Position Paper on Ukraine EU Action Plan Implementation by Ukrainian Side for 2005-2006

POSITION PAPER On Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006

Based on proposals of the executive power bodies of Ukraine

Secretariat of Ukrainian Part for the Ukraine – EU Co-operation Committee Antonyuk Lesya Volodymyrivna Tel.: (380 44) 256 62 98 Fax: (380 44) 226 21 06 e-mail: [email protected]

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006

CONTENTS

INTRODUCTION 4

2.1. POLITICAL DIALOGUE AND REFORM 5-15 2.2. ECONOMIC AND SOCIAL REFORM AND DEVELOPMENT 15-20 Functioning Market Economy 15-17 Monetary, exchange rate and fiscal policies 17-18 Structural reforms 18-19 Social situation, employment, poverty reduction 19 Regional Development 20 2.3 TRADE, MARKET AND REGULATORY REFORMS 20-31 2.3.1 Movement Of Goods 20-21 Trade relations 21-22 Customs 22-23 Standards, technical regulations and conformity assessment (EU harmonized areas) 24 Elimination of restrictions and streamlined administration (EU non-harmonised areas) 25 Sanitary and phytosanitary issues 25-26 2.3.2. Right Of Establishment; Company Law And Services 26-27 2.3.4 Movement Of Persons Including Movement Of Workers 27 2.3.5. Other Key Areas 27-31 Taxation 27-28 Competition policy 28 Intellectual and industrial property rights 29 Public procurement 29-30 Statistics 30 Financial control 30-31 Enterprise policy 31 2.4. CO-OPERATION IN JUSTICE AND HOME AFFAIRS 31-32 2.5. TRANSPORT, ENERGY, INFORMATION SOCIETY AND ENVIRONMENT 32-39 Transport 32-34 Energy 34-37 Information society 37-38 Environment 38-39 2.6. PEOPLE-TO-PEOPLE CONTACTS 39-42 Science and technology, research and development 39-40 Education, training and youth 40-41 Cross-border and regional level co-operation 41-42 Public Health 42

Ukraine – EU talks on a new reinforced agreement 42-43 EU Technical assistance to Ukraine 43 Cooperation with European Investment Bank 43-44 Launch of cooperation on agriculture 44

1. INTRODUCTION

The Ukraine – EU Action Plan was adopted at a special meeting of the Ukraine EU Cooperation Council held on 21 February 2005 in Brussels. The Government of Ukraine annually adopts the Action Plan Implementation Measures. The respective measures for 2006 have been adopted by the Regulation of the Cabinet of Ministers of 27 April 2006 No 243. The implementation of the Ukraine – EU Action Plan has been regularly considered by the Ukrainian Side. The relevant methodical recommendations for monitoring the Action Plan implementation have been adopted. Throughout 2005 and 2006 a preliminary joint assessment of the Action Plan implementation has been carried out at the Ukraine – EU summits (1 December 2005, 25 October 2006), meetings of the Cooperation Council (13 June 2005, 14 September 2006), Cooperation Committee (19 October 2005) and of the relevant Ukraine – EU subcommittees. Regular assessment of the Action Plan implementation will be held on 31 January 2007 during the Ukraine-EU Cooperation Committee meeting. In July 2006 a preliminary version of the Position paper (as of 20 June 2006) has been presented to the European Side. This paper contains updated information on current state of play of the Ukraine – EU Action Plan implementation by the Ukrainian Side. The assessment was carried out taking into account the position of the European Commission, EU member-states, international organizations, foreign companies and others.

2.1 POLITICAL DIALOGUE AND REFORM

“Strengthen the stability and effectiveness of institutions guaranteeing democracy and the rule of law”

On 7 July 2005 the new wording of the Law of Ukraine “On election of people’s deputies” (the Law of Ukraine No. 2777) was adopted, which improved the electoral procedures with due account for the conclusions of the international observers. The updated law received positive opinion of the Venice Commission and of the Parliamentary Assembly of the Council of Europe (Resolution No. 1466 (2005) adopted on 5 October 2005). On 21 December 2005 the Law of Ukraine “On election of the deputies of the Verkhovna Rada of Autonomous Republic of Crimea, deputies of local councils and of village and city mayors” (the Law of Ukraine No. 3253) was adopted. According to the OSCE and the Council of Europe recommendations The work of the Central Electoral Commission was fair, unbiased and professional. In order to ensure the right of every citizen to express his or her will the voter lists were compiled and verified. Since November 2005 the verification of the voter lists by the citizens of Ukraine has been conducted. Starting from 1 January 2006 the Ministry of Foreign Affairs and the Central Electoral Commission of Ukraine regularly provided information to the EU concerning the preparations for the parliamentary elections in Ukraine. The Parliamentary elections in Ukraine in 2006 have been conducted democratically and transparently what was acknowledged by the international observers on behalf of OSCE, the Council of Europe, the European Union and other international organizations and states.

These elections can only be described as free and fair, and so it is the Ukrainian people who are the real winners OSCE PA President Alcee Hastings

The 26 March parliamentary elections were conducted largely in line with OSCE Commitments, Council of Europe commitments and other international standards OSCE/ODIHR Election Observation Mission Final Report of 23 June 2006

According to the amended Constitution of Ukraine, in August 2006 a coalition of parliamentary fractions formed the Government of Ukraine. Work has been done to consolidate several sectors of public administration: state finances, labour and social policy, justice and emergencies. The system for the integrated management of natural resources and environmental safety was formed. The Government of Ukraine adopted the decision on coordinating and directing the activity of the executive power bodies through the respective Ministers (the Resolution of the Cabinet of Ministers of Ukraine of 23 February 2006 No. 207). Measures were taken to strengthen the local government system. The Verkhovna Rada of Ukraine adopted the Law of Ukraine “On the Cabinet of Ministers of Ukraine” which sets the status of the Cabinet of Ministers as the highest body within the system of the executive power bodies, defines its place within the system of government bodies.

Main tasks: - take measures to codify the legislation on elections and establishment of the national voters’ list; - continue work on constitutional and administrative reform.

Assessment of the Ukrainian Side: significant progress made

EU assessment: significant progress made in parliamentary elections preparation in 2006, some progress made on other issues December 2006

“ Further judicial and legal reform, so as to ensure the independence of the judiciary and strengthen its administrative capacity, and to ensure impartiality and effectiveness of prosecution”

In July 2005 the President of Ukraine has created the National Commission for the Strengthening of Democracy and the Rule of Law with a view to consolidate the efforts of the government bodies, political parties, non-governmental organizations and other civil society institutes in this field. Council of Europe monitors the adherence to the European standards in democracy, rule of law and human rights. The Parliamentary Assembly of the Council of Europe has marked a significant progress in honouring by Ukraine of its obligations and commitments to the Council of Europe (Resolution No. 1466 (2005) adopted on 5 October 2005). The President of Ukraine has approved the relevant measures for the honouring by Ukraine of the obligations and commitments mentioned above. For further reforms of the judiciary a Code of Administrative Justice has been adopted in July 2005 and put into effect on 1 September 2005, enabling the operation of administrative courts. A new Code of Civil Procedure took effect on 1 September 2005. The Law of Ukraine “On access to court decisions” (the Law of Ukraine adopted on 22 December 2005 No. 3262-IV takes effect on 1 June 2005) regulates relations connected to ensuring access to the court decisions and transparency of the judiciary. Since 1 June 2006 the State Court Administration of Ukraine launched the Single State Register of court decisions, which can be found at judicial authority’s web-portal www.court.gov.ua To ensure the fulfilment of the decisions and application of the decision of the European Court of Human Rights the relevant Law of Ukraine No. 3477 has been adopted on 23 February 2006. In 2006 the President of Ukraine approved the Plan of measures on improvement of the judicial system and ensuring of fair trial in Ukraine in line with European standards (Decree of the President of Ukraine No. 242), the Concept For The Improvement Of The Judiciary In Order To Ensure Fair Trial In Ukraine In Line With European Standards (Decree of the President of Ukraine No. 361), the National Action Plan of measures aiming to ensure establishment in Ukraine of a judiciary as a unified system of courts and court proceedings (Decree of the President of Ukraine No. 587). To ensure the fulfilment of the Concept for establishing the system of free legal aid (approved In June 2006) the relevant centre has been created in Ukraine. The measures were taken to improve the training at the Academy of Judges of Ukraine; judges of the Supreme Court of Ukraine were trained at the European Court of Human Rights. In May 2006 The European Commission/ Council of Europe Joint Program ‘Strengthening Democratic Stability in Ukraine’ (Ukraine V) was finished and Steering Committee noted the successful implementation of the majority of activities of the program. On 6 November 2006 the Government of Ukraine and Council of Europe signed the Memorandum of understanding envisages the formation Office of coordination programs of cooperation. Main tasks: - further court reform with a view to raise the status of judges, ensure the renewal of staff of the corps of judges, improvement of the system and structure of courts; - further reform of the prosecution system; - ensure the drafting and adoption of the legislation on free legal aid;

Assessment of the Ukrainian Side: some progress made

EU assessment: some progress made April 2006

“Ensure the effectiveness of the fight against corruption

Compared to 2005 in 2006 the ranking of Ukraine in fight against corruption has improved by 14 positions (Ukraine has moved from 113 to 99 place). 2006 Corruption Perception Index Transparency International

Ukraine has reached progress in fight against corruption. On 1 January 2006 Ukraine has become a full member of the Group of States Against Corruption (GRECO). Ukraine ratified the Civil Law Convention on Corruption (March 2005), the Convention on Cybercrime has ( September 2005 ) and Additional Protocol thereto (July 2006), United Nations Convention Against Corruption, Council of Europe Criminal Law Convention on Corruption and Additional Protocol thereto (October 2006). The President of Ukraine approved the primary measures on decreasing the shadow economy and combating corruption (Decree of the President of Ukraine issued on 18 November 2005 No. 1615). The list of persons authorized to perform the functions of the State who shall assume responsibility for corruption has been expanded to the persons holding political posts (the Law of Ukraine adopted on 23 February 2006 No. 3490). Public monitoring in fight against corruption was introduced. Hot lines are constantly operating at the Ministry of Internal Affairs, State Customs Service. Revision and optimization of licensing functions was done. Measures were taken to raise the responsibility of agencies and servants making decisions on issuing licenses, and to strengthen control over their operation. The wages of the civil servants, law enforcement bodies and court officials were raised. On 20 February 2006 the President of Ukraine has approved the Concept for the development of civil service in Ukraine, drafted with regard to Ukrainian and international experience, the recommendations of the Parliamentary Assembly of the Council of Europe and other international organizations (Decree of the President of Ukraine No.140). In May 2006 the Government of Ukraine, the UK Department for International Development, the Swedish International Development Cooperation Agency and the Delegation of the European Commission to Ukraine have signed the Memorandum of understanding concerning Public Administration assessment in Ukraine in accordance with key SIGMA baselines. The Memorandum envisages the assessment of 6 fields of public administration, namely, civil service, external audit, financial control, public expenditures management, policy-making capacity, public procurement. In July 2006 the outcome of the assessment was presented at the international conference “Strategy for administrative reform: SIGMA recommendations to the Government of Ukraine” and are taken into account during the elaboration of the proposals to further administrative reform in Ukraine. The implementation of a three-year project aiming at combating corruption in Ukraine “Support to good governance: Project against corruption in Ukraine (UPAC)”, funded by the EU and the Council of Europe, is underway. Key directions of combating corruption to be implemented in the nearest future are outlined in the Concept for combating corruption “On the way to integrity” (adopted by the Decree of the President of Ukraine of 11 September 2006 No. 742). Main tasks: - take measures to provide entry into force of the Concept for combating corruption “On the way to honesty” - take steps to implement in Ukraine international conventions for combating corruption; - further improvement of legislation on civil service.

Assessment of the Ukrainian Side: some progress made in implementing the goal

EU assessment: some progress made December 2006

Ensure respect of human rights and fundamental freedoms, in line with international and European standards

The state authorities ensure the respect for the right to freedom for peaceful assembly and associations, to freedom of belief. Systemic work is carried out to ensure Ukraine’s accession to UN and Council of Europe conventions and optional protocols on protection of human rights and fundamental freedoms. Namely, Ukraine ratified 52 and signed 37 conventions within the framework of the Council of Europe. On 9 February 2006 the Verkhovna Rada of Ukraine ratified the Protocols No.12 and No.14 to the Convention on Human Rights and Fundamental Freedoms (the Law of Ukraine No 3435). Ukraine signed the European Convention on the Compensation of Victims of Violent Crimes (in April 2005), Convention on Protection of Individuals with Regard to Automatic Processing of Personal Data and Additional Protocol thereto (August 2005), Additional Protocol to the Convention for the Protection of Human Rights and Dignity of The Human Being with Regard to The Application of Biology and Medicine, on the Prohibition of Cloning of Human Beings (April 2006). With a view to remove the gaps in legislation on protection of personal data in Ukraine in accordance with EU legislation, ensure the balance between the human rights, rights of society and state in the field of personal data the Verkhovna Rada of Ukraine adopted the Law f Ukraine “On personal data protection” on 9 January 2007.

Main tasks: - take steps to ratify: the Convention on protection of Individuals with Regard to Automatic Processing of Personal Data and Additional Protocol thereto; the European Convention on the Compensation of Victims of Violent Crimes.

Assessment of the Ukrainian Side: some progress made in implementing the goal

Foster the development of civil society. Ensure the respect of the right of trade- unions and fundamental standards of labour

In Ukraine there is a comprehensive network of civil society organisations Opinion of the European Economic and Social Committee CESE 1622/2003, December 2003

The Government of Ukraine takes steps to provided favourable conditions for the development of civil society and civil society engagement in public policy making. The executive power bodies regularly hold consultations with civil society in the form of public hearings, round tables, conferences, meetings. Throughout 2006 there were held more than 550 consultations, including 350 held during the mandate of the current Government. There are 72 public councils which currently operate and encompass more than 3,000 representatives of NGOs, trade unions, other associations, local governments, mass media. When drafting the work plans for the executive power bodies, the proposals and remarks of the civil society were taken into account. Regular information on these plans was provided to the civil society, and reports on their fulfilment received coverage in media and on the web-sites of the executive power bodies.

A series of projects of international technical assistance (including the EU technical assistance) aiming to develop civil society are currently being implemented. The state registration fee for the associations of citizens was decreased by half (Resolution of the Cabinet of Ministers of Ukraine of 31 May 2006 No. 768).

Labour market organisations bear the characteristic traits found in the current [EU] accession countries past and present Opinion of the European Economic and Social Committee CESE 1622/2003, December 2003

Recent years have been marked by the change of situation on trade union movement in Ukraine. Neither of existing trade unions has a monopoly in Ukraine. Gradually the relations between the trade unions and the State turn to be based on more democratic principles. There was concluded the General Agreement between the Cabinet of Ministers of Ukraine, Ukrainian nationwide associations of employers and entrepreneurs and Ukrainian nationwide trade unions and professional associations for 2004 – 2005. Work on the respective General Agreement for the following period is underway. Regional agreements between the local authorities, associations of employers and trade unions were concluded. With a view to increase effectiveness of social dialogue the Agreement on common actions regarding resolution of employment dispute between the Government and the Federation of trade unions was signed in October 2006. In order to develop the social dialogue there was established a trilateral National Social and Economic Council attached to the President of Ukraine, called to strengthen the role of trade unions and associations of employers in shaping economic and social policies of the State. Since 1 January 2007 under the decision of the Government of Ukraine the trade unions will be released from payment of registration fee, what is fully in line with Article 2 of the ILO Convention No.87 concerning the freedom of association and protection of the right to establish the organisation (Regulation of the Cabinet of Ministers of Ukraine of 31 May 2006 No.768)

Main tasks: - The development of legislature on interaction of the State with civil society.

Assessment of the Ukrainian Side: reasonable progress made

Ensure respect for the freedom of the media and expression

Positive changes were noted in the report of the “Reporters sans frontiers”-2006: Ukraine went up by 6 positions in the freedom of expression ranking (from 112 to 106 positions ).

To ensure freedom of expression the Government’s information policy was directed at ensuring constitutional rights of citizens for information, rigorous adherence to the principles of freedom of expression and guarantees for unimpeded journalist activity. Measures were taken to eliminate administrative, economic and organizational obstacles to the media. Full and equal access of political parties to the state media was ensured. All aspects of home and foreign policies were covered and discussed in a free and open manner. The National TV and Radio Broadcasting Council of Ukraine was protected from the influence of political and economic interests by the law. The Civil Code of Ukraine was amended with a view to ensure its conformity with legislation on information (the Law of Ukraine adopted on 22 December 2005 No. 3261). On 12 January 2006 there was adopted a new wording of the Law of Ukraine “On Television and Radio Broadcasting” (the Law of Ukraine No. 3317), which in particular regulates the share of foreign investors in statutory fund of a TV and radio broadcasting organization.

Main tasks: - the development of legislation and administrative conditions for ensuring the freedom of the media.

Assessment of the Ukrainian Side: good progress made

EU assessment: good progress made December 2006

Prevention of ill-treatment and torture In April 2005 Ukraine signed the European Convention on the Compensation of Victims of Violent Crimes. The relevant action plan on its implementation is being carried out. With a view to further improve the legislation on combating ill-treatment, degrading treatment and torture the Verkhovna Rada of Ukraine adopted the Laws of Ukraine which: - strengthen the prosecution of tortures and respect of rights of detainees and arrested persons; - amend several legal acts concerning the compensation of damage incurred to the citizen by illegal actions of the prosecution bodies, pre-judicial inquiry, and courts to bring the national legislation in conformity with provisions of the Convention in Human Rights and Fundamental Freedoms. - ensure the right of convicted persons and detainees of correspondence with the European Court of Human Rights was ensured. The State Criminal Executive Service is authorized to perform single government policy in execution of criminal punishments (the Law of Ukraine adopted on 23 June 2005 No. 2713). Besides, on 17 May 2006 the Government made the decision to guide the operation of the State Department for Execution of Punishments through the Ministry of Justice. In June 2006 at Ministry of Justice of Ukraine the Public Council on observance of human rights in places of imprisonment was created. In July 2006 the Optional protocol to the European Convention for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment was ratified (the Law of Ukraine No. 22). On 3 August 2006 the State Programme for 2006-2010 aimed at improvement of the detention conditions of condemned or arrested persons according to the European standards was adopted (Regulation of the Cabinet of Ministers of Ukraine No.1090)

.Main tasks: - take steps for further humanization of punishment.

Ensure respect for rights of persons belonging to national minorities. Ensure equal treatment. Ensure respect of Children’s rights

The Government of Ukraine took steps to ensure the respect for rights and the equal opportunities of the persons belonging to national minorities in all fields of Ukrainian society; to facilitate the ethnic and cultural needs of national minorities, support the educational institutions with lectures taught in minority languages. The representatives of national minorities obtained the opportunity to get the high school education in native language in all subjects. As of now there are approximately 1200 national and cultural associations which contribute to building civil society and jointly with executive power bodies take steps aimed at facilitation of ethnic and cultural needs. The state ethnic and national policy of Ukraine and the ensuring of the rights of national minorities in Ukraine is conducted with regard to the resolution of the Committee of Ministers of the Council of Europe Res.CMN (2003) 5. The principle of equal rights of men and women was respected. The Verkhovna Rada of Ukraine adopted the Law of Ukraine on ensuring the equal rights and opportunities of men and women (the Law of Ukraine adopted on 8 September 2005 No. 2866-IV). Steps were taken to improve the operation of the executive power bodies in this field. Seminars, round tables, devoted to gender education issues in Ukraine were held by the government institutions as well as NGOs.

The Government of Ukraine made a decision to conduct the gender and legal expert examination of the current legislation and of the draft legal acts concerning human rights and freedoms (Resolution of the Cabinet of Ministers of Ukraine of 12 April 2006 No. 504) and the State Programme for promoting gender equality in Ukrainian society till 2010 was adopted (Resolution of the Cabinet of Ministers of Ukraine of 27 December 2006 No. 1834). In order to implementation of the UN Convention on the Rights of the Child legal, administrative and educational measures aimed at ensuring the rights and interests of the children were taken. Ukraine joined the Council of Europe Convention on Action against Trafficking in Human Beings (In November 2005 ), the Convention on the Civil Aspects of International Child Abduction which establishes the procedure for the peaceful and prompt return of the child wrongfully removed or retained (In January 2006 ), Convention on the Right of the Child concerning the elimination of children’s homelessness and the support of family (In September 2006 ), the European Convention on the Legal Status of the Children Born out of Wedlock and the European Convention on Recognition and Enforcement of Decisions Concerning Custody of Children and on Restoration of Custody of Children ( In January 2006). In January 2006 amendments were made to the Criminal Code of Ukraine concerning the improvement of the criminal consequences for human trafficking and engagement into prostitution (the Law of Ukraine No. 3316). In February 2006 the respective provision of the Criminal Code of Ukraine were brought in conformity with the United Nations Convention against Transnational Organized Crime and the Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children, supplementing the United Nations Convention against Transnational Organized Crime. In April 2006 the Government of Ukraine approved the Concept of the State program against trafficking in human beings for 2006-2010 (Regulation of the Cabinet of Ministers No. 188). During 2006 the Government of Ukraine approved the Concept of the State program ”The National action plan in order to implementation of the UN Convention on the Rights of the Child till 2016”( Regulation of the Cabinet of Ministers of Ukraine of 22 April 2006 No. 229), made a series of decisions concerning the elimination of children’s homelessness and the support of family. Ukraine ratified the Council of Europe Convention on the Rights of the Child (the Law of Ukraine adopted on 3 August 2006 No. 69).

Main tasks: - develop a new wording of the Law of Ukraine on national minorities in Ukraine with regard to the conclusions of the Venice Commission; - conduct a broad educational campaign on establishing the grounds of gender democracy in Ukraine.

Assessment of the Ukrainian Side: some progress made in implementing the goal EU assessment: some progress made December 2006

Ensuring international justice

In January 2006 Ukraine signed the European Convention on non-use of a limitation period to crimes against humanity and war crimes. In October 2006 Ukraine accessed to the Agreement on privileges and immunities of the International Criminal Court (the Law of Ukraine No. 254). Main tasks: - complete the preparation and adoption of the drafts laws necessary for the ratification of the Rome Statue of the International Criminal Court.

Further strengthen and focus political dialogue and co-operation on foreign and security policy issues Good progress was reached in cooperation on foreign and security policy issues. The political dialogue was strengthened including at the highest level. Regular Ukraine – EU Troika meetings at the level of the Ministers of Foreign Affairs are held.

There were established procedures for: - consultations on foreign policy planning issues between the Ministry of Foreign Affairs of Ukraine and the Political department of the Secretariat General of the EU - joining the declarations on regional and international matters on behalf of the EU (as of 12 January 2007 Ukraine joined 800 of 867 declarations and statements (92.5%). - holding consultations in the within the Ukraine – EU Troika of Political and Security Committee (at the level of political directors), and on OSCE, Council of Europe matters, as well as COARM, CONOP/CODUN, COEST.

Strengthen co-operation on regional and international issues, conflict prevention and crisis management

Upon the initiative of the President of Ukraine in 2005 there was established the Forum of the Community of Democratic Choice as an important framework for regional cooperation aiming to strengthen the democracy, stability and the rule of law in Baltic – Caspian region. The summits of the Forum were held on Kyiv in December 2005 and on Vilnius in May 2006). On 13 June 2005 an Agreement between Ukraine and the European Union on the security procedures for the exchange of classified information was signed. Ukrainian peacekeepers participated in EU Police mission in Bosnia and Herzegovina and in Macedonia, as well as in other 10 peacekeeping missions of the international organization (UN, OSCE). Ukraine signed the Letter of intention concerning the establishment of the Ukrainian- Polish-Lithuanian battalion for possible participation of Ukraine in further ESDP operations and in EU-lead crisis management operations. In June 2006 during a visit to Ukraine of the Director General of the EU Military Staff defined possible new directions of cooperation between Ukraine and the EU. With a view to define possible new directions of cooperation between Ukraine and the EU, including cooperation in crisis management, there is scheduled Ukraine proposed a series of new operational initiatives on settling the Transnistria conflict. The plan of settlement of the Transnistria conflict “To settlement through democracy” declared by the President of Ukraine on 21- 22 April 2005 during the GUUAM Chisinau summit was appreciated by the parties concerned. A regular and constructive dialogue between the Special Representative of Ukraine for Transnistria Settlement and the EU Special Representative for Moldova Republic was established. On 1 December 2005 the EU Border Assistance Mission was opened in Odessa. The presence of Mission’s experts during customs control and registration of goods and vehicles is ensured, and information on amendments to the Ukrainian legislation is provided. In July 2006 the Mission was enhanced: and additional office in Illichivsk and analytical centre at Mission Headquarters in Odessa was opened. The personnel of the Mission increased by 40 officers as well as funding of the Mission by the European Commission was increased by EUR 6 millions. The Action plan for ensuring state security and state border security adopted by the Government of Ukraine in September 2006 is being carried out. Throughout 2006 Ukraine and EU applied efforts to revive the “5+2” negotiations. Namely, a series of “3+2” meetings of mediators (Ukraine, Russian Federation, OSCE) and observers (EU, USA) aimed at seeking a way to revive “5+2” negotiations was held. In October 2006 there was held a “3+2” consultations between mediators and observers, and extraordinary meetings with the representatives of Moldova and Transnistria. In order to develop the cooperation with Moldova on customs and border issues: - a new procedure for customs control on the Transnistrian part of the Ukrainian – Moldovan border in line with Moldovan legislation was established in March 2006. - a Typical technological scheme of pass of persons, vehicles and cargoes across the state Ukrainian – Moldovan border was signed; - a Protocol on cooperation of operational bodies between the State Border Service of Ukraine and the Department of Border Guard of Moldova was signed;

- join control on five points of entry on the Ukrainian-Moldovan border was launched; In July 2006 an Agreement between the Government of Ukraine and Moldova concerning the maintenance of automobile bridges at Ukraine-Moldova border was signed. The demarcation of the Ukraine-Moldova border was carried on. As of 1 September 2006 764 km of the border were demarcated and 1360 border signs were installed. The demarcation of the northern section is almost over. The southern section is being demarcated. Yet the demarcation of the Transnistrian section of the Ukrainian border remains the most problematic. In border management: - 50 entry points at Ukrainian state border were equipped with technical facilities for automation of border control, that makes part of “Arkan” inter-ministerial system which is being developed. - 220 satellite communication stations were installed to ensure the transfer of information on persons and vehicles, crossing the border, from entry points to the centralized database of the State Border Service of Ukraine. - In November 2006 a Protocol between the Administration of the State Border Service of Ukraine and the Border Guard of Moldova concerning the exchange of information, as well as protocol concerning the preparation of joint monthly Evaluation report on results of border guarding was signed In order to improve the border guard system and achieve the European standards in equipping the border infrastructure across the whole length of the border the Concept for development of the State Border Service of Ukraine till 2015 was adopted (the Decree of the President of Ukraine of 19 June 2006 No. 546) and the Concept for comprehensive program of equipping and reconstruction of the state border till 2015 (the Regulation of the Cabinet of Ministers of 27 December 2006 No.640). The work which had been done since early 2006 concerning the establishment of cooperation between Ukraine and European Agency for the Management of Operational Cooperation at the External Borders (FRONTEX) facilitated the adoption by the Agency’s Board of the mandate for conducting negotiations and concluding the so-called “working agreement” with Ukraine. On 20 December 2006 the Verkhovna Rada of Ukraine ratified the Agreement between Ukraine and the European Union on the security procedures for the exchange of classified information (the Law of Ukraine No. 499).

Main tasks: - re-launch the consultations with the EU concerning the use of air transportation facilities of Ukraine in EU-lead operations; - take measures to provide entry into force of: The Agreement between Ukraine and the European Union on the security procedures for the exchange of classified information the Agreement between the European Union and Ukraine establishing a framework for the participation of Ukraine in the European Union crisis management operations; - further development of Ukraine – Moldova cooperation on customs and border issues;

Further develop co-operation in addressing common security threats, including combating terrorism, non-proliferation of weapons of mass destruction and illegal arms exports

As of now Ukraine is a party of all international instruments for fight against terrorism. The Government implements the Concept for 2005-2010 for the development of prevention of legalization and laundering of income received by criminal means and financing of terrorism (regulation of the Cabinet of Ministers of Ukraine of 3 August 2005 No. 315). Ukraine signed the 2005 Council of Europe Convention on Laundering, Search, Seizure and

Confiscation of the Proceeds from Crime and on the Financing of Terrorism (November 2005), the European Convention for the Protection of Individuals with regard to Automatic Processing of Personal Data (August 2005). Considering the necessity to implement new international standards in eradicating the financing of terrorism several laws of Ukraine were amended (the Law of Ukraine of 1 December 2005 No.3163). The Financial Action Task Force on Money Laundering (FATF) removed Ukraine from the list of countries for “active monitoring”. Ukraine is a full member of the Egmont group Financial Intelligence Units. As of now Ukraine concluded 30 memoranda of understanding with FIUs of foreign countries? Including 12 with EU member-states. The preparation of 6 memoranda with EU member-states is underway. Ukraine currently uses the FIU.net protected network for exchange of information, that links the EU member-states FIUs. Ukraine became the first non-EU country to join the FIU.net network (2005). Fruitful cooperation between Ukraine, the Council of Europe and the European Commission is also evidenced by the implementation of technical assistance project against money laundering in Ukraine (MOLI-UA) (February 2003-June 2003). The implementation of the following technical assistance project in this field had started (MOLATEFI-UA-2). A positive conclusion of the EU evaluation mission of the activity of the Committee of Financial Monitoring. On 31 July 2006 Ukraine ratified the Council of Europe Convention for the prevention of terrorism (the Law of Ukraine No.54-V). Taking into account the provisions of the Convention the amendments were made to the Criminal an Criminal Procedure Codes of Ukraine (the Law of Ukraine of 21 September No. 170). In April 2005 Ukraine became the member of the Australian Group – an international regime for control of transfer of dual-use goods, which may be used in creation of chemical or biological weapons. The Government of Ukraine decided to improve the procedure for state control over international transfers of dual-use goods. Ottawa Convention on prohibition of the use, stockpiling, production and transfer of anti- personnel mines and their destruction took its effect for Ukraine on 1 June 2006. It had facilitated the implementation of projects on anti-personnel mines destruction (it is planned to utilize around 6 million anti-personnel mines worth more than € 6 million). Besides, the EU adopted the decision to allocate € 1 million to the NATO Trust Fund for liquidation of old ammunition in Ukraine. The Government of Ukraine adopted the Concept of the State program for disposition of unserviceable conventional ammunition for 2006-2017, which provides for disposing of about 2,5 millions tons of conventional arms at bases and stockpiles of Ukrainian Armed Forces (the Regulation of the Cabinet of Ministers of Ukraine of 28 September 2006 No. 501). The Verkhovna Rada of Ukraine ratified the Additional Protocol to the Agreement between Ukraine and IAAE on increasing the effectiveness of the international nuclear non-proliferation regime (the Law of Ukraine adopted on 16 November 2005 No.3092) and the International Convention for the Suppression of Acts of Nuclear Terrorism (the Law of Ukraine adopted on 15 March 2006 No.3533) An agreement was reached concerning the launch of consultations on defining the mechanisms of cooperation between Ukraine and the EU within the G8 Global Partnership Initiative. The implementation of two projects In Ukraine is envisaged within the framework of implementation of the EU strategy against WMD proliferation. In January 2006 Ukraine held a seminar on control of export of dual use goods. With a view to improve the coordination of disposing the unserviceable and waste missiles, ammunition and explosive ordnance the Commission for coordination attached to the Government of Ukraine was established (the Resolution of the Cabinet of Ministers of Ukraine of 31 December 2006 No. 1856).

Main tasks: - take steps to provide the entry into force of the international conventions against international terrorism signed by Ukraine; - continue talks with the European side concerning the assistance for carrying out the projects on destruction and utilization of unserviceable and waste ammunition and small arms.

EU assessment: significant progress made December 2006

2.2. Economic and social reform and development

According to surveys of several NGOs among 62 countries Ukraine went up from 43 to 39 world position in globalization (when doing the survey the criteria of technology, economic integration, personal contacts and engagement in international policy were used).

Functioning Market Economy

Continue progress in the establishment of a fully functioning market economy

On 30 December 2005 Ukraine received the market economy status (Ukraine was excluded from the list of “transitional economy countries” under anti-dumping legislation of the EU). In 2006 the US government granted to Ukraine the market economy status. On 23 March the President of the USA signed the law on abolishment of the Jackson-Vanik amendment.

Assessment of the Ukrainian Side: the goal was achieved

EU assessment: the goal was achieved April 2006

Further advance in gradual approximation of basic legislative and regulatory framework to that of EU, and ensure its effective implementation

In order to implement the National Program for Adaptation of Legislation of Ukraine to that of the EU the Government of Ukraine annually adopts and implements the relevant measures. The compliance of the draft legal acts of Ukraine which belong to priority fields to the аcquis communautaire is constantly checked (the translations are available at www.sdla.gov.ua). On 2006 the first stage of the National Program aimed to conduct the comparative studies on Ukraine’s legislation compliance with the acquis communautaire in priority areas, defined by The PCA was finished. At the Governmental level the precise mechanism of the drafts of the law and other legislative acts verification exist. The Report on the implementation of the National program for adaptation was prepared on 2005 and submitted to the Verkhovna Rada of Ukraine and can be found on the Government web- portal. On 2006 the second edition of the Overview of the adaptation of Ukrainian law to the acquis which covers all the areas without exceptions where the adaptation was being made according to the National Program for Adaptation of Legislation of Ukraine to that of the EU was prepared. Work on translation of the acquis and its systematization continued. To make civil society updated on the EU law and on the process of adaptation of the Ukrainian legislation to the EU law a web-portal of the State Department for Adaptation of the Legislation (www.sdla.gov.ua) and the ‘Euroinform’ newsletter were launched. The State

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 informational network on the EU Law, trainings and the increasing of the public servants skills on EU Law is being created. On October 2006 the fourth stage of the Ukrainian-European Policy and Legal Advice Center (UEPLAC) was started. To start the TWINNING instrument: - there was held a seminar on rules, procedure and practices of TWINNING application in the partner countries, which has marked the official opening by the European Commission of this instrument in Ukraine; - the Chief Department of Civil Service was empowered to guide and coordinate the preparation and implementation of the TWINNING program in Ukraine; - TWINNING Administrative Office started its operation in Ukraine; - several acts of the Cabinet of Ministers of Ukraine on foreign training of the civil servants and activity of foreign advisors were amended.

Main tasks: - take measures to bring in conformity the provisions of Civil and Economic Codes of Ukraine; - start TWINNING projects in Ukraine; - take measures to expand TAIEX instrument to Ukraine (adoption of the decision by EU Council of Ministers) - Launch the Ukrainian-European Policy and Legal Advice Center are underway (UEPLAC)

Assessment of the Ukrainian Side: good progress made in implementing the goal

EU assessment: good progress made April 2006

Improve investment climate, including by ensuring transparency, predictability and simplification of regulation and its application.

According to EBRD experts in 2005 Ukraine advanced in foreign trade and currency system, reform in banking system and liberalization of interest rates.

Nations in transit EBRD Report 2005

In 2005 Ukraine went up by 29 positions in the index of economic freedom (from 117 ranking position in 2004 to 88 position in 2005 among 155 countries) Heritage Foundation

Steps were taken to improve the investment climate. In April 2005 the composition of the Consultative council on foreign investments in Ukraine was renewed and the expert Commission of the Consultative Council was created, whose main task is elaboration of proposals on eliminating obstacles to the activity of foreign investors in Ukraine (the Decree of the President of Ukraine of 11 April 2005 No. 625). To improve the effectiveness of the state investment and innovation policy as well as coordination of the executive power bodies in these fields the National Council of Ukraine on Investments and Innovations as an advisory body to the President of Ukraine (Decree of the President of Ukraine of 19 July 2005 No. 1116) and the State Agency of Ukraine on Investments and Innovations as central executive power body with special status (Decree of the President of Ukraine of 30 December 2005 No. 1873) were created. To contribute to establishing better legal and organizational conditions for the activity of foreign investors the Ukrainian Center for Facilitating Foreign Investments (Resolution of the Cabinet of Ministers of Ukraine of 2 August 2005 No. 666) was created. Ensured macroeconomic stability, establishment of a favourable investment environment gave the possibility to attract a good volume of foreign direct investments of up to $ 7.9 billion. Net

FDI growth increased by 3.3 times compared to 2004. The growth of investments (excluded assets received from privatization of “Kryvorizhstal”) comprised $ 2.4 billion. This is almost 1/3 more than in 2004. Work is being done to improve the conditions for investment activities in the field of subsoil use. On 15 March 2006 the Government approved the List of subsoil plots which may be leased on conditions determined by the agreements on production distribution. On 25 March 2005 an open tender for the right to conclude the agreement on hydrocarbons distribution which would be extracted from the Kerch are of the Black Sea shelf was held. In order to promote and develop the investment activities and eliminate obstacles for it on 10 April 2006 the President of Ukraine approved the Plan of priority measures on investment activities.

According to the World Bank in 2005 Ukraine ranked among the first ten European states by the criterion of time needed to register the enterprise

Registering and licensing procedures were improved. During 2005 in order to simplify the procedure of initiating business 677 Single registration offices were created, which register the economic agents under the “single window” principle. 675 centres for issuance of licensing documentation under the principle of organizational unity. It takes no more then 3 days to get registered. With a view to facilitate and lower the cost of registration of economic agents several laws were amended (the Law of Ukraine No. 3456). To ensure the fulfilment of the Action Plan for the Implementation of the State Regulatory Policy in 2006 regular meetings, conferences with participation of business at the regional and central levels were launched.

Assessment of the Ukrainian Side: some progress made in implementing the goal EU assessment: some progress made December 2006

Monetary, exchange rate and fiscal policies

Consolidate progress in macro-economic stabilisation and growth policies

During 2005 the positive GDP dynamics (102.7 %) was ensured through the increase of gross added value in transport and communications, extractive industry and manufacturing, education, healthcare and social care. In 2006 the economy of Ukraine developed under the influence of the range of restraint factors (both internal and external) which at the start of the year have in the main negative impact. But as a result of consolidated efforts of all branches of Ukraine’s Power the stability in country was saved, and the economy general recovery features were gained, also the foundations for growth were laid. Real GDP growth in January – November 2006 was 7% compared to the respective period in 2005. At whole the growth dynamics for 2,6 times exceeded the figures of the 2005. Mentioned dynamics pass ahead of that of Russian Federation and EU countries. The UAH/USD exchange rate remains stable. The obligatory sale of 50% of currency income from exports was abolished. The volume of the National Bank’s currency reserves on the 1 January 2007 was $ 22.3 billion), that on 14,8% larger then at the beginning of 2006, their volume is sufficient to cover all potential payment balance risks. Appreciating the increasing possibility of the suspended and consistent economic policy conducting, including the budget implementation state, on 25 October 2006 the Fitch rating Agency raised the forecast for Ukraine on default ratings to eminent in national and foreign currencies from currency “stable” to ”positive”. On 19 December 2006 the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On State budget of Ukraine for 2007” An important element of budget policy in 2007: to ensure the stabilization of the economic and financial situation; improve investment climate, including by

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 ensuring transparency, predictability of regulation; undertake consistent and far-reaching structural reform to further consolidate the functioning of market economy.

EU assessment: some progress made December 2006

Structural reforms

Undertake consistent and far-reaching structural reform program to further consolidate the functioning of market economy.

The reforms in property in 2005 concerned large and the most important for the economy and the state security enterprises were carried on. Their privatization has impact not only on their operation and development, but on the economic transformation in country as well. In 2006 666 state owned and 4349 communal units changed the form of ownership. The State budget received UAH 20.69 billion from the sale of share holding (except the assets of UAH 4.26 billion paid back to the former owner of the OJSC Kryvorizhstal), which is twice bigger then the plan target. 93.02 % of the costs was received from the sale of OJSC Kryvorizhstal at the auction held on 24 October 2005. All the disputed ownership issues were settled in accordance with the existing court procedures without any intervention of the government. Till the 1 January 2007 to the state Budget the UAH 538,46 million of dividends were transferred what consist nearly 124 per cent of the year schedule. The rent from state property receipt increased because of the legislature improvement and more precise controlling of the lassoers of the rent agreement execution. At the same time was not ensured in the full volume the annual budget receipt from privatisation in 2006. During 2006 from state property selling and privatisation the UAH 545,9 millions were transmitted to state budget total fund, what constitute the 26 % from that was planned. 21 September 2006 The Verkhovna Rada adopted the Law of Ukraine “On the state property objects governing”(No 185-V). With the aim to create appropriate conditions for preparation and conducting of the state property privatisation in 2007, to minimise the risk of the not transferring costs according to the scheduled volumes in January 2007 Verkhovna Rada of Ukraine adopted The list of state property objects which are not to be privatize , to which several grand objects as Odessa near port Plant, Pervomaysk chemical Plant were excluded. The liability for breakage for the losses caused by not effective execution of the property governing functions and corporate property rights for state bodies and functionaries adoption what permitted to increase the return from the state property in forms of taxes, dividends, rents and concession payments. During 2006 the legal aspects of the state property governing were regulated, its inventory was completed. With the aim to improve the mechanisms of privatisation, namely middle and grand enterprises, firs of all in the field of increasing the openness and transparency of this process, the Government prepared the draft of the new State program of the privatisation for the next three year period, and also the amendments to the basic laws on privatisation issues. In June 2005 the Government of Ukraine provided to the European Commission the guarantees of non-conclusion of the memoranda which provide for the government intervention in price setting. The reforms in financial sector continued. The new Memorandum between the Cabinet of Ministers of Ukraine and the National Bank of Ukraine on the development of OJSC State Savings Bank (Oshchadbank) within the framework of the IBRR/Ukraine Second Development Policy Loan for Ukraine was concluded.

Measures were taken to improve the operation of the stock market. The procedure for licensing the activity in the securities market was established (the Law of Ukraine adopted on 6 September 2005 No. 2800). The system of economic agents ranking was introduced in Ukraine (the Law of Ukraine adopted on 15 December 2005 No. 3201-IV). The Law of Ukraine “On securities and stock market” will foster the establishment of a transparent and liquid securities market (the Law of Ukraine adopted on 23 February 2006 No. 3480). On 7 March 2006 the Government approved the action plan for the development of the stock market of Ukraine for 2006 – 2010 in major directions. On 15 March 2006 the Verhkhovna Rada adopted the Law of Ukraine “On holding companies in Ukraine” (No 3528). The government approved The Directions of the Credits Cooperation System Development (The resolution of the Cabinet of Ministers of Ukraine on 7 May 2006 No 321). In January 2007 the Verkhovna Rada of Ukraine prolongs the moratorium on selling the farm land until the adoption of the all respective legislative acts. (Law of Ukraine on 19 December 2006 No 490-V)

Main tasks: - take measures to draft the State program of privatization - take measures to adopt the Law of Ukraine “On the joint stock companies” - further develop the stock market

Social situation, employment, poverty reduction

In order to implement the Action plan for the reforms in social sphere a set of measures were taken to raise the welfare of the population and to eliminate the disparities in incomes of the socially vulnerable level of population. The 2005 State Budget was socially oriented. In 2005 the basic social guarantees were strengthened. The differentiation of pension size started and the principle of pension levelling was eliminated. In 2006 the Government policy also is aimed to increase social standards, to strengthen the social protection of the population and to decrease the unemployment level. On 1 January 2007 the average level of the pension payment increase by 17 % in comparison with the beginning of the 2006 year, the living wage was increased for main social and demographic population groups. To improve the labour market situation during 2005 more than 1 million new jobs were created. During the tenth months of 2006 near 935,5 thousands new jobs was created. The unemployment level, defined according to the ILO methodology, shrunk from 9.2% in 2004 to 7.8% in 2005. From the beginning of the 2006 till the 1 December 2006 the number of registered unemployment shrunk to 693,1 thousands or at near for 20%, and their share in general number of the working population decrease from the 3,1 % to 2,5 %. Ukraine and the EU launched the dialogue on employment. In September 2005 a familiarization visit of the European Commission’s mission to Ukraine took place. The counterparts discussed the issues legislation in labour, healthcare, labour safety, social security and development of civil and social dialogue in Ukraine On 6 – 7 February 2006 the European Economic and Social Committee (EESC) held a conference on “Connecting EU-Ukraine Civil Society: Facing Challenges and Finding Opportunities in the Framework of the EU-Ukraine Action Plan to urge Ukrainian civil society organisations participate more intensively in EU values-based reforms. The Government approved the Main directions of state employment policy for the period to 2009 (the Regulation of the Cabinet of Ministers of Ukraine No 922).

Assessment of the Ukrainian Side: some progress made EU assessment: some progress made

April 2006

Regional Development

Reducing regional imbalances and improve local development capacities

On 8 September 2005 there was adopted the Law of Ukraine “On stimulation of regional development” (the Law of Ukraine No. 2850) to define legal, economic and organizational basis for the implementation of the state policy in eliminating depression areas. The Law provides for the conclusion of the regional policy agreements and agreements on territorial development between the Government of Ukraine and the regions of Ukraine. In 2006 the Government of Ukraine and regional Dnipropetrovsk and Kharkiv authorities signed the protocol of intention concerning the conclusion of the regional development agreements. On 13 April 2006 a seminar on “Problems in approximating the Ukrainian legislation on regional development to the European norms and standards in line with the European Charter of Local Self-Government” under the TACIS project “Fostering regional development in Ukraine” was held. The State strategy for regional development of Ukraine till 2015 was adopted (The Regulation of the Cabinet of Ministers on 21 July 2006 No 1001). In October 2006 The Conception on the forecasting and program documents on social and economical development of Ukraine system improvement. (The Regulation of the Cabinet of Ministers No 504). The Conception define the further methodology improvement of the strategic and programming planning for long-, middle and short term periods at the state and regional levels.

Main task: - Take measures for implementation of the State strategy for regional development of Ukraine till 2015

2.3 TRADE, MARKET AND REGULATORY REFORMS

Undertake first assessment of the impact of EU enlargement on trade between the EU and Ukraine during 2005 and regularly thereafter as appropriate.

In 2005 the parties accomplished the first assessment of the impact of EU enlargement on trade between the EU and Ukraine. According to the experts of the European Commission, the enlargement in general had positive impact on development of bilateral Ukraine – EU trade. According to Ukrainian experts, a general positive trend of increase of commodity turnover between Ukraine and the EU was noted. However, the changes in commodity flows are not excluded in mid-term perspective. At the meeting of the Ukraine – EU Cooperation Committee (19 October 2005) the Ukrainian Side proposed to establish a joint working group in the margins of the Ukraine – EU Sub- Committee No. 1 “Trade and Investments”, which would keep on the monitoring of bilateral trade in the context of the EU enlargement. The European Side did not support the idea.

2.3.1 MOVEMENT OF GOODS

There are statistical discrepancies between EUROSTAT data and the data of the State Committee of Statistics of Ukraine. According to the State Committee the foreign trade turnover

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 with the EU member-states in January-November 2006 amounted to $ 23.44 billion, export grew up by 17.2%, import-28.8% ($13.56 billion). The EU member-states share in Ukraine’s foreign trade was 31%). According to the EUROSTAT data the foreign trade turnover in January-September 2006 amounted to €18.71 billion, what is 32.65% more than during the respective period in 2005.The volume of commodity export to Ukraine grew up by 48.48%, while the import from Ukraine grew up by 9.55%. The negative balance of Ukraine in January-September 2006 amounted € 6.11 billion. The Ukraine’s share in the EU member-states foreign trade turnover was 1.14%, what is 0.27% more than during the respective period in 2005.

Trade relations

1. Full implementation of PCA commitments in sphere of trade in goods

With a view to fully implement the Partnership and Cooperation Agreement and honour the commitments in the context of Ukraine’s accession to the WTO there was conducted joint work with the Verkhovna Rada of Ukraine directed at adoption of the laws concerning the liberalization of the foreign economic activity. The Verkhovna Rada of Ukraine adopted the Law of Ukraine aimed at gradual decrease of the export duty for: seeds and oil crops after Ukraine’s full accession to the WTO (it is envisaged that starting from 1 January 2007 a 16% duty of will be decreased by 1% annually until it reaches 10%) (the Law of Ukraine adopted on 7 July 2005 No.2773); live cattle and skin raw material (it is envisaged that starting from 1 January of the year followed the Ukraine’s accession to the WTO the 5% per year decreasing is foreseen for live cattle until it reaches 10%, and for skin raw material the 1% per year decreasing is foreseen until it reaches 20%) (the Law of Ukraine adopted on 16 November 2006 No.356); The Government of Ukraine submitted to the Verkhovna Rada of Ukraine a series of other draft laws to gradually eliminate export and import restrictions which are not yet adopted (namely, concerning the reduction of customs duties for live cattle and rawhide, scrap steel and ferrous metals). On 9 March 2005 Ukraine and the EU signed the Textile Agreement which would liberalize the trade in textile. On 27 July 2005 Ukraine and the EU signed the Steel Agreement for 2005-2006 which increased Ukraine’s annual quota in the EU market up to 1 million tons. In July 2005 and June 2006 there was held a meeting of the Coal and Steel Contact Group with participation of Ukrainian business representatives.

Main tasks: - Take measures to sign The Agreement between the Government of Ukraine and EU on trade in certain steel products in 2007

Accession to the WTO

Ukraine consistently worked at the political, diplomatic and expert levels with major WTO member-states concerning the support of Ukraine’s accession to the WTO. As of now 16 official meetings of the Working Party on the Accession of Ukraine to the WTO (the latest was held on 15 June 2006) and a series of informal meetings (the latest was held on 27 October 2006). The process of harmonization of the Ukraine’s legislature with the WTO norms and principles is completed. In 2005 – 2006 the Verkhovna Rada of Ukraine adopted 38 laws to ensure the Ukraine’s accession to the WTO, which, in particular, regulate the intellectual property rights protection, technical barriers in trade, accounting, automobile industry, quality and safety of food,

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 insurance, some issues in agriculture. More than 98% of a consolidated tariff proposal was approved. As of now it goes through technical processing. As of January 2007 Ukraine signed 49 bilateral protocols on access to goods and services markets.

Main tasks: - take measures to complete the negotiations and sign up the bilateral protocols on access to goods and services markets wit Kyrgyzstan; - prepare the final wording of the draft Report of Working Party.

EU assessment: : significant progress made December 2006

In the light of advances in economic reform and implementation of PCA commitments, consider jointly the feasibility of the establishment of a Free Trade Area following Ukraine’ s accession to the WTO

The independent experts (the Center for European Policy Studies, Brussels, Institute of World Economy, Kiel, International Center for Policy Studies, Kyiv) have undertaken the feasibility study of the establishment of a Free Trade Area between Ukraine and the EU. The summary of this study were presented at the Ministry of Economy in April 2006. It is indicated that this study contains recommendations only and the views expressed in the report are attributable only to the authors, and neither to the European Commission nor the Government of Ukraine. In 2006 the preliminary unofficial working consultations between the experts of Ukraine and the European Commission on establishment of the free trade area between Ukraine and the EU were launched (7 February, 27 April, 12 June, 3 October). The parties work out the proposals concerning the format, content and some prior directions of the draft agreement (technical barriers, sanitary and phytosanitary measures, the trade procedures simplification, services).

Main tasks: - continue informal working consultations concerning the format and content of the draft Agreement on establishment of the free trade area between Ukraine and the EU (in line with the agreement between the parties reached before the Ukraine’s accession to the WTO); - start official negotiations on conclusion of the Agreement on establishment of the free trade area between Ukraine and the EU (after Ukraine’s accession to the WTO).

Assessment of the Ukrainian Side: significant progress made in implementing the goal

EU assessment: some progress made April 2006

Customs

Elaboration and implementation of customs legislation aligned with international and EU standards. Improve functioning of customs service; simplify and modernize customs procedures at borders and inland

The customs and tariff policy of Ukraine aims at liberalization of the foreign trade. During 2005 the Verkhovna Rada of Ukraine adopted a series of laws which reduce the excessive

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 differentiation of the import duty rates for the uniform commodities. The possibility to manipulate the commodity nomenclature and deliberate reduction of the commodity customs value etc. At hole the changes of the import duties rates were concerned of 82 good’s group of the Custom Tariff of Ukraine (what consist of 85% of its commodity nomenclature) After the respective amendments to the custom Tariff the average import duty rate decresed by 38% and consist 6,51%, while on foodstuffs decreased by 30% till 13,84%, and on manufactured goods decreased by near 50% till 4,4%. In particular the following subjects were adjusted by respective Laws: the question of changes on import duty on exotic fruits, footwear, consumer electronics, mobile phones, electrical equipment, agricultural and foodstuffs products, raw materials, utilities, cars, and also for goods and products not producing in Ukraine. On 22 December 2005 there were made amendments to the Customs Code of Ukraine concerning bringing legislation on customs valuation in conformity with the Agreement on application of Article VII of GATT. The Custom ethic Policy have been introduced based on international generally recognized (Arusha Declaration) and by the means of the Law adopted by Verkhovna Rada “On Disciplinary Statute of the Custom Service of Ukraine” (Law on 6 September 2005 No 2805). In May 2005 The State Custom Service of Ukraine approved The Conception on creation, application and development of the risk analysis and controlling system and The Regulations on risk factors analysis and selection system on determination of the certain forms of the custom control. On 18 September 2006 the Expert Commission with application of the risk analysis and controlling system was created (The Decree of the Custom Service of Ukraine on 18 September 2006 No 788). Steps were taken to facilitate customs procedures. Starting from October 2005 the preliminary documentary control of commodities (sanitary-hygienic, veterinary, phytosanitary, ecological, radiological control and control over the movement of cultural valuables) is done directly at points of entry at the state border. Customs supervision and customs registration were introduced at international points of entry at the state border under the principle of single window and single office. Hence the time needed to hold customs procedures under the single office principle at points of entry for automobile services decreased by 50%. The mechanism of continuous provision of information and advice to the foreign trade agents concerning the legislation and the procedure of export and import operations. To liberalize customs operations and facilitate the movement of commodities the State Customs Service signed the memoranda on cooperation with the Council on foreign economic activity attached to the Cabinet of Ministers of Ukraine, European Business Association, importers of seafood, meat, automobiles and automobile dealers, “Union of wholesalers of alcohol and tobacco”, American Chamber of Commerce in Ukraine. The reliable enterprises, according to the State Customs Service, which agree to work with the customs in an open and transparent manner, may receive the stop-cards which would allow reducing the time for customs procedures at the state border. The Customs officials were regularly trained. Measure were taken to create a single centralized electronic database of the acts of the State Customs Service, computerization of customs administration and modernization of the customs laboratories, in particular in the margins of the “Customs – 7” contract under TACIS Program. Ukraine joined the Convention on Simplification and Harmonisation of Customs Procedures (Law of Ukraine on 5 October 2006 No 227-V); On December 2006 The State Custom Service of Ukraine approved The Interim Methods of external trade custom statistic of Ukraine conduction. The first step on the way of the multifunctional complex system “Electronic Custom” creation was taken by establishment on October 2006 The Regional informative Custom.

Main tasks: - take steps to adopt a new wording of the Customs Tariff based on the Harmonized Commodity Description and Coding System 2007.

Standards, technical regulations and conformity assessment (EU harmonized areas)

Continue the alignment of Ukraine with the EU and international regulatory and administrative practices and prepare for Ukraine’s participation in the EU internal market in selected priority industrial sectors

On 1 December 2005 the Verkhovna Rada of Ukraine adopted the Law of Ukraine on standards, technical regulations and procedures for the assessment of conformity, aiming to bring the national legislation on technical regulations in conformity with the provisions of the WTO Agreement on technical barriers to trade (the Law of Ukraine No. 3164). The Program of revision of intergovernmental standards (GOST), which are in effect since 1992, was adopted. As of 1 January 2007 in Ukraine 3598 national standards, alighted with international and EU’s ones, were adopted, among them in 2006 – 493 standards (2005 – 900, 2004 – 596, 2003 - 517) and 20 technical regulations based on EU Directives (17 are still being harmonized). With a view to Ukraine’s accession to the Agreement on Conformity Assessment and Acceptance of industrial products (ACAA) The Action Plan on free movement of the manufactured products is being implemented. The prior spheres of the ACAA accession process and the approximate Accession Action Plan till 2011 were defined. On the 27-28 November in Kyiv the seminar concerning the EU new approach Directives in the field of standardisation and a number of work meetings within the launched Twinning project took place. On 1 December 2005 there was adopted the new wording of the Law of Ukraine “On protection of consumer rights” (the Law of Ukraine No.3161-IV) which brought the Ukrainian legislation in conformity with EU standards concerning the consumer rights protection, ensuring of the safety of products during distribution and placement on market (directives 97/7 EЕС, 85/577, 93/13 EЕС, 98/6 EU, 99/44, 85/374 EEC, 87/102/EЕС, 84/450/EЕС, 98/27 EU). With a view to update and reduce the List of Products subject to certification in Ukraine its systemic revision was ensured. During 2005 - 2006 55 items of the description of low risk commodities were excluded from the List. Certification authority issued more than 167,000 conformity certificates for products and services. During 2006 the quality management systems and environmental management systems of 251 enterprises were certified. On 1 March 2006 the Government of Ukraine approved the state target programs for standardization and development of the reference base for 2006 – 2010. On 11 2006 the Program for introduction of the quality management system in executive power bodies according to international standards of ISO 9000 series was adopted (the Resolution of the Cabinet of Ministers of Ukraine No.614). In May 2006 there was adopted the Concept for the development of technical regulation and consumer policy for 2006 – 2010 aiming to establish a modern system of technical regulation and consumer protection, harmonized with WTO and EU requirements (Regulation of the Cabinet of Ministers of Ukraine No. 267-p). The cooperation with European Standardisation Organisations CEN and CELEX was intensified.

Main tasks: - to take measures for Implementation of the Ukraine Accession Action Plan to the Agreement on Conformity Assessment and Acceptance of industrial products (ACAA) according to agreed schedule.

Assessment of the Ukrainian Side: significant progress made in implementing the goal EU Assessment significant progress made in implementation of the ACAA

Accession Action Plan December 2006

Elimination of restrictions and streamlined administration

Facilitate the movement of goods through i) prevention of quantitative restrictions, ii) gradual elimination of import licences and iii) progressive removal, and prevention of new discriminatory measures. Improve institutional and administrative co-operation

The Government of Ukraine took measures to facilitate the movement of goods. The licensing of the export of iron ore and iron concentrate, meat was abolished. The quoting of the coal-tar export was also cancelled (the Resolution of the Cabinet of Ministers of 11 May 2005 No. 326). The procedure for exports of goods from the customs area of Ukraine was simplified by abolishing the registration of foreign trade contracts (Decree of the President of Ukraine issues on 29 June 2005 No.1003). A fixed fee for the issuance of export/import license under automatic or non-automatic licensing in accordance with WTO requirements and standards was introduced.

Assessment of the Ukrainian Side: reasonable progress made EU assessment: some progress made April 2006

Sanitary and phytosanitary issues

Increase food safety for consumers and facilitate trade through reforms and modernization of the sanitary and phytosanitary sectors

Ukraine joined the Codex Alimentarius Commission and the International Plant Protection Convention (text revised and approved by the FAO Conference in November 1997). With a view to clearly divide the competence of the central executive power bodies in the field of state control and supervision over the production and circulation of food the Verkhovna Rada of Ukraine adopted the new wording of the Law of Ukraine on quality and safety of the food products and foodstuffs” (the Law of Ukraine adopted on 6 September 2005 No.2809-IV). The new wording of the Law of Ukraine “On Plant Quarantine” provides for the harmonization of national legislation on application of sanitary and phyto-sanitary measures with international standards and WTO Agreement provisions (the Law of Ukraine of 19 January 2006 No.3369). The Ministry of Agriculture approved the phytosanitary rules for the imports, transportation in the inland, transit, exports, procedure of processing and sale of the materials under quarantine. The International Agency (DAP) accredited the Central laboratory of veterinary medicine against 50 indicators of the safety of products and forage (according to ISO/IEC 17025:2000). The preparation of 25 regional state laboratories of veterinary medicine for accreditation is underway. The TACIS project “Establishment of an Agricultural Standards Certification and Control Mechanism in Line With WTO-SPS Requirements” was being implemented. On 24 – 29 April 2006 the experts of the European Commission’s Food and Veterinary Office visited Ukraine in order to undertake the general assessment of Ukrainian legislation on food safety, plant and forage safety, animal health and maintenance. Ukraine joined the International Convention for the Protection of New Varieties of Plants (Law of Ukraine on 2 August 2006 No 60)

Main tasks: - intensify the cooperation with EU in veterinary, in particular work out the possibility to conclude the relevant bilateral agreement; - take measures to obtain permission for export of Ukrainian animal products to the EU

Assessment of the Ukrainian Side: some progress made EU Assessment: considerable progress made in this field in view to join the WTO

2.3.2. RIGHT OF ESTABLISHMENT; COMPANY LAW AND SERVICES

Establishment and company law

Full implementation of the most favoured nation and national treatment principles (Conditions affecting establishment and operation of companies)

On 6 September 2005 the Law of Ukraine “On licensing system in economic activity” with a view to eliminate restriction for the establishment of companies (the Law of Ukraine No. 2806-IV). Work was done to eliminate a series of discriminating measures which influence the operation of Ukrainian and EU companies, in particular: - the conditions of localization for production of national automobiles were abolished (the Law of Ukraine adopted on 6 July 2005 No 2740-IV); Equal conditions were created for obtaining the certificate of auditor of Ukraine regardless to citizenship (the Law of Ukraine adopted on 6 July 2006 No. 2738-IV) The including of the financial accounting on person’s commercial activities data to the financial balance and the financial results Annual Report to the Single legal persons and natural persons’ private activities State Registry (Law of Ukraine on 9 February 2006 No 3422).

Main tasks: - continue work on the improvement of procedure of company’s bankruptcy

Assessment of the Ukrainian Side: considerable progress made in implementing the goal

Services

There are statistical discrepancies between EUROSTAT data and the data of the State Committee of Statistics of Ukraine. The foreign trade turnover in services (January – September 2006) with the EU member states amounted $ 2,78 billion. The volume of services export increased by 25,8% and amounted $1,59 billion, import increased by 27,8 % and amounted 1,19 billion. The negative balance amounted near $ 401,7 million.

Gradual abolition of restrictions to progressively allow the supply of services between the EU and Ukraine in certain sectors.

Proposals of Ukraine on services in the framework of WTO accession negotiation process are the most liberalized among all the WTO member-states. The recommendations of the International Monetary Fund and the World Bank submitted in the framework of the Financial Sector Assessment Program were being implemented. The State Committee of Ukraine for Financial Monitoring approved the Methodological recommendations on internal auditing of the financial institutions.

To consolidate the positive development trend of the insurance market of Ukraine there is envisaged the possibility to establish and run on the territory of Ukraine the permanent representations of insurers in the form of affiliates of foreign insurance companies 5 years after Ukraine’s accession to the WTO (the Law of Ukraine adopted on 7 July 2005 No 2774). On 23 August 2005 the Government of Ukraine approved the Concept for the development of insurance market of Ukraine till 2010 (regulation of the Cabinet of Ministers of Ukraine No 369-p). On 16 November 2006 The Verkhovna Rada of Ukraine amended the Law of Ukraine “On insurance”, aimed on bring it in conformity with the WTO principles and requirements.

Main tasks: - continue work on bringing national legislation on services in conformity with international standards

2.3.4 MOVEMENT OF PERSONS INCLUDING MOVEMENT OF WORKERS

On June 2005 the round table on European Convention on the legal status of Migrant workers was conducted in Ukraine. Work on conclusion of the agreement with the EU member-states on coordination of social maintenance was continued. Negotiations were held concerning the conclusions of the relevant agreements with Germany, Hungary, Portugal. As of now Ukraine concluded bilateral agreements on social security with Bulgaria, Spain, Latvia, Lithuania, Slovakia, Hungary, Czech Republic. A series of intergovernmental and inter-ministerial agreements with the EU member-states were signed.

Main tasks: - take steps for the European Convention on the Legal Status of Migrant Workers to take effect

2.3.5. OTHER KEY AREAS

Taxation

Development and implementation of tax systems and their institutions based on international and European standards

The amendments to the State Budget of Ukraine for 2005 and to other budget laws provided for: improvement of VAT administering; broadening of taxation base through abolishing of sectoral benefits; elimination of benefits on VAT payment, excise duties, income tax, import duty for the enterprises of automobile industry; elimination of benefits in the free economic areas and in the areas of priority development. As of now the Government considers the proposals on mechanisms of compensation to the investors who have already worked in these areas and honored the provisions of the agreements; granting to the enterprises with foreign investments of the right to use the tax anticipation bills; declaration of a 5-year moratorium for granting new and enhancing the existing VAT benefits; In order to advance the tax reform the working groups to scrutinize the problems of tax and duties administering were established. With regard to experience of the leading world countries in

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 improving the tax administering there was elaborated the description of technological process for the performance of tax service functions, integrated into a single Concept for the Operational Activity of the State Tax Service. The Government of Ukraine significantly improved the situation with VAT refund. By the end of 2006 the volume of overdue VAT refunded on UAH 15 billion, what is 12.2% more than during the respective period in 2005. On 23 May 2006 Ukraine obtained full membership in the General Assembly of the Intra- European Organisation of Tax Administrations. The Strategy for the Development of the State Tax Service of Ukraine till 2013 is being realised. Within the framework of this strategy there were elaborated: the methodology for division of taxpayers in the categories of attention and the relevant software ; methodological guide on tax audit; concept for creation of STS corporate telecommunications network; distance learning course on “Modernization of tax service of Ukraine”. There was created the database of tax risks, which provides the possibility to select the taxpayers for documentary control relying on the tax risks.

Main tasks: - continue work on tax system reforms in Ukraine.

Assessment of the Ukrainian Side: some progress made EU assessment: some progress made December 2006

Competition policy

Appropriate legal and institutional frameworks of state competition protection were created. The legislature in force in the field of economic competition protection at whole is harmonised with the respective EU norms, is agreed with the secondary legislation including the latest amendments made into EU Competition Law. With the aim to increase the legal adjustment efficiency the respective amendments were made in the field of economic competition protection, which foresee the legal means improvement of the anti-competitive concerted action disclosure, and concentration control to avoid the regional markets monopolization. On August 2006 the Rules on economic competition protection infringement investigation were approved with the aim to ensure more complete following of the the non-discrimination and transparency principles. The Government of Ukraine implements the Concept of the restructuring the state subsidies for the branches of national economy, which prevents the use of state assistance that distort competition and international trade. This is evidenced by elimination of sectoral tax benefits during 2005. The centre for comprehensive studies in antimonopoly policy in Ukraine undertakes analysis of the impact the state assistance has on competition in Ukraine. With participation of the experts of the European Commission a round table on “Control over state assistance to the economic agents as a part of state competition policy” was held. With regard to the proposals of the European experts he amendments to the laws of Ukraine “On Antimonopoly Committee” and “On Protection of Economic Competition” concerning the supervision on the state authorities when granting state assistance to the economic agents.

Main tasks: - Continue work on drafting the legislation concerning the supervision over granting and use of state assistance to the economic agents.

Intellectual and industrial property rights

In August 2005 the US Government adopted the decisions to lift trade sanctions against Ukraine following the work done in bringing the Ukrainian legislation on intellectual property rights protection in line with EU law and international agreements in this field, and introduction of the effective enforcement machinery. On 23 January 2006 the USA, in recognition of the Government of Ukraine's efforts to improve the enforcement and protection of intellectual property rights, adopted the decision to reinstate Generalized System of Preferences (GSP) benefits for Ukraine. The Ukraine’s IPR Protection Ranking under Special 301 improved Ukraine adopted legislation on IPR protection in line with international standards and established effective enforcement infrastructure, which ensures the enforcement of state policy in this field, namely, there were adopted 10 special laws and more than 100 subordinate legal acts; 18 international agreements were concluded. On 26 May 2006 in Brussels there was held a presentation of the Ukrainian central executive power bodies activity “Effective implementation and enforcement of intellectual property rights in Ukraine”. On 6 July 2005 Ukraine passed law, which regulates the operations connected with the manufacturing, exporting and importing of laser disks, and laser disk systems (the Law of Ukraine No.2734). To reduce the use of unlicensed software the Ministry of Education and Science of Ukraine and Microsoft Ireland Operations Limited signed Agreement on legalization of the software. The State Department for Intellectual Property also signed agreement with Novell company representation and ABI Ukraine Ltd. On 9 February 2006 Ukraine passed the law No. 3423-IV which stipulates a strengthening of criminal consequences for violation of intellectual property rights when putting into circulation of audiovisual products, phonograms, video games, software and databases. The Ministry of Internal Affairs of Ukraine published the Practical Guidelines on Copyright and Neighbouring Rights Protection for use in its activities. The Program of coordinated actions of law-enforcement and supervisory bodies against unlawful manufacturing, distribution and sale of audio and video production, CDs or other intellectual property objects is being carried out. The control over manufacturing and transfer of production across the customs border of Ukraine was strengthened. The relevant information and explanatory work was done. Upon the initiative of the European Commission a permanent Dialogue between Ukraine and he EU on intellectual property rights protection was launched. On 11 April 2006 in Kyiv there was held the first experts meeting during which the European Commission marked positive developments in IPR protection in Ukraine. It was agreed to start the discussion on conclusion of a bilateral Agreement on mutual protection of geographical indicators between Ukraine and he EU.

Main tasks: - complete the bringing of Ukrainian legislation in conformity with EU laws - work out the issue of conclusion of the agreement with the EU on mutual protection of geographical indicators.

Assessment of the Ukrainian Side: significant progress made EU Assessment: significant progress made

December 2006

Public procurement

The Government of Ukraine adopted the Strategy for the development of public procurement system for 2005-2010 (the resolution of the Cabinet of Ministers of Ukraine of 21 December 2005 No. 1257). Due to amendments made to the Law of Ukraine “On procurement of goods, works and

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 services at the state expense” (the Law of Ukraine adopted on 15 December 2005 No. 3205-IV) the legislation on public procurement is being revised. During the No1 “Trade and investment” and No3 “Enterprises, competition, regulatory cooperation” meetings (13-14 June 2006) Ukrainian side provide the explanations on public procurement legislature in force, as well as on further steps planned to be taken in the field of its improvement. The EU-Ukraine bilateral dialog on public procurement issues was launched by means of information exchange and experts meetings conducting.

Main tasks: - continue work to improve the legislation on public procurement - to create the conditions for free efficient access to the public procurement information.

Statistics

The State Committee of Statistics undertook comparative study and find out the major discrepancies in the systems of statistical indicators of Ukraine and Eurostat. The methodological scheme for gradual introduction of several statistical indicators in Ukraine is being elaborated. The Project of the development of state statistics for the monitoring of social and economic transformations in Ukraine in the margins of the Loan Agreement with International Bank for Reconstruction and Development (the Law of Ukraine of 18 May 2005 No. 2568-IV). In December 2005 the Procedure for interaction of the information exchange subjects (State Committee for Regulatory Policy and Entrepreneurship, State Committee of Statistics, STA, Pension Fund and social security funds) concerning use of data of the Single State Register of Legal Entities and Natural Persons Entrepreneurs. The Government approved the 2006 Action Plan for Implementation of the Strategy of the Development of State Statistics till 2008 (regulation of the Cabinet of Ministers of 15 February 2006 No. 82). Besides, the proposal of the State Committee of Statistics concerning the experiment on introduction, with regard to the EU member-states experience, of a two-level system of statistical data collection, processing and distribution in the state statistics institution (regulation of the Cabinet of Ministers of 15 March 2006 No. 136). Starting from 1 April 2006 the second version of the Classification of economic activities harmonized with the European classification came into effect.

Assessment of the Ukrainian Side: reasonable progress made Financial control There were made amendments to the Article 98 of the Constitution of Ukraine, which envisage that the Accounting Chamber of Ukraine supervises not only the use of state budget funds, but their receipt as well (amendments came into force on 1 January 2006). This will have positive effects for the audit of budget incomes and expenditures. According to the state budgets of Ukraine for 2005 and 2006 the State Treasury of Ukraine serves the specially allocated state funds (Pension Fund, Social Insurance Fund for Temporary Disabled Employees, Mandatory Unemployment Social Insurance Fund, Social Insurance Fund against Occupational Accidents and Diseases). With the purpose to improve the system of external and internal audit and supervision over the use of state and local budget funds the Government of Ukraine approved and carries out the Concept of the development of internal financial control (Regulation of the Cabinet of Ministers No. 158). The Government of Ukraine approved the Strategy for modernizing accounting system in the state management sector for 2007-2015 (Regulation of the Cabinet of Ministers of 16 January 2007 No. 34).

Main tasks:

- to ensure the implementation of the Strategy of modernization of accounting system in the

state management sector for 2007-2015 ;

Assessment of the Ukrainian Side: some progress made in implementing the goal EU Assessment: significant progress made December 2006

Enterprise policy

The updating of the database and functioning of the Single State Register of Legal Entities and Natural Persons Entrepreneurs, in line with European standards, was ensured. Ukraine became the first country beyond the EU joined to the European Business Register. On the permanent basis there were held consultation with national and foreign economic agents in order to carry out the regulatory reform aiming to reduce the administrative barriers to the business development. Businesses were assisted by 354 business-centers, 77 business incubators, 251 leasing companies, 180 entrepreneurship assistance funds, 723 credit unions and 398 insurance companies. In December 2005 the first European Information Correspondent Center was opened in Kyiv. It will provide information and advice to support Ukrainian and foreign economic agents, small and medium businesses concerning their trade and economic relations with partners from the EU member-states.

Main tasks: - start cooperation between Ukraine and the EU based on the European Charter for Small Enterprises

Assessment of the Ukrainian Side: : significant progress made

2.4. CO-OPERATION IN JUSTICE AND HOME AFFAIRS

The implementation of the EU Action Plan on Justice and Home Affairs in Ukraine for 2002- 2005 was accomplished. In December 2005 and February 2006 expert assessment mission were held, which resulted in Justice, Freedom and Security Report. The European side with regard to this Report prepared and submitted to Ukrainian side the draft update Justice, Freedom and Security EU-Ukraine Action Plan. The new Action Plan on Justice and Home Affairs for the next period was agreed at the Ukraine – EU Troika meeting on justice and home affairs ministers (4 October 2006). In July 2005 the President of Ukraine adopted the decision on visa-free regime for citizens of the EU member-states, Switzerland and Duchy of Lichtenstein (Decree of the President of Ukraine No.1131). On October 27, 2006 during the tenth EU-Ukraine Summit the Visa facilitation Agreement and The Readmission Agreement were initialled. On December 22, 2006 The Readmission Agreement between the Government of Ukraine and Government of Russia Federation was signed. The readmission agreement negotiations with Belarus are underway. At general Ukraine ratified readmission agreement with Turkey , Switzerland , Georgia, Turkmenistan . Ukraine joined the justice and home affairs ministers’ Joint Declaration on the exchange information on organized crime fight contact centres establishment. On June 2006 in Hague the first official negotiation round on The Agreement on cooperation between Ukraine and the European Union’s Cooperation Unit (Eurojust) were conducted, where the main text provisions of the agreement of the text were agreed. The negotiation process with Europol was initiated.

Main tasks:

-- to implement the Ukraine – EU JHA Action Plan; - simultaneous signing of the readmission agreements between by Ukraine, EU, Belarus; - hold negotiations and conclude a cooperation agreement between Ukraine and Europol and Eurojust; - enhance participation of Ukrainian representatives in EU programs in the field of justice and home affairs, further setting of partnership with respective bodies of EU member-states.

Assessment of the Ukrainian Side: considerable progress made in implementing the goal

According to EU general assessment in the field of “visa facilitation for Ukrainian citizens and conclusion of Agreement on Readmission” considerable progress made in implementing the goal April 2006

2.5. TRANSPORT, ENERGY, INFORMATION SOCIETY AND ENVIRONMENT

Transport

1 In 2005 the Ministry of Transport and Communications of Ukraine launched the implementation of the strategy of reforms in railways, air transport and maritime transport. The World Bank project “The analysis of the transport sector of Ukrainian economy” was implemented On 1 December 2005 Ukraine signed the Cooperation agreement on a civil Global Navigation Satellite System (GNSS) On 12 April 2006 the Government of Ukraine approved the Program for the development of national network of international transport corridors in Ukraine for 2006-2010 (Resolution of the Cabinet of Ministers of Ukraine No 496). Ukraine takes part on the regular basis in the work of the European Commission High Level Group on the Trans-European Transport Network concerning the extension of the major Trans- European transport axes to the neighbouring countries. Active position of Ukraine at the meetings was noted by European experts. On 7 September 2005 Ukraine joined the European Agreement concerning the work of crews of vehicles engaged in international road transport (AETR) (the Law of Ukraine No. 2819). Relevant amendments related to the access to the profession were made to the Law of Ukraine “On road transport”. The enforcement of a series of measures on road safety allowed stabilizing in 2005 the accidents ratio on licensed motor vehicles. Implementation of measures resulted in the decrease of road accidents by 6%, mortality rate by 6%, and injured rate by 2%. Ukraine joined the Convention Convention on the Contract for the International Carriage of Goods by Road (Law of Ukraine of 1 August 2006 No.57) On 15-16 October Ukraine took part in International conference “The Trans European Networks for Transport: A strategic tool for cohesion in Europe”, devoted to discussions on further development prospects of international transport Corridor V. In order to improve the efficiency of services on combined cargo transportation including the procedures of border crossing, Ukraine joined on 11 July 2005 the European Agreement on Important International Combined Transport Lines and Related Installations (Decree of the President of Ukraine No. 1077). Ukraine’s joining to the Protocol of 3 June 1999 on amendments to the Convention concerning International Carriage by Rail (COTIF) (Law of Ukraine of 16 November 2005 No. 3091) legally enabled cargo carriage between Ukraine and EU Member States while using Ukrainian railway network. On 14 July 2006 the Government of Ukraine adopted a decision on an experimental use of

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 unified rail consignment note CIM/SMGS as a basic carriage document ( in the course of transportation via international transport corridors III (Berlin – Wroclaw- Lviv – Kyiv) and V (Trieste – Ljubljana - Budapest (Bratislava) – Lviv) (Resolution of the Cabinet of Ministers No. 403). The challenging issue of VAT payment on temporary importation of aircrafts to the Ukrainian customs territory under the operational leasing was removed at the level of Law (Law of Ukraine of 7 July 2005 No. 2771). On September 2005 the European Commission issued a Communication (COM (2005) 451) “Developing a Common Aviation Area with Ukraine”. On 1 December 2005 Ukraine and EU signed the Agreement on some aspects of air transport. The Parties completed internal procedures and from 13 October 2006 the Agreement is supposed to be in force. Starting from 2006 the cooperation between Ukraine and the EU has considerably intensified and became more pragmatic. A technical seminar on approximation of Ukrainian legislation in aviation to that of the EU was held in Brussels in February 2006, a seminar on new organisation of management of air traffic in upper air space under formation of “Single European Sky” was held in Kyiv in September 2006. To improve bilateral agreements on air transport with the EU member-states as of 1 May 2006 negotiations were held with Austria, France, Italy, Hungary, Czech Republic, Poland, Germany, Great Britain and Portugal; in the follow-up the draft protocols on amendments to the agreements in force are being processed. The implementation of the JAA JARs in Ukrainian legislation is underway. In 2005 six main JARs were implemented, which is a minimal requirement of JAA concerning the consideration of Ukraine’s full accession to this organization (JAR-FCL, JAR-145, JAR-66, JAR-147, JAR-21, JAR- OPS). The preliminary conclusions of the EU aviation experts that were fact-finding missions in Ukraine (July, October 2006) the ratio of harmonisation of national legal framework on access to the air transportation market, economic licensing of air carriers, ground services in airports to the one of the EU reached over 80%. The European Commission received on 12 December 2006 according to the decision of the EU Council a mandate for negotiations with Ukraine on wide aviation agreement. It is expected that the EC will soon officially inform the Ukrainian Side on format of the mandate and will provide a draft modal agreement. The structure of regional State Aviation Service inspections for effective supervision on flights safety was established. The implementation of the State program for improvement of operation of the state system for ensuring the safety of shipping for 2002-2006 was moving forward. In Ukraine’s rescue responsibility area the Sevastopol Maritime Center for Rescue Coordination of the Global Maritime Distress and Safety System (within a radius of 90 nautical miles) was established and set in experimental operation. There was created the system for surface surveillance and services to regulate the traffic of ships on the Ukrainian part of the Danube River. The premises for supervisory authorities according to the ‘single office’ principle were constructed, reconstructed or equipped in every maritime commercial port. This allowed optimizing the customs procedures for commodities. To ensure the use of the Danube river facilities as one of the most important components of European inland waterway the representative of Ukraine participated in the meeting of the Pan- European Transport Corridor No. 7 Steering Committee and in the Ministerial Conference under the aegis of the European Commission. Upon the results of the latter the decision on establishing working groups on rail, road and air transport, infrastructure, safety and environment was made. On 27-28 February the International conference on “Conservation and sustainable development of the Danube Delta” under the auspices of UNESCO and International Commission for the Protection of the Danube river was held in Odessa. The representatives of the Council of Europe, the EU and other international organizations took part in the conference.

Main tasks: - negotiations on establishment of single aviation space and on new wide aviation agreement between the EU and Ukraine; - elaborate draft Comprehensive State Target Program for the Development of Road

and Traffic Complex of Ukraine till 2015 and the Fundamentals (strategy) of transport policy; - increase safety on roads - Ukraine to become full member of the JAA - Set working procedures between the State Aviation Service and EASA concerning the maintenance of flying capacity of aircrafts;

Assessment of the Ukrainian Side: considerable progress made

Energy

A high level dialogue between Ukraine and the EU in energy was launched. On 1 December 2005 Ukraine and the EU signed the Memorandum of Understanding on Cooperation in the Field of Energy. On 14 September an Aide Memoire was signed that allows to engage the EU funding for projects in gas and oil transportation in Ukraine. In October 2006 a Joint Assessment of the Memorandum implementation in 2006 was completed. Also a number of priority projects in the area of energy that might be supported by the EIB and EBRD were identified. In October 2005 the European Side supported Ukraine in its aspiration to accede to the Energy Community Treaty in order to create a common gas and electricity market on the EU principles, and implement the respective EU directives on energy and environment. On 15 March 2006 the Energy strategy of Ukraine till 2030 was approved (regulation of the Cabinet of Ministers No. 145-p). The goals of the Strategy are to meet the demand for energy products, create conditions for safe, reliable and sustainable functioning of energy system, introduction of effective energy-saving technologies, as well as integration of Unified Energy System of Ukraine into the European energy network, and strengthen the position of Ukraine as a transit state for oil and gas. An action plan for 2006-2010 on the Strategy implementation was approved by the Government in July (Resolution of the Cabinet of Ministers of 27 July 2006 No. 436-r). On 17 November 2006 Ukraine became an observer with the Energy Treaty Community. On 23 June 2005 defined the measures aiming to ensure the sustainable functioning of enterprises in fuel and energy complex was adopted (the Law of Ukraine No. 2711). The laws were passed, which envisage: - special mechanism for payment of debts of fuel and energy complex enterprises, which emerged as a result of incomplete payment for energy resources consumed (the Law of Ukraine adopted on 23 June 2005 No. 2711). Using these mechanisms debts which amount to UAH 193 million were paid off. - criminal liability for theft of power (the Law of Ukraine adopted on 31 May 2005 No. 2598) - grounds for operation in the field of heat supply, connected to manufacturing, delivery, supply and consumption of heat energy (the Law of Ukraine adopted on 2 June 2005 No. 2633) Starting from January 2006 the National Commission on electric power regulation of Ukraine launched measures on gradual bringing of tariffs on energy and natural gas for all categories of consumers to the level that correspond with economically grounded costs for their sale. The implementation of the project under TACIS Program “Consultative assistance on technical, economic, financial and legal issues in elaborating the project concept concerning the system for oil carriage along Odessa – Brody – Plock” (€ 2 million) started. This is going to become an important step in creating conditions for Caspian oil delivery to the European markets. In December 2005 the working groups for the support of Odessa-Brody-Plock projects were established to define Ukraine’s strategy for creation of oil and oil products reserve. The mission of the groups is to draft the intergovernmental agreement between Ukraine and Poland on extending the Odessa-Brody oil pipeline to Plock, searching of prospective consumer in Europe and in Poland in particular, as well as elaboration of proposals to the strategy of Ukraine for creation of oil

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 and oil products reserve. In May 2006 at the meeting of the Joint Working Group Ukraine – Poland – EC the Ukrainian and Polish Side approved the preliminary framework business plan on Odesa-Brody-Plock project development. They also considered draft Ukraine-Poland Intergovernmental on this project. The orders of the Ministry for Fuel and Energy approved: - The Rules for gas metering during its delivery through the gas distribution system, supply and consumption; - Regulation on examination of utility meters, installed with consumers and destined to measure the gas consumed. The schedule for pumping the gas into the underground gas storages was reintroduced in 2006. Some 25.6 bln. cubic meters of gas were stocked by the beginning of the heating season. This should allow catering for needs of Ukrainian consumers and guaranteeing the smooth transit of gas to European countries. Measures taken in 2006 on energy saving allowed to reduce the consumption of natural gas by industrial consumers by 6%, by thermoelectric power stations – by 25%, by municipal utilities – by 4.3%. Technological losses in electricity transmission dropped by 1.2%, specific losses of standard coal in power generation – by 2 g per kW/h. The preliminary results of the audit ordered by the Commission gave the Swedish company Sveco grounds to award the “stable” rating to the Ukrainian gas transportation system for the next five years. On 4 May 2006 the Ukraine’s and Moldova’s application for parallel operation with UCTE synchronized are was accepted by the Assembly General of UCTE. It was decided in November 2006 that the USTE will go on with procedures of integration of Ukrainian and Moldavian power networks into the UCTE and that a Project Group will be established in order to define the technical criteria of an agreement on extension of synchronised area.

The EU Energy Commissioner Mr. Piebalgs stated that he had never known of the case when Ukraine broke its commitment on Russian gas supplies in the EU member-states. December 2005

Due to measures taken in order to modernize and reduce the losses in gas pipelines and ensure the safety of transit pipelines the number of infringements in the most difficult areas decreased by 40%. There was ensured the implementation of TACIS project on “Reform in maintenance of transit gas pipeline network of Ukraine”. The project on creation of International metrology center in Boyarka is being successfully implemented. There were adopted and implemented a new Concept for the development of coal mining industry, which defined the main directions, phases and mechanisms of reforms in coal mining industry. For the first time 10 coal mines were fully liquidated in 2005. On 29 March 2006 The Government of Ukraine approved the Program for enhancing of work safety at coal mines and mine construction companies for 2006-2010 (Regulation of the Cabinet of Ministers of Ukraine No.374). In the course 2005 15.2 million ton of standard coal (5.6 billion hryvnia of value) were replaced grace to the use of alternative and renewable energy sources. The National Academy of Sciences of Ukraine drafted the Atlas of renewable and non- traditional energy facilities. On 29 October 2005 an Agreement renewing the Agreement between the Government of Ukraine and the European Community, represented by the European Commission on financing the energy efficiency projects (the regulation of the Cabinet of Ministers of Ukraine No. 436-p) On 31 December 2005 upon the decision of the President of Ukraine the National Agency of Ukraine For Effective Use Of Energy Resources was established (Decree of the President of Ukraine No. 1900). On 15 March 2006 the Loan Agreement between Ukraine and the EBRD on “Financing Ukrainian ESCO (the second phase) was ratified (the Law of Ukraine passed on 15 March 2006 No. 3536-IV). In May 2005 the Chornobyl Shelter Fund Donor Conference was successfully held.

To modernize and improve he safety of K2 R4 after their phasing-in on 7 September 2005 there were ratified: The Guarantee Agreement between Ukraine and the EBRD which stipulates conditions for granting of $42 million (the Law of Ukraine adopted on 7 September 2005) No. 2817); The Guarantee Agreement between Ukraine and the European Community of Atomic Energy concerning the loan mechanisms (loan amount in € equal to $ 83,000,000) (the Law of Ukraine adopted on 7 September 2005 No. 2818). On 8 September 2005 the Verkhovna Rada of Ukraine approved the Procedure for decision- making on location, design and construction of nuclear facilities and objects equipped for nuclear waste handling, of national significance (the Law of Ukraine No.2861-IV). The Concept for the improvement of safety of operational nuclear power units till 2010 was approved (regulation of the Cabinet of Ministers of Ukraine No. 515). 31 of 244 preventive measures envisaged by the Concept were implemented. In January 2006 the activity of Ukraine - EBRR Joint Committee was resumed. There was held a tender for a new safe confinement on Chornobyl nuclear power plant site. On 13 January the Government of Ukraine adopted the decision concerning the additional contribution of Ukraine to the Chornobyl Shelter Fund in amount of $ 22 million (the regulation of the Cabinet of Ministers of Ukraine No. 12). On 17 May the Government of Ukraine settled the issue of re-distribution of Ukraine’s contribution to Chornobyl Shelter Fund till 2010 (resolution of the Cabinet of Ministers No. 694). The Government of Ukraine decided to phase-in the K2 power unit (regulation of the Cabinet of Ministers No. 17). On 25 January 2006 the Government of Ukraine ratified the Agreement for Cooperation between the European Atomic Energy Community and the Cabinet of Ministers of Ukraine in the Peaceful Uses of Nuclear Energy, which was signed on 28 April 2005 (the resolution of the Cabinet of Ministers of Ukraine No. 59) On 15 March 2006 the Government of Ukraine decided to phase-in the R4 power unit (regulation of the Cabinet of Ministers No. 138). On 25 January 2006 the Government of Ukraine ratified the Agreement for Cooperation between the European Atomic Energy Community and the Cabinet of Ministers of Ukraine in the Peaceful Uses of Nuclear Energy, which was signed on 28 April 2005 (Resolution of the Cabinet of Ministers of Ukraine No. 59). The Agreement came into force on 1 September 2006. The Verkhovna Rada of Ukraine approved the National program on overcoming the consequences of Chornobyl disaster for 2006-2010 (Law of Ukraine of 14 March 2006 No. 3522, in force from 1 January 2007). It stipulates the actions on further social, medical and psychological rehabilitation of population and related anti-radiation protection. The construction of launcher of the facility on processing and disposal of radioactive waste “Vector” is underway. The overall construction completion level of the facility is around 95%. Starting from 5 December 2005 1088 spent fuel elements were taken from 1st and 3rd power units of Chornobyl nuclear power plant to the Spent Nuclear Fuel Store (ISF-1) for temporary storage. The 1st power unit was completely cleared of spent nuclear fuel. This is an important step in the Chornobyl nuclear power plant decommissioning. Almost all works on stabilization of building structures of the Shelter in the framework of the “Shelter” Implementation Plan were completed. This will significantly improve the safety in the course of construction activities over the new safe confinement. The Cabinet of Ministers approved a new State Program on safe store of highly active sources of ionising radiation and created state inspections on nuclear and radioactive safety. That enhanced greatly the status of radiation safety in country. On 27 April the Government of Ukraine decided to form and use a financial reserve for nuclear power units decommissioning (Regulation of the Cabinet of Ministers No. 594). On 31 May 2006 NJSEC Energoatom submitted to the EBRD and EURATOM the notification on compliance with all conditions for Loan Agreements’ entry into force (in particular, concerning the establishing of the Nuclear power units decommissioning fund). As for now NJSEC Energoatom has allocated more than $ 25 million of own funds for the implementation of measures connected to modernization and improvement of K2R4 safety.

On 31 May 2006 NJSEC Energoatom submitted to the EBRD and EURATOM the notification

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 on compliance with all conditions for Loan Agreements’ entry into force (in particular, concerning the establishing of the Nuclear power units decommissioning fund). As of now NJSEC Energoatom has allocated more than $ 25 million of own funds for the implementation of measures connected to modernization and improvement of K2R4 safety. On 7 August the Government of Ukraine decided to establish State inspections on nuclear and radioactive safety in regions in order to provide for efficient supervision over the nuclear safety at the sites of production and use of sources of ionising radiation as well as to fight the illegal turnover of radioactive materials and prevention of nuclear terrorism (Regulation of the Cabinet of Ministers No. 796). Tender on the project on “Modernization of automated radiation control system in Chornobyl alienation zone” was held. In June 2005 Ukraine became a member ofnGeneral Conference resolution (GC(44)/RES/21). The project should allow the selection the optimal nuclear fuel cycle for Ukraine from the point of view of safety, environment and economy.

Main tasks: - take steps to execute the Memorandum of Understanding on Cooperation in the Field of Energy; - implement the K2R4 modernization programs; - further projects implementation on Chornobyl Nuclear Power Plant site; - - taking actions on construction of 2 new power units for Kmelnitska Nuclear Power Plant; - joining the Energy Treaty Community; - establishing the fund on liquid radioactive waste management.

Assessment of the Ukrainian Side: considerable progress made

Information society

A series of normative legal acts on personnel, organization and maintenance of the National Commission of Ukraine on Communication Regulation was adopted (established by the decision of the President of Ukraine in August 2004). The President of Ukraine approved the actions on information society development in Ukraine for 2006-2010 in all areas including the national and local authorities (Decree of the President of Ukraine of 20 October 2005 No. 1497). In July 2005 a technology center was put into operation, which ensures the functioning of the central certification body – the basis of national infrastructure for verification of the e-signature. As for 1 October 2006 the Centre certified four key certification centres. Certain elements of e-governance were introduced. The majority of authorities provide information services to natural and legal persons via their web-sites or the Single web- portal of the Government. Around 1.5 million of persons visit the Single web-portal monthly. In 2005 for the first time Wi-Fi and Wi-Max data transmission technologies were introduced in Ukraine. The national Internet segment is actively developing. The number of regular Internet users amounts today to 19.5% of the population (over 8 million people). More than 1000 collective access points were opened by the end of 2006. Over 100 of them are located in postal offices, 838 – in libraries of 25 regions and cities of Kyiv and Sevastopil. Ukraine participated in the World Summit on the Information Society held in Tunisia on 15-18 November 2005. In the course of the Summit Ukraine provided information on major direction and development prospects for the national information society. Ukraine aligned with final documents of the Summit. On 15 December 2005 the Government of Ukraine approved the National table of radio frequencies distribution (resolution of the Cabinet of Ministers No. 1208), which will allow the effective use of radio frequency resources of Ukraine.

In order to ensure the dynamic development of telecommunication networks on all the territory of the country on 7 June 2006 the Government of Ukraine approved the Concept for the development of telecommunications in Ukraine till 2010 (regulation of the Cabinet of Ministers of Ukraine No.316). A series of acts on further development of the telecommunication network of general access, on conditions for introduction of the newest technologies in communication industry of Ukraine, on improved operational conditions for operators on national market were adopted. Until now communication industry of Ukraine continues to show high paces of growth and innovative development. The Government approved the Plan of use of the radiofrequency resources of Ukraine (Regulation of the Cabinet of Ministers of Ukraine of 9 June 2006 No. 815). On 30 November the Cabinet of Ministers of Ukraine approved the Concept of State Program on digital broadcasting introduction in Ukraine. In February 2007 The Verkhovna Rada of Ukraine approved the National Strategy of the informational society development in Ukraine for 2006-2015.

Main steps: - further introduction of modern technologies and development of information society in Ukraine;

Environment

Regular coverage and public debates concerning the issues of environmental protection are held with Aarhus information and training centre and Public Council of the environmental organizations attached to the Ministry. The Regulation “On quarterly informing of the population through mass media concerning the facilities which contaminate the environment the most” was adopted (Order of the Ministry of 1 November 2005 No. 397). Ukraine has fulfilled on general the preconditions for the right to use Kyoto Protocol mechanisms. “Second National report on climate change” and “Report on honouring by Ukraine of commitments under Kyoto Protocol” were sent to the Secretariat of the Framework UN Convention on climate change. In order to implement the UN framework Convention on climate change (Kyoto Protocol): - The Centre on Climate Change was created - The National Action Plan for the implementation of the Kyoto Protocol was approved (regulation of the Cabinet of Ministers of Ukraine of 18 August 2005 No. 346). - The Ministry of Environmental Protection defined as a national coordinator of Ukraine’s honouring of commitments under the Kyoto Protocol (Decree of the President of Ukraine of 12 September 2005 No. 1239). - The Procedure for consideration, approval and implementation of the projects aimed to reduce the volume of anthropogenic emissions or increase absorption of the greenhouse gases according to Kyoto protocol was approved (resolution of the Cabinet of Ministers of Ukraine of 22 February 2006 No. 206). - The Procedure for coordination of measures concerning Ukraine’s commitments under the Kyoto Protocol (resolution of the Cabinet of Ministers of Ukraine from 10 April 2006 No. 468). - The implementation of the TACIS project "The Technical assistance to the process of honouring by Ukraine and Belarus of commitments concerning containment of global climate change", which main task is to establish in Ukraine the National system for the assessment of anthropogenic emissions from sources of pollution and absorption of the greenhouse gasses by the absorbers of kinds. During 2005-2006 Ukraine prepared a series of joint projects which were submitted for tender on purchase of units for reduction of the emissions, announced by the Netherlands, Denmark and Austria. The Ukraine - EU Working group on climate change resumed its work.

On 3 March 2005 with the purpose to implement the state policy concerning the provision to the population of qualitative potable water the nation-wide program «Potable water of Ukraine " for 2006-2020 (the Law of Ukraine No. 2455) was approved. On 7 September 2005 with a view to conserve the biological and landscape diversity Ukraine ratified the European landscape convention (the Law of Ukraine No. 2831). On 4 January 2006 the Framework Convention on protection and sustainable development of Carpathians came into force (ratified by Ukraine on April 2004).

On 31 May 2006 at the meeting of the Ukraine - EU Sub-committee No. 4 during the discussion of construction of a deep-water ship course Danube – Black Sea the European Side was informed about the work of the ad hoc Commission which was established within under Convention on Environmental Impact Assessment in a Transboundary Context (Espoo, 1991). It is supposed, that in July this year the report of the commission will be accessible.

Main steps: - To take steps to implement the Kyoto Protocol to the UN Framework Convention on Climate Change. - To ratify the Black Sea Biodiversity and Landscape Conservation Protocol to the Convention on the Protection of the Black Sea Against Pollution

Assessment of the EU Side: good progress was made in implementation of “Transport, energy, information society and environment” section (except for “nuclear energy point’) (December 2006)

2.6. PEOPLE-TO-PEOPLE CONTACTS

Science and technology, research and development

The legislation of Ukraine on support of technology parks was amended in order to attract additional investments in innovations (the Law of Ukraine adopted on 12 January 2006 No.3333). The Government has also a Concept of creation of industrial parks that outlines the mechanisms and actions on national policy implementation in this area Regulation of the Cabinet of Ministers of 1 August 2006 No. 447). A Convention between Ukraine and the INTAS was signed in March 2006. It started the Fellowship Programme Ukraine-INTAS for young scientists for 2006-2007. In September 11 projects of total value of 170 thousand euro involving 7 Ukrainian universities and 4 research institutes were selected at the meeting of expert group on Joint fellowship contest. In June 2006 Ukraine submitted an application for membership in European Research Co- ordination Agency (EUREKA) programme. This should facilitate Ukraine’s integration into the European science and research community (Regulation of the Cabinet of Ministers No. 365). Activities aimed at more active involvement of Ukrainian scientists in INTAS Program, 6th and 7th EU Framework Programs were implemented throughout 2005-2006. The National Information Centre For Ukraine-EU S&T Cooperation provides permanent information to Ukrainian scientific institutions concerning the opportunities of the 6th and 7th EU Framework Program in Ukraine, Marie Curie Program, and on INTAS competition announcements In order to enhance the cooperation in the area of space: within Global Monitoring for Environment and Security (GMES) with participation of Ukrainian research institutions the implementation of three research projects in space research goes on (ERUNET, OSCSAR, FEMINE); the Ukrainian space industry enterprises actively participate in “VEGA” project implementation (jointly with FIAT AVIO, Italy), on the design and production of the fourth stage engine;

regular consultations were launched between Ukraine and the EU on implementation of the joint projects; the European experts elaborated methodological recommendations on protection of intellectual property rights in the margins of Ukrainian space technology commercialization. On 31 May 2006 the Government of Ukraine approved the Concept of the Nationwide Space Program of Ukraine for 2007-2011. On 6-10 November an International UN Symposium on space law “Status, implementation and progressive development of the international and national space law” was held in Kyiv. On 13-14 November 2006 during the visit of the delegation of the European Space Agency to Ukraine parties approved the draft Framework agreement between the Government of Ukraine and ESA on co-operation on peaceful use of space.

Main tasks: - take steps to conclude a Cooperation Agreement between Ukraine and ESA

EU Assessment: reasonable progress made April 2006

Education, training and youth

Political dialogue was launched between Ukraine and the EU on education and training. In 2005 Ukraine joined the Bologna process. An inter-ministerial commission was established to prepare the amendments to the national legislation with regard to Ukraine’s accession to the Bologna Process. To implement the provisions of the Bologna Declaration in higher education and science: a list of directions for preparation, knowledge branches and qualifications of the future professionals was drafted; a national system of qualifications compatible with general qualification system of the European Higher Education Area was developed; state standards for higher education were updated; credits and modules system of educational process in the higher educational establishments of III-IV level pf accreditation was introduced in 2006/07 academic year; national support and monitoring for higher education is being developed in compliance with Common European Education Area principles. The Loan Agreement between Ukraine and the IBRD concerning the “Equal access to quality education in Ukraine” project was ratified (the Law of Ukraine adopted on 21 December 2005 No. 3255). On 8 July 2006 the Government of Ukraine established a Committee on implementation of “Equal access to quality education in Ukraine” project (Regulation of the Cabinet of Ministers No. 948). During 11 years of TEMPUS project 126 projects in 40 higher educational establishments of Ukraine related to upgrade of higher education were implemented. The higher education institutions open the faculties of European studies and introduce European study courses in the margins of the “Common European higher education area” project; jointly with educational institutions from European countries develop educational and professional training programs. This allows to get the Ukrainian diploma one plus the one of another (foreign partner) university. The TEMPUS project on “Educational programs on European integration for pubic administration in Ukraine” started. In order to upgrade the human capital in the field of European integration a List of higher educational establishments and institutions for post-graduate studies, which train (and re-train) personnel in this field was approved (8 higher educational establishments and 27 regional and city

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 centers). Departments of European Law, European and World Economy are operational in several higher educational establishments of Ukraine. The number of Ukrainian students and professors who won the ERASMUS MUNDUS fellowships increased (6 persons in 2004/2005, 24 persons in 2005/2006, in 2006/2007- 30 persons). On 12 July 2006 the Government approved the Concept of State Program of Education Development for 2006-2010 aimed at integration of Ukraine into the European Education Area (Regulation of the Cabinet of Ministers No. 396). Starting from 2003 the Europe Days are regularly held in Ukraine. In order to develop the dialogue on cultural diversity in September 2005 the Fifth (enhanced) Ministerial colloquium on “Culture and cultural development policies” was held in Kyiv under Council of Europe STAGE project. Ukraine supported the position of the European Commission in the margins of UNESCO negotiations concerning the Convention on cultural diversity during the 33 General Conference in October 2005. In March 2005 the Verkhovna Rada of Ukraine approved the Concept of State policy in the area of culture for 2005-2007 (the Law of Ukraine No. 2460). In March 2006 the Government of Ukraine approved the Concept implementation action plan for 2006 – 2007 (regulation of he Cabinet of Ministers No.126).

Main tasks: to take measures to: meet the requirements of the Bologna Process in Ukraine; facilitate the entry into force of the European Convention on Transfrontier Television and the Protocol thereto and provide the entry into force of the Convention on cultural diversity;

Assessment of the Ukrainian Side: considerable progress made Assessment of the EU Side: considerable progress made December 2006

Cross-border and regional level co-operation

Six euro-regions function on the border of Ukraine – Bug, Upper Prut, Lower Danube, Carpathian, Dnipro and Slobozhanschyna as organizational forms of cooperation of local administrative units of the European states. The implementation of the Neighbourhood Programs “Ukraine –Poland – Belarus”, “Ukraine – Slovakia – Hungary” and “Ukraine – Romania”, CADSES started. The decision on financing of 6 joint projects with participation of Ukraine was adopted after the assessment by the Neighbourhood Program Ukraine – Slovakia – Hungary Joint Technical Secretariat. A range of regulations aimed at improvement of drafting procedures of cross-border cooperation projects (programs) and competitive selection of such projects were adopted. The State Program on trans-border co-operation development for 2006-2010 was approved (Regulation of the Cabinet of Ministers of Ukraine of 27 December 2006 No. 1819). In March 2006 the Agreement on financing of the programs with participation of many countries (2005 TACIS Action Program on Cross-Border Cooperation – Neighbourhood Program component), which allocates € 39 million for the implementation of joint projects under Neighbourhood Programs with participation of Ukraine’s regions. During the meetings of bilateral commissions between Ukraine and the EU Member States that border with Ukraine, the issues of regional and cross-border cooperation are reviewed on the permanent basis. In Ukraine’s and EU Member States’ border regions the Days of good neighbourhood are traditionally held. Main tasks: - to ensure the implementation of the State Program on trans-border co-operation development for 2006-2010;

- to implement the Neighbourhood Programs “Ukraine – Poland – Belarus”, “Ukraine – Slovakia – Hungary” and “Ukraine – Romania”, CADSES

Public health

The following activities are performed within the framework of the National program for prevent measures against HIV, assistance and treatment of HIV-infected persons and AIDS patients for 2004 – 2008: antiretroviral therapy to the HIV/AIDS patients is being introduced; information campaign on HIV/AIDS preventive measures is conducted in high schools and higher educational establishments; problems connected to HIV/AIDS receive regular coverage on national, regional and local state TV channels; In order to coordinate the activity of the executive power bodies, relevant international and non-governmental organizations, the National coordination council on preventing HIV/AIDS spread prevention and the Committee on abatement of HIV/AIDS and other socially dangerous diseases (as an authority) were established. Measures on re-launching the World Bank-funded project on “Control over tuberculosis and HIV/AIDS in Ukraine” ($55 million) were taken in 2006. The Global Fund to fight AIDS, Tuberculosis and Malaria Board accepted allocation of around $ 151 million for the implementation of projects to combat the spread of HIV/AIDS in Ukraine over the next five years. 3 virology laboratories, accredited by the WHO European office, were re-equipped and integrated into the WHO laboratory network with the WHO assistance. Buildings and installations for the city AIDS prevention centre were put into operation in 2006 in Kyiv.

Assessment of the EU Side: reforms should be deepened further (December 2006)

Measures implemented with a view to achieve the goals presented in the EU General Affairs and External Relations Council (GAERC) Conclusion (21 February 2005)

Ukraine - EU talks on a new reinforced agreement On 22 May 2006 the first round of informal consultations on a new reinforced agreement between Ukraine and the EU was held in Brussels. It is expected that the European Commission will receive a mandate for negotiations with Ukraine on new enhanced agreement at the beginning of 2007. The issue of conclusion of a new enhanced agreement was considered at the EU-Ukraine Cooperation Council (14 September 2006) and at the EU-Ukraine Summit (27 October 2006). The Government of Ukraine drafted the list of delegation of Ukraine for negotiations with the Commission on new enhanced agreement as well as draft instructions for the delegation for the negotiations.

Main tasks: - to start negotiations on a draft new agreement between Ukraine and the EU, which is to replace the current Partnership and Co-operation Agreement

EU Technical Assistance to Ukraine The European Union is the biggest donor for Ukraine – in 2003-2006 alone the technical assistance totalled over € 910 million. On 18 January 2006 the conference of donors of technical assistance to Ukraine was held with support of the World Bank. The following agreements were signed between Ukraine and the EU in 2005-2006: Agreement on financing of the 2004 TACIS program for Ukraine, 2004 TACIS Action Program on Cross-Border Cooperation (Neighbourhood Program component) and 2004 TACIS Regional Action Program; The Agreement (in the form of exchange of letters) between the Cabinet of Ministers of Ukraine and the European Commission, acting on behalf of the European Union, concerning the amendments to the Memorandum on TACIS Program financing of Ukraine for 2002, Agreement on financing the TACIS National Program for Ukraine for 2003 and the Agreement on financing the 2004 TACIS Action Program for Ukraine; Agreement renewing the Agreement on financing the energy efficiency projects; Agreement on financing the 2005 TACIS Action Program for Ukraine, 2005 TACIS Regional Action Program, 2005 TACIS Action Program on Cross-Border Cooperation (Neighbourhood Program component and part II – State border-crossings development component), 2005 TACIS Action Program on Nuclear Safety The Memorandum of understanding on financing within the TACIS program of construction, equipment supply and technical assistance to ‘Rava-Ruska’ and ‘Uzhgorod’ State border crossing point; The proposals concerning the cooperation with Ukraine concerning the Ukraine – EU Action Plan implementation were made by several EU Member States (in particular Poland, Slovakia, Czech Republic, Hungary). Latvia, Lithuania, Estonia, Slovakia, Greece, Netherlands, Sweden, Finland, Spain, France, Great Britain, Germany, Italy, Austria, Czech Republic, Belgium, Cyprus indicated the opportunity to host the study and training visits of officials from Ukrainian authorities to learn the European integration experience of the EU Member States. Ukrainian civil servants made training visits to Belgium, Poland, Lithuania, Slovakia, Sweden, Great Britain, Turkey. At the beginning of June 2006 the European Commission completed internal procedures to agree the draft decision on application of TAIEX instrument in Ukraine within the framework of the European Neighbourhood Policy.

Main tasks: - take measures to conclude a Framework Agreement between the Government of Ukraine and the European Commission on technical assistance; - develop bilateral technical cooperation aiming at the Ukraine – EU Action Plan implementation - to take steps to draft projects putting TAIEX instrument into action in Ukraine

Assessment of the Ukrainian side: some progress made

Assessment of the EU side: good progress made (April 2006)

Cooperation with European Investment Bank

On 7 February 2006 the Verkhovna Rada of Ukraine ratified the Framework Agreement with European Investment Bank (the Law of Ukraine No.3392). This provided access to loan funding (€ 250 million) for the investment projects in Ukraine, in particular, in transport, communications, energy infrastructures, for environmental protection. A series of meetings of the EIB representatives with future beneficiaries were held in September 2006 in Kyiv. The Ukrainian side prepares projects to attract the EIB funds. Ukrainian side drafts projects to attract EU funding of €200 million for the joint investment project (with EBRD participation) “Kyiv-Chop motorway

-2- - Position paper on Ukraine – EU Action Plan Implementation by Ukrainian Side For 2005-2006 rehabilitation” (third project). The projects are being drafted to attract the EIB and EBRD funding for projects in oil- and gas transportation.

Assessment of the Ukrainian side: good progress made

Assessment of the EU side: good progress made (April 2006)

Cooperation Areas beyond the Ukraine – EU Action Plan

Launch of cooperation on agriculture

The common vision of Sides on priorities of cooperation was reflected in the Memorandum of understanding on cooperation in the area of agriculture between the Ministry of Agriculture of Ukraine and DG Agriculture and Rural Development on 18 October 2006. The Parties agreed to establish the High Level Working Group and separate expert working groups in different areas of cooperation. The first meeting of these groups took place in Kyiv on 14-15 December. At the meeting the Parties agreed to draft an Action Plan for 2007.

Main tasks: - to implement the provisions of the Memorandum of understanding on cooperation in the area of agriculture between the Ministry of Agriculture of Ukraine and DG Agriculture and Rural Development

Assessment of the Ukrainian side: significant progress made