Sunshine on a shakedown culture
To break its culture of corruption, the former Soviet state has put a light of transparency on private companies and corrupt low-level officials. One result: a welcome spurt in economic growth.
Long one of the world’s most corrupt countries, Ukraine received startling news last week. The economy grew 4.6% last quarter. It was the second-fastest rate in Europe. One possible reason for the growth spurt is that many reforms begun after a 2014 pro-democracy revolution are kicking in.
In addition, an election in April saw an anti-corruption crusader, Volodymyr Zelenskiy, become president. His party also took over parliament in a July election. He vows radical change from the top, focused on an overhaul of courts, law enforcement, and Ukraine’s spy agency to prevent them from frequent shakedowns of businesses.
Yet one type of reform stands out in its ability to improve Ukraine’s investment climate. It is the creation of two bodies that are changing a corrupt culture from the bottom up, one individual at a time, by shining a bright light in the dark corners where corruption hides while also promoting accountability in lower-level public officials.
The Business Ombudsman Council, created in 2015 with foreign assistance, helps protect companies when officials try to extract money either through groundless delays, tax searches, or outright demands for a bribe. It directly confronts such officials to correct their practices, either by shame or persuasion. Over the past four years, it has also collected more than $450 million in illegally charged taxes, fines, and other payments.
“We hear from hundreds of entrepreneurs each year. Many are frustrated with the actions of ‘uncaring’ officials,” says the council’s head, Algirdas Šemeta.
The Ukrainian Network of Integrity and Compliance is a group of more than 50 large and civic-minded companies that share their experiences in promoting an ethical business climate and in raising public scrutiny of corruption. The resulting peer pressure has helped Ukraine rise up several places in the World Bank’s latest “ease of doing business” index.
Before these reforms began, more than a quarter of Ukraine firms said they had to bribe officials “to get things done,” according to a poll. Last year, more than half said it is possible to do business without being involved in corrupt practices. Such results have inspired other post-Soviet states, such as Kyrgyzstan, to learn from Ukraine even though that country still has a long way to end a corrupt and oligarchic system.
Light is the most efficient policeman, said the late U.S. Supreme Court Justice Louis Brandeis. In Ukraine, it is also an efficient way to boost the economy, one individual conscience at a time.