Statement by Pieter Stek at the meeting of September 12, 2000

87457 International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS2000-334 September 11, 2000 05:02:03 PM Statement by Pieter Stek, Executive Director Date of Meeting: September 12, 2000 Ukraine - Country Assistance Strategy 1. Ukraine has gone through difficult years as is well described in this Country Assistance Strategy. The Government is eager to use the political opportunity that has arisen after the Presidential elections of last November to take decisive steps to emerge from decline and stagnation and to start meeting systematically the needs of the population. It realizes that credibility can only be built up through its own actions and is grateful that the World Bank Group, the IMF, the EBRD and a number of bilateral donors have stood by the country in spite of disappointments and are now willing to support it with advice and funding in the effort to make a break with the past. 2. There can be no question that this CAS will be enormously helpful to the Government's efforts. The analysis is powerful, the lessons from the past have been incorporated, and the strategic choices are attuned to the creation of greater trust amongst the population and of confidence in prospects. Essential steps, in a well structured sequence, are to be taken to put the country on a path of sustainable growth. This is also a CAS in which IFC's participation has led to significant strengthening of the proposed package of policies. MIGA's involvement is also welcome. The Government is extremely pleased with the proposed use of the PAL instrument in the Base Case. This instrument marries the timing of actions and funding with its own intentions, thereby enhancing policy integration and the incentive throughout the political spectrum to act responsibly. 3. The Government realizes that the conjunction of economic growth and a solid majority in the Rada provides an opportunity that must be grasped to tackle the reform issues spelt out in the CAS. This co-incides with the turning of a new leaf in the relationship with the IMF, now that the misreporting episode has been brought to closure. The lesson from that event has been taken to heart. More broadly, the Government intends to work earnestly on creating a structure with incentives and controls that not only reduce the chance of mishaps and the opportunity for abuses, but also incorporates major strides towards creating an enabling role for the public sector vis-à-vis the private sector. The Government is in full agreement with the candid treatment of corruption in this context. Meeting its request for special support from the Bank in the anticorruption effort is of great importance, because the Bank's analysis does justice to the complexity of the issue, as do its policy recommendations. On a personal note, I recall from our constituency meeting in Kiev in March the intense interest with which Danny Kaufmanns's exposé was followed and saw copious notes being taken by the highest level of government officials. 4. The Government's commitment to reform serving the general interest is also evidenced by the range of participatory instruments described in the document (par. 63-65). The CAS itself is on the web; so are the monthly budget realizations. The Ministry of Economy organizes regular discussion sessions with business, local administrations and NGOs. Media coverage is penetrating. 5. None of this is to deny the deep-rooted problems that Ukraine still needs to overcome of vested interests resistant to change, of poverty, disease, and environmental degradation. Besides the loans themselves that are part of the strategy, the systematic and wideranging program for ESW is essential to the success of the reform effort, as is technical assistance in many areas to build the capacity needed for sustainability. 6. Ukraine has high expectations of the development of the use of information technology for the whole development effort and is determined to use the experience gained in the pilot exercise for the Global Development Gateway to make major advances.