Wednesday, January 12, 2005

Corruption reform

Here are some interesting comments about reform from the Financial / Home UK - Reform in Ukraine must be swift and sweeping:

The United Nations Development Programme last summer asked a commission to draft a reform programme for Ukraine's next president. We served as members, and are now presenting dozens of recommendations in Proposals to the President: A New Wave of Reform.

First, political reform must make democracy and freedom a reality. Second, judicial reform must provide a firm foundation for the rule of law. Third, the state must be deprived of arbitrary powers of ownership, taxation, regulation and inspection because these inhibit commerce and breed corruption. Fourth, the state must cater better to social needs. Finally, Ukraine must be allowed to transform its "European choice" from a political slogan into a geopolitical reality.

Reforming the state is at the heart of our policy recommendations. Rapid private sector growth is the engine behind Ukraine's recent successes, but the state remains a failure. Political reform is the remedy. A consensus calls for a transition from presidential power to parliamentary rule, but the current proposals leave too much power with the parliamentary speaker and the prosecutor-general. A clear division of powers is needed, and decision makers must be made accountable.

A public administration worthy of a democracy must be created, staffed by civil servants rather than cronies. They should receive decent salaries rather than living off bribes. The rights of ordinary citizens in their dealings with the state should be protected. This includes the right to information. The parliament should adopt quickly a public information act, opening all public documents to scrutiny, with exceptions only for national security and individual privacy.

Massive corruption is likely to persist until civil servants no longer have so much to sell. One solution is to complete privatisation processes that have stalled. Another is to eliminate the plethora of inspections and permits required to conduct business. A modern tax code should be adopted, reducing the number of taxes and their rates, while eliminating loopholes. Proper corporate and financial legislation should be enacted to counteract the excessive concentration of Ukrainian big business and ensure protection of minority shareholders. The dozens of financial acts that have been drafted should be promulgated.

These seem sensible of course. One of the problems with most corruption reform is that it is often centered on making sure that civil servants get paid enough. But this is typical Western thinking--they seek bribes because they have to scramble to eat. So increase their salaries and watch the corruption evaporate away.

The problem with this is that it is not economics that drives it, it is culture. I could go into a long explanation about it and maybe will eventually but this is all based on what is a reciprocal culture. It will take a real cultural change to get rid of it completely. I do think an example set at the top of scrupulous adherence to law and policy will go a long way toward helping to get rid of it.

But the idea of decreasing what the civil service has to sell is a very good start. There are inspections here no end and the tax police show up periodically to businesses claiming amounts owed that are set for no other reason than to shake the business down for bribes. And this is true in any agency up and down government.

In the next building from the one we live in, lives a member of the militsya. These are the local cops and they are beat cops and traffic cops. We happened to see this guy pull in one day. He was driving a late model Mercedes, a car that very few here can afford, very, very few. And he was able to buy this on a salary that could not be more than $200 a month. Not bloody likely.

Coming back from a trip to Germanya few months back, we had to take two taxis to get the whole family home from the station. My wife took the first and I was in the second. The guy I was with got started a little later and was speeding trying to catch up and he ran a red light at one point to do it. The militsya was right there and signaled him to pull over. When he stopped, the driver reached over, opened up his glove box and pulled out a fifty gryvna note--about $10. When the officer came to the window, the guy slipped the note to him along with his driver's license. I heard the officer say after examining the pertinent documents, "Mr. Such and Such, you have a good day."

And we have had to pay money to a government inspector to get his signature on a document we needed signed to sell an apartment we had. If we hadn't gotten it, we could not have sold it.

It is a big problem here. Yuschenko has said that it has eaten away at the moral fiber of the people. He is right about that.


Anonymous said...

Good grief! That is a sad tale, Scott.

I thought better existed there. You're right, it will take a change of heart within the people as a whole - and that will take a lot of time and effort to bring about.

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