provisions that allow avoiding public discussion of a regulatory act of the NCRT;
• there is no liability for non-compliance with the NCRT’s requirements by business owners and no personal liability of NCRT’s members.

What should be the law on the NCRT?  

In case of adoption of the law with unconstitutional provisions, the operation of the newly created National Commission may be partially or completely blocked by the Constitutional Court at any time. The lack of sufficient guarantees of the independence of the body and its members creates the risk that no impartiality and fairness of regulation will be ensured.

Instead of the appointment procedure, the competitive selection process should be completely transparent, as this is a guarantee of confidence in future decisions of the regulator. Moreover, requirements for the professional development and expertise of candidates for the position of NCRT’s members should be higher in comparison with ordinary civil servants and guarantee their complete non-involvement in politics and business. 

NCRT should be able to make its own decisions: on the basis of its own calculations and research and without any control from other government agencies. This means that neither the Cabinet of Ministers nor the State Regulatory Service can revoke its decisions; the Ministry of Justice or the Government Printing Office should not have any tools to stop, disapprove, refuse the registration or publication of a draft regulatory act of the NCRT. 

There should be exhaustive grounds for the dismissal of an NCRT’s member and no chance to dismiss them for political reasons or approve ‘uncomfortable’ decisions. This is a prerequisite for true, not just declared, independence. 

Transparency should be provided at all stages of the NCRT’s decision-making. Businesses, local self-government bodies, and executive authorities should be allowed to engage in a dialogue with the NCRT, so they will be heard and their proposals will be taken into account or reasonably rejected.

The NCRT should be financed through regulatory contributions paid by natural monopolies and related markets to ensure its maximum financial independence. Due to the introduction of regulatory fees, businesses do not have to pay more taxes: the amount of taxes paid should remain unchanged.

Last year, BRDO experts drafted a law that addresses the gaps of existing legal documents in terms of unconstitutionality and non-compliance with European obligations of Ukraine and offers much more guarantees for the sustainable, uninterrupted functioning of the state body.

Strong and independent (structurally, functionally, and financially), transparent, and professional NCRT is an investment in more effective government regulation for years and decades. While the creation of the commission under the current government act threatens Ukrainians with more budget expenditures and the lack of fundamental changes for the better in the transport services market.  

Source: Mintrans

Basic components of the transportation process are infrastructure and locomotive traction services, and the provision of wagons for use.

BRDO experts published a study “Railway Freight Transportation” and are planning to publish “Unbundling of the JSC “Ukrzaliznytsia”: liberalization of the freight car market”.

The study found that:

Each year, the JSC “Ukrzaliznytsia” (UZ) systematically fails to meet the portfolio performance of capital investments in fixed assets approved by shareholders. In 2020, compared to 2012, total capital investments in the replacement of fixed assets decreased by 32% (-UAH 3.9 billion), and almost by 5 times in dollar terms. In general, only 64.7% of the capital investment plan has been implemented, and UAH 29.4 billion (USD 1.2 billion) has not been used over the past 5 years.

Only 65.1% of the plan for rolling stock replacement and modernization, which is crucial for the sector performance, has been implemented, and about UAH 13 billion has not been used.

Only 65% (-UAH 29 billion) of the financing sources of capital investments determined by the Government (in particular, 74% of shareholder’s equity (depreciation) (-UAH 17 billion) and 30% of third-party funds (-UAH 12 billion) were used in 2016-2020.

The results of such harmful sector management in 2016-2020 are:

1) A fleet of locomotives in operation was reduced by 1.8 times, hundreds of locomotives were dismantled for parts, spoiled, and damaged beyond repair. The company suffered tens of billions of hryvnias in losses.

Under the requirements of current regulations, about 60% of locomotives in operation are technically unsuitable to be operated due to a threat to traffic safety. To repair them, it is necessary to spend UAH 8.2 billion in 2021, but the plan envisages only UAH 1.0 billion. 

2) Only 36.7 thousand units (or 35%) of the inventory fleet of freight cars owned by the JSC “UZ” that amounted to 105.4 thousand units in 2020 were constantly in operation, while other freight cars are not suitable for operation.

3) A passenger rolling stock fleet was reduced by 20-30%. Currently, 41% of the operational passenger rolling stock fleet needs various types of repairs that have been delayed. 61% of unserviceable electric trains and almost all diesel trains are operated while endangering passengers and train crews.

4) In recent years, 400 km of main tracks and 1,800 km of station tracks, as well as 2,500 of track switches, have been closed due to the impossibility of their operation.

31.8 thousand speed limits for trains (on average one speed limit per 1 km) have been set.

Currently, more than 11,000 km of railways lines, or every third kilometer operated, need major repairs and reconstruction. For 9 months^[1] in 2021, the length of main tracks that need major repairs and reconstruction increased by 626.8 km (+ 6.85%) compared to 2020 (from 9,145.3 km to 9,772.1 km).

Summary data on the serviceability status and the need for repairs of main types of production assets demonstrate a situation close to catastrophic. The total cost of delayed repairs that can no longer be delayed is UAH 73.7 billion in current prices, which is equal to the annual income of the JSC “UZ”. 

The financial plan for 2021 provided UAH 4.23 billion for production asset repairs. This is UAH 1 billion less than in 2020 and UAH 10.3 billion less than urgent needs.

In our opinion:

A key factor in the deterioration of operating capabilities of the JSC “UZ” and the generation of risks of violation of legislation on protection of economic competition is a combination of activities carried out by one legal entity (business entity) in both monopoly and competitive market segments. This factor is multiplied by the fact that the JSC “UZ” is a natural monopoly (in terms of providing the railway transport infrastructure in use) and a supervisory (control, inspection) entity that monitors the compliance with requirements of regulatory acts to ensure traffic safety in railway transport.

Existing problems in the railway transport operation require the urgent implementation of certain regulatory and administrative measures to be addressed, specifically including but not limited to:

1. The unbundling of the JSC “UZ” within the deadlines set by the National Transport Strategy of Ukraine 2030, Government programs, and plans. This step will allow to significantly improve the manageability of newly formed business entities within corporate governance procedures, reduce corruption risks and increase compliance with legislation on economic competition.
2. The identification of freight car operators of the JSC “UZ” as separate legal entities. This step will allow removing them from the natural monopoly’s influence and ensuring fair competition between them and private rolling stock operators.
3. The separation of organizational and financial functions of the infrastructure operator, freight and passenger carriers, traction rolling stock operators (including by approving separate financial plans by the Government, changing the current approach — the approval of a consolidated financial plan of the JSC “UZ”).
4. The introduction of Government target programs for rolling stock replacement.
5. Introducing an investment component in the tariff (as part of the infrastructure share in the transportation cost), ensuring transparency in setting the tariff for infrastructure services and the further use of funds exclusively for the maintenance and repair of infrastructure facilities.

ІСС Ukraine experts and transport commission members share the opinion of colleagues from the BRDO and will also try to make it visible to improve the situation in the railway sector.

At the meeting on January 12, the Cabinet of Ministers approved amendments to the Law “On Transport” (hereinafter — the draft law) that determine the legal and organizational basis for the creation and operation of the National Commission for State Regulation of Transport (hereinafter — the NCRT).

Since the beginning of the newly elected Verkhovna Rada’s work, several draft laws “On the National Commission for State Regulation of Transport” have been developed. In particular, these are the draft laws developed by the government, MPs, and BRDO experts. However, it is the MPs’ draft law #3927 that was registered.

The biggest issue for both the previous draft laws and the draft law approved by the Cabinet of Ministers as amendments to the Law of Ukraine “On Transport” is the independence of such a regulator. Actually, the creation of one more CEB was envisaged, and therefore it is logical to ask: for what purpose? What is the feasibility of one more body if it is politically motivated and lacks independence? 

By the way, BRDO experts have repeatedly published analytical materials and recommendations on how to ensure the independence of the body in the current legislative environment.

Regulations on the National Commission, the maximum number of its employees are approved by the President; it is subordinate to the President; the Chairman and members of the commission are appointed by the President

Such provisions are unconstitutional, as the powers of the President and the Verkhovna Rada are clearly defined in the Constitution of Ukraine. Additional empowerment enshrined in the laws is unacceptable, and the Constitutional Court of Ukraine has repeatedly emphasized this fact in its decisions:

#5-r / 2019 of 13.06.2019 (Decision in the case of the National Commission for State Regulation of Energy and Public Utilities);

#21-rp / 2008 of 08.10.2008 (Decision in the case of the National Commission for State Regulation of Communications of Ukraine).

Unconstitutional provisions in the draft law threaten the stable functioning of the NCRT and allow blocking the work of the body at any time. Therefore, we propose to bring such provisions in line with the Constitution.

Lack of independence of the body in decision-making

Following Directive 2012/34/EU and the recommendations of the Organization for Economic Co-operation and Development (hereinafter — the OECD), a national transport regulator should be an independent (stand-alone) authority which is, in organizational, functional, hierarchical, and decision-making terms, legally distinct and independent from any other public (government) or private entity.

This draft law currently contains provisions that completely undermine the independence of the body:

regarding the election of the chairman and members of the body,

decision-making, approval, and registration of acts

financing of the NCRT from the State Budget

Additional risks: Unpredictability of regulation for business. The draft law contains some provisions that do not comply with the principle of legal certainty and do not allow to predict the consequences of regulation, in particular:

Unclear provisions that allow avoiding public discussion of a regulatory act

There is no liability for non-compliance with the requirements of the Regulator by business owners, there is no provision (it is not specified) for the personal liability of Regulator’s members.

The adoption of the law with unconstitutional provisions involves the risk for the operation of the newly created body to be partially or completely blocked by the Constitutional Court at any time.

The lack of sufficient guarantees of the independence of the body and its members following the requirements of the Directives carries the risk that no impartiality and fairness of regulation will be ensured.

BRDO experts have drafted a law that not only eliminates the gaps of draft law #3927 in terms of unconstitutionality and non-compliance with European obligations but also offers much more guarantees for the sustainable, uninterrupted functioning of the independent and professional NCRT.  

The draft law prepared by the BRDO, like the draft law #3927, is based on the text of the Law of Ukraine “On the National Commission for State Regulation of Energy and Public Utilities” in the version that contained the most requirements for transparency of the NCRT and guaranteed the widest possible involvement of non-governmental organizations and businesses to discuss draft decisions. The draft law was prepared developed taking into account the provisions of the Constitution of Ukraine and the decision of the Constitutional Court of Ukraine #5-r/2019 of 13/06/2019; #21-rp/2008 of 08/10/2008, Directive 2012/34/EU establishing a single European railway area, recommendations of the Organization for Economic Co-operation and Development, proposals of business associations and the Ukrainian context.

Source: ICC

Why are financial statements still not publicly available? 

On February 4 at 11:00, open data experts will hold a round table to discuss this issue.

You can join the meeting by clicking the following Zoom link: https://us02web.zoom.us/j/83869204074 

The meeting is organized by the Better Regulation Delivery Office (BRDO) together with OpenUp Ukraine, youcontrol.com.ua – YouControl, and the Public Council (GromRada) at the Ministry of Digital Transformation.

Corporate financial statements are one of the most popular data sets among businesses, government agencies, and the public. Financial reporting analysis helps to create a transparent business environment, as well as prevent financial and corruption risks. 

We invite you to join the round table to understand what prevents making financial statements public, hear the experts and discuss current challenges that require the synchronization of efforts and collaboration.

The following issues will be discussed at the meeting:

• Quality of financial statements published by the State Tax Service.
• What financial statements are not included in the data set and why do users need them?
• How to change this situation?

The round table will be attended by: 

• Mykhailo Kornieiev, Head of the Open Data Expert Group of the Ministry of Digital Transformation of Ukraine,
• Dmytro Lebedyev, BRDO analyst, 
• Yaroslav Garaguts, founder and developer of the Clarity Project open data analytics system, 
• Danylo Globa, Deputy Director for Legal Affairs, YouControl, 
• Yegor Stefanovych, representative of the Public Council at the Ministry of Digital Transformation, 
• Ivan Lakhtionov, representative of Transparency International Ukraine, 
• Volodymyr Tarnai, regional manager of Open Contracting Partnership in Eastern Europe and Central Asia, 

as well as representatives of the State Statistics Service of Ukraine, the State Tax Service of Ukraine, and the Ministry of Justice of Ukraine.

Moderator — Nadiya Babynska, OpenUp coordinator.

Please keep in mind that you can participate in a survey on the use of financial statements of Ukrainian enterprises: https://forms.gle/LSnkJVeoMBgbYKfA9. If you use this type of open data, please fill out the form. This information will help our experts in analyzing the quality and completeness of published data.

The event is organized as part of the RAPID project implemented with the support of the Press, Education, and Culture Department of the US Embassy in Ukraine, as well as in partnership with the American Councils and the Open World Ukraine program. The views of the participants do not necessarily reflect the official position of the U.S. Government.