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EU-modelled State Aid reform in Ukraine - a decisive step towards structural economic change? (Nicolas Heger in Länderanalysen Osteuropa - Ukraine, No. 209, December 2018

Pursuant to Art. 267 (1) of the EU-Ukraine Association Agreement of 2014, Ukraine adopted the Law on State Aid to Undertakings which fully entered into force in August 2017. As a result, within a transition period over the next years, nearly all kinds of direct or indirect support by public authorities to the private sector will be controlled by an EU-inspired State Aid System. Ukraine’s Economy consists of thousands of state-owned, controlled or subsidised enterprises, stipulating that EU State Aid rules will trigger a significant change in Ukraine’s industrial base. While scholars estimate an overall positive effect leading to enhanced competition and sound public finances, concerns rise in terms of the correct and timely implementation, adequate enforcement of the recovery of unlawful State Aids and the influence of reform opponents in Ukraine’s political-administrative system. Having thoroughly examined the transposition of the State Aid provisions in the EU-Ukraine Association Agreement, we find a comprehensive level of correspondence with the relevant EU law, while holding that the jurisdiction of the EU Court of Justice on the interpretation of the agreement will allow for an unprecedented intense legal harmonization in Ukraine within the ambits of the European Neighbourhood Policy. Applying modern administrative theories to the actor’s constellation in Ukraine’s State Aid reform system, we identify reform opponents and bottlenecks while suggesting adequate managerial strategies for Ukraine’s competition regulator. Provided that the reform is correctly and timely carried-out and the benefits of fair competition policy are understood by policy-makers, authorities but also private undertakings, we conclude that the ongoing State Aid reform will boost Ukraine’s economic growth, consolidate public spending and contribute to transparency and the fight against corruption.

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