Weekend Economists Wring Out the Old December 31, 2015-January 3, 2016

[Proserpina]

69. Corruption in Ukraine is so bad, a Nigerian prince would be embarrassed

http://blogs.reuters.com/great-debate/2015/12/30/corruption-in-ukraine-is-so-bad-a-nigerian-prince-would-be-embarrassed-2/

United States Vice President Joe Biden has never been one to hold his tongue. He certainly didn’t in his recent trip to Kiev. In a speech before Ukraine’s Parliament, Biden told legislators that corruption was eating Ukraine “like a cancer,” and warned Ukrainian President Petro Poroshenko that Ukraine had “one more chance” to confront corruption before the United States cuts off aid.

Biden’s language was undiplomatic, but he’s right: Ukraine needs radical reforms to root out graft. After 18 months in power, Poroshenko still refuses to decisively confront corruption. It’s time for Poroshenko to either step up his fight against corruption — or step down if he won’t.

When it comes to Ukrainian corruption, the numbers speak for themselves. Over $12 billion per year disappears from the Ukrainian budget, according to an adviser to Ukraine’s National Anti-Corruption Bureau. And in its most recent review of global graft, anti-corruption watchdog Transparency International ranked Ukraine 142 out of 174 countries on its Corruption Perceptions Index — below countries such as Uganda, Nicaragua and Nigeria. Ordinary Ukrainians also endure paying petty bribes in all areas of life. From vehicle registration, to getting their children into kindergarten, to obtaining needed medicine, everything connected to government has a price.

The worst corruption occurs at the nexus between business oligarchs and government officials. A small number of oligarchs control 70 percent of Ukraine’s economy, and over the years have captured and corrupted Ukraine’s political and judicial institutions. As a result, a “culture of impunity” was created, where politicians, judges, prosecutors and oligarchs collude in a corrupt system where everyone but the average citizen benefits.

While there are numerous examples of high-level corruption in Ukraine, a few stand out for their sheer brazenness. In one case, $1.8 billion of an IMF loan to Ukraine meant to support the banking system instead disappeared into various offshore accounts affiliated with PrivatBank in Ukraine, which is owned by Ihor Kolomoisky — one of Ukraine’s leading oligarchs...

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