| 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
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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