Ukraine seeks to improve investment climate

Ukraine submits Candidature application for the EITI in order to improve the management of its natural resources.

Transit is expected to be a large revenue stream in the country’s Extractives Industries Transparency Initiative (EITI) Report, as Ukraine is one of the world’s major transit countries (see map above).

In its application to the Extractive Industries Transparency Initiative (EITI), the Ukrainian government states its goals for implementing the Standard.

“The main goal of adopting the EITI is to improve the management methods in extractive industries of Ukraine and the investment climate in the country, strengthening the fight against corruption and ensuring the participation of civil society in controlling the volume of revenues to the state budget of Ukraine from activities related to mining.”

The Ukraine Cabinet of Ministers reaffirmed its commitment to implement the EITI through Ukraine’s commitment to the Open Government Partnership in 2012.

Ukraine’s national EITI commission was tasked with compiling the Candidature application, and had representatives from the government, companies and civil society organisations. The commission first met in October 2012 and has had a total of six meetings in preparing the country’s application.

The Minister of Energy and Coal Industry, Mr Eduard Stavytskyi, wrote to the EITI Chair Clare Short, outlining how the EITI should function in Ukraine.

“The multi-stakeholder group members agreed on the importance of working with companies in the sector to involve them in the EITI process, preparing reports, holding their reconciliation and going through the validation procedure..”

The EITI Board will review Ukraine’s application, and a decision is expected in mid-October.  


Background - Ukraine’s extractive sector

Historically Ukraine’s strength was in the agricultural sector. According to the official statistics Ukraine holds up to 5% of the world reserves of natural resources – oil, gas, biomass, coal and hydrocarbons. Being an important transit country for natural gas from Russia to Europe, the government of Ukraine has been looking into possibilities of reducing its gas consumption and increasing its indigenous production. The energy sector in Ukraine is highly inefficient and one of the key development challenges for the government is its restructuring.[1] Improving the energy sector has a potential of contributing to overall sustainability of the Ukrainian economy.

In recent years the government of Ukraine has been trying to attract more foreign extractive companies to increase the hydrocarbon production.[2] Modernisation of the energy sector remains one of the main challenges of the existing government, and there is lack of capital investment in the sector.[3] EITI, as suggested by both ambassadors and representatives of International companies[4]  

More information about the EITI Candidature application can be found at here.

In order for Ukraine to apply to the EITI Board and be accepted as candidate, it will need to:

  • issue an unequivocal public statement of its intention to implement the EITI;
  • commit to work with civil society and companies on implementation;
  • appoint a senior individual to lead on the implementation;
  • establish a multi-stakeholder group to oversee the implementation (comprising business, civil society and government). The multi-stakeholder group has to agree and publish a fully-costed work plan, containing measurable targets, and a timetable for implementation and incorporating an assessment of capacity constraints.

Once accepted as a candidate, Ukraine will have 18 months to publish an ‘EITI report’ that reconciles what companies say that they pay in taxes, royalties and signature bonuses, with what government has received.  Ukraine would have two and half years to reach compliance. To do this it would undergo an independent validation to check that it is complying with EITI rules.

If the international EITI Board considers a country to have met all EITI requirements, the country will be recognised as EITI Compliant.