Tomas Fiala: Yanukovych has disappeared, but corruption hasn’t

Tomas Fiala, Head of the European Business Association explains why Yanukovych has disappeared but corruption hasn’t. In his interview to Oleg Gavrish (nvua.net) Tomas says that in another three months we will be saying about the President and Prime Minister that “for a fish decay starts in the head”.

Eleven months after a new government was sworn in corruption remains very high. Many politicians, including some Cabinet ministers are busy filling their pockets instead of taking care of public affairs. This is of no concern to the law enforcement agencies because they are busy doing the same.

Tomas Fiala, president of EVA and CEO of the investment company Dragon Capital talks about how officials are able to continue “earning” millions of dollars in government service, why none of them is punished and how the channel of bribe paying can be blocked.

How do you assess the corruption level in post-Maidan Ukraine?

As I stood listening to Yatseniuk and Poroshenko speak from the stage at the Maidan I honestly thought that if they were elected to serve in the government they would practice a zero tolerance policy in regard to corruption. I didn’t think they would repeat the mistakes Yulia Tymoshenko and Viktor Yushchenko had made after the Orange Revolution. I certainly did not expect that the public would let them get away with repeating those mistakes.

Today’s situation is similar to what it was in 2002. It’s true that organized mafia-type corruption instituted by Yanukovich is gone but there is a lot of wide-ranging corruption, everywhere, including within the ranks of the ruling political party. This is a huge disappointment for me personally, for business and for the society at large.

In our country who is most responsible for maintaining a culture of corruption?

When Yanukovych was president it was often said that a fish decays from the head down. The same is being said today. I would give our current leadership another three months before we are forced to resort to repeating what we did before.

Who among the politicians gains the most from corruption and why?

The law enforcement officials, definitely. Still today they care more about their pockets than they do about performing their duties honestly and responsibly. I know that between March and November of last year some of the ministers were able to generate close to 300 million USD for themselves and for the party that nominated them. The same can be said about the law enforcement agencies: the Office of the Prosecutor, the Ministry of the Interior, the Security Service, and the courts.
Can you name the five most egregious cases of corruption within the last year? What is particularly memorable for you?

As an example I remember the hopelessness of the situation the importers encountered, a large group of whom decided to stop “gray importing” and to pay all duties and taxes directly to the personnel in customs. Sadly, customs has not forbidden smuggling and continues to take bribes for it. Importers have asked customs officials many times that the flow of contraband be stopped and that fair and equal rules be applied and guaranteed to all importers alike. Government officials agreed and promised to stop the flow of contraband but nothing has changed. Importers have asked me time and again to appeal to the Minister of Finance to make one final attempt at making sure the import/export sector is conducted legally treating all importers/exporters equally honestly. If no steps are taken then many of them will resort to dealing in contraband in order to save their business. This is a simple recipe on how to improve the balance of payments without imposing an additional five to ten percent in import taxes. The importers are already paying their fees in full. Because taxes have been increased on “white importing” contraband becomes even more attractive.

Why is no one being punished for corruption? Why do the Ministry of the Interior, the Security Service and the Office of the Prosecutor block investigations into corruption?

Well, that’s easy to explain: the law enforcement agencies will thank you kindly for bringing in the files containing evidence on corruption and then they proceed to “shake down” the corrupt money into their own pockets.

State-owned companies and agencies and government ministries are the focus of anti-corruption initiatives. For example, when tenders for public procurement are offered, the appointment of individuals for government positions is being determined, or permits and licenses are being issued. How can this problem be tackled and ultimately solved?

Reduce the staff in various ministries by 80% and in some ministries by as much as 90% and decrease their responsibilities. A lot of them have practically zero responsibility anyway and instead produce a negative effect on economic growth. Improve the staff in charge of transparent tenders, increase their salaries to reflect market value, and implement severe punishment for corruption. In Georgia out of a population of four million it took several years since 2004 for about 100 thousand of them to be charged with corruption and put in prison until they learned not to pay or take bribes. In Ukraine around a million people would be incarcerated for corruption if the same ratio were to be applied.

How is it that directors of ministry departments are paid relatively low salaries and yet they are millionaires?

By receiving direct and indirect bribes. In some ministries directors of departments “earn” up to 20 million USD for themselves and for those politicians or political parties that secured the director the position.

How can this unlawful enrichment be stopped?

Like I said: hire a new, smaller staff, raise their salaries, and punish those who take bribes with prison sentences. A really simple recipe that in other countries has been proven to be effective, and there are plenty of advisors ready to help. Our leadership is not required to invent a new bicycle. All that is needed is to have the will to earn money honestly and to live an honest life. It is, unfortunately, in politics that people are unprepared to live honestly.

Is it necessary to fire all the ministerial and department staff in order to get rid of corruption? Or does it suffice to only fire some of the staff?

It is important for all of them to pass a certification process. If an employee passes the certification process he can stay. Although if we are to believe Kakha Bendukidze (and I do believe him) in Georgia of the people who were dismissed (approximately 20% of the employees) at the outset had to ultimately be fired.

Does there have to be a completely new team of elites for corruption to be eradicated?

I do think so. The existing system of party funding does not even pretend to be fighting corruption. In the October parliamentary elections about 100 million USD per political party was spent. The money was divvied out by the oligarchs who expect high returns.

Are Poroshenko or Yatseniuk capable of making changes in the way things work?

I’ve already said that in about three months we will see if the saying “for a fish decay starts in the head” needs to be expressed yet again. I do hope that the president and the prime minister will be able to handle this huge challenge. For me it is very important that the challenge be met and that corruption will be eradicated. I will help where I can and I wish our leaders success. Last year in March I decided to invest in media but not because it was profitable in the emergent advertising market. I invested in media because I believe that without a strong, independent media it will be impossible to build a free and democratic country with a developing market economy. But the problems have to be resolved systematically, and without implementing measures such as administrative reform or the reform of the way political parties are financed there will be no resolution.