Page last updated at 09:31 GMT, Monday, 7 March 2011

Bribes and bureaucrats: Doing business in Ukraine

By Rob Young
BBC Business Reporter

He's known as the Chocolate King. Petro Poroshenko is one of Ukraine's richest and most successful businessmen.

He owns dozens of companies including the Roshen chocolate brand, hence his nickname.

Petro Poroshenko
Poroshenko insists the problem was improving under the old administration

In conversation he is a fast-talker with almost flawless English, but one question makes him pause and speak hesitantly.

He is clearly deciding how he should answer the question asking whether he has ever paid a bribe.

"I wish to say no. But I believe in God and it's not a good thing to be a liar," he says.

"I am in a position not to give bribes to the bureaucrats now. But in the beginning unfortunately it happened."

Pretty much every Ukrainian you meet complains about corruption, saying they have to give illicit payments to police officers to file legal complaints and to doctors to get medication.

They allege that politicians and civil servants cream off public funds to line their own pockets.

Headache for business

Petro Poroshenko was a member of the government which swept to power after the 2004 Orange Revolution.

He insists the administration he was a part of started to clean up corruption.

Now, a year after that government was kicked out of office, the problem is getting worse again, he says.

"The corruption pressure is selective and dangerous. It creates a big headache and problem for businesses, big or small."


Corruption is in all branches of power in our country.
Ukrainian President Viktor Yanukovych

The Organisation for Economic Cooperation and Development says corruption is a "significant obstacle" to doing business in Ukraine.

Transparency International, an anti-bribery pressure group, puts Ukraine near the bottom of its Corruption Perceptions Index, ranking it 134 out of 178 countries.

That's the same position as Zimbabwe and Azerbaijan.

Vladimir Dubrovsky, an independent economic analyst at the Centre for Social and Economic Research in Kiev, says corruption goes right to the heart of the government.

"More or less every big business should have a patron in government who will protect it from attacks from law enforcement."

"Laws give state officials a high level of discretion. This is a Russian tradition, a lust for power exercised by the discretional and selective implementation of impractical laws."

Crackdown

President Viktor Yanukovych seems to agree that the giving and demanding of kickbacks is rampant.

"Corruption is in all branches of power in our country," he tells the BBC.

But he says he is cracking down on the problem.

"You can't do it all at once. The experience of other countries shows us that it's hard to eradicate. So we have a fight against corruption ahead."

Yulia Tymoshenko
Yulia Tymoshenko was narrowly defeated in the 2010 election

There have been a series of high profile corruption-related arrests in Ukraine over recent months, largely involving people aligned with the former government.

The ex-Prime Minister Yulia Tymoshenko has been accused of misusing public money.

She denies the allegations made against her and has insisted they are politically motivated.

However, President Vanukovych dismisses the suggestion he is using the justice system to settle old scores.

"The prosecutor doesn't see political colours when somebody is breaking Ukrainian law."

The OECD is so far unimpressed with Ukraine's efforts to tackle widespread bribery.

Its criticism is not limited to the current government.

It takes aim at all administrations since Ukraine gained independence from the Soviet Union 20 years ago.

In a January report it said, "When many other countries in transition have reformed their legal frameworks… Ukraine has yet to make the first step and to adopt relevant laws".



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