Rule of law is only pathway out of a corrupt system

The Ukraine’s potentially powerhouse economy is being sucked dry by a crooked government in bed with big business cronies. Europe Correspondent Anne Cahill reports from Kiev.

IN the Ukraine, economics and politics are one and the same, in every sense.

The economy is controlled by three major oligarchies.

The current president, 66-year-old Leonid Kuchma and his son-in-law head one of them, while their preference for president, Viktor Yanukovych, represents another.

Opposition leader and presidential contender Viktor Yushchenko does not have the support of any.

However, the representatives of big business in the Ukraine do not just hold the most powerful political post in the country - they also sit in the Parliament and control the legal system from start to finish.

For those in charge of the economy, the election is about protecting their interests. They need guarantees that political rivals will not deprive them of their wealth and they also want to ensure that neither Russia nor the EU can threaten their power either.

According to a yet to be published report on the Ukraine by the World Bank, conditions have never been so good in the country to put in place reforms crucial to the country’s future development.

Most economic trends and short-term prospects remain highly positive. After a decade of economic decline and crisis, the economy has shown strong growth and unprecedented stability since 2000.

Unemployment was well down, household incomes increased significant and poverty is declining.

The bank says that Ukraine is in a much better position than Russia and most other countries in the region to develop and integrate with Europe and world markets. It could easily become a member of the World Trade Organisation, have greater economic integration with the EU and gain greater market access for its exports. But after that the report goes downhill all the way.

This is an insider economy, where the entire economy is subservient to the interests of a chosen few and their cronies.

Corruption goes right through the system, from top to bottom. A survey by the Institute for Economic Research and Policy Consulting of 300 manufacturing firms last year found up to half said “pull” with the police, the tax and civil servants at national and local level was essential.

Those who give loyal support and service are well rewarded. People are routinely given plots of land or whole apartment blocs, usually on a 99-year lease.

Bribery is frequently suspected, especially if a group of parliamentarians suddenly change their vote, it is safe enough to presume they have been bribed. For those who prove difficult the consequences can be fatal. People disappear - and they frequently do - as they were standing in the way of some business deal or had become an irritant.

Journalists investigating corruption have been murdered, some believe on the direct instructions of the President Kuchma.

Steffen Skovmand of the EU’s mission in Kiev says that there is only one answer - the rule of law: “The economist, Friedman, said in the early part of the transition process the only thing that mattered was privatisation, but he has since changed his mind and said it’s the rule of law.

“We have all got wiser too and now this country has to learn that the rule of law is more important and more difficult to achieve.”