You're reading: ​Lawmakers and ministers clash over future of Cabinet

Ministers and lawmakers bickered over the future shape of the government this week, putting essential reforms in limbo and cooperation with Western donors at risk.

Adding to tensions, Christine Lagarde, the managing director of the International Monetary Fund, on Feb. 10 warned that the IMF might withhold vital funds for the country if “a substantial new effort” to improve governance is not made soon.

Her statement followed the resignation of Minister Aivaras Abromavicius on Feb. 3, who alleged interference in reforms and perpetuation of corrupt schemes involving state-owned enterprises by Ihor Kononenko, a lawmaker and close friend of President Petro Poroshenko.

A day later four other ministers who had threatened to quit – Agriculture Minister Oleksiy Pavlenko, Health Minister Oleksandr Kvitashvili, Infrastructure Minister Andriy Pyvovarsky and Information Policy Minister Yuri Stets – agreed to withdraw their resignations, but set three conditions for remaining in office.

The ministers demanded the authority to hire temporary CEOs for state-owned enterprises, the immediate start of the privatization of state-owned enterprises and better salaries for staff in all ministries.

“We’re at the point when the checklist can be fulfilled tomorrow – if there is willingness from the parliament, the president, the prime minister and the speaker (of parliament),” Pyvovarsky said in an interview with the Kyiv Post on Feb. 5.

But lawmakers polled by the Kyiv Post said the ministers’ demands would hardly be met any time soon.

Privatization

Pyvovarsky said there would be no investment in Ukraine until “we start privatization.” Finance Minister Nathalie Jaresko has called privatization one of the benchmarks for IMF support.

But in 2015 the government raised only Hr 200 million ($7.7 million) from the sale of state property, instead of the planned Hr 17 billion ($654 million). “Last year was the worst in last 15 years” in terms of privatization, Oleksandr Parashchy, head of research at Concorde Capital, told the Kyiv Post.

The government has been demanding for months that lawmakers pass legislation that would allow large-scale privatization to kick off. After more than 10 attempts, the bill scraped through first reading on Jan. 28 with 237 votes.

However, there is no guarantee the bill will garner enough votes to pass second reading, according to Olena Sotnyk, a lawmaker with the Samopomich faction.

Sotnyk said there are still issues that need to be cleared up, including “a guarantee of a fair price, transparency, how the objects will be evaluated, and who will decide whether the objects up for privatization are not strategically important to the state.”

She added the law wouldn’t get support in parliament unless the government prepares amendments that would guarantee that all of these conditions are met.

The most lucrative companies that could potentially undergo privatization include Centerenergo, one of the largest power generating companies in Ukraine, regional power companies Kharkiv Oblenergo and Zaporizhzhya Oblenergo, and Turboatom, one of the top ten turbine construction companies in the world.

But investors are smacking their lips most over another choice state asset – Odesa Portside Plant. The plant was sold in July 2009 to a consortium of bidders including oligarch Ihor Kolomoisky for about Hr 5 billion ($625 million at that time). But the State Property Fund immediately cancelled the deal, accusing the bidders of colluding to force the sale price down, and the Constitutional Court then banned the privatization of the company.

Meanwhile, it’s unclear whether any of these firms will be sold, as there is still no final list of state properties slated for privatization, Parashchy said.

Salaries

Pyvovarsky said the ministry’s staff should be paid at least Hr 25,000 ($960) instead of the current $300 per month or less.

The new law on civil service passed by parliament on Dec. 10 should help here, said Viktoria Ptashnyk, an independent lawmaker and a member of parliament’s economy committee. The law comes into effect on May 1, but parliament needs to pass at least 30 more bills for its full implementation.

But Sotnyk of Samopomich said it’s up to the government to determine the size of salaries for its staff. “Salaries are defined by the budget, which is prepared by the government. It seems weird to hear such complaints about salaries from the very people who ARE the government,” she said.

Sotnyk added that if Ukraine’s Cabinet initiates a salary raise, parliament might support it – but only after the Rada approves the government’s report, which is expected to be presented on Feb. 16.

New coalition agreement

The proposed new coalition agreement should oblige the pro-government coalition in parliament to support the government’s draft laws, Pyvovarsky said. As of now there are up to 100 crucial bills yet to be approved by lawmakers.

However, the lawmakers believe there’s no need to work out a new draft of coalition agreement – it should just have stricter deadlines and stipulate who is responsible for every task, they say.

The current coalition agreement was finalized on Nov. 21, 2014 after nearly four weeks of negotiations. It covers almost all areas of state governance, ranging from a thorough overhaul of electoral law to far-reaching economic reforms, and would see Ukraine relinquish its status as a non-aligned country, opening the way for it to resume efforts to join the NATO defensive alliance.

Most of these changes were supposed to have been made in 2015.

“Of course, it was always going to be impossible to fulfill every point within a year, as the coalition agreement was drafted for a four-year period, but it’s a decent-enough document,” Ptashnyk said.

Sotnyk recommended that ministers “read the coalition agreement from time to time, and suggest legislative initiatives that correspond with it.”

Lawmakers believe the situation will be clearer after Feb. 16 – when Prime Minister ArseniyYatsenyuk presents the 161-page government report in the Rada. The report highlights the government’s main achievements over the year, including the launch of a free-trade deal with the European Union, which came into force on Jan. 1, the unlocking of a four-year $17.5-billion aid program with the IMF, and the start of the procedure of restructuring the part of Ukraine’s external debt owed to private creditors.

A no-confidence vote in the Yatenyuk government is possible, but lawmakers aren’t betting on it yet. However, the omens are not good for the cabinet: its report met with sharp criticism at a Feb. 10 meeting of parliament’s economy committee attended by representatives from the key ministries.

According to Ihor Lutsenko, a member of the Batkivshchyna faction in parliament, the government is facing “a reshuffle in which a couple of ministers will be replaced,” but most likely the status quo will be maintained.

But that won’t please some lawmakers from the Samopomich and Batkivshyna factions, who said earlier that they would quit the coalition if the government line-up remains the same.