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Research Report

Corruption, Democracy, and Investment in Ukraine

Jan Neutze
Adrian Karatnycky
Copyright Date: Oct. 1, 2007
Published by: Atlantic Council
Pages: 60
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Table of Contents

  1. (pp. i-ii)
    Frederick Kempe

    Good governance and economic transparency are building blocks for democratic stability and development. Conversely, democracy is threatened where they don’t exist. We at the Atlantic Council have witnessed the corrosive nature of corruption to young democracies in the post-Soviet space and in Russia itself — and we thus consider it one of the top challenges of the Atlantic Community to encourage those who wish to integrate themselves in its structure to above all tackle issues of political and business corruption.

    We do not do this in any holier-than-thou manner, as we realize that not even the most developed of Western...

  2. (pp. 1-9)

    In contrast to the long history of Ukrainian culture and society, Ukraine is a young state, having attained independence in 1991 at the time of the dissolution of the USSR. Since then, it has surmounted a wide array of problems that accompanied the simultaneous tasks of building independent state institutions and making a transition from a state-controlled to a market economy.

    Today, its economy is growing rapidly, averaging over 7 percent annual growth since the late 1990s.¹ In the first half of 2007, the economy expanded at an annual rate of 8.2 percent.² And while its democratic institutions remain fragile,...

  3. (pp. 10-23)

    Of all the sectors of the Ukrainian economy, it is the consensus of experts interviewed by the Task Force, that energy, land and real estate, and the transportation sector have in recent years been the sectors most implicated in wide-ranging corruption. Of these, energy has been the most problematic.

    The energy sector remains among the least transparent and most challenging in terms of perceived corruption. Organizations and individuals who monitor corruption in the energy sector allege that secretive intermediary companies have long controlled Ukraine’s gas imports, often as a result of tenders and arrangements that have been far from open....

  4. (pp. 24-29)

    The 2007 parliamentary elections were deemed free and fair by international observers.76 The focus has now shifted to creating a post-election climate that will be conducive to combating corruption in the economy, judiciary, and government generally. It would be naïve to suppose that one election could end corruption. Yet, this election provides an important opportunity for the new government to overcome the cynicism that surrounds this issue and make some important steps forward.

    According to the election results, Ukraine’s voters gave the Orange forces (The Bloc of Yulia Tymoshenko and Our Ukraine-People’s Self Defense) a small majority which is in...

  5. (pp. 30-31)

    It is the conclusion of the Atlantic Council Task Force that nothing is more important to Ukraine’s long term economic and political health than combating corruption. Corruption is perceived by Ukraine’s citizens, by the business community, and by civic monitoring organizations to be a pervasive and debilitating factor in the country’s life. If investment is to grow, and Ukraine to be fully integrated into the global economic community, business and political leaders, both in Ukraine and elsewhere, must have greater confidence in the overall impartiality of the state system.

    In addition to the corrosive effect corruption can have on competition,...