On Sunday, Ukrainians flocked to vote in the early parliamentary elections. The Organization for Security and Cooperation in Europe found the votes free and fair despite fears of fraud.

The decision to hold early elections was a compromise between President Viktor Yushchenko, the leader of Our Ukraine-Self Defense bloc, known by its Ukrainian acronym NUNS, and Prime Minister Viktor Yanukovych, who heads Ukraine's Regions party. Under the Ukrainian constitution, if a single political party does not receive a majority of the seats in the Verkhovna Rada (Parliament), a coalition must form the Cabinet of Ministers.

After the March 2006 elections, the pro-Western "Orange Coalition," which led the country's democratic revolution in 2004-2005, headed by Mr. Yushchenko and former Prime Minister Yulia Tymoshenko and her BYuT bloc, was unable to successfully form a parliamentary majority.

As the result, Oleksandr Moroz, leader of the Socialist Party of Ukraine, who initially supported the Orange forces, defected to the Yanukovych camp, forming the Anti-Crisis Coalition with the Party of Regions and the Communist Party of Ukraine. Mr. Yanukovych then proceeded to gnaw on Mr. Yushchenko's presidential powers, painting the president into the corner and triggering the recent elections.

The election results, still too close to call, are a sign of increased political competition and a tribute to Ukraine's democratic development. The "orange" blocs - Mrs. Tymoshenko's BYuT and Mr. Yushchenko's NUNS - both received more support than pre-election polls anticipated.

BYuT's performance was particularly surprising: more than 30 percent of the popular vote, up nearly 10 percent from the March 2006 elections. Mrs. Tymoshenko's increased popularity, particularly in central and eastern regions, which previously supported Mr. Yanukovych, will not only give her legitimacy as prime minister but place her in an excellent position for the 2009 presidential elections. However, Mr. Yanukovych promised to scuttle the elections by dissolving his party, if the outcome is not to his taste.

The necessity to form a new coalition has led Mr. Yushchenko to negotiate again with Mrs. Tymoshenko, who outperformed Mr. Yushchenko's Our Ukraine/People's Self-Defense by more than 2:1. Relations between Mr. Yushchenko and Mrs. Tymoshenko have been strained since Mrs. Tymoshenko was fired as prime minister after being accused of mishandling the economy.

Still, Mrs. Tymoshenko may return as prime minister after the impressive electoral performance Sunday. While some have predicted a Yushchenko-Yanukovych coalition, but only 6 percent of Ukrainians polled support such an outcome.

With pro-democracy forces returning to power in the Rada, it is hoped the next Cabinet can address several key issues. Ukraine has experienced significant political turmoil since the Orange Revolution, often leaving the government paralyzed and unable to address important policy issues.

In particular, the Ukrainian parliament should pass substantial constitutional reforms to prevent further institutional crises. Among the constitutional changes needed for a stronger democracy in Ukraine are clearly defined delineation of power for the president and prime minister and between various ministers.

Ukraine may benefit greatly from a shorter time limit for forming a government and approving the candidacy of the prime minister. The country's political system also needs well-defined grounds and procedures for dissolving the Rada by the president, and a more accountable and precise organizational chart for "power" ministers, including law enforcement, interior, security services and defense.

Ukrainians also hope for economic reforms in line with free-market principles. Ukraine's economy suffered considerably on the Party of Regions' watch, seeing price controls on some commodities and excessive and arbitrary regulations of sales of crucial commodities such as natural gas and grain.

Mrs. Tymoshenko's prior performance as prime minister drew lots of criticism from within and outside the country, but her surprising achievement last Sunday may give local and foreign investors hope for a liberalized, investor-friendly economy.

While talk of full NATO and European Union membership remains premature, Washington is expected to continue supporting Ukraine's Euro-Atlantic agenda. More hands-on engagement from the EU would be welcome.

Though Ukraine remains highly divided on the key foreign policy issue of NATO membership, it is hoped the renewed power of pro-Western forces will break the country's political deadlock and allow the government to make significant strides, including Ukraine's final negotiations for World Trade Organization membership.

Much of the new coalition's success will be determined by how committed it is to actively pursuing anti-corruption reforms. Unfortunately, some of Mr. Yanukovych's close Cabinet associates were on the corruption A list. President Yushchenko has also failed to fulfill his campaign promise to "put the bandits in jail." Some of his supporters were uncomfortably close to the highly lucrative and opaque oil and gas trade. As the result, Ukraine's energy security suffered, while key pipelines, such as Odessa-Brody-Gdansk, remained unfinished.

Finally, the murder of journalist Georgiy Gongadze, a catalyst in the Orange Revolution, remains unsolved, as has the related "suicide" of Yuri Kravchenko, who was interior minister during Leonid Kuchma 1994-2005 term as president.

Ukraine's powerful oligarchs continue to protect their financial interests by funding all political parties. Without full commitment to fighting corruption, Ukraine may remain in a limbo of postcommunist transition.

Ukraine's democratic breakthrough, increasingly rare in the former Soviet bloc, is challenged by a system entrenched in high-level corruption. Transparency and executive competence are essential role for the future of democratic governance in Ukraine.

Ariel Cohen is senior research fellow at the Heritage Foundation and senior adviser to the U.S.-Ukraine Business Council.