3. EU Assistance to Ukraine
Until 2014, the EU, like many other donors, assumed that Ukraine had weak but nevertheless functioning state institutions that merely needed some assistance to perform more effectively. This assumption was shattered in 2014. In recognition of the formidable sacrifices made by Ukrainian society, and of the challenges facing the state, the EU has since provided support to Ukraine well beyond what it usually offers to ‘third countries’; this support is at a level second only to that for pre-accession countries. The EU institutions and member states collectively are the biggest donor in Ukraine,18 while the EU’s delegation there is the second-largest that it maintains anywhere in the world after that in Turkey.
The EU has increased its assistance to Ukraine considerably in comparison to pre-2014 levels. It has also made important innovations in this field.
Scale of assistance
Between 1991 and 2015, the EU offered Ukraine assistance worth €12.1 billion: €8.3 billion in loans and €3.8 billion in grants (the former have to be repaid).19 This has been distributed via a large number of instruments, initiatives and facilities.20 The largest amount (€2.3 billion) was made available through the European Neighbourhood Policy Instrument (ENPI), which became the European Neighbourhood Instrument (ENI) in 2014. This was followed by €862 million dedicated to the Nuclear Safety Instrument, including investment in the Chernobyl Shelter Fund. The EU also provided macro-financial loans (worth €4 billion overall), European Investment Bank loans (€3.9 billion) and Euratom loans (€383 million) between 1991 and 2015.
On average, Ukraine received €50 million to €70 million per year under the Technical Assistance to the Commonwealth of Independent States programme up to 2004. Under the ENPI, this increased to between €100 million and €150 million per year in 2005–13, as a result of a reformed European Neighbourhood Policy and the Orange Revolution in 2004. Following the Revolution of Dignity in 2014 and the signing of the AA, EU assistance through the ENI has risen to more than €200 million annually.
The level of EU grant assistance to Ukraine is difficult to gauge, as there is no single publicly accessible source of data for this. In addition, some EU information is not publicly available (for data from the OECD, see Annex 2). However, an analysis of available sources suggests that grants have increased by only €60 million under the 2014–20 EU Multiannual Financial Framework, up from €1.5 billion for the 2007–13 framework.21 Loans, however, have increased significantly since 2014. They stood at €7.1 billion in 2014–16, up from €2.9 billion in 2007–13 and €858 million in 1991–2006.22 More is promised by 2020.
How does Ukraine compare with Central and Eastern European states?
Comparisons are frequently made between the EU’s financial support to Ukraine and that provided to Central and Eastern European states before they joined the EU. Usually these comparisons emphasize how meagre the assistance to Ukraine is, especially given its needs and obligations under the AA-DCFTA.23 However, a more correct comparison is with the pre-accession assistance in the form of grant allocations that the Central and Eastern European states received. Such a comparison provides a more nuanced picture (see Table 1 and a more detailed breakdown in Annex 1).
Table 1: EU pre-accession assistance to Central and Eastern Europe, 1990–2006,* grant allocations (commitments)
Country |
Total, € million |
Per capita € |
---|---|---|
Bulgaria |
2,943 |
360 |
Czech Republic |
1,220 |
119 |
Estonia |
511 |
357 |
Hungary |
1,987 |
195 |
Latvia |
712 |
291 |
Lithuania |
1,126 |
321 |
Poland |
6,122 |
159 |
Romania |
5,264 |
233 |
Slovakia |
913 |
170 |
Slovenia |
443 |
221 |
Total Central and Eastern Europe |
21,239 |
203 |
Ukraine (1991–2006) |
1,751 |
35 |
Ukraine (1991–2016) |
3,824 |
79 |
Ukraine total (1991–2020)** |
4,830 |
100 |
* Including Transitional Facility, which was implemented in 2004–06. ** For 2017–20, only the European Neighbourhood Instrument bilateral programmes are included, i.e. not all grants, so the overall total and per capita allocation are likely to be bigger.
Sources: European Commission, Phare Programme Annual Reports 1996, 1997, 1998, 1999; European Commission, General Reports on Pre-accession Assistance (Phare-ISPA-SAPARD) 2000, 2001, 2002, 2003; Business and Strategies Europe (2015), ‘Evaluation of PHARE [EU pre-accession] financial assistance to Bulgaria, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Romania, Slovakia, Slovenia’, (accessed 12 Jun. 2018); European Commission (2016), ‘Support Group of Ukraine. Activity Report. The First 18 Months’; US Census Bureau, International Database, (accessed 18 Apr. 2018).
Note: Data from 2000 onward exclude allocations received through horizontal, regional and part of the nuclear safety programmes. Amount of assistance per capita data are based on average of national populations in 1990, 1995, 2000 and 2005 (and 2010 and 2015 for Ukraine).
In this comparison, what Ukraine has received is hardly meagre. Moreover, by 2020 EU grants to Ukraine will have reached about €4.8 billion. In absolute monetary terms this will comfortably exceed, or in a couple of cases approach, the levels of assistance provided earlier to the countries of Central and Eastern Europe prior to their accession (although on a per capita basis the assistance to Ukraine is much lower than that provided to the accession countries).24 Yet despite the comparatively generous financing, it is unlikely that by 2020 Ukraine will have achieved even half of the reforms implemented by these countries.
There is no simple answer as to why this is the case. Clearly, domestic factors – including Soviet legacies, institutional erosion in the 1990s and a chronic lack of political will among the elites – have been pivotal. But until 2013, international assistance in general, and EU assistance in particular, was insufficiently geared towards addressing the fundamental problems facing Ukrainian state institutions.
Nor is this pervasive institutional weakness a recent discovery. Already by the late 1990s all major donors to Ukraine had begun to appreciate that institutional reform was far more complex than originally thought. Hence institutional development became the new priority from the late 1990s and early 2000s.25 But it is evident that 20 years of assistance to Ukraine achieved only a negligible impact on the functioning of state institutions.
The blame for such problems is usually placed on the ‘beneficiary’ country. Yet among countries receiving international assistance, a lack of political will for reform and weak institutions are hardly a phenomenon unique to Ukraine. Indeed, such shortcomings provide the very rationale for assistance in the first place. To be effective, assistance has to factor in domestic barriers to reforms and address the underlying weaknesses of institutions. If domestic elites do not reform on their own initiative, international donors can incentivize them and/or promote reformist actors who will, and develop suitable types of interventions to maximize the chances of success.
To its credit, since 2014 the EU has recognized these challenges and reformed many aspects of its assistance accordingly. It has focused strategically on the reform-oriented dimension of its policies. Yet some aspects of its old approach persist.
Innovations
Prior to the AA-DCFTA, the main forms of EU assistance to Ukraine consisted of budgetary support and technical assistance (including ‘twinning’),26 administered by the EU delegation in Kyiv and the European Commission in Brussels.27 Since 2014, however, the EU’s assistance has changed significantly.28 This section looks at the main innovations and changes. A further, important part of the assistance to Ukraine is the advisory mission by EU member states addressing civilian security issues (see Box 1) – however, that is not the main focus of this paper.
The Support Group for Ukraine
One significant innovation occurred with the establishment by the president of the European Commission of the Support Group for Ukraine (SGUA) in April 2014. This group consists of about 35 officials from the Commission and member states, and is headed by Peter Wagner, a Commission director. The SGUA aims to act as a ‘catalyst, facilitator and supporter of reforms’.29 Among EU institutions, it is the main coordinating body for assistance to Ukraine across various directorates-general in the European Commission and European External Action Service. At the same time, SGUA experts have gained detailed knowledge of specific sectors in Ukraine. Some of the officials are based in the country as part of the operational section of the EU delegation.
The SGUA has also coordinated the efforts of other European and international donors. As a result, the SGUA is able to liaise with various parts of the Commission (such as the directorates-general for trade and energy) to identify the country’s needs and tailor assistance accordingly. Unlike some other donors, the EU in general (and the SGUA in particular) has promoted a sector-focused approach in Ukraine since 2014. It also matters that SGUA members bring specific sectoral experience from their work in their own countries (EU member states).
The sector-focused approach allows for a comprehensive strategy – from capacity-building to policy implementation – that is more effective than isolated and sporadic interventions aimed at single state institutions or policy measures. Thus, it marks an important shift from the pre-2014 period. For example, in 2002–09 EU assistance was delivered through a large number (692) of small projects, while a sectoral approach was applied only in one policy area, the rural sector. The SGUA focuses on state-building issues (e.g. justice and anti-corruption), as well as on the strategic coordination and programming of assistance. These are precisely the areas that had been underdeveloped until 2014. The Commission and the SGUA have also taken on a broader mandate with regard to fundamental reforms, such as public administration.
The shift to a sectoral approach is pivotal, as one expert with direct experience of working on EU projects explains:
Appropriate use of sectoral reform strategies means that tasks are prioritised and done in the right order to enable individual reforms to build on each other in a systemic way. The lack of sectoral strategies leads to chaotic interventions with inappropriate sequencing, little linkage and therefore little real impact. Premature interventions mean resources could have been used for higher priorities and late interventions mean time pressure and delay in dependent interventions or project outputs. Lack of coordination of strategies leads to duplications, gaps and political and technical tensions and inefficiencies.30
The sectoral approach also requires strong coordination with other international donors that seek to support the same sectors. In Ukraine, such coordination is a major undertaking. As of mid-2017, there were about 260 projects ongoing in the country that were funded by the EU and its member states. The clustering of assistance around specific sectors complicates coordination further. Some sectors are inundated with international support, which can lead to overlap and duplication of efforts, whereas others, such as healthcare, receive relatively little assistance. One example of successful donor coordination can be seen in the reforms to decentralize government since 2014.
Without proper coordination, it can be difficult for the EU to promote coherent sector-wide reforms when other donors favour a different reform strategy. The presence of other donors may also make it more difficult for the EU to adopt a more assertive position vis-à-vis the beneficiary institutions, as there is an element of competition. This can lead to inefficiency, duplication or rivalry in providing assistance, which the beneficiary can exploit. The SGUA and EU delegation are able to coordinate assistance in areas such as public administration reform (PAR) with other donors, including EU member states, which provide considerable assistance to Ukraine (see Annex 2). This also allows different assistance instruments to be mixed and blended, often in coordination with financial institutions such as the European Bank for Reconstruction and Development (EBRD) and the European Investment Bank.
At the same time, the EU can only provide support once the legal and political frameworks for the reforms of public institutions are decided by the Ukrainian government.31 This is not a simple task. It requires pressuring the Ukrainian government to prepare sectoral strategies, which then can be supported by the EU and other international donors.
Overall, the SGUA, alongside a large EU delegation in Kyiv, has proven its worth. It has benefited from broad support within the European External Action Service; and high-level backing from Johannes Hahn, the commissioner for European neighbourhood policy and enlargement negotiations, and Katarína Mathernová, the deputy director-general of the Directorate-General for European Neighbourhood Policy and Enlargement Negotiations (DG NEAR), both of whom adapted their institutions’ assistance to Ukraine in response to challenges on the ground.
At the macro level, the SGUA has been able to tailor its supply of assistance and expertise to Ukrainian needs. As a result, assistance has become more systemic, focusing on strengthening state capacity rather than merely facilitating legal approximation. The EU has been able to deploy a mix of instruments in a comprehensive way, with clear conditions and accompanying policy dialogue, as well as coordinating strategically with member states and other donors. This hybrid approach is not in itself a particular innovation – it has been done elsewhere by the EU – but its application to the challenges of reform in Ukraine represents an important innovation. With the SGUA and its considerable staff capacity, together with the European delegation, the EU is able to assist with implementation of reform much more robustly than before.
The SGUA has mediated between Kyiv and Brussels by helping the Ukrainian authorities to access the relevant directorates of the European Commission. However, the Commission’s staff can only devote limited attention to Ukraine, given their wide responsibilities. This has hampered the process. While the EU has concluded ambitious and complex agreements with the countries of the EaP, including Ukraine, capacity within individual directorates has not increased accordingly. Moreover, such agreements have added to the already heavy workload of staff. DG NEAR and the directorates dealing with trade, health and food safety have chiefly been able to focus on Ukraine to complement the work of other EU bodies. This reflects the rather diffuse ‘ownership’ of the AA implementation process across EU institutions.
Local knowledge
In the complex institutional context of the EU, the SGUA plays a central role in building ‘local knowledge’ – that is, a deep understanding of how Ukraine works in terms of its institutional framework, sector-wide problems, key stakeholders and assistance provided by other donors. This is indispensable for designing and delivering effective assistance.
Studies of the factors determining success and failure in international development all point to the primacy of ‘domestic politics’.32 From the late 1990s, amid growing disenchantment with ‘technically sound but ultimately unsuccessful interventions’, several donors, including the US Agency for International Development, the World Bank and the UK Department for International Development, moved to incorporate better understanding of beneficiary countries’ local political contexts into their assistance planning.33 As a result, the World Bank has pioneered a political economy analysis,34 while various international agencies also conduct their own political analysis as a pre-condition for intervention. The EU also experimented with political economy analysis, but discontinued the initiative as the analyses often became too theoretical. Ultimately, though, what matters is not the particular mode of delivery of such expertise (e.g. written analysis) but that it is continuously updated and appropriately applied, so as to inform assistance and support reform measures.
Local knowledge is important both at the macro and micro levels – not only for the design of sectoral support but also for the implementation of assistance through individual projects. Success hinges on effective cooperation with beneficiary institutions, which in turn necessitates a solid grasp of the domestic context on the part of the assisting institutions. In other words, effective assistance is not so much about exporting ‘best practice’ as about devising sound and feasible solutions that are appropriate to the problems faced by specific institutions in the beneficiary country.
This type of knowledge is particularly useful in the case of countries such as Ukraine, where informal practices – pervasive even in formal institutions – often result in extensive rent extraction. Every sector has its vested interests and reform blockers, which so-called ‘reform coalitions’ need to overcome.35 Fortunately for donors, Ukraine is also rather transparent when it comes to information on informal networks, rent-seekers, oligarchs and so forth, particularly as civil society knows ‘who is who’.
However, it is not always evident that the EU and other donors take advantage of this unusual availability of information when designing and implementing assistance projects at the micro level. Within the EU, knowledge of local context is more difficult to achieve because managers overseeing assistance projects are required to focus on implementation, despite not always having relevant sector and country experience. As a result, project officers and experts are not geared towards developing and harnessing this deep knowledge when implementing technical assistance and twinning projects.
The EU delegation and the SGUA, in principle, are well positioned to be depositories of such deep knowledge. Indeed, there is formidable expertise within both. It is certainly useful that some SGUA staff are based in Kyiv and can work closely with the EU delegation staff. However, the high turnover of SGUA staff – many of whom are seconded by member states – replicates a problem found elsewhere in EU institutions. Local knowledge is required to inform the active oversight of individual technical assistance projects, both by SGUA staff and operational staff from the EU delegation. Presently many of these projects are overseen only by the EU delegation, without sufficient attention from the SGUA.36
Ukraine lacks a functioning and effective mechanism for coordinating European integration, making the need for understanding the local context especially important. It started to create such a mechanism in the late 2000s, but many leading civil servants (especially those who negotiated the AA-DCFTA) left their positions during the Yanukovych presidency. In 2014, the Governmental Office for European and Euro-Atlantic Integration (GOEEI) was established in the Secretariat of the Cabinet of Ministers in a coordination role. However, building such an institution takes time, as does developing sufficient political and administrative capacity for it to coordinate AA-DCFTA implementation effectively.
By now, the GOEEI could have developed into a powerful policymaking hub capable of leading – rather than merely managing – European integration. However, as often happens in Ukraine, the coordination mechanism was reset following the change of government in 2016. A post of deputy prime minister for European and Euro-Atlantic integration was created, but its formation coincided with a loss of staff in the GOEEI. This disruptive reset took place at the very time when the AA came into force. It took 18 months for the reformed office to regain full control of the integration process.37 No doubt, it will take several more years before the office is in a position to lead implementation of the AA-DCFTA and associated reform process effectively – and even this is contingent on its work not being disrupted yet again by political developments. The EU has been unable to put pressure on the Ukrainian government to ensure the continuity and stability of the integration coordination mechanism. In recognition of this weakness, the EU ambassador to Ukraine, Hugues Mingarelli, has been highly active in engaging the Ukrainian government to galvanize it into action and help clear various political blockages.
On the Ukrainian side, coordination and planning remain weak points for implementation of the AA-DCFTA, particularly where sectoral reforms are concerned. There are numerous action plans, strategies, ‘road maps’ and ‘score cards’ in various policy fields. However, these deal with the total scope of reform, focusing on integration-oriented rather than targeted, resource-based implementation plans. As a result, Ukraine has many plans, which for the most part are very general and lack focus. For example, there is the EU–Ukraine Association Agenda (endorsed by the EU–Ukraine Association Council in 2015), the Medium-Term Plan of Priority Actions for the Government until 2020 (adopted by the cabinet in 2016), and the Action Plan for Implementation of the Association Agreement (adopted by the cabinet in 2017). However, as a rule, these do not deal with sectoral priorities for implementing the AA-DCFTA and/or address them in insufficient detail. Crucially, they lack any indication of budgetary implications.
This lack of policymaking capacity makes it essential for EU assistance to compensate for these deficiencies.
Hiring staff to reform institutions
Given the weakness of the state, another important innovation has been supporting the creation of ‘reform posts’ in the government. This is an initiative aimed at civil servants. It is entirely separate from decisions on the structure of the government, such as political appointments of deputy ministers in charge of European integration in individual ministries. The EU’s support for a PAR strategy creates ‘fiscal space’ for the Ukrainian government to make strategic appointments of civil servants capable of reforming institutions. The EU does not usually support staffing costs for public administration institutions in third countries, but the PAR initiative stemmed from a realization that reformers within Ukraine’s state institutions were too few. With some exceptions at ministerial level, the reform process in 2014–17 was largely driven by ad hoc teams of ‘quiet’ reformers, mainly located in middle-level positions within the government. By late 2017, however, a large number of these informal teams had collapsed, as many reform-minded officials simply could not survive on state salaries or were pushed out by those opposed to reform.38
An early initiative included the establishment of reform support teams (RSTs) – largely financed through donors (mainly the EU), and administered by the EBRD. In addition, the EU supports the Strategic Advisory Group for Support of Ukrainian Reforms, which is made up of high-level international advisers to the government.
After the government approved the PAR strategy in 2016, and after extensive deliberation, the European Commission announced a €90 million programme to assist its implementation, with the first €10 million disbursed soon after.39 This type of budget support for PAR allowed the government to pay higher salaries for up to 2,000 ‘reform posts’, the intention being to continue supporting these positions until such a time as the anticipated savings from reforms themselves enabled salaries to be fully financed from the domestic budget.40
The scheme was piloted in the autumn of 2017. It involved the Secretariat of the Cabinet, 10 line ministries and two state agencies.41 Following a highly competitive selection procedure, with input from EU experts, more than 100 civil servants were recruited into reform posts by early 2018. The officials are mostly employed in the newly created Strategic Planning and Policy Coordination Departments42 and Policy Directorates in the line ministries. According to participants on both sides of the selection process, the quality of the intake so far has been relatively high, with new recruits as well as already employed civil servants moving to higher-paid posts with wider responsibilities.43 There are justifiable concerns that the scheme could in effect result in a ‘two-tier’ civil service – in which pay differences undermine morale – but no better idea has yet emerged for bringing dedicated reformers into the government.
Offering proper remuneration to civil servants who are committed to, and capable of, reforming state institutions is crucial. Political buy-in at the top level is needed, but even with the most committed politicians (who are in short supply in Ukraine), the quality of reforms will ultimately depend on the capacity of the civil service. Given its potential long-term impact, this innovation should be seen as one of the most important to have been implemented in Ukraine.
Scaling down budgetary support
Devising effective modes of assistance has been a major challenge for donors around the world. The EU’s experience in Ukraine is not unique in that regard. In the 1990s and 2000s, the dominant form of assistance was technical. By the late 2000s, the limited effectiveness of this approach was recognized. Partly as a consequence, in 2008 budgetary support was introduced that aimed to finance ‘policies and not projects’. Ukraine received €344 million across six areas (energy strategy, energy efficiency, trade, the environment, transport and border protection) between 2008 and 2014. Budget support was nominally tied to progress in reforms, but this conditionality was not successful.44 Indeed, the EU was soon criticized for its lax approach. In the words of two Ukrainian analysts in 2010, ‘the EU continues to ignore the unreformed state of Ukraine’s government institutions, giving them hard cash for the budget despite the fact that Ukraine does not meet EU criteria for allocating this kind of assistance’.45 Indeed, it could be argued that budget support was introduced too early – before state institutions were sufficiently reformed to manage the financial inflows effectively.
With its limited effectiveness recognized, budget support was scaled down by 2014. What remained was used only for removing technical barriers to trade between Ukraine and the EU, and for supporting transport, environmental and border-management policies. By 2017, these programmes had expired. EU budgetary support continues only for the Energy Strategy of Ukraine (an energy efficiency project), and is scheduled to run until May 2020. Most importantly, since 2014 budget support has been accompanied by stricter and more detailed conditionality. However, such support still can and should be used strategically. The PAR strategy is an example of the appropriate multifaceted mix of assistance for reforms and policy implementation in Ukraine.
Delegated agreements
Since 2014, the EU has introduced a new form of assistance in several sectors in Ukraine: so-called ‘delegated agreements’. These are resource programmes implemented by development agencies of EU member states.46 What makes these agreements innovative is the more proactive way in which they enable the identification and deployment of member states’ relevant expertise, and how they support more flexible, needs-based implementation. The agreements demonstrate how the EU and its member states’ assistance portfolio can be adapted to new methods of implementation.
The first €90 million package was provided at the end of 2015, targeting administrative decentralization (the reforms also included the improvement of local administrative services). The programme was principally implemented by the development agencies of Germany and Sweden, with Poland’s development agency playing a minor role. In 2017, a €16 million anti-corruption programme started, implemented by Denmark’s development agency.47 Several other programmes have been launched, including Support Rule of Law Reforms in Ukraine (PRAVO) for judiciary and law enforcement.
These delegated agreements speed up award allocation procedures, allow for longer term projects, introduce needs-driven flexibility in implementation, and combine support instruments (for example, investment, technical assistance and twinning). Moreover, they benefit from the experience of member states with a record of addressing policy and reform issues.
The broader sectoral experience of staff from developmental agencies of EU member states and the flexibility of the delegated agreements are improving the effectiveness of assistance to Ukraine. However, managing such large programmes is challenging. The complexity of the different programmes creates risks of duplication or fragmentation unless there is tight central control and oversight.48 Ongoing fine-tuning of these programmes is required in order for them to succeed.
Box 1: The European Union Advisory Mission Ukraine
The European Union Advisory Mission (EUAM) Ukraine is a unique part of the EU’s assistance to Ukraine. The EUAM offers support on civilian security issues, which is provided by the EU member states party to the Common Security and Defence Policy, while other EU assistance is channelled through or implemented by the European Commission. The EUAM began operations from its headquarters in Kyiv in December 2014 and is now also present in Lviv, Kharkiv and Odessa. It aims to create a civilian security sector that is efficient, accountable and trusted by the public.49 At the time of writing, the EUAM employs 256 advisory staff from 20 EU member states (as well as from Norway, Canada and Switzerland) and 15 local administrative support staff.50
The EUAM represents a compromise solution between the Ukrainian request for the EU to provide an armed police mission in the conflict zone in the east of the country and the EU’s initial soft-power (advisory) response. Although EU support for security sector reform in third countries is well established, including through advisory missions,51 Ukraine is unique in that the mission has been deployed during the war with Russia rather than as a post-conflict instrument.
The presence of the EUAM demonstrates the EU’s strategic interest in countering Russia’s aggression and its influence in Ukraine’s civilian security sector. However, the EUAM is primarily designed as a ‘normative’ project to empower local actors in an effort to free the civilian security sector of corruption and Soviet-era practices. It relies on relatively weak tools (advice and, more recently, training), which cannot be effective without a locally shared vision of what the Ukrainian security sector should be like.52
The deployment of such a mission without a proper analysis of the situation in Ukraine led to a chaotic start, which frustrated Ukraine and EU member states. However, the EUAM quickly found its feet by initially implementing smaller projects. As a result, it is now being treated as a credible partner by Ukrainian institutions. It has also managed to resolve rivalries53 with the EU delegation, the SGUA and other technical assistance and twinning projects.
The EUAM is a demanding mission to maintain, due to the breadth of its activities. It occasionally requires approval for its plans from the Political and Security Committee of the Council of the EU; but the mission acts independently as a successful strategic player by choosing the reforms it supports.54 An expanded regional presence and a shift from bureaucratic advice to fieldwork, including hands-on training, modest investment in infrastructure and improved working conditions of local counterparts have also helped establish the mission.
The need to achieve broad political buy-in from as many EU member states as possible (through deployment of their experts) and the relatively short rotation periods of experts (one-and-a-half to two years) reduces the scope for developing specific local expertise in the security sector. The EUAM continues to depend on the Political and Security Committee for overall direction and consequently is rather slow operationally. While it has managed to achieve some strategic objectives, with the limited tools at its disposal its objective of empowering local actors still very much depends on the willingness of Ukrainian institutions to cooperate.
Overall, this cooperation is satisfactory but security sector reform is still uncertain. Thus, the EUAM is focusing on engaging with local actors and supporting bottom-up pressure for security sector reform. Its geopolitical significance, however, remains undisputed.
Macro-financial assistance
Another EU innovation has been macroeconomic assistance. Building on two earlier programmes, the EU offered a further €1.8 billion in macro-financial assistance to Ukraine in 2015. This was to ease the country’s urgent external financial obligations, alleviate its balance of payments and budgetary needs, and strengthen its foreign exchange reserves. The assistance consisted of three equal tranches of €600 million, subject to Ukraine fulfilling certain conditions. The memorandum of understanding between the EU and Ukraine includes a list of structural reform policy measures that the government committed itself to implementing in order to receive the second and third instalments of assistance. The measures required to qualify for the second tranche include 12 key aspects of reforms ranging from fiscal governance to public administration, while the third tranche is conditional upon deepening the reforms in these areas.55
The first tranche was paid in 2015 but the second was delayed because the Ukraine government did not satisfy the agreed implementation conditions. It introduced a wood export ban that breached the memorandum of understanding, which stipulated that Ukraine should refrain from implementing new trade-restricting measures. Nevertheless, the EU agreed to release the second tranche in 2017, as otherwise the funds would have been re-directed to other EU priorities. This sent the wrong signal as it implied that the EU was satisfied with the reform work of Ukraine’s leadership. It also negated the EU’s efforts to use macro-financial conditionality to exert pressure on the government. The EU, however, refused to disperse the third tranche in November 2017, due to Ukraine’s continued breach of several conditions. Soon after, the government requested additional macro-financial assistance, which the EU promised to deliver on the condition that Ukraine’s International Monetary Fund (IMF) programme remains on track. If and when a fourth macro-financial assistance programme is approved, it should be accompanied by more strategic and tailored conditionality.
Technical assistance and its limits56
DG NEAR and the SGUA have increased the effectiveness of EU funding for Ukraine primarily through identifying needs and offering more targeted assistance for state-building. However, there is still room for further improvements with regard to technical assistance, which remains an important mode of support (see Annex 2).
Technical assistance typically takes the form of relatively short-term (1–3 years), pre-scripted projects, which are carried out by short- and long-term experts. The terms of such projects specify priorities, deliverables, timelines and a line-up of experts in a detailed and prescriptive way. Twinning projects similarly involve EU experts from member states’ peer institutions providing advice to beneficiary institutions in Ukraine.
Aid in support of state-building reforms and the implementation of the AA-DCFTA relies heavily on technical cooperation. As of late 2017, the EU was implementing €50 million worth of technical assistance and twinning projects in Ukraine. The number of projects has since increased. By early 2018, 42 twinning projects had been completed in Ukraine, while 12 were under way and 10 were at the preparation stage, on average they are each estimated to be worth around €1 million to €2 million.57 Given the weakness of state administration, these projects are important as they often offer the only chance to advance legal approximation and capacity-building. Some projects, such as the funding for a business ombudsman, also contribute to the emergence of trust among economic actors, government institutions and the donor community.
However, the majority of these technical assistance projects frequently encounter challenges due to prescriptive, rigid design. Research on international assistance, and in particular one study of technical assistance in Ukraine in the 2000s,58 shows that donors often fail to appreciate that successful action taken by institutions is usually context-specific. Donors tend to favour exporting ‘best practice’, and transferring ready-made policies and solutions from other countries or contexts. They rarely seek to devise a solution that is tailored to local circumstances.59
EU expert teams often arrive in a beneficiary country with their own ideas and models. They appear to have little understanding or institutional memory of what has gone before there. As a result, ‘the short-term nature of technical assistance programmes has limited donor capacity to understand the institutional context in which their interventions take place and has compromised their ability to promote institutional change’.60
Due to a lack of understanding of the local context, international assistance projects in Ukraine have sometimes undermined the flagship initiatives of pro-reform elements in the government.61 In the words of a former reformer, instead of focusing on the transfer of good international practice, ‘a better approach would be problem-led, with foreign experts and their Ukrainian counterparts jointly identifying and working to resolve problems as equal partners rather than as donor and beneficiary’.62 Above all, deep and long-term engagement in problem solving is needed. This critique applies to Ukraine since the Revolution of Dignity for three reasons.
First, most of the EU’s technical assistance focuses on existing state institutions with entrenched practices and often, even the projects aimed at capacity-building, struggle with their limited ‘absorption capacity’. Projects are regularly delivered without assessing whether pre-conditions are met. Terms of reference for technical assistance and twinning projects focus on training civil servants and transferring best practice. This means training has been delivered to institutions in which civil servants may not be able to perform their duties effectively in the first place due to structural, systemic problems and not necessarily because of a lack of training alone.
Yet, due to their rigid design and short-term duration, many projects are oblivious to the most pressing issues faced by beneficiary institutions, such as low pay and low motivation to work, high personnel turnover and politicization. Ultimately, to receive EU funding, projects need to prove that they have delivered on the goals outlined at the design stage with concrete and easily verifiable products (so-called deliverables). These often include the number of training sessions held or the drafting of new laws, which is seen as the safest way to justify EU funding. However, this tends to exacerbate a tradition of addressing problems by drafting laws without first considering various policy alternatives.
Second, a persuasive body of evidence shows that ‘capacity and technical knowledge alone are insufficient to change deeply entrenched political interests and bureaucratic norms’.63 This is a crucial ‘design’ problem, as isolated technical assistance projects cannot address the broader bureaucratic culture. This is why international development experts promote ‘flexible, responsive, adaptive programming’ rather than prescriptive projects.64 This argument resonates strongly in Ukraine. Hence the creation of research support teams and reform posts to carry out this type of programming within the broader PAR.
Third, international projects targeted at inadequately paid civil servants actually result in a ‘brain drain’ from public administration. EU projects often hire civil servants as local experts with significantly higher remuneration than they had in the civil service. It could also be argued that too much simultaneous intensive yet short-term technical assistance has been offered to weak institutions, which has resulted in their limited effectiveness.
Despite innovations at the macro-level, the design of technical assistance projects has continued much as it was in the pre-2014 period. The SGUA has mainly focused on defining general needs and priorities at a sectoral level.
Traditionally, the operations sections within EU delegations launch and monitor projects; while EU delegation project managers, and team leaders and experts in the assistance projects, follow stringent procedures to abide by projects’ terms of reference. From the EU perspective, timely and uninterrupted delivery of projects is paramount. However, often this is irrespective of changing circumstances or project efficacy. In theory, design and implementation of projects should be premised on understanding how they relate to the Ukrainian context and how they serve the evolving institutional dynamics. But internal EU procedures discourage creative solutions to problems encountered during the implementation of assistance projects.
Numerous EU projects and programmes in Ukraine, notably those that concern the rule of law and security services, have an element of conditionality. But the conditionality criteria do not generally reflect the main problems that impede the effectiveness of a project, which tend to emerge during the process of implementation. The lack of impact of these projects is not an issue of corruption or deliberate misuse of EU funds. If anything, it could be argued that meticulous and detailed planning and accounting to prevent corruption and misuse of funds is one of the reasons why the projects are rigidly implemented. These inflexible operational procedures represent a major challenge, in that they are so cumbersome and time-consuming that they encourage formulaic compliance by project managers, leaders and experts, and thereby discourage flexibility and adaptation to local contexts. EU regulations, especially for technical assistance projects, hardly allow for responsive disbursement of funds, which is required for projects aimed at institution-building.
Overall, implementing traditional technical assistance in countries with weak institutions increases the risk of projects being rigidly designed and with a poor understanding of the local context. These projects also tend to have a supply-driven approach shaped by short time horizons; suggest solutions based on imported expertise;65 and operate like a revolving door for experts and beneficiaries all repeating the same process over and over again, with little institutional memory of what has gone before.66
No doubt, such an inflexible approach affects many foreign ministries and development agencies in Europe, but the European Commission appears to be particularly risk-averse and procedurally minded. This is a major impediment to the way that EU delegations deliver assistance around the world. The emphasis on procedural expertise rather than country and sectoral expertise often results in disillusionment and frustration among those delegation officials who do make an effort to understand the countries where they work.
Most projects take a long time to develop and are too short in duration. Assistance planning – ranging from identifying needs to launching a project – can take up to 2–3 years, which is too long in the context of rapidly changing policy environments and circumstances. Moreover, the typical duration of such assistance projects (1–3 years) is usually too short to make a sustainable impact. Overall, a useful distinction can be made between technical assistance intended to transfer narrow technical knowledge and skills to a partner that is committed to a defined outcome, and technical assistance designed to achieve deeper institutional change, where the outcomes are longer-term, harder to measure and often politically contested.67 The EU’s support for PAR is a welcome change and likely to encourage more flexible and creative forms of assistance.
Writing about the failure of donor advice to advance institutional reform in developing countries, Matt Andrews argues that too often ill fitting ‘best practices’ have been mimetically introduced while ignoring the capacity of recipient governments to implement them. The result is a change in the form but not in the functionality of institutions. He argues for a ‘problem-driven’ approach. This relies less on prescribed and invariably overambitious strategies for addressing institutional weakness and more on a longer-term, step-by-step process of analysing problems with local agents to arrive at locally sustainable solutions. The purpose of external assistance is to guide the process and to build capacity to implement the agreed solutions over a reasonable period of time.68
A glimpse at EU technical assistance projects in Ukraine in three areas – civil society development, governance and regional development – demonstrates the prevalence of a short-term approach. Most of the 46 EU projects69 were for either two years (12) or three years (20), nine lasted for four years and five were for just a year.70 By contrast, two other major donors providing technical assistance to Ukraine in these areas run much longer projects. USAID lists seven projects in the governance/anti-corruption field, six of which will run for five years. None of USAID’s four projects on civil society lasts less than five years, and one is for six years.71 The Canadian government currently has one major project on regional policy in Ukraine, which is also due to last six years.72
Most of the issues raised in this section are only too familiar to EU officials and experts working on development assistance. Since these are generally well-worn criticisms of technical assistance, they tend to be dismissed by donors when confronted with uncomfortable truths.
There are few examples of successful technical assistance projects that have promoted institution-building in Ukraine.73 This reality necessitates a fundamental change of approach. The EU and the beneficiaries of its assistance need to adopt a culture of continuous improvement. At the moment new projects tend to focus on problems already tackled by previous projects, despite being affected by the same shortcomings (see Box 2).
There are countries that have developed good practice to address these issues including Germany, the Nordic countries, Switzerland, the UK and the US. The assistance programmes and terms of reference of these countries tend to be less prescriptive and put a premium on results rather than merely procedural compliance. This is because they are more flexible and realistic regarding changing circumstances on the ground. However, unlike the EU, these countries do not have the capacity to devise a sector-wide approach on their own. So their individual technical assistance projects may be more effective but they tend to remain isolated interventions.
An overhaul of the EU’s technical assistance in general is long overdue. The case of Ukraine is merely indicative of the structural shortcomings in its process-oriented approach, which is devoid of flexibility and sensitivity to the local context. Notwithstanding its innovations, much of the EU’s support to Ukraine and other Eastern Partnership countries continues to rely on unreformed technical assistance. This is of limited effectiveness given the fundamental weakness of the beneficiary state and a lack of political will on the part of the country’s leadership to promote systemic changes. For too long, unwarranted assumptions have underpinned the EU’s assistance, such as the idea that training alone is enough to improve dysfunctional institutions. New institutions and broader capacity need to be created – rather than merely training civil servants – in order for these countries to devise effective public policies and implement the AA.
The administrative culture has to change within the European Commission, the European External Action Service and, by extension, within EU delegations. The culture must evolve to be prepared to acknowledge difficulties and failures and enable underperforming or misconceived projects to be reformed and/or discontinued as part of the learning process.
Sustainability and efficiency of technical assistance projects
For nearly three decades, EU assistance to Ukraine has had limited long-standing impacts once projects have concluded. Therefore in many areas, technical assistance and twinning projects tend to be repeated again and again, focusing on basically the same issues in a given policy area and involving the same experts.
It is clear that little has been learnt from these projects since the early 2000s. This is at least partially because access to the materials and analysis produced by the projects tends to be restricted. This includes essential prerequisites for effectively implementing the AA-DCFTA, such as regulatory impact assessments, which were conducted from the late 2000s onwards and are not publicly available.
The EU delegation has an internal document management system, which relies on project managers to upload project-related documentation. However, this is not done consistently. Nor are these materials routinely reviewed when new projects are planned. The document management system is not a publicly accessible depository.74 As a result of these various factors, new projects must start from scratch.75 This affects the efficiency of EU assistance as projects are repeatedly funded to find solutions to problems already addressed in past projects. Sustainability is hampered too, even if indirectly, because a lack of access to previously accumulated knowledge means that officials in the Ukrainian government and EU delegation are forced to address the same (often basic) issues time and again. The case of the numerous Ukrainian-European Policy and Legal Advice Centres is a typical example (see Box 2). Several more policy areas such as public procurement, competition or state aid have received similar technical assistance.
Duplication is common. For example, in late 2014 the EU delegation procured services to examine various models for coordinating European integration in Ukraine even though the relevant expertise already existed. In 2006–08, the UK financed the European Union Coordination project for the benefit of what was the European Integration Coordination Bureau at the Secretariat of the Cabinet. As part of this project, there was a comprehensive analysis of various alternative coordination models and regional practices (from Central and Eastern European countries as well as the Western Balkans). When asked about this in 2015, neither the EU delegation nor the newly established GOEEI seemed aware of its existence.76
Box 2: EU assistance materials – a disappearing act?
The problem of limited sustainability and efficiency is illustrated by the impact of the five Ukrainian-European Policy and Legal Advice Centres, which operated between 1999 and 2012, and the Association for Ukraine project, which began in 2016 and is due to end in autumn 2018. The total value of their funding is €30.5 million. In essence, all aimed to enhance the capacity of civil servants working in European integration coordination institutions and line ministries to perform their functions. They covered the same issues, including:
- Policy development and planning related to European integration (overall and sectoral);
- Implementation and monitoring of legal approximation and integration-related institutional development;
- Impact assessment;
- Translation of EU law into Ukrainian; and
- Boosting awareness among the public.
Over the last two decades, the purpose of this technical assistance has not changed (except the changes to the EU acquis over this period). Yet few outputs of these projects are available to the European integration management structures in Ukraine.
Many materials produced by the five Ukrainian-European Policy and Legal Advice Centres have disappeared. These include various legal assessments, policy notes, training materials, impact assessment studies and translations. Some would be relevant today, not least to avoid duplication and to provide insights into European integration across various policy sectors.
The Association for Ukraine project – the successor to the centres in all but name – has created a website with at least some of the analyses made public. Once again, it is unclear what will happen to the documents once the project ends.
Overall, the Association for Ukraine project was pre-designed to work on a mix of issues, some of which are central and some are peripheral to implementing the AA-DCFTA. One issue that could have been more prominent is the focus on sectoral integration policies based on cost-benefit assessment. Instead the project has been training 150 new European integration specialists, some of whom have been tasked with specific roles in line ministries. Yet, after two years, these roles will end in the autumn of 2018 and cannot be extended as EU rules do not allow extensions for revised projects. As such, in order to continue this work, a new project needs to be designed and launched. By the time the new project is up and running, the work will essentially need to start from scratch and the budding expertise of those involved in the previous project is likely to be lost. Yet again this brings into question the effectiveness and sustainability of this specific series of projects.
Investment plan
Investment in Ukraine remains lacklustre. There have been repeated calls for the EU to address the developmental needs of its partner countries through financial assistance. In parallel to support for institution-building and the transfer of legal norms, the EU must devote a greater share of its financial assistance to developing public infrastructure, such as roads, municipal services and healthcare, in the Eastern Partnership countries that require such investment.77
The EU provides some limited support for government-controlled territories in eastern Ukraine, which are on the frontline in the war with Russia. For example, in 2017, Ukraine and the EU signed a €50 million financing agreement to strengthen local governance, economic recovery, community security and social cohesion in the Donetsk and Luhansk regions. In total, EU institutions provided €88 million of humanitarian assistance in early 2018.78
However, there is no EU plan to address Ukraine’s dilapidated infrastructure, such as its roads, water supplies, waste-processing facilities and sewage system. This demonstrates the main difference in how the EU interacts with associated and accession countries, with the latter receiving massive support for infrastructure projects upon accession to the EU.
In Ukraine, such infrastructure funding is important for two reasons. First, it is needed because implementing the AA-DCFTA entails significant costs – not simply legal approximation but also costly upgrades to state infrastructure. This takes resources away from social and public infrastructure. The Central and Eastern European states only obtained significant EU funds for this form of modernization after they joined (partly through EU structural funds). Yet, in Ukraine, the EU’s assistance is focused on capacity-building for public administration and businesses rather than on improving infrastructure. Without an accompanying investment plan, the AA-DCFTA alone will struggle to modernize Ukraine.
Second, this kind of investment is also needed to generate popular support for EU integration, especially in Ukraine’s southeastern regions. For citizens, public services and infrastructure are more important than increased trade flows with the EU. Sectors such as public health, education, social services and infrastructure are of key importance for the public and should therefore receive more attention and assistance from the EU if it aspires to maintain the high levels of pro-European support in the country.79 If these sectors continue to function poorly, Ukrainian reformers are unlikely to gain credit for their efforts, regardless of how well they implement the AA-DCFTA. For the EU, investing in these sectors is the best chance of enhancing its visibility among the population.
Thus, a group of experts in a study for the European Parliament have called for:
…the establishment of a trust fund for Ukraine, Georgia and Moldova based on the best practices of multi-donor instruments, while stressing that this trust fund should focus on private and public investments, in particular those in social and economic infrastructure and aimed at boosting investment absorptive capacity.80
A proposal for the New European Plan for Ukraine aims to address this gap. It was developed in 2017 by the Lithuanian parliament and subsequently agreed with the government of Ukraine.81 Inspired by the Marshall Plan for rebuilding Western Europe after the Second World War, it was designed to offer developmental incentives for Ukraine in the absence of the prospect of EU membership. According to different analysts, the country can achieve annual economic growth of 6–8 per cent over a period of five to 10 years if it doubles annual investment to €5 billion.82
This idea has gained some traction. In April 2018, the European commissioner for European neighbourhood policy and enlargement negotiations, Johannes Hahn, announced that the EU is developing a new investment programme for Ukraine, called the Reform Contract for Investment. Under such a policy, the European Commission is proposing to allocate €50 million of investment into Ukraine’s economy, which could leverage up to €500 million of private investment.83 This is an important step forward that underpins the concept of the New European Plan for Ukraine. 84
Crucially, the concept of the New European Plan for Ukraine proposes to address institutional capacity-building in Ukraine in order to design and implement investment in non-corrupt and efficient ways. The EU and international financial institutions have tended to overlook this until now, typically blaming the Ukrainian authorities for their low absorption capacity. That particular problem has been known for a long time and until now has not been explicitly and systematically addressed. For example, in 2017, Ukraine was implementing 33 investment programmes financed through preferential 15- to 25-year maturity loans from international financial institutions, worth €4.8 billion with annual interest rates of 0.5–1 per cent. While investment volumes from these institutions have increased, Ukraine’s annual absorption rates declined from 70 per cent in 2014 to 42 per cent in 2016.85 According to Andrius Kubilius, one of the authors of the original European Plan for Ukraine, by early 2018 only €1.6 billion had been absorbed out of approximately €7 billion of commitments from international financial institutions.86 Ukraine is finding it increasingly difficult to absorb investments. As the head of the SGUA, Peter Wagner, observes, ‘billions of funds for Ukraine are not implemented for bureaucratic reasons’.87 As such, some in the EU delegation and European Commission were initially sceptical of the New European Plan for Ukraine.
Increasing absorption capacity needs to be an explicit priority for Ukraine, which the EU hopes to tackle under a different initiative, the new External Investment Plan (EIP). The European Commission created the EIP in 2016 for countries in Africa and the EU neighbourhood. The plan uses a new generation of financial instruments, such as guarantees and risk-sharing instruments, as well as the blending of grants and loans for sustainable development projects.
The newly created European Fund for Sustainable Development (EFSD), which is part of the EIP, will help to leverage additional financing for development, notably from the private sector. It is hoped that the EFSD’s contribution of €4.1 billion will encourage investors to engage in Africa and the EU neighbourhood, both of which tend to be avoided by risk-averse investors. It is expected that the EIP will generate up to €44 billion of additional investments. These will mainly be targeted at improving economic and social infrastructure and proximity services, as well as supporting small and medium-sized enterprises, microfinance and job creation projects. The EIP will go beyond classical development assistance by supporting sustainable investments in an integrated way. It will blend technical assistance with strategic policy and political dialogue in order to improve the investment climate and business environment.88 When the EU first requested proposals in late 2017 for two ‘investment windows’ (i.e. areas for investment)89 – sustainable energy and connectivity, and micro, small and medium-sized enterprise financing – international financial institutions requested about €1 billion worth of guarantees from EFSD for Eastern Partnership countries.90
In sum, the EU’s assistance needs to be coupled with investment in Ukraine. This is highly desirable not only to address the developmental needs of Ukraine but also to reduce the gap between Ukraine and candidate states for EU membership, such as Western Balkan states. This is not least because the EU is unable to offer Ukraine full assistance while it is not a member state, even though Ukraine has taken on more extensive commitments than other candidate states.91 The EU aims to secure a peaceful, stable and prosperous neighbourhood. Investment in Ukraine (or indeed in any other EU neighbourhood country) will help to achieve the EU’s objectives even without being offered membership. The EU should target developmental issues in an integrated way and it should help address Ukraine’s absorption capacity problems.
Ukrainian officials are keen on the New European Plan for Ukraine.92 However, it is still unclear how reform-linked conditionality will be applied. The Ukrainian government already realizes that this is a particular weakness that needs to be addressed explicitly and the prospect of investment funds is a motivating factor. It is clear that strict but reasonable and well-informed conditionality and monitoring will be needed.