AMERICA FIGHTS CORRUPTION AGAIN. WHAT ABOUT UKRAINE?
On April 30, 1998, after hearing Secretary of State Madeline Albright, Congress will decide whether the US should continue helping Ukraine financially. If they say yes, Ukraine will receive the rest of $225 billion worth of such aid, along with restored partnership. And this is becoming especially urgent after the scandalous stoppage of the IMF loan program.
Exactly a year ago, when deliberating the terms of financial aid to former Soviet republics in the House of Representatives, Ukraine’s receipt of the next tranche was made directly dependent on progress in its struggle against corruption. Then a series of critical articles appeared in the US press, portraying Ukraine as a country where business could be done only through bribery, feathering bureaucrats’ nests from top to bottom (incidentally, this is expressly forbidden by US law). As a result, the Ukrainian lobby could not count on planning any expansion in financial aid programs and the US resorted to even more rigid measures in monitoring the Ukrainian Cabinet’s performance in honoring its commitments. Then Ukraine was given a year to prepare a positive answer to the rhetorical question, “Why should one pay a country with such a level of corruption?” Also, Ukraine was told to settle all disputes with US business at home.
Early this year Mrs. Albright visited Kyiv, among other things to get first-hand information to see what headway was made in solving the problems dating from last spring. She stayed for 7 hours, apparently too short a period to be convinced that the law was indeed respected in Ukraine and the authorities were fighting corruption. Several weeks later, Vice Premier Serhiy Tyhypko flew to Washington at the head of a Ukrainian delegation. They did their best to familiarize the US legislature with progress in the reform campaign and what steps the Cabinet was taking to improve the investment climate. In particular, UNIAN reported that the Vice Premier capitalized on what was described as a “degree of stability,” stopping GDP and industrial output decline, low inflation, steady national currency, positive balance of payment, and active deregulation of the economy. The American side, however, did not seem convinced, so the President’s special aide for the CIS Richard Morningstar appeared in Ukraine last Tuesday. And thus a year’s effort against corruption was to be summed up last week, along with a report on measures taken to settle differences in bilateral business.
On April 10, 1997, the President approved the National Program for Fighting Corruption, supposed to pave the way for stopping bribery in the upper echelons of power. Under the program, all corrupt civil servants will be fired, and every arms sale and privatization transaction checked for signs of corruption. In addition, the President instructed the Cabinet to institute paid custom and militia services and curb the tax authorities’ oversight functions. A look at any periodical makes it clear whether or not this program was carried out.
The World Bank, in turn, as a representative of international capital in Ukraine, published its own concept of an anti-corruption campaign. A letter from the World Bank President to Mr. Kuchma listed short- and long-term measures aimed at improving the investment climate. Remarkably, the bank sees the main cause of economic stagnation in overall corruption, excessive taxation, and suffocating over-regulation (e.g., a plethora of regulations and instructions). Among the immediate measures it suggested the appointment of an official reporting only to the President who would settle conflicts with private investors, simplification of tax procedures and lower corporate tax rates, creation of a centralized police service to combat organized crime, and prohibition of arbitrary trade restrictions. Of all this, only more or less simplified licensing procedures will take effect as of April 29, 1998. As for long-term measures (e.g., full revision of the tax and pension systems, bringing foreign trade law into conformity with WTO standards, continuous simplification of legal procedures with regard to private business, accelerated privatization of state-owned enterprises, targeted measures to reduce civil service corruption, and public sector reform), the Cabinet has had no time to do anything.
In other words, the President and government had a year (April 1997 - April 1998) and a comprehensive program to do away with corruption. Under the circumstances, fulfilling this program would also mean substantially improving the investment climate. Let us figure out now whether Ukraine can count on any favors from its US strategic partner, the more so that Special Aide Morningstar, when asked by journalists, said he didn’t know, despite the fact that “most conflicts with US investors have already been settled.”
Of course, during this period the President, Cabinet, and Verkhovna Rada have more than once showed their concern about fighting corruption. But was it an effort to improve the law and investment climate? Obviously not. Last year’s anti-corruption campaigns, as a rule, were aimed at either undermining the financial empires of individuals or at discrediting potential political rivals. This year’s “struggle against corruption” was apparently part of the elections game. Suffice it to recall what happened to gas traders, alcohol distillers, petroleum derivatives dealers, or the conflicts in the Crimea. Dnipropetrovsk, and Donetsk, to understand that such “methods” of fighting corruption can do nothing to lower it.
Still, in his dialogue with America the President will very likely portray reprisals against political and business adversaries as practical efforts in this struggle. True, he will have a hard time explaining the slow pace of reforms in Ukraine. It is also possible that the government is even now trying to lull its strategic friends. After all, it did succeed in convincing IMF last year that the transgressions of the $2.5 billion EFF loan terms were excusable, receiving a $550 million stand-by on terms best suiting government bureaucrats. Incidentally, a similar game is being played these days with IMF, even though now the blatant violations of stand-by terms that caused its stoppage are being presented as reason for an even larger EFF handout.
