Defending Ukraine’s private sector from corruption

By Lucia Sconosciuto

Share this page:

International Anti-Corruption Day serves as a reminder of the scourge that affects firms and consumers the world over and requires concerted action from governments, businesses, citizens and international organisations. According to the United Nations Development Programme, over 5 per cent of global GDP is lost to corruption each year.

The European Bank for Reconstruction and Development (EBRD) contributes to the fight against corruption with technical assistance to both policy-makers and businesses. Such dialogue and assistance seek to strengthen legal and economic institutions and promote good corporate governance and sound business environments. These initiatives can have real impact, as businesses in Ukraine can testify.

The EBRD contributes to the fight against corruption with technical assistance to both policy-makers and businesses. With funding from Ukraine Multi-Donor Account, we are backing the Business Ombudsman Council .

More videos

Mr Krivorot, for example, is the director of a pig farm in Kiev oblast. When he submitted his company’s application for a VAT refund, he was convinced he had filled in all the forms correctly.  He did not expect the task to mark the beginning of a bureaucratic maze with seemingly no way out.

Realising the refund had not been paid in the time specified, he made enquiries at the tax office. But six months passed with no convincing explanation or funds received.

The 3.5 million hryvnas (approximately €126,000) owed to his company were meant to cover its running costs, including animal feed and salaries. When Mr Krivorot realised  delay would put the farm’s future in jeopardy, he decided on a different course of action. He contacted Ukraine’s Business Ombudsman Council.

The Business Ombudsman Council was established in Ukraine in 2014 with the support of the EBRD and funding from the Ukraine Stabilisation and Sustainable Growth Multi-Donor Account. Its donors include: Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, Poland, Sweden, Switzerland, the United Kingdom, the United States of America and, with the most recent and largest contribution, the European Union.

Its role, operationally completely independent from the State, is to fight abuse and promote a culture of fairness and accountability in the public sector by investigating and helping solve cases of maladministration and corruption of which businesses in Ukraine are victim.

Corruption is perceived by Ukrainian firms as one of the top three business environment obstacles. According to an EBRD survey carried out in 2013 and involving over a thousand Ukrainian firms, over a quarter of respondent companies had to pay informal gifts to public officials “to get things done”.

The need to fight back and restore the rule of law is urgent. In this context, the EBRD and its donors have been upholding Ukraine’s efforts to improve its business climate and restore sustainable growth. Their support to the Business Ombudsman Council is part of an Anti-Corruption Initiative, striving to promote positive change in the country.

“By setting up this institution, Ukraine has taken a major step towards improving public offices’ accountability and regaining investors’ trust in bringing their business here. Big corporates as well as smaller companies across the country are coming forward to seek justice and redress. We have already solved about 650 cases, and recovered the equivalent of €200 million. The involvement of the EBRD was crucial in establishing the office.” said Algirdas Šemeta, first Business Ombudsman of Ukraine.

“Building on the positive outcome of the Business Ombudsman project, we continue working with the Ukrainian authorities on other projects designed to improve the country’s business climate. They include the preparation of Government decrees to improve governance of state-owned enterprises and draft legislation to facilitate transparent privatisations,” said Juraj Strasser, EBRD Associate Director, Governance and Political Affairs.

One of the cases resolved by the Business Ombudsman Council was Mr Krivorot’s. Thanks to the involvement of the Business Ombudsman Council, which contacted the tax office about the proper execution of the VAT refund procedure, the company received the refund within six weeks of the investigation opening.

“When we brought our case to the Business Ombudsman, it was our last resort. We didn’t know what to expect. What was even more surprising was that it was solved in a matter of weeks, after months of failures. We were hugely relieved to be able to recover the sum and go on with our work. We recommend any company facing similar challenges to not hesitate and address the Business Ombudsman Council,” said Mr Krivorot.

The Business Ombudsman Council also issues recommendations on how to address systemic issues affecting the investment climate which are used by the authorities to improve relevant legislation and procedures.

This demonstrates the role of the institution as an effective tool of policy dialogue. The EBRD has been advising governments on establishing Business Ombudsman institutions in the Kyrgyz Republic, Armenia and Albania, where the lessons learned in Ukraine could improve the business climate.

Share this page: