Massive corruption in the Ukrainian government has left Ukraine and its people in a state of developmental stagnation for decades. Despite this, in recent years, Ukraine has demonstrated its willingness to reform and change for the better through countless efforts to expose and clean up these corruptions. These 10 facts outline the specifics of corruption in Ukraine.
10 Facts About Corruption in Ukraine
- Corruption: According to Transparency International (TI), as of 2018, Ukraine ranked 120 out of 182 countries in TI’s Corruptions Perception Index, making it the second most corrupt country in all of Europe. A survey from Freedom House also indicated that the level of corruption in Ukraine had only slightly alleviated since the fall of the particularly corrupt Yanukovych presidency in 2014.
- Tax Reforms: Tax reform continues to be a major barrier in the fight against corruption in Ukraine. Outrageous tax schemes and gross misuse of funds led to a 35 percent VAT compliance gap in the 2012-2013 fiscal year, compared to the 6 percent gap recorded in 2011. In 2014, new authority investigations found that $37 billion of the country’s overall budget disappeared due to fraudulent tax schemes. Experts speculate that during Yanukovych’s presidency, a total of $9 billion went unaccounted for and at least $2 billion of that went into the pockets of Yanukovych’s family coffers.
- Banking: Another major contribution to the corruption in Ukraine lies within its banking sector. The severity of corruption within Ukrainian banks became especially apparent during the 2014 banking crisis. Most banks involved themselves in the money-laundering Ponzi schemes. The banking systems were so corrupt that out of 182 of the nation’s banks, 98 of them have been or are in the process of being completely liquidated. Strict anti-money-laundering laws and tighter control over cash-flow have helped alleviate some of this corruption. In addition, banks that survived the crisis are now liable for any losses their clients suffer due to fraudulent banking practices.
- Government Accountability: Quintagroup aimed to reach a higher level of government accountability by creating a transparent electronic procurement system for officials to use. The system, ProZorro, allows users to view all procurements, government contracts and funds from electronic platforms, ensuring the transparency of public funding and procurement procedures. The Ministry of Infrastructure, Ministry of Defense and Ministry of Economy are among some of the government entities currently in the system. Since its 2014 launch, the system has saved Ukraine $1.1 billion in costs to the state, annually.
- Gas and Natural Resources: Ukraine’s elite took advantage of the discrepancy between subsidized and market gas prices, skimming billions of dollars from state funding. One major gas company, Naftogaz, is largely responsible for creating a domestic reliance on Russian-imported gas by penalizing domestic gas production and discouraging efficient energy methods. To combat this type of corruption in Ukraine, the IMF (International Monetary Fund) stepped in and insisted that the country equalize household and commercial gas tariffs and sought to improve transparency in the gas markets. With the reforms implemented by new officials, Naftogaz became a profitable contributor to the state budget and in 2018 accounted for 19.3 percent of state revenue. That revenue allowed UVG (a gas production subsidiary of Naftogaz) to boost domestic production by 4.2 percent in 2017.
- De-Monopolization: During Yanukovych’s presidency, the oligarch’s established formal and informal monopolies, both locally and nationwide. These monopolies formed under informal business agreements that provided corrupt officials total control over a sector of their choosing. In 2015, the State Anti-Monopoly carried out an examination of the condition of Ukraine’s various markets. The results indicated that only 42.7 percent of all markets were still competitive and 9.8 percent of them were still completely monopolized by corrupt government officials.
- Justice Systems: Distrust for the justice system in Ukraine is widespread. In fact, Ukraine ranked 101 out of 109 countries in the 2017 Index of Public Integrity. Opinion polls taken in 2016 recorded that only 3 to 5 percent of the population had any trust in the country’s justice system. In the same year, Ukraine took its first steps towards judicial improvement with the establishment of a new Supreme Court. This did little to gain public trust, however, as recruitment of new judicial officials was only half-way transparent. The Public Integrity Council of Ukraine found that 25 out the 113 new judges were unfit.
- Higher Education: Surprisingly, another major facet of corruption in Ukraine lies within the country’s institutions of higher education. Bribery demands from professors, deans and department boards have increased in recent years and show no sign of slowing down. According to a student/teacher violation monitoring website, students attending these institutions reported more than 400 violations, 41 percent of them being related to bribery. To combat this widespread corruption, the Ukrainian Parliament passed a law in 2012 that required institutions to post all financial documents online. Despite this effort, only a very small portion of universities actually complied with the new requirement.
- Deregulation: Since the Maiden Revolution of 2014, Ukraine has abolished several corrupted agencies and costly, dated regulations through deregulation. Among the various government agencies that Ukraine abolished for high levels of corruption were the Price Inspectorate, Traffic Police Inspectorate and the Real Estate Registration Agency. Between 2014 and 2015, the country also got rid of price regulations while it reassessed and updated others accordingly.
- Law Enforcement: Reform in Ukraine’s law enforcement sector is slow-moving and still largely operates under communist influence. But, in 2014 an organization known as the patrol police emerged. The patrol service has developed a positive reputation for recruiting and training officials according to a much higher standard than officers working under the country’s primary police force. In the years since its creation, the patrol service has enlisted 13,000 officers in 33 different cities nationwide. The organization accounts for only a small portion of the country’s law enforcement, but its continuing growth, increased backing from international partners and civil society organizations have proven it to be an entity dedicated to ending corruption in Ukraine.
Despite endemic corruption in Ukraine, its people have clearly not given up on improving their quality of life through reform. Since 2014, Ukraine has taken strides, big and small, to combat corrupt systems and has proven that it is capable of change.
– Ashlyn Jensen