Ukraine’s anti-corruption efforts save $6 billion annually: Report

Ukraine saves $6 bln annually due to anti-corruption measures: Study

 

Analysis & Opinion, Ukraine

The Kyiv-based Institute for Economic Research and Policy Consulting has published their report “Ukraine’s Fight Against Corruption: The Economic Front. Economic Assessment of Anticorruption Measures Implemented 2014-2018.” The research has found that the fight against corruption saves $6 billion a year for the country.

To tackle corruption, the Ukrainian authorities have been focused on narrowing corruption opportunities through reforms in different sectors and on creating efficient corruption fighting institutions.

The research primarily focuses on the first line of changes, in the first place on the effects of reforms which are enhancing transparency and openness in the work of government and increasing the efficiency of public administration.

Ukraine is often perceived as a highly corrupt country, yet international ratings measure corruption perceptions, while economic assessments tend to focus on losses caused by corruption. The research is an attempt to calculate economic benefits achieved by Ukraine’s anti-corruption reforms.

The authors analyzed changes in the period from 2014 to 2018 in the sectors where corruption was “traditionally considered as Ukraine’s calling card”:

  • The natural gas sector, in which reforms narrowed opportunities for corruption making PJSC Naftogaz Ukrainy, which earlier had about $3 bln losses annually, a profitable company.
  • The closing of so-called “tax holes,” which caused $1,8 bln losses in 2013 alone.
  • The liquidation of money laundering “conversion platforms” and fighting schematic tax credits, which amounted tax revenues to approximately $3 bln throughout 2014-2017.
  • The introduction of the electronic system of public procurement, ProZorro broke corrupt schemes in the area which incurred $1,3–$1,9 bln of annual losses. The switch to the new procurement procedure has already resulted in about $1,5 bln of savings, while estimates in price savings may amount to an additional $0,37–0,90 bln.

Among other anti-corruption measures the report lists the following:

  • The creation of the open data portal provided access to a vast number of state registers, removing the .monopoly of bureaucrats for access to the data stored by state entities.
  • Deregulation, removing excessive administrative burdens on business, aims to reduce the corruption opportunities for bureaucrats. Ukraine has moved up 38 positions in the World Bank’s Doing Business – from 112 in 2014 to 76 in 2018. However, according to the Regulator Service of Ukraine (SRSU), about half of 112 items of Government’s  Action Plan have not been implemented yet.
  • The state-owned enterprises (SOEs) are the most corrupt institutions in Ukraine, according to the National Anticorruption Bureau of Ukraine (NABU) and Transparency International Ukraine. Out of 2,392 SOEs in 2017 only 1,611 companies were still in operation with only 1,056 being profit-making. Governance of SOEs is being implemented and a smallscale privatization is planned with the help of ProZorro sales system.
  • Improvement of the supervision of Ukraine’s banking system is another line of actions aimed at narrowing the opportunities for corrupt practices.
  • Ukraine has established the National Anticorruption Bureau of Ukraine (NABU), the National Agency on Corruption Prevention (NACP), and the Specialized Anticorruption Prosecutor’s Office (SAPO). In June 2018, the draft law on establishing an Anticorruption Court was adopted.

Reforms are still in progress in the above-mentioned fields and Ukraine still has much to do to increase their efficiency.

The economic effect of anti-corruption measures undertaken by Ukraine in 2015-2017. Image: ier.com.ua

“We estimate that aggregate economic gain from anticorruption measures amounts to nearly 6% of GDP, or approximately $6 bln. Even with the above-mentioned positive achievements, the fight against corruption has only just started. To date, Ukraine has had to adequately respond to a double challenge – to prevent the roll-back of the reforms that have brought about these achievements and to further strengthen the process of fighting corruption,” the report reads.

The report concludes, “Strategically, Ukraine must nurture the zero tolerance of its people to all manifestations of corruption. To achieve this, it is necessary to change the ideology and state governance framework in such a way that all Ukrainian citizens could be confident that being honest is prestigious, rewarding and safe.”

 

The full 85-page report is available on the website of the Institute for Economic Research and Policy Consulting.


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