Ukraine ‘must revamp labour laws and step up privatisation to fix economy’

Ukraine needs to revamp its labour laws and redouble efforts to privatise thousands of companies to repair its economy, its president’s economic adviser has said.

Alexander Rodnyansky, an adviser to the president, Volodymyr Zelenskiy, said the war-torn country needed to speed up efforts to reform industries as it looked to rebuild after Russia’s invasion.

Rodnyansky told the Guardian that the Ukrainian government needed to “create the foundations for rapid economic growth” while also financing the conflict.

Ukraine faces a debt crisis as well as inflation of more than 20% as the country counts the cost of Russia’s offensive.

Rodnyansky, who is also a professor of economics at the University of Cambridge, said “receiving more foreign aid is the easiest way to fund the war”; however, efforts were being made to cut spending, collect taxes and issue debt to finance its efforts.

He said that Zelenskiy and his top team were also examining priorities to rebuild the economy, including progressing efforts initiated before the war to rework 50-year-old labour regulations. “We have deep issues with our labour code, developed in the 1970s, that needs to be overhauled.

“We’re going to try to emulate a more liberal approach, like Denmark, with a flexible labour market because we need to catch up.”

Rodnyansky said there were “peculiarities with our post-Soviet system” that had fuelled red tape. “If you want to let someone off on holiday, there is four pages of bureaucracy you need to go through.

“There are also more conventional things to reform: ease of hiring, ease of firing, severance pay, flexible hours and contracts and fixed-term contracts.”

Labour organisations have expressed concerns over workers’ rights amid the Ukrainian government’s labour liberalisation, which has included a vote in favour of legalising zero-hours contracts earlier this year.

Rodnyansky said he was also in favour of reviewing minimum wages to scrap them in some industries where it did not increase employment. “We need to make sure it’s not too high because our economy is collapsing and we need to make sure it does not push up unemployment,” he said.

A group of leading economists said last month that Ukraine’s government needed to overhaul its tax and spending policies or risk an economic crisis that could “cripple its ability to sustain the war effort”.

Rodnyansky called on western nations to expand the sanctions imposed on Russian companies and individuals and sell their assets to fund the reconstruction of Ukraine. “The UK has done a lot but it has not been exhaustive,” he said.

The government of Ukraine, the European Commission and the World Bank have estimated that the cost of reconstruction and recovery in Ukraine is almost $350bn (£310bn) and rising.

Rodnyansky was promoted to become chief economic adviser earlier this year after two years with the government. His father is a film producer who helped Zelenskiy become a household name as an actor.

Russian attacks on Ukrainian power stations, including the Zaporizhzhia nuclear site in south-eastern Ukraine, have led to safety worries about nuclear power.