Common Ukrainians with salary near UAH 2-3 thnd. contribute to the budget near UAH 25 thnd. per year. To large extent, millions of such contributions ensure 2/3 of budget revenues. Still only few in our country realize the chain «my money -> taxes -> public spending». What more, the majority of Ukrainians believe that budget collects taxes only from large businesses and that is why there is no reason to care about «other people’s» money. Such perception of the world is the main reason of alienation to state waste and corruption.

Already two years have passed since the day Viktor Yanukovich announced new reformation course and presented Economic reform program 2010-2014 «Prosperous society, competitive economy, effective state». The ambitious plan outlined considerable changes in economic system and even in case the plan was partially implemented, Ukraine could reach another level of development. A Coordinative Center for Economic Reforms had been created at the President Office and active work had started. However, after two years of active changes and contradictory results a question arose – what, out of all implemented measures, was indeed for good and deserves to be called «reforms».

It is normal for all plans to be revised and improved. However, the recently approved “National action plan 2012” looks like a step back. It dilutes or postpones for the future crucial reforms, aimed at strengthening of competitive environment and property rights. Among diluted reforms appeared to be the issue of inspections, housing reform and the problem of agro-land market. Technical reforms have been distorted not that dramatically, however, still are delayed.

A year and a half have already passed since the start of Viktor Yanukovich reform. The ambitious transformation plan has showed noticeable progress on many directions. However, so far none, including the authorities’ representatives, can call the reformation efforts successful. Properly outlined priorities and action plan stumbled on financial and political interests of various influential groups, what, naturally, stipulated for a large-scale ‘correction’ of the reform plan. Apparently every plan needs to be updated with time. However, comparative analysis of the new reform action plan showed that ‘reformators’ have already skipped many initially positive initiatives.

Over the last two years Ukraine has implemented many policy changes outlined at the President Reform Program for 2010-2014. Despite the large number of bills and laws approved through 2010-2011, the program lags behind the outlined schedule and none of the reforming priorities has reached the declared goals. Some of the adopted regulations are quite positive; however, still the initiatives have quite limited effect due to existent practices for administrative pressure, corruption and poor confidence on judicial power. Large number of approved laws and regulations are simply technical, which means that the essence of the problems they addressed remains unchanged. Positive steps were observed in reformation of healthcare, education, and pension system, however, so far no fundamental changes happened at the areas. Some of the reform priorities remained untouched. For instance, in electricity sector and oil and gas sector, where business and political interests are closely interlinked, powerful business-groups simply blocked any reforms. In general, the reformation process is poorly transparent. Moreover, for many important directions the authorities ignore public opinion consulting with civil society players only formally.

Ukraine is balancing at the edge between limited and open access order. Although the country lacks rule of law and business is closely interlinked with politics, political competition is still present, civil society has been developing and some markets are competitive. The transition stance of Ukraine is unstable, burdensome and dangerous. Only implementation of real deep structural reforms can make the transformation to open system easier and quicker. However, Ukrainian authorities do not conduct such reforms, often substituting them with technical policy changes (improving only some mechanisms), or introducing only temporal economic policy measures (like ‘belt tightening’).

Nobel Prize winner Douglass North defines two types of social order. The first one is the open access order, which stands on principles of openness and fair competition. The second one is the limited access order, which relies on selectiveness and privileges thus restricting both political and economic competition. In the first case the open system brings to success the most competitive players (those who can produce the best quality and the cheapest products and services). In case of limited access order the success depends only on how someone is close to the clan, family or caste. Ukraine, apparently, is a country with the limited access order. And it needs fundamental changes to pass to the openness. However, political elites as well as business elites face conflict of interests when it comes too close to real reforms since fundamental changes threaten their own rent-seeking schemes. In that case the only way (though a thorny one) is to build demand for real changes from “below”.

This work analyzes social and economic development of a country. rnThe presentation is heavily animated, with animation being essential for understanding of the substance. Please use MS Power Point XP or later versions in the “Slide Show” mode to view them. Please wait after each click until the animation completes. Russian version only.

The work presents a theoretical framework, and offers a tentative analytical framework for building strategies for combating systemic corruption of the kind that is observed in Ukraine. It argues that, as in some other countries undergoing the process of modernization, corruption in Ukraine plays an important social role by filling gaps between formal (often impracticable) rules, and informal ones.

Presentation for the round table “Effective anti-corruption strategies for Ukraine”. Language: Ukrainian.

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