Foundation for Effective Governance Ukraine, Kiev, 23-F Kudryavskaya Str., tel: +380 44 501 41 00, факс: + 380 44 501 41 05

feg@feg.org.ua www.feg.org.ua, www.debaty.org

Economic reforms will help eliminate corruption in Ukraine

Corruption worsens country’s investment climate. It increases direct costs of doing

business making national product less competitive, and hampers establishment of a

level playing field. Corruption distorts competition, increases business and

personal risk. The economy suffers on many fronts - from reduced incentives to

reduced long-term investments to reduced activity. Ultimately, the price is paid for

in growth and well-being.

And corruption can actually be brought under control - Chile, Singapore and South

Korea have all shown that cultures of corruption can be reformed. Research shows

that getting rid of corruption pays off handsomely in the long term - incomes per

capita can go up three times.

Ukraine does not do well today: it is ranked 134 out of 178 in the Transparency

International Corruption Perception Index. President Yanukovitch has introduced

an economic reform package that was intended to improve things. But will it

work? Was it right to initiate economic reforms before corruption was tamed?

Corruption hurts the

economy and general

welfare

Arguments FOR

The reforms will reduce the role of the state in the economy. That reduces the

opportunity for corruption, so will reduce its level too. The number of licenses and

permits required to do business in Ukraine will fall; hence, as the degree of contact

required between the state and business falls, so will corruption. Privatisation will

have the same effect. The smaller state will be able to concentrate on its core

function of levelling the playing field. A smaller state is more easily held to

account. All in all corruption should be reduced.

A smaller state offers less

opportunity for

corruption …

Some social functions are irreducibly the proper purvey of the state - public goods,

some standard-setting and anti-trust law. The reform package aims to increase

transparency and accountability in those areas that remain under state control.

Energy tariffs are to be increased towards cost-reflective levels, and public

procurement will be reformed to enhance transparency. Responsibilities will be

properly ascribed and the civil service will become professionalised. A well-

functioning state offers fewer motivations for corrupt practices.

… and public sector

reform will make for a

more transparent state

Foundation for Effective Governance Ukraine, Kiev, 23-F Kudryavskaya Str., tel: +380 44 501 41 00, факс: + 380 44 501 41 05

feg@feg.org.ua www.feg.org.ua, www.debaty.org

Arguments AGAINST

All very well in theory, but think about the implementation: that will entirely be in

the hands of corrupt bureaucrats and politicians backed up by a corrupt media. You

would need real monitoring by the public and strong coercive measures in place to

get implementation anywhere near what is needed. Without it, the reforms will be

blocked or manipulated for the survival of the current, vicious system. Things

could even be worse than they are today. Get real: a system this corrupt cannot

reform itself. The political system needs to be cleaned-up first. The reforms have

got the sequencing all wrong. Look at Georgia, they successfully reformed their

police by implementing structural reforms together with replacement of the

incumbent police staff not prior to that.

A corrupt system cannot

reform itself - the

sequencing is all wrong

A big piece of missing reform is the judiciary. You cannot have effective

deregulation, for example, even if the governing law is unambiguous but

businesses cannot actually get protection in court. A good law overseen by an

incompetent - or corrupt - judiciary is of no use at all. Again, the sequencing is all

wrong.

The whole system -

including the judiciary -

needs reform, not just the

economy

The impact of the economic reform package on corruption in Ukraine will be debated in public at an event

brought to you by the Foundation for Effective Governance in partnership with London-based Intelligence

Squared on October 13th

in Kiev, Ukraine.

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Statistics

Control of Corruption for different countries in years

1998 and 2009 World Bank Worldwide Governance Indicators

Correlation between Corruption Perception Index

(CPI) and Global Competitiveness Index (GCI) Transparency International and World Economic Forum