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How to overcome corruption in Ukraine

Ukraine: The European frontier – a blog curated by Valerii Pekar.

Ukraine is currently considered one of the most corrupt countries in Europe. Some argue that this is just a perception, as Ukraine is also one of the most transparent countries in Europe, ever since it established an unprecedented openness of public data and private data of public servants (known as “e-declarations”). Countries with less data transparency could be very corrupt as well, but this is not a permanent focus of internal and international public opinion. Furthermore, corruption in Ukraine has been brought into focus since the Revolution of Dignity (EuroMaidan), which had a clearly pronounced anti-corruption orientation.

April 28, 2017 - Valerii Pekar - Articles and Commentary

1 Верховна Рада України VADIM CHUPRINA

Nevertheless, corruption in Ukraine remains high both subjectively and objectively; therefore discussions on how to overcome it are much more productive than discussions about whether it is as high as may be perceived.

There are two principal approaches to the issue.

The first one, known in Ukraine as “anti-corruption reform”, is to ensure the inevitability of punishment for corruption. Traditionally in Ukraine corrupt bureaucrats, tax and custom inspectors, militiamen (an old name for police officers), prosecutors and judges are members of the same close-knit clans, so a corrupt state servant would never be punished, except in the rare occasions of aggravated clan wars. This is why a number of new independent institutions have been created. The National Anti-corruption Bureau (NABU) and Specialised Anti-corruption Prosecutor’s Office were introduced to investigate cases of high-level corruption, while the National Agency for the Prevention of Corruption (NAPC) analyses the integrity of public servants and politicians.

By the beginning of 2017, NABU had initiated some 264 criminal cases and the NAPC had gathered 107,000 e-declarations of MPs, top government officials, judges, prosecutors, etc. Nevertheless, public activists are concerned about severe problems, and even rollbacks, in this sphere.

There are several major issues that have emerged as a result. The first major is that an independent and new anti-corruption court has not been established, as was demanded by the law. NABU cases, hence, go to the traditional corrupt courts and stop dead there. Second, the NAPC has not yet started a full-scale examination of the e-declarations, and the online register of e-declarations has many bugs and often does not work as it should. Third, some politicians have tried to undermine the independence of NABU by blocking the assignment of independent and trustworthy auditors. Fourth, until now NABU has had no legal right to wiretap communications and, in order to initiate wiretaps, it has to go to the traditional corrupt institutions which often immediately inform the suspects. Fifth, the law demands that investigation functions be transferred from the Prosecutor General’s Office to the newly established State Bureau of Investigations, but its head has not yet been assigned. Sixth, the mandates of the members of the Central Election Committee, one of the most corrupt institutions, expired long ago and new members have not been elected. Seventh, civil society organisations, the business community and international financial organisations have all demanded the dismissal of the extremely corrupt “tax militia” (a part of the fiscal service) and the establishment of an analytical demilitarised Financial Investigations Service under the auspices of the Ministry of Finance. Last, but not least, there are rumours that the examination of candidates to the reconstructed Supreme Court of Ukraine is not honest, and civil activists are demanding the publication of the tests of the applicants together with the grades, and to organise an online live stream of the interviews and to make public and transparent the attempts of the High Qualifying Commission of Judges to tackle the veto by the Public Integrity Council. All of these issues mentioned above, and some additional demands, were included to the “Anti-corruption Declaration”, signed on April 10 by dozens of authoritative NGOs and political parties.

Perhaps, the most important point is that the NAPC does not show any desire to organise the examination of e-declarations of state servants and MPs, while the parliament has adopted a law which forces the representatives of anti-corruption civil society groups to submit the same kind of e-declarations. Many NGOs consider this last fact as a declaration of war by corrupt politicians on the civil society.

While anti-corruption reform is slowing down and in some areas have even been rolled back, we have to consider another way to fight corruption, which is as important as the first method. This one is about undermining the sources of corruption, rather than catching individual corrupt officials.

The freer the economy is; the less space is available for corruption. Ukraine’s economy remains extremely “un-free” (166th rank in the Heritage Foundation’s Economic Freedom Index), and even the very efficient NABU, NAPC and Anti-corruption courts are not able to eliminate corruption in this turbid water.

State-owned enterprises are the greatest source of corruption. There are still approximately 3,500 of such enterprises in Ukraine; ten times more than the average European country. Their privatisation has been postponed for years by political clans which extract money from them. In addition, opening the agricultural market has been blocked again and again. Deregulation, an area where many achievements have been reached in previous years, has now slowed. Ministries and other state agencies still have a lot of obsolete and redundant functions, often concentrating powers like rules setting, inspection, administrative services, policy development and state property management. Verification of social subsidies has failed, because there are many ways to extract corrupt money from them. Tax systems remain complicated and non-transparent (at present the Ministry of Finance is fighting for automatic VAT refund to exporters, whereas the traditional manual refund is a major source of corruption). Education and public health remain very corrupt spheres due to their post-communist models of financing.

From this point of view, every reform in Ukraine is an anti-corruption one. Indeed, there have been some important breakthroughs. Gas market reform eliminated corruption in this sphere. The new patrol police, created from scratch, enjoy much greater public trust than the former militia due to its new practices. The National Bank has cleansed the financial system of many money-laundering banks. Deregulation has deprived corrupt bureaucrats from many important sources of income. Public procurements have been completely remade with the new online platform, the award-winning ProZorro. But comparing the successes of the three years since the EuroMaidan with the long to-do list, tasks set by civil society organisations, the EU and IMF, we see that the pace of change is unsatisfactory.

This is why we need to unite the efforts of the civil society and Ukraine’s international partners to overcome this rollback and to increase the pace of reforms dramatically. Only joint pressure will work effectively.

Valerii Pekar is a co-founder of the Nova Kraina Civic Platform, a lecturer at the Kyiv-Mohyla Business School and a former member of the National Reform Council. He curates a blog titled Ukraine: The European frontier.


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