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How to Teach Bribe Takers to Curb Their Appetites

15 February, 00:00

It is difficult to imagine a more noble goal than the one Viktor Yushchenko and Yuliya Tymoshenko have set themselves under the influence of the Orange Revolution — to eliminate the corruption that has become ingrained in the flesh and blood of our society and state. Sleaze will have to be banished from business as well as from all individuals, who have in fact resigned themselves to the “corruption tax” on the roads, in hospitals, schools, colleges, and in public administration agencies. The new government says it is going to separate itself from business and will let civil servants live solely on their salaries instead of trying to have their itchy palms greased by ordinary people or lobbying related businesses to their own advantage.

It would be very good if these supposedly honest intentions are carried out. But are those who have made these declarations fully aware of what they are saying? Do they understand that they will encounter resistance, even within their own far from business-unfriendly ranks? Are these projects serious? Here is a recent example from Lviv, one of the strongholds of the Orange Revolution. Mayor Liubomyr Buniak is denying corruption charges made by People’s Deputy Oleksandr Hudyma and says he is not resigning despite demands from the Ukrainian National Party’s regional branch. “Yes, a relative of mine is the founder of the Enerhoinvest Company, but there’s nothing illegal in that: everything is in compliance with the current law,” says Mr. Buniak, rebuffing attacks on his mother-in-law.

“Look, if I am the mayor, do my relatives have to be seventh- generation hobos?” the astonished city boss recently commented. (Incidentally, at one time Mr. Buniak was the CEO of the Druzhba Oil Pipeline and is now vying for the post of president of Naftohaz Ukrayiny, a company with a billion-dollar turnover.)

If, let’s say, ex-businessmen Yevhen Chervonenko and David Zhvaniya, who are now the heads of the transport and emergencies ministries, respectively, should only be living on their official salaries, how high should these salaries be? Although I will not cast aspersions on anybody, I must say the problem is so obvious and serious that it should not be hushed up anymore.

Can the people who went from the sphere of Ukrainian business, which is far from ideal or law-abiding, to assume public office resist “going on the take?” Can a bureaucrat not be susceptible to corruption if he manages millions and billions of dollars’ worth in financial flows but earns only 2,000 hryvnias? Officials’ salaries must be raised. Below is a very interesting table that shows the relationship between the prime minister’s salary and his country’s corruption ranking (the higher the ranking, the more susceptible a state is to corruption a state).

The table clearly shows that the less the prime minister costs taxpayers, the more vulnerable a state is to corruption. Naturally, Ukrainian voters will hardly accept the idea that our prime minister earns as much as his German or British counterpart. Yet, it is counterproductive to pay him less than his counterparts pull down in Latvia, Poland, or Russia. After all, an underappreciated bureaucrat who comes cheaply ends up looking for a better “feeding trough”.

Ukraine’s new leadership must honestly admit this, while society should not stint itself. The real problem is where to get this money, because everyone — from deputy-prime ministers to traffic policemen — should have their pay increased. But how — by slashing the bureaucratic apparatus so that the remaining staff has enough funds to live a decent life? This is dangerous because it can set off the time-tested Parkinson’s Law that says, “The number of people in any working group tends to increase regardless of the amount of work to be done.” One of the consequences of this law is that, no matter how much you reduce the apparatus, it is bound to increase. A classic example that confirms this law is Italy’s Prime Minister Silvio Berlusconi. On coming to power in 2001, he suspended all decisions related to increasing the number of civil servants. He was surprised to find in early 2004, however, that since then the bureaucratic machine had engulfed another 150,000 people. So I suggest that our civil servants wait for a year and then have their salaries boosted — not because they’re wonderful people but for the sake of obtaining a concrete result, for example, a higher GDP and low inflation. This could be a performance yardstick for the Cabinet and governors, while other types of officials could have their work assessed by some lesser criteria based on the main figures of this formula.

But is it enough just to raise salaries? World experience shows that corruption scandals also occur in places where bureaucrats have enough money to buy not just a one-way ticket to North America. In the late 1990s the World Bank and the European Bank for Reconstruction and Development conducted a study on corruption in 20 transition-economy countries. The authors of the report divided sleaze into administrative corruption and corruption linked to “capturing” the state. A classic example of administrative corruption is a small-time trader who has to bribe an endless string of inspectors, local administration bosses, law-enforcement officials, and all kinds of criminal “protectors,” etc.

In CIS countries, payments related to administrative corruption amounted to an estimated average 3.7% of a large company’s gross annual earnings. A similar index for small companies was almost three times as low. A classic example of “capturing a state” is the case of former Prime Minister Pavlo Lazarenko, now on trial in the US.

The temptation to do business by relying on one’s official connections is still too great. What, then, is the answer? Naturally, it would be naive to expect an absolute victory by relying on mere slogans. We can and must apply the experience of other civilized states that have achieved some progress in this matter. For instance, Britain has been focusing on changing the overall culture of public administration in order to reorient the civil service toward the “consumer.”

One of the key elements of the British concept of public administration is devolution of a large number of official services from the central government to the lower links of this chain. The U.K. recently adopted the Charter of the Individual, a framework law that is supposed to defend the rights of consumers of governmental services. Bureaucrats are now dependent on the evaluation of their work by individuals who are no longer their hostages. Then legislative acts were passed to modernize the public administration sector and reform the civil service, thus laying the groundwork for an administrative reform. Interestingly, the Russian administrative reform has in fact become unstuck, as has the attempt to carry out a similar reform in Ukraine not too long ago. The same applies to efforts to carry out a fiscal amnesty that were supposed to help legalize a considerable segment of the economy. Will we see the current leadership continuing these reforms? The Day’s experts harbor no particular illusions about this.

INCIDENTALLY

Last Thursday it was reported that Yury Nedashkivsky has been appointed acting president of Energoatom, the national nuclear energy company. He held this post once before, in September 2001-June 2002. This appointment is subject to Cabinet’s approval. There will probably be no delays, although we still remember the problems that this state-run company face a few years ago.

In another development, the Main Directorate of the Civil Service of Ukraine told The Day that the resolution that classifies ministerial salaries has been labeled secret, and it refuses to disclose even the number and date of this decision. So our advice to the new leadership is: your first step should be to declassify governmental salaries.

Country Prime Minister Salary, Country’s ranking

$ per year according to the 2003

Corruption Perceptions Index

Hong Kong Tung Chee Hwa 628,326 14

Japan Junichiro Koizumi 471,698 21

United Kingdom Tony Blair 318,782 11

New Zealand Helen Clark 304,996 3

Germany Gerhard Schroeder 228,040 16

Canada Paul Martin 265,393 11

Netherlands Wim Kok 145,416 7

Italy Silvio Berlusconi 113,818 35

France Jean-Pierre Raffarin 98,885 23