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Ukraine needs to face the issue of corruption

As the civil conflict in the eastern Ukraine is once again threatening to explode, the government in Kiev is at the same time trying to fight an even bigger threat to the country as a whole – the endemic corruption. Transparency International. An international corruption watchdog, reported that Ukraine is ranked 144 out of 177 on the index of Corruption Perception. This basically means that Ukraine is at the very bottom of the rating along with Nigeria, Cameroon, Papua New Guinea and other countries. 

Even though the Ukrainian government has a big agenda fighting corruption is on the very top of that lost. The prime-minister of the Ukraine Arseniy Yatsenyuk stated that the government is making $25 billion in state purchases every year and about 40 percent of this sum - $10 billion is lost due to corruption. Sergiy Gula – a government procurement expert said at Transparency International Ukraine that the public procurement is the most problematic sector when it comes to corruption. In fact, he claimed that for certain things, the level of corruption in a tender may reach up to 50 percent. 

Gula also mentioned that the most common type of corruption when it comes to the government tenders is either unlawful usage of an associated company or a single party – a fictional competition or the tender is won by an already predetermined company. Even if its offer is the worst and the most expensive one out there. Gula’s point is being backed up by the corruption cases in purchasing the AIDs/HIV drugs that were uncovered by the Anti-Corruption Center in Kiev. Generally, a number of companies that are controlled by a single owner tend to “compete” with one another in order to win a huge tender. In the end, the corruption leads to the fact that only 43 percent of HIV-positive patients get the drugs they require. 

Yet another example of how corrupted party associated procurement really is can be demonstrated via the 2011 purchase of an offshore drilling rig by the state-owned energy company Naftogaz. The drilling rig was acquired for $400 million, whereas it is sold around the globe for $250 million. In this cas the only two bidders (Falcona Systems Ltd and Highway Investment Processing LLP) were both owned by two citizens of Latvia. 

How should Kiev act in order to cleanse the Ukrainian government procurements? A law was passed by the parliament of Ukraine that created an anti-corruption agency, which is a start. This legislation obligates the public officials in Ukraine to file public declarations of their own incomes as well as assets that may help in ferreting out the government workers who could benefit from the schemes of procurement corruption. 

In order to increase the transparency in public procurement, Ukraine could imitate Chile. Back in 2003 the government of Chile created the ChileCompra – a special e-commerce platform, which placed all government procurement info, including awards, tenders, bidding processes as well as regulations and rules in a single portal on the net. 

A study from the United Nations Development Program demonstrates that the creation of ChileCompra significantly improve transparency in government procurement. It has done so through ensuring that all the government purchases could remain arms-length transactions, which take place only between the sellers and the buyers, thus reducing the possibilities for corruption. It is important for Ukraine to implement its very own version of ChileCompra and to make sure that this version also implements government agencies and state enterprises. 

A special NGO that we may call, for example – the Ukrainian Procurement Authority may be established. This NGO could be residing completely outside any kind of government ministry and it could be composed solely of nongovernment staff members. Any kind purchase of goods or tender about $100 thousand by any government body would then be overseen by the outside Procurement Authority. 

Let us review and example of how the NGO would function. Let us say that Naftogaz is in need of new gas pipeline equipment that will cost millions of dollars. Instead of leaving the tender specifications to be decided solely by Naftogaz alone, the NGO will need to sign off on all parts of the tender in order to make sure that it was not an elaborate design to favor a single bidder. 

In order to ensure the overall independence as well as lack of corruption of the newly created Procurement Authority, it is imperative to fund it in full. This would include staff salaries. The funds could come from international donors – the World Bank, Western Governments, the International Monetary funds. Every staff member would be receiving a good salary – no less than $1 000 every month as well as all the technical assistance could be provided by the Western expatriates that would have the knowledge of the government procurement. 

So does this proposal imply the Ukrainian government to outsource a certain part of its sovereignty to tan NGO that is funded from abroad? Of course – this is the whole point. Truth be told – the government of the Ukraine has long since been the greatest impediment to the success of the state as a whole, hence the problems should be solved by the civil society organizations, including the Anti-Corruption Action Center. 

In conclusion, it is apparent that after nearly 25 years of predatory as well as genuinely incompetent governance, the country requires reforms and not just cosmetic ones. Before pledging the $19 billion to Kiev. International donors must make sure that Ukraine is actually moving towards implementing those reforms.

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