It is worth putting cynicism aside for a moment to consider the impact of corruption on Ukraine. Everyone has their lives impoverished, even those directly profiting from corruption. All of the economic studies that have been carried out by the World Bank and other international institutions such as the European Bank of Reconstruction and Development and International Monetary Fund demonstrate that embedded and widespread corruption across an economy acts like an economic cancer. It eats away at the commercial lifeblood of the nation, draining capital from the economic system and suppressing the growth of new businesses. Where corruption does not actually deter foreign investment it limits the impact that any investment can make.
According to Transparency International’s Corruption Index in 2009, Ukraine was ranked 146th, along with Zimbabwe, Sierra Leone, Ecuador and Russia. This is appalling for everyone. For Ukrainians in their daily lives, it means forking out additional cash to obtain nursery school places or medical treatment. But even for the business and political elites corruption is hugely damaging. The point often missed by the elites is that corruption, even if some of them are immediately benefiting from it, so damages value that all significant property holders lose out.
This is particularly the case with Ukraine, an enormously rich land, with huge reserves of gas and oil and an enormous fertile farmland, with the capacity to feed all Europe. Released from the shackles of corruption, everyone — rich and poor — would benefit from the enormous economic growth which would flow.
Despite the natural cynicism of previous failed attempts to get to grips with corruption there may be now an opportunity to tackle the problem once and for all. With a 15 percent fall in gross domestic property in 2009, there is now an urgent need to restore economic growth. Tackling corruption is one really effective way of growing an economy.
However, if Yanukovych’s government is going to take corruption seriously, then it has to recognize that adopting new anti-corruption laws and agencies is only a part of the answer. Any really effective campaign to root out corruption has to recognize the pervasive and systemic nature of corruption across the economy. Simply cracking down on individual officials is not sufficient. To root out corruption it is necessary to rethink the state.
One major source of corruption derives from overly complex government regulations, licensing requirements and heavy handed but rarely applied regulations. Complexity, licensing and discretionally applied penalties provide ample opportunity for corruption. One solution is to just repeal regulations. Or where repeal is not possible to ask the simple question. What is the minimum regulation with the minimum state interference we need to get the job done? The more minimal the state interference, the fewer opportunity for bribes.
It also has to be recognized that bribes and additional fees are also a response by officials to very low levels of pay. Given the economic crisis the government cannot be expected to eliminate this incentive to corruption in one go. However, steps can be taken to reduce corruption incentives and pay increases around those officials responsible for business regulation and development.
The core point here is that an anti-corruption strategy is not principally about prosecuting corrupt officials. It is about removing the incentives and procedures that lead to corruption.
When it comes to a hard edged prosecution strategy, Yanukovych is right to create a public body to run corruption cases. There are a number of international models available. The most successful is probably the Hong Kong Independent Commission Against Corruption. In 1974, when established, Hong Kong was among the most corrupt cities on earth. Even in Ukraine, payment is not required for an ambulance to stop at the scene of an accident. Such “tea money” was required back in the Hong Kong of the 1970s, in order to ensure basic public services were delivered. The Hong Kong Independent Commission Against Corruption was set up as an independent public agency reporting to an independent judge with the backing of the British governor general. The commission recruited high caliber law enforcement officers and lawyers and paid them well. It went after the corrupt with some vigor.
This enforcement strategy was matched with a preventative reform strategy which has resulted in a situation that even after 13 years after the British left Hong Kong, the Transparency International corruption practices index places Hong Kong in 12th place, the Brits, by contrast, manage only 17th place.
The history of anti-corruption strategies in Ukraine suggests that deep cynicism is a reasonable response to any political announcement on this subject. However, the economic crisis, plus the double realization that corruption is choking economic development and that it fundamentally undermines elite interests, may get the attention of Ukrainian power brokers to take reform seriously.
Alan Riley is a professor at City Law School at City University in London.
