With the upcoming presidential elections in Ukraine, the country again has an opportunity to choose a candidate for a new direction. There has been much discussion recently about the degree of change accomplished over the years since the 2014 EuroMaidan Revolution which forced the Viktor Yanukovych regime to flee to Russia.
The central issues of concern to the electorate are the continuing war in the Donbas initiated by Russia, the state of the country’s economic welfare and the level of corruption. Each candidate for office must address these issues and be assessed on credibility while the incumbent must also be judged by his actions on these matters during the past term.
First, one needs a realistic assessment of the state of economic reforms in Ukraine over the past four years. To suggest that “nothing has changed” is certainly incorrect. It is obvious that progress has been made on a number of key factors. These include the market pricing of natural gas, the reduction in budgetary deficits, the stabilization in the national debt, the changes in the procurement process, the improved refund system on value-added tax, the changes in business regulation and the restructuring of the banking system.
Unfortunately, the missing ingredient for vibrant economic growth is missing. The past four years have seen the failure of the administration to make any serious effort to reduce corruption and to establish the proper rule of law.
The evidence on this is abundantly clear to the citizens of Ukraine.
The current administration has consistently appointed prosecutors who have thwarted prosecutions of any significance. In particular, known major oligarchs, some with obvious ties to Russia, have not been brought to justice.
The reform of the judiciary introduced by the administration has been significantly de-railed by the inclusion of judges with known reputations of corruption as assessed by independent observers. Police reform has been stuck at the level of the road patrols with little change in the overall system. The anti-corruption institutions created to address the issue have been continually hampered in their operations by the other levels of the justice system, openly harassed and even infused with corrupt agents. The organizations of civil society who have focused on exposing corruption have been maligned by controlled media, harassed by police, threatened by the prosecution and physically attacked and even murdered.
As a prime example of the thwarting of reforms by the administration is the implementation of the asset declaration system which has been cited by supporters as evidence of change. The intent of such a system was the exposure of illicit assets by senior officials and politicians. Indeed, such declarations were filed and made publicly available. However, there has been no serious follow up on the filings and essentially no prosecutions of officials with clearly suspicious assets. Even worse, the system was then extended to require filings by NGO organizations in the forefront of the anti-corruption efforts. This extension was clearly a form of harassment and intimidation of activists.
Another often cited reform is the closure of numerous illiquid banks which were run as non-arms length funding operations of owners. While such steps were certainly necessary, the implementation of this policy was rampant with corruption at the expense of the public. The government’s guarantee fund paid out billions to depositors of these failed banks. At the same time, very little effort was made to recover the losses from the corrupt owners or prosecute them for self-dealing. The most grievous example of this would be the takeover of PrivatBank, Ukraine’s largest bank, whose oligarch owners have never been prosecuted and the losses amount to around $4 billion to the public purse.
The lack of commitment to fight corruption and establish the rule of law over the past four years is disturbingly apparent and is a principle cause of the disillusion of the electorate with the current administration.
It is apparent to outside observers such as Transparency International which continues to rank Ukraine among the most highly corrupt nations of the world. Other institutions such as the International Monetary Fund, World Bank, and Western governments repeatedly have required progress on corruption as a condition for loans and assistance. The reason for this focus on corruption is not simply one of morality or ethics. Economists fully recognize that corruption inhibits economic growth. It has reduced investment inflow to a pitiful level. It has eroded the budget of the country, damaging the capacity to provide for pensions, education or infrastructure. It has permitted the continued domination of oligarchic interests resulting in excessive regulated prices. It has hampered the evolution of small and medium-sized business. It has resulted in misappropriation of money even from the funds allocated to the essential war effort.
The electorate will need to assess the credibility of the various candidates with regard to the pivotal issue of corruption. What is the track record of the candidate when in power?
Have they participated in corruption to amass their own wealth? Are they controlled by corrupt oligarchs? Do they have the support of anti-corruption activists in civil society?
Populist promises made cannot serve as a basis of choice. The electoral system highly favors candidates with money, media control, and administrative power. True reforms will only be achieved when a candidate with personal integrity and commitment to the country is chosen as a leader. Consolidation of all democratic forces in achieving this goal is essential to the future of Ukraine.
Basil Kalymon is a professor emeritus of finance at the Ivey Business School at Western University (London, Ontario.)
