ANALYSIS

Ukraine under corruption spotlight

by Robert Lyle
RFE/RL Newsline

The detention in the U.S. of former Ukrainian Prime Minister Pavlo Lazarenko, who is wanted on corruption and money-laundering charges in Ukraine and Switzerland, has put the global spotlight on Ukraine, again drawing attention to the country's problems with corruption.

The editor of the publication "ERT" from the private Ukrainian Center for Independent Research, Inna Pidluska, told an Organization for Economic Cooperation and Development conference in Washington earlier this week that corruption is "a painful" subject in Ukraine because it has been so broadly discussed since 1992 and more than 20 laws enacted on fighting the phenomenon.

The problem, Ms. Pidluska said, is that despite all those laws and seven government ministries and departments assigned the task of fighting corruption, no one is actually doing the fighting. Ukraine, she noted, is lagging behind many other post-communist states, both in economic performance and in dealing with corruption.

One of the reasons, she added, is the totalitarian attitude of the state toward business - the taxation system has not been reformed, nor has the criminal code. She noted that there is still a law on the books making "speculation" illegal. Speculation is defined as reselling something to gain profit, which is business activity, and in Ukraine that still is de facto outlawed. This means that businesses are pushed into bribing officials.

Part of the problem in Ukraine, said Ms. Pidluska, is that the average business owner spends 55 days registering his or her business and it is not unusual for that process to take 90 days. At the same time, there are 26 state bodies authorized to perform inspections in any business and impose fines on entrepreneurs for any infraction of the agency's rules.

The rules, however, are not published, and frequently the inspectors will not tell even the business owner what violations are being cited. Of course, Ms. Pidluska commented, there is a simple and fast way to get a license or pass an inspection - namely, bribery.

Without question, she said, President Leonid Kuchma was right last year when he admitted that abuse of power, bribery and extortion by bureaucrats were the main obstacles to economic development in Ukraine.

Ukraine is not alone in having to battle corruption.

The deputy administrator of the U.S. Agency for International Development (AID), Harriet Babbitt, told the conference that in its role of promoting democracy around the world, the American aid agency helps fight corruption as well. She noted that in Armenia, for example, USAID supported 200 community development programs that stressed the importance of transparency and accountability in managing any funds, public or private. It backed judicial reform through ethics classes in schools and the creation of professional associations in law, business, and the media to endorse anti-corruption codes of ethics. And it also encouraged the independent media in Armenia and in the last elections provided the most balanced coverage in Armenia's history.

Additionally, she said, by helping Armenia privatize its energy sector, the U.S. aid agency helped the government reduce electric meter tampering and bribery through launching a computerized system that separates the metering, billing and collection functions.

The vice-president of the private group, Transparency International, Frank Vogl, wrapped up the OECD conference saying that corruption is seen as a "massive problem" in more than half the countries of the world.

Petty corruption serves as a vicious tax on the poor, he said, while grand corruption hurts the economies of Central and Eastern Europe. Looting, which he described as the most outrageous form of corruption, has been perpetrated by leaders in Russia, Indonesia, Nigeria and Kenya, among others. While fighting corruption has become a major global topic, Mr. Vogl said efforts so far have "only made a dent." He said the armor of protection surrounding the corrupt - in government and business - remains largely intact.

Businesses should be pro-active, he said by reforming themselves and being good corporate citizens everywhere.

Robert Lyle is an RFE/RL correspondent based in Washington.

Copyright © The Ukrainian Weekly, March 7, 1999, No. 10, Vol. LXVII

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