Survey: Companies In Ukraine Paying More In Bribes Again

KIEV, Ukraine -- Companies operating in Ukraine are spending more money on bribes in order to sift through Ukraine’s murky business climate, according to the Institute for Economic Research and Policy Consulting.

Bribes are a way of life in Ukraine and will be part of the Ukrainian landscape for many years to come.

A survey conducted by the institute in April-May suggests that the average amount of bribes this year compared to 2006 has “increased from 3.6 to 4.2 percent” of an enterprise’s annual sales volume.

In the study, officially called the Annual Assessment of Business Climate in Ukraine, 300 enterprises were surveyed on various issues critical to Ukraine’s economy and investment climate.

The companies were asked to respond to questions on bribes, corruption, tax evasion, security of property rights and difficulties in the regulatory environment.

Oksana Kuziakiv, executive director of the institute and head of the Business Tendency Survey, which included the survey on bribes, said the study results suggest that corruption is again on the rise in Ukraine, but still below the levels detected in 2004, before the pro-democracy Orange Revolution.

A significant increase in the amounts of bribes was detected in 2004, up to 6.5 percent of the annual sales volume of an enterprise, compared to 1.9 percent recorded in 2003.

The aggregate number of bribes started to decline in 2005, as the pro-Western administration of newly elected President Viktor Yushchenko took power, declaring its intention to fight corruption.

In that year the amount of bribes decreased from 6.5 percent to 1.4 percent of an enterprise’s annual sales volume.

In 2006, corruption started to increase again.

This year has seen an increase in bribery. Those surveyed, however, remain uncertain that bribes would help successfully cut corners or avoid red tape – a huge barrier to businesses’ operations in the country.

Nevertheless, Ukrainian businesses are often pressured by influential officials into paying bribes, often through would-be racketeering arrangements, as a way of keeping their businesses protected from various risk factors, including violations of the country’s vague and contradictory legislation.

In 2003, about 25 percent of Ukrainian enterprises felt that a bribe would deliver no effect.

From 2004 until 2005, this percentage increased from 29.6 percent to 65.8 percent. The year 2005 appeared to be the peak in this tendency.

In 2006 this percentage decreased by 2.3 percent, to 63.5 percent, and this year the tendency saw an 8.5 percent drop to 55 percent.

Over the period 2004 to 2007, businesses have considered it important to establish strong working relations with tax authorities and militia, allegedly common benefactors of bribes.

The importance of maintaining relations with local authorities in regions increased last year.

The Institute for Economic Research and Policy Consulting, IER, is an independent research organization founded in 1999 by senior Ukrainian politicians and the German Advisory Group.

The main purpose of the institute is to promote the principles of a free and democratic market economy.

Source: Kyiv Post