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CASE Ukraine www.case-ukraine.kiev.ua

Corruption in Ukraine: Behind and Beyond the Orange Revolution. Vladimir Dubrovskiy. CASE Ukraine www.case-ukraine.kiev.ua. CASE Ukraine. The 2004 Transparency International Corruption Perceptions Index . Out of 147 countries. http://www.infoplease.com/ipa/A0781359.html .

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CASE Ukraine www.case-ukraine.kiev.ua

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  1. Corruption in Ukraine: Behind and Beyond the Orange Revolution Vladimir Dubrovskiy CASE Ukraine www.case-ukraine.kiev.ua

  2. CASE Ukraine The 2004 Transparency International Corruption Perceptions Index Out of 147 countries http://www.infoplease.com/ipa/A0781359.html

  3. CASE Ukraine Out of 204 countries Governance Matters IV: Governance Indicators for 1996-2004 Daniel Kaufmann, Aart Kraay, and Massimo Mastruzzi The World Bank, May 2005

  4. CASE Ukraine Petty corruption: medicine, education, traffic enforcement …. Just increase the salaries and improve the control Embezzlement and abuses of procurement Improve the transparency and control Corruption in state-business relations Hellman,1998; Hellman, Jones, and Kaufmann, 2000 Extortion Bribing Karklins, 2002 Collusion “State Capture” by Corrupt Networks

  5. CASE Ukraine Is it the “bribe tax” that makes a difference? Investment Climate Assessments survey. IFC, 2002

  6. CASE Ukraine “Business Environment in Ukraine”.IFC,Septamber, 2003

  7. CASE Ukraine Corruption itself is perceived as a serious impediment for doing business… … while the other impediments are connected to it “Business Environment in Ukraine”.IFC, December, 2004

  8. Institutional legacy (following North; Putnam) CASE Ukraine Karamsin, 19th century Russian historian Institutional memory of the former empire: “The severity of the Russian laws is alleviated only by discretion in their enforcement” “… just this disorder makes life in Russia possible” Gertzen, 19th century Russian social thinker Legislation is designed (intentionally?) in such a way that almost EVERYONE must become a lawbreaker “Laws are written for the fools” Discretion is the only resort from such a “total guilt” “Who are the boss, we or the law?” Every business is subject to the authorities’ arbitrary, discretionary power

  9. CASE Ukraine Corruption is embedded into the structure of post-Soviet society Forced modernization, especially the Communist regime: Legislation violates the natural law Normal economic activities are considered illegal No contract enforcement is officially available Ledeneva, 1998 Reputation-based informal networks of interpersonal mutual exchange with “favors of access” (blat) Emerge to facilitate the illegal transactions of all kinds Litwak, 1991 (!) “One has to deserve a right to pay a bribe” while Weak rule of law

  10. CASE Ukraine INTEREST INTEREST ALLEVIATES ALLEVIATES FACILITATES ENHANCES Decreasing the demand for improvements Corruption Legislation (flawed, ambiguous, impracticable) Discretion

  11. Officials: not a bureaucracy Bureaucracy (Weber) Administrative power in Ukraine Highly-paid professional public servants facilitating rational processes of control. Implements legislation in a strictly formal (impersonal) way Poorly-paid and dependent upon administrative rents (in money or barter) Relies upon discretionary power and vague and arbitrary informal rules Operates under constant public scrutiny and political oversight Controls politicians rather than vice versa. Tries to control mass-media to avoid public scrutiny No decision-making power Clear separation of “powers” from branches of State Possesses the political power to magnify ambiguity and non-transparency in legislation Strictly controlled and separated from business Uncontrolled and mostly affiliated with business

  12. CASE Ukraine Consequences Inhibited business selection through the entry and exit Suppressed entrepreneurship and FDI Poor governance Distorted political representation Misuse and misallocation of resources High social cost

  13. CASE Ukraine “Business Environment in Ukraine”.IFC, December, 2004

  14. Whither “captured state”: a dead end? Administrative power: Provides protection and patronage for business Property rights, rents Business: a “Milk caw” or a “Rent pump” for officials Orange Revolution November, 2004 Sources of rents Perceived totally rent-seeking Perceived manipulated Perceived totally corrupted Blat A tacit social contract: “We” do not bother “them”, “they” do not bother “us” Public PASSIVE PLAYER

  15. CASE Ukraine As a result of the revolution: Public is not passive any more Authorities are committed to fight corruption seriously Executive power officials have lesser impact on the legislature Political market emerges but “While we’re numerous, we’re invincible!” Societal structures are persistent Further closing of corrupt networks Legislation did not change significantly Without a truly systemic and well-designed anti-corruption policy, the loses from corruption increase whenever a government tries to fight it

  16. Thanks for your attention!

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