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A purely analytical perception...


UKRAINE

 

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Poland is a neighbor of the Ukraine and at one time was their conqueror.  Historically, there have been more similarities than differences between the cultures.  However, where Poland facilitates the ability to do business, the Ukraine government literally blocks it with bribes, bureaucracy and theft.  This is exemplified by the fact that Poland with a population of 38 million people has two million small businesses, while the Ukraine with a population of 52 million has only about 100,000.  Does anyone here really care?   The World Bank conducted a seminar on corruption in Kiev at the behest of Ukrainian President Leonid Kuchma, which was called an “integrity workshop.”  

Kuchma failed even to show up, and various people that were known to be anticorruption fighters were banned from the event.

 

As an example of how tough things have gotten, in the eastern Ukraine nine mineworkers cut their arms and threatened suicide unless they received their back wages.  In Luhansk and Lviv, the miners would not return to the surface until they were assured of at least some of the money owed to them, and in the grandest gesture of them all, two mine workers immolated themselves when told that they were not going to be paid.

 

No wonder that things are in a state of chaos, for this is a country where crime is literally the only industry still functioning, and the only people that aren’t stealing are retired.  In a country of approximately 52 million people, 15 million are retired and are getting a pension from the government.  They receive between $27 and $30 per month in a country where the cheapest rent for a hovel is about $50 per month.  Eighty percent of the population is substantially below the poverty line.  The army hasn’t be paid in months, and people are very concerned about the old Ukrainian axiom which goes, "If you don't pay the Army, the Army will find someone else to pay them.”  Teachers in higher education and schools have not been paid for three to four months. Even government officials have not seen a paycheck in some time.

 

Fortune Asia did a story on the subject on 6/12/2000 by Mankiw N. Gregory:

 

“In this world there are two ways to get rich. No. 1: Produce something valuable and sell it to others. No. 2: find people pursuing the first strategy, and steal from them. On a recent trip to Kiev, I was reminded that a nation achieves economic prosperity only when it makes the first strategy more profitable for its citizens than the second. . Corruption is a large part of the problem. The police regularly shake down foreigners for cash. Doctors won’t provide the supposedly free health care unless patients make side payments. Businesses hide much of their sales to avoid paying the country’s high taxes. As a result, the government finds itself without enough revenue to make good on all its commitments. Many government workers go for months without being paid, except for the bribes they receive on the job.”

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Bribes have become so pervasive in the Ukraine that a survey was taken of 150 businesses in five Ukrainian cities to see how much that each item cost:[1]

 

            $1,250          to install a telephone line

            $   390            for an import l../../icense_o_p_ _/o_p_ _/span__/p__p class_.css"MsoNormal" style="text-align:justify">            $   295            for a border crossing

            $   125            for every visit by a tax inspector

            $     60            for every visit by a health or fire inspector.            

 

Interestingly enough, the survey did not hesitate to point out that the average bribe for the same services in Russia is roughly similar, according to a poll of 50 Russian enterprises.  Even ordinary citizens must pay bribes.  “One-fifth of ordinary Ukrainians say they had to pay bribes for basic government services. Police and customs officials most commonly required bribes, but they were necessary for health and education service, too.  Corruption is directly linked to the heavy burden of regulation and inspection.  At least 25 different Ukrainian agencies have unlimited powers to inspect businesses; many can seize assets, freeze bank accounts, remove financial records and even shut down a business. High taxes are another major cause of corruption.  Taxes in Ukraine can exceed 130 per cent of a company’s revenue.  The country has 37 different types of taxes and obligatory fees.”[2]

 

Corruption in Ukraine operates somewhat differently than anywhere else in the world. It beings at the very top and works it way down by example. Recently Mikola Melnichenko, a Ukrainian citizen who worked in President Leonid D. Kuchma country’s office as part of his senior security detail for a number of years has released a series of tapes that leave little to the imagination.  “He charged in a long interview that Mr. Kuchma had pocketed at least $1 billion for personal or political use, and that the full transcript of recording made since at least 1998 in Mr. Kuchma’s office would establish that “there is no greater criminal in Ukraine that Kuchma.”[3] Now a billion dollars anywhere is a lot of money, but in the Ukraine where nobody has anything you are talking about in inconceivable number. As these tapes start being played on television, radio and the Internet, we would tend to believe that Mr. Kuchma’s days as President of the country would be severely numbered. 

 

Protests calling for the resignation of Ukraine’s President Leonid Kuchma turned violent yesterday with clashes between protesters and riot police erupting on the streets of the capital, Kiev. After an estimated 10,000 people took part in a march to the presidential administration building in the center of the city, demonstrators tore down two rows of barricades and hurled them at riot police, sparking a vicious half-hour brawl. Protesters threw rocks, bricks and at least one Molotov cocktail at the police. The police responded with truncheons and tear gas.”[4]

 

There are no taxes being paid by eighty percent of the workers in the Ukrainian market, because if they pay taxes, they won't be able to work, and if you don't pay taxes, then there is hope that you won't get caught.  Another game being played is that businessmen manage to work for three years, close their companies and open new ones, and the tax inspectors don’t catch them in just three years.  Today, one hundred percent of the proceeds that come to organizations are paid out as salary.  The taxes that are paid are very slight.  It is a mystery how they pay any taxes at all.  The unfortunate result, however, is that these enterprises cannot plow revenues back into production.

 

Ukrainian health care is in a catastrophic state.  They have abolished free meals in practically all hospitals.  People have to bring their own food, and for the last two years, patients have to buy their own medicine.  Ukrainian leaders have admitted that without a health care reform and without an education reform, they will not be able to continue funding for both health care and education in the budget.

 

A senior Ukrainian Minister pointed out that: “For the past year, I have been designated the chairperson of the National Auditing Committee in Ukraine.  The purpose of creating this committee was to control the use of State money, to see that it is used effectively.  In the last eighteen months, the Cabinet of Ministers has been doing everything to prevent our committee from working efficiently.  They do not allow us to exercise control.  We just twice were invited in when two of the Ministers had to be removed, and it was obvious to everybody that they would be removed.  But in our country very often when we remove a Minister from his position, he then becomes an advisor to the President.”

 

While the miners were out cutting their arms, suffocating underground and burning themselves to death trying to get paid, Pavlo Lazarenko, former Ukrainian Prime Minister, was picked up by the police in Switzerland for money laundering, wanted by the Ukraine for grand theft and for escaping the Ukraine and entering the United States with fraudulent travel documents. The Ukrainian government has identified millions of dollars looted by Pavlo, who was elected to his post on an austerity plank.  What he must have meant was that everyone else should skimp while he walked off with the loot.

 

“There is no limit to how high the corruption goes. News reports indicate that Pavlo Lazarenko, Ukraine’s Prime Minister until 1997, allegedly transferred more than $250 million from public funds to Swiss bank accounts before leaving the country on a Panamanian passport. According to these reports, he is now in the U.S., fighting extradition on charges of money laundering and embezzlement. After arriving here, Lazarenko bought a 41-romm house from actor Eddie Murphy for $6.75 million. Most Ukrainians, meanwhile, live in the small, crowded, decrepit apartments built during the Soviet era.”[5]

 

This type of act was not limited to Lazarenko alone.  General Ihor Smeshko, the National Security and Defense Council of Ukraine's director for strategic planning and analysis, indicated to a congressional committee in Washington that the "new democracies clearly were not prepared for the problems of crime” and that organized crime is "like a cancer" which, if unchecked, continues to expand.  He continued that the Ukraine did not have either the resources or the knowledge to effectively fight this problem.  He indicated that the "level of corruption of some government bodies is very high and that the level of crime is increasing."  What is worse, the criminal elements are using high tech methods to enhance their ability to launder money.  One of the principal methods is to buy the State’s privatized assets and flow their criminal funds through seemingly legitimate businesses.  The General seemed to sum up the problem succinctly when he was asked why there has never been an indictment for corruption.  His answer was simply the fact that there is no clear law on the subject. 

 

The United States Department of State put out a little treatise entitled "Ukraine Country Report of Democracy, Human Rights, and Labor“ dated January 30, 1997.   We will paraphrase their report:

 

Police and prison officials regularly beat detainees and prisoners, and the Government rarely punishes officials who commit such abuses.  Prison conditions remain poor, and lengthy pretrial detention under poor conditions is a problem.  Significant societal anti-Semitism, violence against women and discrimination against women, ethnic groups and religious minorities persists.

The Government's inability to stem economic decline and check the growth of violent, organized criminal activity has had major repercussions.  Politicians continued to be the victims -- whether through killing or kidnapping -- of organized criminal groups, aided in a few cases, either actively or passively by corrupt officials.  The number of contract killings of members of the business community, often managers of state-owned enterprises, remained high.  The undermining of governmental authority was particularly serious in Crimea.  The central Government in Kiev lacks institutional control over the peninsula, and the Crimean authorities are widely alleged to be compromised by ties to organized criminal elements.

 

The Constitution prohibits torture; however, police and prison officials regularly beat detainees and prisoners, and there is no effective mechanism for registering complaints about mistreatment or for obtaining redress.  Human rights groups claim that there are isolated cases of abuse of psychiatric diagnosis for economic reasons relating to property, inheritance, or divorce-related disputes.  Conditions in pretrial detention facilities routinely fail to meet basis human rights standards.  Inmates are sometimes held in "investigative isolation" for extended periods and subjected to intimidation and mistreatment by jail guards.

 

Overcrowding, poor sanitation, and inadequate medical care are all problems in the prisons.  Human rights groups have complained of being refused access to some prisons.  Although the concept of providing attorneys from the state system remains in principle, public attorneys often refuse to defend indigents for the low government fee.  General Prosecutors and defense attorneys by law have equal status before the courts.  In practice, however, prosecutors are still very influential because court proceedings are not conducted in an adversarial manner and the procuracy, in its pretrial investigative function, often acts in effect as a grand jury.

 

Many serving judges and prosecutors were appointed during the Soviet era, when political influence pervaded the criminal justice system.  Human rights lawyers claim that the judiciary is not free from government influenced, particularly at the regional and local levels.  Criminal elements routinely use intimidation to induce victims and witnesses to withdraw or change their testimony.  Human rights groups contend that judicial processes are sometimes affected by the biases of expert advisers, who answer to government investigative and prosecutorial bodies.

 

The judiciary is inefficient and lacks sufficient staff and funds. While the defendant is presumed innocent, conviction rates have not changed since the Soviet era.  Nearly 99% of completed cases result in convictions.   Judges frequently send cases unlikely to end in convictions back to the prosecutor's office for "additional investigation."

 

Bail does not exist.  It is commonly believed that suspects frequently bribe court officials to drop charges before cases go to trial.  Consequently, conviction rates are a somewhat misleading statistic.  According to the Justice Ministry, in the first half of the year 35.2% of convicted defendants tried on criminal charges were sent to jail.  Present and former member of the Parliament, members of local councils and judges enjoy immunity from criminal prosecution unless the Parliament or the respective council gives its consent to criminal proceedings.  Consent is rarely given in practice.  Militia personnel have the right to stop vehicles arbitrarily and need no probably cause to initiate extensive document checks and inspection of all parts of the vehicle.  Citizens who have committed no violation, or only a minor one, often prefer to pay a bribe to avoid a time-consuming inspection.

 

Reporting on organized crime and corruption in the Government, including misconduct by high-ranking cabinet and administration officials, is becoming increasingly bold.  Journalist's content that they have been subject to threats, including the treat of arrest, and violent assaults for aggressively reporting on crime and official corruption.

 

Academic freedom within universities, however, is an underdeveloped and poorly understood concept.  University administrators are traditionally conservative establishment figures and possess the power to silence professors with whom they disagree by denying them the possibility to publish or more directly by withholding pay or housing benefits.  This atmosphere tends to limit the spirit of free inquiry. 

 

The constitution, law and government regulations impose significant limits on freedom of association, and the Government uses onerous registration requirements to circumscribe this right.  Freedom of association is circumscribed by an onerous registration requirement that lends itself to abuse and bureaucratic manipulation.  Groups must be registered with the Government to pursue almost any purpose, whether commercial, political or philanthropic.  The Ministries of Justice, Economy and Foreign Economic Relations as well as the Committees on Religion and Broadcasting and others, all have registration functions, which they have used at one time or another to prevent citizens from exercising their right of free association.

 

The government enacted a regulation imposing limitations on the establishment of regional political parties through restrictive registration requirements.  Unregistered groups are prohibited from having bank accounts, acquiring property or entering into contracts.  Furthermore, the registration law gives the Government an unlimited right to inspect the activities of all registered groups.  Registered groups may not duplicate any function or service that the Government is supposed to provide.  For example, human rights lawyers who wish to represent prisoners are prohibited from establishing an association to do so because the Government is supposed to provide lawyers for the accused.

 

Religious organizations are required to register with local authorities and with the Government's Committee for Religious Affairs.  Local officials have occasionally impeded the activities of foreign religious workers.  Freedom of movement within the country is not restricted by law; however, regulations impose a nationwide requirement to register at the workplace and place of residence in order to be eligible for social benefits, thereby complicating freedom of movement by limiting access to certain social benefits to the place where one is registered.  Because the current election law requires a minimum of a 50% voter turnout for elections to be valid, over 30 seats of the 450-seat legislature remain unfilled.  During several parliamentary by-elections, human rights groups received complaints of irregularities, especially in rural constituencies.  The new Constitution prohibits discrimination on the basis of race, sex and other grounds; however, due in part to the absence of an effective judicial system, the Government has not been able to effectively to enforce many of these provisions.

 

While comprehensive information measuring the extent of violence against women is not readily available, survey results suggest that the problem is pervasive.  The law prohibits discrimination against the disabled, but, especially with the economic crisis, the Government has been unable to support programs targeted at increasing opportunities for the disabled.  The Constitution and other laws contain occupational safety and health standards, which are frequently ignored in practice. In theory, workers have a legal right to remove themselves from dangerous work situation without jeopardizing continued employment.  In reality, however, independent trade unionists report that asserting this right would result in retaliation and perhaps dismissal by management.

 

The Ukraine also ranks second only to China in the sale of human organs.  This grisly business in China is usually performed on unwilling convicts who forcibly become part of the nations commerce.  In the Ukraine, things are different: people donate organs because it is all that they have left to sell.  That isn’t the only thing that brings in money: baby smuggling has also achieved some substantial notoriety as a way of bringing in hard currency, and this industry has received substantial attention.  Countless children have been pilfered in the Lvov region of the Ukraine.  “Police allege the adoptions were achieved by fraud, using fake death certificates, falsification of adoption papers and other illegal means.  Parents were often led to believe that their newborn babies had died, then the infants were smuggled out of the country.”[6]



[1] Embarrassment loom for Ukraine, Geoffrey York, The Globe and Mail, 12/10/97.

[2] Ibid.

[3] From Under a Couch, an Effort to Stop Corruption in Ukraine, Patrick E. Tyler, The New York Times, February 26, 2001.

[4] Anti-Kuchma protesters clash with police in Kiev, Tom Warner, Financial Times, March 10 & 11, 2001.

[5] Fortune Asia, Mankiw, N. Gregory, June 12, 2000, Ukraine: How Not to run and Economy.

[6] CNN – Ukraine trial begins for accused baby smugglers – Dec 24, 1996.

 

 

 

 

 

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