Bribery fears blight Ukraine outlook
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Bribery fears blight Ukraine outlook

Prime minister Yulia Timoshenko this weekend claimed the “Ukrainian government is open for co-operation but closed for bribes,” but analysts increasingly believe otherwise about doing business in the ex- communist state.

A string of recent studies have found that the country ranks among the most corruption-blighted nations on earth.

Most worrying for Ukraine is that fact that the country’s rankings in recent business climate surveys are deteriorating rather than improving.

Transparency International’s (TI) latest Corruption Perceptions Index, ranked Ukraine 118 out of 179 countries surveyed around the world, placing it alongside African countries such as Benin and Mali.

There’s a similarly damning conclusion in TI’s Global Corruption Barometer report in which between18%-32% of respondents reported having paid a bribe to obtain a service. This places Ukraine in the second quartile of countries most affected by bribery.

And its own citizens don’t believe that their own government is willing or able to combat graft, with Ukraine ranking among the bottom quartile of countries where the population believes government efforts to fight corruption are least effective. Some 82% of Ukrainians believe the level of corruption in the country will either stay the same or increase, the report found.

Marek Dabrowski, chairman of Warsaw-headquartered think tank Center for Social and Economic Research, said: “In spite of the impressive economic growth of the first decade of the 2000s, Ukraine is not considered a business-friendly country.”

Meanwhile, the Heritage Foundation Index of Economic Freedom Ukraine places Ukraine 133rd out of the 157 countries in its 2008 rankings, right on the cusp between “mostly unfree” and “repressed economies”.

On a regional basis Ukraine ranked 39th out of 41 countries in Europe, with its overall score of 51.1% - well below the 66.8% average economic freedom score for the rest of the region.

As the Heritage Foundation report concludes that promises of more market openness and economic reform after Ukraine’s 2004 Orange Revolution have “fallen short”. Corruption is also a “major problem throughout the civil service, and bureaucratic inefficiency makes many commercial operations difficult.”

While overseas investment may have grown strongly in recent years, many surveys say the authorities in Kiev need to do more to improve the business climate in Ukraine if the country able to compete for capital against other more investor friendly destinations.

In the World Bank’s 2008 Doing Business report Ukraine ranked 139th out of 178 countries reviewed in the survey, among a group of states where the business environment is characterized as “difficult”. Commenting on the findings of the report,

Paul Bermingham, the World Bank’s country director for Ukraine, said that reforms are taking place in Ukraine, but not at a pace sufficient to allow Ukraine to advance against the other economies with whom it is competing for investment and markets.

Separately, much-needed capital markets reform is on Ukraine’s political agenda. Timoshenko said this weekend that Ukraine must “establish a fully functioning stock market,” adding that the government is set to introduce a new stock market law which is designed to improve both market efficiency and transparency.

Ukrainian equity markets posted a 135% gain in 2007.

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