Corruption in Ukrainian Society: Problem of Counteraction to Effective Development of Economy

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SHEE “Pereyaslav-Khmelnytskiy SPU named after Grygiriy Skovoroda”

Corruption in Ukrainian Society: Problem of Counteraction to Effective Development of Economy

Tetiana Maksymivna Bogolib

Doctor of Economics, Professor

Kyiv Region, Ukraine

Foreword

Purpose: Corruption in Ukraine, being one of the reasons of political, economic and social instability, has destructive character, constitutes serious obstacle to the economic reforms and prevents the investments. One of the reasons of such tendencies is the absence of complexity and consistency of anti-corruption policy. The article proposes the algorithm for counteracting corruption in Ukraine, as well as the main directions of efficient and effective anti-corruption policy.

Methods: Anti-corruption policy is based on laws and procedures determining methods for the prevention of corruptive practices and spread of corruption. Such methods include democratization of society, diagnostic testing of the economy branches on the possibility of working without shadow schemes, openness and transparency in taking state and administrative decisions, efficient mechanisms of control over the activities of power authorities.

Results: The result of research is algorithm of anti-corruption activities developed by the author, which presupposes implementation of the obligatory rule for the state officials about the provision of detailed information (regarding all the financial assets, liabilities and connections of such person for the period of being state official), periodical reporting on income and business transactions, information about the “outside” income, sale and purchase of any asset, exceeding the determined value. The important factors of counteracting corruption include high status and legal and material protection of the state officials.

Corruption in Ukraine, having covered political and administrative spheres, has negative influence on both the social life and the economy due to the fact that in case of state and political institutions being unable to adequately support market activities in the country, the enterprises are forced to store their capital “in the shadow”. Shadow economy has adverse impact on the development of national economy in Ukraine.

Problem: For the time being corruption poses one of the main threats to the national safety and democracy. The level of corruption is one of the indicators of development of society, its moral, political, economic and social condition. Corruption proves ineffectiveness of power authorities in economic, political, legal, social and other important processes. From the point of view of experts, Ukraine out of all the post-Soviet countries has the greatest potential to effectively counteract corruption. But for this purpose the state authorities and civil society need complex and consistent actions, as corruption quickly and easily adjusts to any changes. Counteraction to corruption is vitally important. This issue is critical for the social progress, normal life and prevention of other challenges and threats. Great potential of Ukraine in the economic, political, legal and social spheres brings hope for the improvement of anti-corruption situation in our country.

Analysis of researches and publications on the problem: Many Ukrainian scientists, such as М. Melnyk, О. Paskhaver, B. Romaniuk, S. Stetsenko, О. Tkachenko, О. Turchynov dealt with the problems of corruption. Famous foreign scientists, such as G. Bekker, D. Blades, J. Biukennen, J. Wilson, K. Morris, J. Stigler, Е. Fage, made great contribution into the research of corruption and its interconnection with the shadow economy.

Actuality of the problems of corruption influence on the effective development of economy, their practical significance and insufficient theoretical development determined the topic of our research.

Research Methodology

Aim of research consists in grounding the phenomenon of corruption in the administrative environment and problem of counteraction to the effective development of economy in the conditions of corrupt practices in economic, political and social spheres.

Main provisions

Level of corruption in Ukraine is characterized as posing threat to the national safety and adding complexity to solving the problem of national integrity of the Ukrainian state. The results of public opinion poll conducted by the Kyiv International Institute of Sociology after the Revolution of Dignity in 2014 show that 58.7% of citizens consider the level of corruption to be analogous to the level of 2013, and 37.6% consider such level to be higher (Stetsenko, Tkachenko, 2008, p. 162).

From the point of view of the citizens the most corruptive officials are the deputies of Verkhovna Rada (58.2%), members of Government (52.3%), militia, STI (72.3%), medical institutions (51%) and courts (61.8%). Gorshenin Institute (Kyiv), dealing with the managerial problems, came to the conclusion about complete absence of trust of the Ukrainian citizens to the representatives of courts, law enforcement bodies and public prosecution service (Stetsenko, Tkachenko, 2008, p. 163).

Counteraction to corruption is complicated by the fact that the Ukrainian society considers corruption to be inseparable part of the development process. 61% of citizens in Ukraine regard the fight against corruption to be the task of the President of Ukraine. Overwhelming majority of the Ukrainian citizens (2014) agrees that corruption is usual phenomenon for the power authorities through the fault of their higher executives (89.7%) (Stetsenko, Tkachenko, 2008, p. 164).

Political corruption is the most widely spread type of corruption in Ukraine. Political corruption is traced in different forms and political processes. Taking into account versatility and peculiarities of political corruption in the conditions of election process, special type of corruption, such as electoral corruption is distinguished. It may be defined as the system of bribing electors, organizers of elections and even candidates for political offices.

Therefore, the power authorities (state and local) become a merchandise to be purchased on condition of having access to the sufficient financial, material, information and other resources. Separate American scientists state that character of deputy seat (in particular its temporary status) may become the factor of corruptive behavior of its owner. From the point of view of experts, deputies of representative bodies are often in a dilemma: to preserve political support of electors ensuring further re-election or accept monetary remuneration from the lobbyist and improve the material status.

The representatives of different political groups showed their true faces in Verkhovna Rada after the Revolution of Dignity. This is especially relevant for the Party of Regions and Communist Party.

The following features of political corruption may be distinguished:

· political corruption covers not so many people directly experiencing such type of corruption, what enhances its latency. Political corruption dwells in very high political circles and does not become the element of everyday experience of overwhelming majority;

· political corruption is not always material (in the amount of cash equivalent or rendered services). Definitely, political corruption may have “its financial rates”, but the share of “fixed charges” is much lesser. Many experts ascertain the absence of cash constituent of political corruption as the remuneration is used not for personal aims of the definite state official, but for power and policy purposes (for example, support of the leaders during the political crisis or elections);

· engagement of politicians and state officials into the political corruption is quite durable and has multiple vector direction. In other words, as political corruptionists are people with considerable powers and authorities, as well as with many connections, being within the different networks of political influence, the services which they render are universal and connected with many spheres of social and public life;

· as contrasted with “usual” corruption, political corruption is almost legal from the perspective of public opinion and political circles. The concept of politics is closely connected with the concept of “dirty business” and the society considers political corruption to be inseparable part of such dirt, not perceiving it as the socially dangerous phenomenon. Among the politicians legitimacy of political corruption is based on the unity of political management and political technologies. This is especially relevant for the controlled democracies, in which the politicians are aware of the necessity to route the societal and political processes to the necessary direction, including by means of actions qualified as political corruption (Coalition of V. Lytvyn on the problem of fighting against corruption, 2014).

These provisions permit to make the conclusion that political corruption is much more concealed, invariant and not apparent for the majority of people. Political corruption leads to the shift of principal values in the system “instrument-aim”.

In democratic state (even in conditions of the so called democracy) achievement of the strategic and tactical aims in the system of state and legal relations presupposes application of certain regulative measures. 637 deputies of city, town and village councils, 379 state officials, officials of local self-governance bodies, 5 judges and officials of the judicial branch, 33 employees of State Prosecution Service, state security service, diplomatic service and tax service, 148 state officials of ARC, 200 officials of legal entities of public law were brought to the administrative responsibility for the political corruption in 2013 (Annual Reports of Transparency International (2010; 2011; 2012; 2013)).

Abuse of administrative authorities has objective character and appears from the moment of the person taking the decision-making position and its individual will transforming into the state will.

The person taking decision-making position acts not for the benefit of the society, but for its proper benefit and his/her will dominates over the state will directing it into the irrational, illegal and even criminal way. During power abuse the official uses his/her authorities for the protectionism and illegal obtainment of different benefits (tabl. 1).

The national and world practice of administrative management is aware of numerous examples when the representatives of business, using possibilities to interfere with the process of lawmaking, create preferential conditions for themselves with the aim of successful fight against their competitors with the application of administrative methods or receive other benefits for seizing the desirable market segments.

The same researchers state: “Appropriation of the state is the independent setting of rules or influence on their adoption (laws and by-laws) with the help of individual remunerations for the benefit of clerks, judges and deputies and without such remunerations. Taking into account the branch, within which any state authority is authorized to take decisions, we may differentiate between the appropriation of legislative, executive and judicial power” (Romaniuk, 2004, p. 26).

In 2013 2345 criminal cases were referred to courts with the letters of accusation concerning the corruption offences.

Table 1. People subject to the administrative responsibility for the corruption practices within the field of activities

*Source: Ministry of Justice of Ukraine (Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013, p. 28)

In 2013 799 people were convicted for the criminal corruption offences, including 74 people sentenced to imprisonment, 18 people - to personal restraint, 3 people - to arrest, 1 person - to correctional labor, 1 person - to public works, 215 people - to penalties, up to three people were deprived of the right to hold definite positions or prohibited from engaging into specific activities, and 2 people - to service restrictions for the military servants (Annual Reports of Transparency International (2010; 2011; 2012; 2013)).

12 deputies of city, town and village councils, 1 deputy of regional council, 217 state officials, officials of local self-governance bodies, 40 military servants, 4 judges, 141 officials of law enforcement bodies, 62 officials of State Prosecution Service, 68 officials of ARC were convicted in 2013 (the sentences have taken effect) for the corruption offences (Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013, p. 32).

Criminal proceedings were instituted against the following people on the fields of activities: financial and credit system - 3 people; banking system - 1 person; fuel and energy complex - 22 people; agricultural complex - 12 people; education - 55 people; health protection - 55 people; transport - 18 people; defense industry complex - 1 person; budget - 90 people; land relations - 82 people; privatization - 6 people; environmental protection - 38 people (Annual Reports of Transparency International (2010; 2011; 2012; 2013)).

In 2013 investigation units of the State Prosecution Service referred to courts 776 (48.3% of all the cases investigated by law enforcement officers) criminal cases regarding 925 people, guilty of 1095 criminal corruption offences (out of them 99 suspects were detained in custody).

Investigators and prosecutors directed their efforts towards the detection of the most dangerous corruption practices.

On the closed proceedings 104 offences connected with the acceptance of proposal, promise or receiving improper benefit by the state official were disclosed.

In 2013 accusatory cases for the criminal corruption offences were referred to courts:

64 - abuse of power or official position (Article 364 of CC of Ukraine);

6 - excess of power or service authorities (Article 365 of CC of Ukraine);

5 - abuse of power by the official, legal entity of private law (Article 364-1 of CC of Ukraine);

65 - appropriation of property due to abuse of power (part 2-5 of Article 191of CC of Ukraine) (Law of Ukraine “On Fight against Corruption”, 2013).

14 officials of regional state administrations and 49 officials of district state administrations were brought to criminal responsibility. Letters of accusation regarding 221 employees of MIA, 97 officials of Ministry of Income and Fees of Ukraine and 36 officials of state criminal and executive service were referred to courts (Annual Reports of Transparency International (2010; 2011; 2012; 2013)).

As of March 18, 2014 investigation units of the State Prosecution Service conducted prejudicial inquiry regarding three judges and one judge assistant, which were informed about the suspicion of criminal corruption offences.

After the proceedings damaged for the amount 35.7 million UAH were revealed, out of which 10.8 million UAH were indemnified. The property of suspects for the amount of 50.2 million UAH was arrested and property, cash, securities and foreign currency for the amount of 3.3 million UAH were confiscated Annual Reports of Transparency International (2010; 2011; 2012; 2013).

The law enforcement bodies registered 9770 criminal offences in the sphere of official activities, out of them 1594 facts of obtaining improper benefits by the officials of the state authorities (821) and controlling bodies (630). Total amount of improper benefits made 89.1 million UAH, while average amount was 75.8 thousand UAH, and the highest rate of improper benefits by the higher state officials was registered in Odessa Region (Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013, p. 28).

Thus, Department for organized Crime Control of MIA of Ukraine together with the State Prosecution Service detained the head of District State Administration in Odessa Region (state official of the 3^rd category, 5^th range), who demanded and received improper benefits in the amount 480 thousand UAH from the private entrepreneur for the allotment of land plot 4 ha for further long-term rent (Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013, p. 29).

In 2013 on the basis of materials of Security Service of Ukraine, different people were informed about the suspicion of their committing 456 corruption offences, out of which 247 are connected with the acceptance of proposal, promise or receiving improper benefits and 95 with the abuse of power or official position.

Total amount of damages, inflicted by the corruption offences in 2013, the responsibility for which is determined by the Code of Ukraine on Administrative Offences, constituted 635 716 UAH, out of which 448 961 UAH and on the claims of prosecutor 33 461 UAH were indemnified (Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013, p. 30).

Total amount of damaged, inflicted by the criminal corruption offences constitutes 268.8 million UAH, out of which 233.4 million UAH are damages to state interests. The amount of indemnified damages constituted 28.6 million UAH.

With the aim of indemnifying damages, the law enforcement bodies arrested property for the amount 285.1 million UAH (Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013, p. 31).

Corruption in Ukraine, having covered political and administrative spheres in Ukraine has negative influence not only on the public life, but also on the economy of the country. When state and political institutions are incapable of adequate organizing and supporting market activities in the country, the companies are forced to transfer their capital “into the shadow” (Actual problems of fighting against corruption in the context of Euro-Atlantic integration, 2006).

Unofficial economy covers all the economic activities unknown to the state authorities and its proportions in the separate country may not be precisely determined. The level of shadow economy in Ukraine in 2013 reached 49.2% of GDP. Shadow sector showed considerable growth in 2010-2013, being the highest in the monetary sector, i.e. 58% (Annual Reports of Transparency International (2010; 2011; 2012; 2013)).

Such growth is explained by the consequences of the financial and economic crisis, leading to outpouring of money from the banking system. The quantity of shadow operations grew in mining industry (to 52%), processing industry (to 45.8%), oil processing industry (to 55.2%), light industry (to 52.7%), smaller quantity was noticeable in metallurgy (45.2%) and machine building industry (46.2%) (Stetsenko, Tkachenko, 2008, p. 143).

Political and state corruption creates favorable environment for the development of shadow economy and negatively influences the development of the Ukrainian economy.

In Ukraine legal system for fighting against corruption is based on numerous laws and by-laws which prove their ineffectiveness (Hellman, Yeraint, Kaufmaun, 2000, p. 13).

Obscurity of legislative definitions of corruption and responsibility for the corruptive practices contradicts the generally accepted legislative standards. Judging from the international laws, corruption means criminal activities with much higher level of social danger than the separate facts of bribing state officials and abusing power.

Such approach diminishes the social danger of corruption as political and legal phenomenon. Acting anti-corruption legislation is so vague that one corruption activity may be interpreted either as offence or as crime.

It may be stated that for the time being legislative instruments in the sphere of fighting corruption are not effective and provisions of conceptual documents are declarative and abstract.

Imperfection of anti-corruption legislation, its unsystematic character, groundlessness and inefficient arrangement is the reason of ineffectiveness of anti-corruption activities. But this is not the main reason. The main reason is the unwillingness of the higher executive officials and law enforcement bodies to grasp the depth of the problem and make corresponding conclusions, their efforts to substitute serious assessments with the quiet “equilibristics” of numbers. In general the problem lies not in the imperfection of legislation in the sphere of counteraction to corruption, but in its ineffective application.

The prevention measures taken by the law enforcement bodies turn to be ineffective. Due to the improper documentation of the corruptive practices, proceedings on many administrative cases are closed and the state officials having committed corresponding offences avoid responsibility stipulated by applicable laws. Separate executive bodies and local self-governance bodies do not properly employ the mechanisms for the attestation of the state officials for dismissing the people who have lost the trust of population and constantly violate applicable laws (Conception of overcoming corruption in Ukraine “On Way to Virtue”, 2006, p. 23).

Anti-corruption Committee established in Ukraine is not viable.

Within the recent years anti-corruption measures, such as adoption of programs, orders, regulations and conduct of meetings, were taken in Ukraine, though they did not result in any appreciable changes. Moreover, the corruption practices grew. Such situation resulted from the fact that the counteraction to corruption was not systemic. The main efforts were directed at the separate facts of corruption, instead of being directed at the elimination of reasons favoring the spread of corruption. Blurred legal boundaries and inconsistency of requirements of separate laws became the reason of mass pressure on the state authorities, incitement to corruptive practices on part of entrepreneurs, higher executives of companies with different types of property wishing to protect themselves from the tax load, different penalties and deductions. Systematic amendments to the tax legislation complicated the situation bringing instability into the business and economy, decreasing the number of investors, destroying the economic basis of the state and enlarging corruption. There was not real counteraction to corruption in Ukraine. Such fact is recognized not only by the legal experts, but also by the political leaders of our country. Analysis of activities of the law enforcement bodies is sufficient evidence of the abovementioned fact. Thus, the law enforcement bodies on the annual basis revealed approximately seven thousand corruption cases, but only several state officials of range І-ІІ were brought to administrative responsibility. More than a half of people brought to administrative responsibility for the petty offences are village heads and state officials of the lowest range (Melnyk, 2013, p. 78).

The original cause of such condition is that the generally accepted state and legal principles, such as supremacy of law, higher priority of rights and freedoms of a person in comparison with any other values, were not actually functioning in Ukraine during all the years of its independence. The presence of these principles ensures democracy of power, its flexibility and subordination to people and their absence leads to the corruption of power. One of the main errors made in the process of organizing counteraction to corruption in the society was the reliance on the law enforcement bodies and not on the establishment of the new system of developed economy institutions which would cover all the economic activities.

Conclusions

In Ukraine the issue of fighting corruption is often used as political instrument. Political will was never sufficient for overcoming corruption, which penetrated into the political elite and restrained the democratic development of the society, counteracting the effective economic development and supporting the spread of poverty.

Annual (2013) global research of Transparency International proved that Ukraine together with the countries of Eastern, South-Eastern Europe and Central Asia is perceived as highly corrupted state. Position of Ukraine in the corruption rating of the countries in 2014 with 2 grades and general rates of corruption spreading proved the necessity to take decisive measures for saving the country and drawing it out of the corruption abyss. Ukraine lost index 2.8 and caught up with Somali. In the conditions of military conflict the index may further drop. The Ukrainian society senses the painful symptoms of corruption: the huge proportions of feeding at the public trough, rise in unemployment levels, escalation of military conflict, growth of poverty, spreading of dangerous diseases, outflow of capital, decline of GDP and fall of living standards.

The world experience proves that state reforms are accompanied with the growth of corruption level. Therefore, corruption in Ukraine, its proportions, peculiarities and dynamics are the consequences of general political, military, social and economic problems of our country experiencing the drastic reorganization of its social, state and economic bases. In spite of the recent organizational and legal measures aimed at counteraction to corruption, its proportions are still quite considerable. Different researches of the corruption level show that the citizens believe in the wide penetration of corruption into all the power structures and on all the administrative levels. The overwhelming majority of respondents consider corruption to be usual phenomenon for our country.

Proposals: The precondition for preventing and neutralizing the corruptive practices is consecutive democratization of all the spheres of social life. Publicity of power, transparency of taking state and administrative decisions, efficient mechanisms of control over the activities of the state authorities on part of civil society are the most significant factors of successful counteraction to corruption. Systematic and public fight against corruption shall be the priority of the power authorities.

The important step shall be the ratification by Verkhovna Rada of Ukraine-European Union Association Agreement, which will permit to align the Ukrainian legislation with the European legislation.

The important measure for the prevention and detection of corruption is the establishment of the obligatory rule for the state officials about the provision of detailed information (regarding all the financial assets, liabilities and connections of such person for the period of being state official), periodical reporting on income and business transactions, information about the “outside” income, sale and purchase of any asset, exceeding the determined value. Therefore, severe financial control is vitally important, as well as confiscation of funds and property obtained on account of corruptive practices.

The important factors of counteracting corruption include high status and legal and material protection of the state officials.

The society needs institutes for controlling the state machinery and protecting the human rights.

References

1. Actual problems of fighting against corruption in the context of Euro-Atlantic integration // Materials of international scientific and practical conference “Evaluation of risks and threats to the national safety in the context of European and Euro-Atlantic integration of Ukraine” / Kyiv, July 14, 2006 - [Electronic reference] - Access: http://www.adm-pl.gov.ua

2. Annual Reports of Transparency International (2010; 2011; 2012; 2013).

3. Coalition of V. Lytvyn on the problem of fighting against corruption. - [Electronic reference] - Access: http://blog.meta.ua.

4. Conception of overcoming corruption in Ukraine “On Way to Virtue” // Uriadoviy kurier (Government courier). - No 175. - 20.09.2006.

5. Hellman Joel S., Jones Yeraint, Kaufmaun Daniel. Seize the day, seize the state. An empirical analysis of state capture and corruption in transition. World Bank Working papers.

6. Law of Ukraine “On Fight against Corruption” (2013). - Кyiv: Pravo.

7. Melnyk, M.I. (2013). Scientific provisions of anti-corruption practices in the bodies of state authorities. - Кyiv.

8. Report on the results of taking measures aimed at the prevention and counteraction to corruption in 2013. - Кyiv: MIU.

9. Romaniuk, B.V. (2004). Fight against organized crime and corruption requires specific actions. Fight against the organized crime and corruption (theory and practice), 9, 26-36.

10. Stetsenko, S.T., Tkachenko, O.V. (2008). Corruption in the bodies of internal affairs: problems of counteraction: monography - Кyiv: Aperta.

Annotation

Corruption in Ukrainian Society: Problem of Counteraction to Effective Development of Economy. Tetiana Maksymivna Bogolib Doctor of Economics, Professor, Dean of Financial and Humanitarian Faculty of SHEE “Pereyaslav-Khmelnytskiy SPU named after Grygiriy Skovoroda” e-mail: bogolib60@mail.ru Pereyaslav-Khmelnytskiy, 30 Sukhomlynskogo Street, Kyiv Region, Ukraine, 08400

The article deals with the corruption as the integral attribute of any state, because it exists together with the public authority. Corruption is one of the reasons of political and economic instability in Ukraine. Corruption caused sharp economic crisis turning into the military confrontation in the Eastern Ukraine, power crisis and continuous economic crisis. The author proves that corruption has destructive influence on all the spheres of Ukrainian society, constitutes serious obstacle to the economic reforms, hinders the establishment of market institutions, prevents the investments and poses threat to the national safety of Ukraine. The author concludes that the acting state authority initiated vigorous actions to counteract corruption, though in general state anti-corruption policy did not achieve complexity and consistency. Ukraine remains the world leader of corrupt practices. The article proposes the algorithm for counteracting corruption in Ukraine. economic social corruption confiscation

Keywords: economic crisis; investments; corruption; national safety; political crisis; public authority; market reforms; shadow economy.

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