Ukraine is committed to deepening its political association and economic integration with the EU and to enhancing its cooperation with NATO. Membership of the two organisations is the ultimate goal, an objective that is enshrined in the Constitution. The reform process began in the aftermath of the 2013/2014 Maidan revolution. It has resulted in important reform progress in a number of key areas, including macro-financial stability, banking, decentralisation, energy, education and healthcare. The newly elected president and government are expected to continue with the reform agenda by implementing concrete actions that are in line with democratic practices and respect the rule of law. Ukrainian civil society has played a key role in the reform process and will continue to play a crucial role in sustaining its momentum. The improvement of the country's socio-economic structure depends on stronger and more equitable economic growth. To this end, an improvement in the overall business environment and the level of foreign direct investment (FDI) attractiveness is essential and remains dependent on a strengthening of the rule of law and the availability of skilled labour. Increased labour migration from Ukraine, especially among young people, and decreased enrolment in VET will put significant pressure on skills availability in the country in the years to come.

This ETF assessment comes at an important moment when Ukraine has made remarkable progress in renewing its legal and strategic framework for the entire education system. In recent years, the ETF has been closely accompanying and advising the Ukrainian government and stakeholders on how to modernise the country's VET system. The European Union (EU) and its Member States recognised the need for action and agreed to finance a large EUR 58 million EU4Skills programme to support VET reform in Ukraine. While the strategic direction and legal framework of Ukraine are in line with the EU practices and policies, the ETF assessment makes an attempt to identify critical issues to be addressed in the course of implementing the ongoing VET reform. The assessment looks particularly at issues of human capital development and education reform which could support the alignment of reforms in Ukraine's secondary VET system with other sub-systems of education such as general secondary education and professional pre-higher education and so enhance lifelong learning. It draws lessons from the recent decentralisation process in VET and how national policies and actions could facilitate the reform process by taking into account the diversity of the regions. The assessment also contributes to the preparation of the next Eastern Partnership multiannual programme which will be launched in 2020.

The assessment process included an extensive phase of desk research based on responses to a standardised questionnaire, the national reporting framework (NRF), and the preparation of an Issues Paper with an overview of themes to be discussed in this report, which were then finalised in consultation with the ETF country and thematic teams responsible for Ukraine. In addition to the NRF, all 25 regions of the Ukraine carried out a self-assessment of their VET systems using the Torino Process guidelines. A wealth of experience, practice and progress at sub-national level has been reflected in the NRF. The author carried out a fact-finding mission to Kyiv in Ukraine and interviewed a number of key stakeholders and experts who provided invaluable insight and evidence for the preparation of this assessment. The findings and recommendations of the ETF assessment were shared and discussed with national and regional authorities and other stakeholders at an event which took place in Lviv in 2019.

Like other ETF assessments, this paper is not meant to be exhaustive. The national report covers a broad selection of issues around human capital development and use, while the focus here is on challenges which the ETF recommends addressing as a matter of priority.

The population of Ukraine shrank from 50 million in 1999 to 42 million in 2019. Like many other European countries, Ukraine faces depopulation. However, Ukraine's population is falling on an unparalleled scale and at an unparalleled rate compared to its neighbours[2] See https://www.msp.gov.ua/news/14711.html.
. According to the UN World Population Prospects, the population will decline by more than 15% by 2050 (United Nations Department of Economic and Social Affairs, 2017). Ukraine ranks among the 30 'oldest' countries in the world in terms of the share of the population aged 60 and above. This share was 23% in 2018 and is projected to grow to 25% by 2025. Ukraine is also among the top five countries whose populations are shrinking most rapidly[3] See https://www.msp.gov.ua/news/14711.html.
. The relative size of the young population (aged 15 to 24) decreased from 16.7% in 2013 to 13.2% in 2018, and its share is the smallest among the Eastern Partnership countries (Figure 1). According to UN Population Division data, international migrant stock reached 4.9 million Ukrainians in 2017, a similar figure to 2010.

FIGURE 1 Share of YOUNG PEOPLE (0 TO 24 years old) in the population

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Ukraine's economy has stabilised following a deep recession after the Maidan revolution in 2014 and 2015 and has grown gradually over the last three years (GDP grew by 2.4% in 2016, by 2.5% in 2017 and by 3.3% in 2018)[4] National reporting framework: A 1.1.
. The key factor in economic growth has been the increase in household consumption. The currency market has also stabilised following its liberalisation. At the same time, socio-economic development is affected by external debt payments in 2018 and 2019, a low level of labour productivity and social standards, and a high level of poverty[5] National reporting framework: A 1.1.
.

TABLE 1 SELECTED COUNTRY INDICATORS, UKRAINE

Indicator		2013	2017	2018
Total population (000)		45 372.7	42 414.9	42 216.8
Relative size of youth population (age group 15–24, %)		16.7	13.7	13.2
GDP growth rate (%)		0.0	2.5	3.3
Public expenditure on education (as % of GDP)		6.7	6.0	N/A
Share of VET students in upper secondary education (ISCED level 3) (%)		31.0	30.3	N/A
Participation in training/lifelong learning (age group 25–64) by sex (%)	Total	N/A	0.8	0.8
Activity rate (aged 15+) (%)	Total	65.0	62.0	62.6
Employment rate (aged 15+) (%)	Total	60.3	56.1	57.1
Unemployment rate (aged 15+) (%)		7.2	9.5	8.8
Youth unemployment rate (aged 15–24) (%)	Total	17.4	18.9	17.9
Proportion of people aged 15–24 not in employment, education or training (NEET) (%)	Total	16.2	16.5	14.5

Source: ETF database

Between 1999 and 2017, the period during which Ukraine's private sector emerged, the average rate of growth of per capita income was 3.3% per year, lower than the average rate in post-Soviet countries (World Bank, 2019b). At the same time, Ukraine's population continues to age and decline due to declining birth rates and emigration. The population of Ukraine has shrunk by around 15% since 1999, and the youth population has declined by nearly 25%.

GDP growth has been solid and reached an estimated 3.6% in 2019, driven by agriculture and sectors dependent on domestic consumption. Growth in the first three quarters of 2019 was driven by a strong harvest, and sectors such as wholesale and retail, transport, as well as financial services. The agriculture sector grew by 6% in the first half of 2019. Household consumption continued to grow, supported by one-off social transfers during the election cycle, continued strong remittances from labour migration to EU countries and a resumption of consumer lending (World Bank, 2019c). At the same time, manufacturing and investment growth remained weak. At only 20% of GDP, the level of fixed investment remains too low for strong and sustained economic growth. According to World Bank estimates, economic growth is projected at 3.6% in 2019, 3.7% in 2020 and 4.2% in 2021 if key reforms move forward expeditiously.

The restructuring of the economy has had implications for the distribution of employed people by economic sector. The share of agriculture and industry in total employment has decreased, while employment in the service sector has increased. In 2018, the majority of the labour force (60.8%) worked in services, followed by industry (24.3%) and agriculture (14.9%). The self-employment rate is relatively low and decreased from 18.1% in 2013 to 15.8% in 2018 (ETF, 2019, unpublished).

Poverty has continued to decline, supported by higher wages and consumption. Real wages grew by 9.5% between January and September 2019, driven mostly by salary increases in the private sector due to pressure from outward labour migration. Remittances also continued to grow by 12% between January and September 2019. As a result, moderate poverty (World Bank's national methodology for Ukraine) is projected to decline by around 4% in 2019 compared to 2018 and return back to the pre-crisis level seen in 2013.

FIGURE 2 Poverty Rate

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Source: World Bank, 2019c.

A recent analysis by the World Bank indicates that the growth rate of Ukraine's economy has been too slow to absorb the excess supply of employees released by the old economy and the new entrants to the labour force (2019a). Therefore, many young Ukrainians have opted to emigrate, attracted by higher expected earnings in other countries. At the same time, the human capital skills demanded by expanding sectors are different to those supplied by workers in old disappearing industries.

The improvement in the country's socio-economic structure is dependent on stronger and more equitable economic growth. To this end, an improvement in the overall business environment and the level of FDI attractiveness is essential. This in turn is dependent on strengthening the rule of law and the availability of skilled labour. The socio-economic situation is also affected by the ongoing conflict in Eastern Ukraine. Around 3.5 million people on both sides of the contact line remain in need of humanitarian assistance and protection. Increased labour migration from Ukraine, especially among young people, and decreased enrolment in VET will put significant pressure on skills availability in the country in the years to come.

The Association Agreement (AA) with the EU provides the agenda for the reform process in Ukraine. The agreement, including its Deep and Comprehensive Free Trade Area (DCFTA), entered fully into force in September 2017. The government has introduced significant measures to establish the institutional and coordination framework necessary to implement the Association Agreement. Presidential and parliamentary elections in 2019 brought about major changes in the executive and legislative authorities, which is likely to have an effect in the short term on the pace of implementation of the agreement. However, President Volodymyr Zelensky, whose party Servant of the People won the parliamentary elections, is expected to proceed with the reform agenda according to democratic practices and with respect for the rule of law. Ukrainian civil society has played a key role in the reform process and will remain crucial to sustaining its momentum. In recent years, Ukraine has been strengthening integration processes with Europe, which have significantly influenced social, political and economic developments in the country. The EU is now Ukraine's biggest trading partner with both exports and imports exceeding 40%.

Significant progress in education reform was one of the most important achievements for human capital development in Ukraine between 2016 and 2019. The Law on Education, adopted in 2017, provides an overall policy and legal framework and introduces a new structure for the education system, which includes:

preschool education

complete general secondary education (four years of primary education, five years of basic secondary education and three years of field-specific secondary education)

out-of-school education

specialised education

VET

professional pre-higher education

higher education

adult education, including postgraduate education

The Law on Education also defines the NQF and stipulates the setting up of a National Agency for Qualifications, which was established in 2019[6] See https://zakon.rada.gov.ua/laws/show/693-2019-%D0%BF.
.

The Law on Education paved the way for the modernisation of general secondary education. This is articulated in the New Ukrainian School concept[7] See https://www.kmu.gov.ua/npas/249613934.
. Complete secondary education will be compulsory for everybody in Ukraine. A new schooling structure introduced in the law will extend the duration of complete secondary education to 12 years. It has four main components: i) developing new, modern standards in secondary education with a competence-based approach; ii) revising the national curriculum according to new education standards; iii) introducing the teacher certification procedure and new programmes to enhance professional qualifications; and iv) reducing bureaucracy in the education system while introducing a transparent and effective system of governance. The New Ukrainian School concept is to be implemented in three phases. Since 2018, it has been piloted in primary education in around 100 schools. It will be scaled up for basic secondary education in 2022, and from 2027 onwards will also cover upper secondary education. The last phase of the reform includes profiling provision at upper secondary level. This will include both academically and vocationally oriented pathways for learners. A new Law on Complete Secondary General Education[8] See https://zakon.rada.gov.ua/laws/show/463-20
, adopted in January 2020, provides practical guidance and tools for the implementation of the New Ukrainian School concept and includes clarification on the disputed issue of the language of instruction for national minorities in secondary education.

In June 2019, the government adopted a Concept[9] See https://www.kmu.gov.ua/ua/npas/pro-shvalennya-koncepciyi-realizaciyi-derzhavnoyi-politiki-u-sferi-profesijnoyi-profesijno-tehnichnoyi-osviti-suchasna-profesijna-profesijno-tehnichna-osvita-na-period-do-2027-roku-i120619.
for Modern VET for the period up to 2027 to support the implementation of VET reforms. The concept identifies the following three priority tasks:

1. further decentralisation of VET by increasing school autonomy, optimising VET provider networks and ensuring the acquisition of vocational qualifications in a lifelong learning context;

2. aligning VET provision with regional labour market needs;
3. improving the quality of VET, e.g. through competence-based and flexible provision; by improving the status of VET teachers and trainers and attracting professionals from industry to teach in VET institutions; and developing cooperation and different forms of interaction and partnerships with employers and the private sector to increase the relevance of VET.

A new draft Law on VET has been prepared but its submission to the parliament has been delayed due to the change in government in September 2019.

The Law on Professional Pre-Higher Education was adopted in June 2019. This law governs the provision, funding and institutional governance of colleges and technikums, which were previously associated with higher education as institutions of 1st and 2nd level accreditation. These institutions are expected to introduce a new qualification known as a 'professional junior bachelor' from 2020 onwards. They may also be licensed to provide short-cycle higher education programmes or bachelor-level qualifications. Junior specialist qualifications will be provided in the secondary VET system. The role and future developments of this level of education are discussed later in the report.

The EU provides considerable support to Ukraine to ensure a stable, prosperous and democratic future for all its citizens, and has pledged a EUR 12.8 billion package for the next few years to support the reform process. The EU strategy aimed at supporting Ukraine between 2018 and 2020 identifies human capital development as a priority for cooperation under the objective of economic development and market opportunities. Ukraine has embarked on a comprehensive reform of the education sector. The EU is providing support, notably in the area of VET and minority languages.

The largest intervention financed by the EU and its Member States – Germany, Finland and Poland – is the EU4Skills: Better Skills for Modern Ukraine programme, which will provide EUR 58 million to support VET reform in Ukraine. The project will support the modernisation of the VET system in Ukraine through better governance and funding, improved quality and attractiveness of provision, investment in infrastructure and optimisation of VET provider networks. The intervention is planned to be complemented by infrastructure loans from the European Investment Bank to establish and enlarge the network of vocational centres of excellence in the years to come.