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Belt and Road 2013 – 2020: “the roads” of improvements. Lessons for China

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Today it became clear that the cooperation between Europe and China in the framework of the BRI can contribute both to balanced development of the partners and the risks of new challenges in the dialogue between the States-parties of the initiative. Thus, both sides of the dialog learned their lessons and mistakes and can implement new improvement in resolving the current problems and challenges in cooperation within BRI.

China is the founder and the main country of the Belt and Road Initiative. It is one of the most interested in implementing BRI country, but during period 20132020 it faced a number of challenges, which have to be resolved to fully enjoy the benefits and profits of the initiative.

Analyzing the possible challenges facing the mechanism of cooperation between China and countries of Europe, the article proposes a number of recommendations, made under the backdrop of many other conflicting realities with regard to harmonize the relation between countries-participant of the initiative, which can be implemented by Chinese side of the Initiative.

The PRC

To take into account the geopolitical situation in the CEE region and establish relations with other interested countries.

Analysis of China – CEE relations has shown that the basis of bilateral cooperation is not strong enough today. China and the countries of Central and Eastern Europe belong to different civilizations, they are geographically far from each other, and after the end of the Cold War, the former ideological unity between them disappeared.

Since three-quarters of the CEE countries have already become members of the EU, following the common European foreign and security policy, China needs to balance two areas – relations with the EU and diplomacy with each country separately. Deepening ties with CEE countries is necessary to promote the “One belt, One road” initiative, but the “triangle” of China – EU – Central and Eastern European relations should be taken into account when creating a cooperation mechanisms.

For example, the EU has a strong presence in the CEE region by promoting a set of economic rules. The US maintains a military presence there. Germany considers CEE as a region of its’ traditional influence. Russia also has important geopolitical interests there.

The EU expresses doubts about the 17 + 1 format and sees it as a manifestation of China’s “divide and rule”policy. The US, through the NATO security structures, firmly controls the political and military development of 17 States. Although the US has expressed a positive assessment of the 17 + 1 format, it is constantly increasing its’ influence on Poland, the Baltic States, and the Eastern Balkans.

Because of the Ukrainian crisis, the US-led NATO bloc strengthened its control over CEE. Germany sees CEE as its “backyard” and traditional sphere of influence. The German government openly doubts the mechanism of China’s cooperation with the 17 CEE States, believing that it leads to the undermining of EU norms, which is unfavorable for European unity.

The influence of Russia in the region should not be underestimatedas well. The Central Asian and Eurasian economic space is very important for Russia, which is leading the process of economic integration and has a deep traditional influence and real interests (many countries in Central and Eastern Europe are heavily dependent on Russian energy resources).

It is also worth noting that due to historical reasons (CIS countries used to be underthe pressure from the USSR) and the current Ukrainian crisis, the CEE countries have noticeably increased their sense of distrust towards Russia. On this background, the relations of comprehensive strategic partnership between China and Russia can also cause“psychological pressure” on the countries of Central and Eastern Europe to a certain extent. Therefore, China, in cooperation with the CEE countries, needs to find common ground between the interests of the Chinese side, the European, the Russian side and the CEE countries. It is very important to properly resolve the hidden problems and contradictions affecting the trilateral relations.

When China and CEE countries cooperate within the BRI, special attention should be paid to the existing mechanisms of cooperation within CEE, internal conflicts of CEE countries where, for historical reasons, national contradictions are huge, as well as to differences in the levels of development of CEE countries.

It is worth noting that political relations between China and the CEE countries remain“relatively slow” compared to economic relations. According to the researcher, this is due to the “superiority mentality” of some CEE countries towards China on issues of the political system, human rights, religion and other values. (In particular, Poland and the Czech Republic in 2003–2009 repeatedly criticized China on human rights issues and Tibet. In December 2008, during the Dalai Lama’s visit to Europe, Polish President Lech Kaczynski and Czech Prime Minister Mirek Topolanek met with him. As a result, this forced the Chinese government to keep its distance from the CEE countries in order to avoid political risks. This blocked China’s plans to increase the status of relations with the region in the overall structure of foreign policy.

Given the fact that 17 + 1 is an extension of China – Europe cooperation and the functions of the 17 + 1 format are limited, the agenda cannot be promoted indefinitely in all important areas. In this regards, to maintain the vitality of cooperation, it is necessary to increase the strategic height of cooperation. The UN, EU and OSCE platforms can be used to address the security issues facing the CEE region.

In China – CEE – EU relations, the principle of openness in order to take advantage of the opportunities to involve a third party in cooperation should be also adhered. In the 17 + 1 format, the mechanism for attracting observers should be widely opened, inviting countries, including the EU, international financial organizations and international organizations. The EU is an irremediable influence factor, through the 17 + 1 it is possible to promote mutual cooperation between China and the EU, while actively attracting important EU members such as Germany and France to become a third party to China – CEE cooperation.

In-depth analysis and harmonization of the legal framework for EUChina cooperation in the region.

Since the laws of the CEE countries are fully aligned with the EU in many aspects, the Chinese side should strengthen its knowledge and understanding of the relevant EU laws and regulations, which is a prerequisite for promoting the 17 + 1 cooperation. It is necessary to actively study the successful experience of the best Chinese enterprises in carrying out commercial activities in CEE, fully understand the hidden rules for investment in CEE countries and identify trade barriers.

An important role can be played by “outward-looking” Chinese enterprises. When investing abroad, they should follow international norms and market laws, pay attention to the international social responsibility of enterprises with Chinese capital. It is necessary to allow Chinese enterprises to thoroughly understand the local requirements of socio-economic development, diligently increase employment, emphasize openness and inclusiveness, the spirit of joint win-win cooperation, and eliminate doubts of the CEE countries about the feasibility of cooperation with China.

Europe should also be better informed about the goals, structure and significance of the BRI, both for the region and for individual countries.

The analysis showed that despite a lot of explanatory work from the Chinese side and the signing of relevant political documents, the European region lacks understanding that the BRI initiative reaches Europe: it is often mistakenly believed that it is intended only for China’s neighbors. In this regards, within the 17 + 1 mechanism, along with reaching a practical level of cooperation, problems have emerged that reduce the interest and expectations of European countries in the initiative, which is reflected in negative reviews of the initiative in the media and the lack of interest of countries in the implementation of infrastructure projects. In particular, the difference in economic opportunities and needs for cooperation among the 17 countries makes itself felt.

It is noted that on the background of China’s rapid rise and continuous increase in its international influence, assessments of the “One belt, One road” initiative and other aspects of China’s foreign strategy are affected by geopolitics or the “Cold War mentality”.

In this regards, the CEE countries’cooperation with China causes them to fear that their influence will be weaken and that China will use economic tools to “split” the unity of the EU. Due to this the EU is trying to minimize the impact of the PRC on the CEE region by tightening budget requirements, and as a result, small countries are afraid to take Chinese investment for infrastructure projects.

To address this challenge, the article recommends expanding the joint discussion of cooperation plans with CEE and EU countries. If specific economic plans are difficult to find, partners should offer the cooperation in other areas, in order to ensure equal participation of 17 countries in the construction of the BRI, supporting the balanced development of the existing mechanism of cooperation and not allowing these countries to lose enthusiasm in the absence of“big projects” (for example, together with Croatia, partners can train specialists in EU legislation, with Slovenia – share experience in environmental protection). Thus, the legal system, culture, education, science and technology are areas through which the BRI initiative can increase visibility for small and medium-sized CEE countries. On the Chinese side, it is necessary to transmit correct information to them, promote cooperation of research centers, organize international conferences, explain the ideals and practice of diplomacy of a large state with Chinese characteristics, and form a favorable public opinion.

Support for humanitarian cooperation should be provided through special funds.

Thus, the effective financial support mechanisms for the European (especially CEE) markets is needed. The governments of some of these countries cannot provide sovereign guarantees because they have exceeded the EU’s debt limit. For this reason, the countries of Central and Eastern Europe that have joined the European Union can not take preferential Chinese loans. In Europe, interest rates are low, and interest rates on Chinese commercial loans are higher, hence they are unattractive to CEE governments and businesses. To solve this problem, the creation of the 17 + 1 investment Bank and support of the creation of a regional multilateral international financial company of 17 + 1 should be discussed, as well as the experience of international financial organizations in the CEE region, adhered to a market orientation, and financial guarantees for bilateral cooperation should be provided.

To use the One belt, One Road as a framework for promoting practical cooperation between China and CEE

There is a need to link Chinese proposals with development projects that a particular CEE country is concerned about. (For example, Estonia’s plans to build a shale power plant in Jordan, which were slowed down by the fall in oil prices and the subsequent financial difficulties of the Estonian energy company. In 2016 The Chinese industrial and commercial Bank allocated money for this project, which was linked to the interests of China, since the construction contractor was the Guangdong heat and power engineering company).

European experts note that a promising direction is the construction of transport infrastructure, which, according to them, is relatively backward in CEE. In this regard, the study recommends to offer the CEE new comparative advantages of Chinese HSR (high-speed railway) and rolling stock for them and port mechanisms, along with the construction of airports. This will increase the level of industrialization in CEE countries, which is currently relatively low. Offering production cooperation in advanced industries, especially HSR, it will be possible to enter the European “outpost” through the Czech Republic and other countries with Chinese technologies. In addition, it is recommended that China can participate in the development of agricultural processing in CEE countries, where agriculture occupies an important place in the national economies. In this way, Chinese enterprises can help increase employment in CEE countries, which will improve the image of China in the region.

The strengthening of financial institutions and the alignment of the line of providing loans to CEE countries.

When the small nation of Montenegro approached the EUfor help paying off a nearly $1 billion loan to China’s Export – Import Bank (EXIM), borrowed to finance the construction of a large highway project, alarm bells were raised across Europe. The request presented the EU with a problem that members of the World Bank may soon find themselves grappling with – what to do about large loans for economically unviable projects already under construction as part of China’s BRI. The European Commission ultimately decided to reject Montenegro’s request, raising fundamental questions about the EU’s willingness to reckon with BRI’s expansion.

As BRI develops, the trade imbalance between China and CEE countries may grow noticeably. If imports from these countries do not increase, their debt to China will increase, this situation will not last long and will lead to a deterioration in the terms of trade and to friction. To avoid this, targeted incentives should be granted to products from CEE countries in order to expand their exports to China.

In addressing this challenge, China needsto coordinate its economic relations with the EU, taking into account that the countries of Central and Eastern Europe are more oriented towards the EU in economy, trade and politics. Experts believe that the emerging TTIP agreement, which will bring the newest market standards and trade rules, may cause a blow to interaction with CEE countries. It will have an impact on the rules that China wants to set through the promotion of the BRI initiative, on the ability of Chinese enterprises to enter Central and Eastern European countries with investment and trade.

The possibility of financial exhaustion should also be taken into account, since the development of trade and economic ties with CEE through the BRI will require significant financial support. In addition to support from international financial organizations, more funds will be required from the Chinese side. Now the global economy is at a low point, China is in a period of economic transition, and the demand for money has become even greater. When deploying the BRI projects, it is impossible to exclude the depletion of finances within the country, hence partners should be prepared for the possible negative impact on the economic transition.

To strengthen humanitarian exchanges with ordinary people in CEE in order to deepen their understanding of China.

The Chinese Government should be encouraged by its EU partners to become a participant in the OECD Arrangement on Guidelines for Officially Supported Export Credits. In particular, it is recommended that, in monitoring progress towards a Comprehensive Agreement on Investment, the European Parliament seeks to ensure that China’s participation in the OECD framework is a key objective of the EU’s negotiating strategy.

An analysis of the public opinion of citizens of CEE countries showed that in many CEE countries, understanding of China is limited, and this is unfavorable for the development of cooperation. The study, in connection with the solution of this challenge, recommends opening more Confucius Institutes in CEE countries and supporting cultural dialogues within the BRI project.

Particular attention should be paid to the “greening” of China itself and BRI in particular. Thus, despite the narrative promoted by the Chinese government of a “Green Silk Road”, the environmental impact of many BRI-related projects continues to cause controversy. This includes effects on host country ecosystems and their biodiversity.

An example is the construction of a dam in the Batang Toru rainforest in Indonesia. Its construction has had devastating effects on biodiversity, leading it to be legally challenged by the Indonesian Forum for the Environment (WALHI). The World Bank, meanwhile, has refused to fund the project over environmental concerns. Yet, in March 2019, the court in North Sumatra decided the project would proceed.

Another example of environmental concerns related to BRI infrastructure project is Montenegro’s Bar-Boljare Motorway. The construction began in 2015 by the China Road and Bridge Corporation (CRBC), a subsidiary of the majority state owned China Communications Construction Company (CCCC), and is funded by China’s EXIM Bank.

Environmental concerns are specifically related to the Smokovac–Mateševo section of this project, which cuts across the Tara River, through an area protected by a UNESCO Biosphere. The most visible consequence of the project is the need for rock excavation for a motorway tunnel, but other implications, such as water pollution and illegal landfills also emerged from an investigation by the Montenegrin NGO MANS.The European Parliament and European Commission have called on authorities to share more details about the project’s environmental impact with the public.

It is also advisable that host governments start implementing more transparent bidding processes for infrastructure projects, in order to reduce environmental damage and increase long-term net benefits. On the other hand, in order to assess the environmental sustainability of projects with more accuracy and transparency, banks involved in financing the BRI should rely on third party reports, rather than those produced internally.

In order to improve transparency, it would be useful for the Chinese government to create a public portfolio of BRI-related projects, which would make it easier to verify to what extent they are environmentally sustainable. China does not directly operate as a unified actor in BRI-related infrastructural projects, but different actors such as State-Owned Enterprises (SOEs) and banks contribute to the realisation and funding and these should be made to comply with environmental standards.

These implications are especially relevant on a global level as well. The COVID-19 pandemic should arouse awareness about the scale of the consequences that phenomena such as deforestation and habitat fragmentation have on our planet and lives. As underlined by a recent Stanford University study, deforestation and landscape fragmentation have been recognised as facilitating direct transmission of zoonotic infections, including the risk of pandemics.

To sum up, it is worth noting that althoughit is extremely difficult to implement these recommendations in practice, however, China started to implement them even before the official start of the initiative. Thus, their gradual implementation can in the near future eliminate the negative consequences of the problematic areas in the PRC – CEE – EU relations and reduce the risk of its inflaming.

Dr. Maria Smotrytska is a senior research sinologist and International Politics specialist of the Ukrainian Association of Sinologists. She is currently the Research Fellow at International Institute for Middle East and Balkan Studies (IFIMES), Department for Strategic Studies on Asia. PhD in International politics, Central China Normal University (Wuhan, Hubei province, PR China) Contact information : officer[at]ifimes.org SmotrM_S[at]mail.ru

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Economy Contradicts Democracy: Russian Markets Boom Amid Political Sabotage

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The political game plan laid by the Russian premier Vladimir Putin has proven effective for the past two decades. Apart from the systemic opposition, the core critics of the Kremlin are absent from the ballot. And while a competitive pretense is skilfully maintained, frontrunners like Alexei Navalny have either been incarcerated, exiled, or pushed against the metaphorical wall. All in all, United Russia is ahead in the parliamentary polls and almost certain to gain a veto-proof majority in State Duma – the Russian parliament. Surprisingly, however, the Russian economy seems unperturbed by the active political manipulation of the Kremlin. On the contrary, the Russian markets have already established their dominance in the developing world as Putin is all set to hold his reign indefinitely.

The Russian economy is forecasted to grow by 3.9% in 2021. The pandemic seems like a pained tale of history as the markets have strongly rebounded from the slump of 2020. The rising commodity prices – despite worrisome – have edged the productivity of the Russian raw material giants. The gains in ruble have gradually inched higher since January, while the current account surplus has grown by 3.9%. Clearly, the manufacturing mechanism of Moscow has turned more robust. Primarily because the industrial sector has felt little to no jitters of both domestic and international defiance. The aftermath of the arrest of Alexei Navalny wrapped up dramatically while the international community couldn’t muster any resistance beyond a handful of sanctions. The Putin regime managed to harness criticism and allegations while deftly sketching a blueprint to extend its dominance.

The ideal ‘No Uncertainty’ situation has worked wonders for the Russian Bourse and the bond market. The benchmark MOEX index (Moscow Exchange) has rallied by 23% in 2021 – the strongest performance in the emerging markets. Moreover, the fixed income premiums have dropped to record lows; Russian treasury bonds offering the best price-to-earning ratio in the emerging markets. The main reason behind such a bustling market response could be narrowed down to one factor: growing investor confidence.

According to Bloomberg’s data, the Russian Foreign Exchange reserves are at their record high of $621 billion. And while the government bonds’ returns hover at a mere 1.48%, the foreign ownership of treasury bonds has inflated above 20% for the second time this year. The investors are confident that a significant political shuffle is not on cards as Putin maintains a tight hold over Kremlin. Furthermore, investors do not perceive the United States as an active deterrent to Russia – at least in the near term. The notion was further exacerbated when the Biden administration unilaterally dropped sanctions from the Nord Stream 2 pipeline project. And while Europe and the US remain sympathetic with the Kremlin critics, large economies like Germany have clarified their economic position by striking lucrative deals amid political pressure. It is apparent that while Europe is conflicted after Brexit, even the US faces much more pressing issues in the guise of China and Afghanistan. Thus, no active international defiance has all but bolstered the Kremlin in its drive to gain foreign investments.

Another factor at work is the overly hawkish Russian Central Bank (RCB). To tame inflation – currency raging at an annual rate of 6.7% – the RCB hiked its policy rate to 6.75% from the all-time low of 4.25%. The RCB has raised its policy rate by a cumulative 250 basis points in four consecutive hikes since January which has all but attracted the investors to jump on the bandwagon. However, inflation is proving to be sturdy in the face of intermittent rate hikes. And while Russian productivity is enjoying a smooth run, failure of monetary policy tools could just as easily backfire.

While political dissent or international sanctions remain futile, inflation is the prime enemy which could detract the Russian economy. For years Russia has faced a sharp decline in living standards, and despite commendable fiscal management of the Kremlin, such a steep rise in prices is an omen of a financial crisis. Moreover, the unemployment rates have dropped to record low levels. However, the labor shortage is emerging as another facet that could plausibly ignite the wage-price spiral. Further exacerbating the threat of inflation are the $9.6 billion pre-election giveaways orchestrated by President Putin to garner more support for his United Russia party. Such a tremendous demand pressure could presumably neutralize the aggressive tightening of the monetary policy by the RCB. Thus, while President Putin sure is on a definitive path of immortality on the throne of the Kremlin, surging inflation could mark a return of uncertainty, chip away investors’ confidence: eventually putting a brake on the economic streak.

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Synchronicity in Economic Policy amid the Pandemic

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business-economy

Synchronicity is an ever present reality for those who have eyes to see.Carl Jung

The Covid pandemic has elicited a number of deficiencies in the current global governance framework, most notably its weaknesses in mustering a coordinated response to the global economic downturn. A global economy is not fully “global” if it is devoid of the capability to conduct coordinated and effective responses to a global economic crisis. What may be needed is a more flexible governance structure in the world economy that is capable of exhibiting greater synchronicity in economic policies across countries and regions. Such a governance structure should accord greater weight to regional integration arrangements and their development institutions at the level of key G20 decisions concerning international economic policy coordination.

The need for greater synchronicity in the global economy arises across several trajectories:

· Greater synchronicity in the anti-crisis response across countries and regions – according to the IMF it is a coordinated response that renders economic stimulus more efficacious in countering the global downturn

· Synchronicity in the withdrawal of stimulus across the largest economies – absent such coordination the timing of policy normalization could be postponed with negative implications for macroeconomic stability

· Greater synchronicity in opening borders, lifting lockdowns and other policy measures related to responding to the pandemic: such synchronicity provides more scope for cross-country and cross-regional value-added chains to boost production

· Greater synchronicity in ensuring a recovery in migration and the movement of people across borders.

Of course such greater synchronicity in economic policy should not undermine the autonomy of national economic policy – it is rather about the capability of national and regional economies to exhibit greater coordination during downturns rather than a progression towards a uniform pattern of economic policy across countries. Synchronicity is not only about policy coordination per se, but also about creating the infrastructure that facilitates such joint actions. This includes the conclusion of digital accords/agreements that raise significantly the potential for economic policy coordination. Another area is the development of physical infrastructure, most notably in the transportation sphere. Such measures serve to improve regional and inter-regional connectivity and provide a firmer foundation for regional economic integration.

The paradox in which the world economy finds itself is that even as the current crisis is leading to fragmentation and isolationism there is a greater need for more policy coordination and synchronicity to overcome the economic downturn. This need for synchronicity may well increase in the future given the widening array of global risks such as risks to cyber-security as well as energy security and climate change. There is also the risk of the depletion of reserves to counter the Covid crisis that has been accompanied by a rise in debt levels across developed and developing economies. Also, the speed of the propagation of crisis impulses (that effectively increases with technological advances and globalization) is not matched by the capability of economic policy coordination and efficiency of anti-crisis policies.

There may be several modes of advancing greater synchronicity across borders in international relations. One possible option is a major superpower using its clout in a largely unipolar setting to facilitate greater policy coordination. Another possibility is for such coordination to be supported by global international institutions such as the UN, the WTO, Bretton Woods institutions, etc. Other options include coordination across the multiplicity of all countries of the global economy as well as across regional integration arrangements and institutions.

Attaining greater synchronicity across countries will necessitate changes in the global governance framework, which currently is characterized by weak multilateral institutions at the top level and a fragmented framework of governance at the level of countries. What may be needed is a greater scope accorded to regional integration arrangements that may facilitate greater coordination of synchronicity at the regional level as well as across regions. The advantage of providing greater weight to the regional institutions in dealing with global economic downturns emanates from their greater efficiency in coordinating an anti-crisis response at the regional level via investment/infrastructure projects as well as macroeconomic policy coordination. Regional development institutions also have a comparative advantage in leveraging regional interdependencies to promote economic recovery.

In conclusion, the global economy has arguably become more fragmented as a result of the Covid pandemic. The multiplicity of country models of dealing with the pandemic, the “vaccine competition”, the breaking up of global value chains and their nationalization and regionalization all point in the direction of greater localization and self-sufficiency. At the same time there is a need from greater synchronicity across countries particularly in the context of the current pandemic crisis. Regional integration arrangements and institutions could serve to facilitate such coordination in economic policy within and across the major regions of the world economy.

From our partner RIAC

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A New Strategy for Ukraine

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Authors: Anna Bjerde and Novoye Vremia

Four years ago, the World Bank prepared a multi-year strategy to support Ukraine’s development goals. This was a period of recovery from the economic crisis of 2014-2015, when GDP declined by a cumulative 16 percentage points, the banking sector collapsed, and poverty and other measures of insecurity spiked. Indeed, we noted at the time that Ukraine was at a turning point.

Four years later, despite daunting internal and external challenges, including an ongoing pandemic, Ukraine is a stronger country. It has proved more resilient to unpredictable challenges and is better positioned to achieve its long-term development vision. This increased capacity is first and foremost the result of the determination of the Ukrainian people.

The World Bank is proud to have joined the international community in supporting Ukraine during this period. I am here in Kyiv this week to launch a new program of assistance. In doing this, we look back to what worked and how to apply those lessons going forward. In Ukraine—as in many countries—the chief lesson is that development assistance is most effective when it supports policies and projects which the government and citizens really want.

This doesn’t mean only easy or even non-controversial measures; rather, it means we engage closely with government authorities, business, local leaders, and civil society to understand where policy reforms may be most effective in removing obstacles to growth and human development and where specific projects can be most successful in delivering social services, particularly to the poorest.

Looking back over the past four years in Ukraine, a few examples stand out. First, agricultural land reform. For the past two decades, Ukraine was one of the few countries in the world where farmers were not free to sell their land.

The prohibition on allowing farmers to leverage their most valuable asset contributed to underinvestment in one of Ukraine’s most important sources of growth, hurt individual landowners, led to high levels of rural unemployment and poverty, and undermined the country’s long-term competitiveness.

The determination by the President and the actions by the government to open the market on July 1 required courage. This was not an easy decision. Powerful and well-connected interests benefited from the status quo; but it was the right one for Ukrainian citizens.

A second area where we have been closely involved is governance, both with respect to public institutions and the rule of law, as well as the corporate governance of state-owned banks and enterprises. Poll after poll in Ukraine going back more than a decade revealed that strengthening public institutions and creating a level playing field for business was a top priority.

World Bank technical assistance and policy financing have supported measures to restore liability for illicit enrichment of public officials, to strengthen existing anticorruption agencies such as NABU and NACP, and to create new institutions, including the independent High-Anticorruption Court.

We are also working with government to ensure the integrity of state-owned enterprises. Our support to the government’s unbundling of Naftogaz is a good example; assistance in establishing supervisory boards in state-owned banks is another. We hope our early dialogue on modernizing the operations of Ukrzaliznytsia will be equally beneficial.

As we begin preparation of a new strategy, the issues which have guided our ongoing work—strengthening markets, stabilizing Ukraine’s fiscal and financial accounts; and providing inclusive social services more efficiently—remain as pressing today as they were in 2017. Indeed, the progress which has been achieved needs to continue to be supported as they frequently come under assault from powerful interests.

At the same time, recent years have highlighted emerging challenges where we hope to deepen and expand our engagement. First, COVID-19 has underscored the importance of our long partnership in health reform and strengthening social protection programs.

The changes to the provision of health care in Ukraine over recent years has helped mitigate the effects of COVID-19 and will continue to make Ukrainians healthier. Government efforts to better target social spending to the poor has also made a difference. We look forward to continuing our support in both areas, including over the near term through further support to purchase COVID-19 vaccines.

Looking ahead, the challenge confronting us all is climate change. Here again, our dialogue with the government has positioned us to help, including to achieve Ukraine’s ambitious commitment to reduce carbon emissions. During President Zelenskyy’s visit to Washington in early September we discussed operations to strengthen the electricity sector; a program to transition from coal power to renewables; municipal energy efficiency investments; and how to tap into Ukraine’s unique capacity to produce and store hydrogen energy. This is a bold agenda, but one that can be realized.

I have been gratified by my visit to Kyiv to see first-hand what has been achieved in recent years. I look forward to our partnership with Ukraine to help realize this courageous vision of the future.

Originally published in Ukrainian language in Novoye Vremia, via World Bank

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