Internal Policy

The results of the year of General Prosecutor Yuriy Lutsenko

24.05.2017
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ICPS Press

 

The analysis of the year of work of the General Prosecutor Yuriy Lutsenko showed that his activity is more focused on creating beautiful images in the media, than on achieving real results. Most of the promises of Yuriy Lutsenko were populistic, and some were only partially implemented. Almost all high-profile criminal cases initiated by the General Prosecutor are stopped at the investigation stage, either through procedural violations by the prosecution and the weakness of the evidence base collected by them falls apart in court. Yuriy Lutsenko uses GPO as an instrument of political competition and pressure, and also as a PR platform for a future political career. During the year of his work as General Prosecutor Yuriy Lutsenko was not able to reform a body towards European standards, which for 20 years acted as a tool of promoting political interests.

On May 12, 2016 Yuriy Lutsenko was appointed the General Prosecutor. For the first time in the modern history of Ukraine, a politician was appointed to the position of the Prosecutor General, and what is important, without law education and the necessary experience in the field of law.

On the new post Yuriy Lutsenko in the first place, promised to reform and clear the Prosecutor’s Office, to punish members of the previous government, responsible for the killings on the Maidan, to return stolen Yanukovych's team funds. Lutsenko also emphasized the political impartiality of his work and promised that politics will in not affect the investigation of resonant cases.

Yuriy Lutsenko talked a lot about the intensification of the lustration processes within the Prosecutor’s Office. The purification began with the verification of probity of prosecutors – collected using a special questionnaire of information on occupations and lifestyle of the employees of the Prosecutor's Office and possible corruption risks. Such information has become the basis for performance verification and public scrutiny. But the use of questionnaires caused great doubts as to the effectiveness of this mechanism, because the prosecutors just confirmed or denied a number of allegations and did not provide any specifics. As a result, almost zero results were obtained. Instead of layoffs, the Prosecutor’s Office issues warnings and reprimands to prosecutors. Among 12,5 thousand prosecutors only three were brought to disciplinary proceedings.

The GPO repeatedly took the competences of the NABU and SAPO that created excessive competition between old and new anticorruption institutions, and contributed to the collapse of cases in court. A vivid example of relations with the GPO and the newly established anti-corruption institutions was the scandal in August 2016, when the Prosecutor's Office detained two detectives of NABU. The statistics is vivid and according to it, by 3.5 times fewer people were detained for this crime than in 2013 during the presidency of Viktor Yanukovych.

The following cleaning mechanism was the creation of the General Inspectorate of the GPO. But the launch of this body was accompanied by a scandal. Lutsenko decided to assign odious Petro Shkutiak as a person responsible for the inspection, he was not only subject to lustration, and even was involved in corruption fraud. After the resignation, according to the results of competitive selection, Volodymyr Uvarov was chosen for his position. During four month under Uvarov’s leadership the office submitted criminal proceedings to the court in respect of nine prosecutors.

Thus, purification of the Prosecutor's Office on grounds of quality did not happen. Competitions to the regional Prosecutor's Offices and the GPO were not held. Competitive selection was carried out only in the local offices, but the results can hardly be considered satisfactory. Almost all of the heads and deputy heads of local prosecution offices are from the old system, and the ordinary structure has not been restarted. Public confidence in the prosecution is declining, the official salary, despite promises, remained at an uncompetitive level, and mismanagement leads to degradation of personnel of the GPO.

Yuriy Lutsenko did not offer any plan for the reform of the Prosecutor's Office and turning it into a judicial body. The adjustment to the new requirements of the Constitution, the law on prosecution and procedure codes were also left without attention of the General Prosecutor. On the contrary, through lobbying bill No. 5177, Yuriy Lutsenko did not seek to narrow the powers of the prosecution, as required by the basic law, but rather to expand them. This issue, in particular, attracted attention of experts of the Council of Europe, which provided an appropriate conclusion. In general, we can talk about the folding of the prosecution that is a confirmation of the unwillingness of the authorities to lose control over such an important instrument of political pressure.

The start of functioning of the prosecutorial self-government, the Council of Prosecutors and Disciplinary Commission (CDC) of prosecutors, which should form the personnel policy department also did not happen without scandals. The fact that the Ukrainian conference of prosecutors in the last year, until the appointment of Yuriy Lutsenko, elected their representatives to these bodies. Legal grounds for exemption of the elected members did not exist, but that did not stop the current management of the Prosecutor's Office breaking the law and carrying out a new Ukrainian conference of prosecutors and electing other members to the prosecution bodies.

On May 4, 2017 in the Obolon district court of Kyiv a preparatory hearing in relation to the long-awaited prosecution of Viktor Yanukovych for treason was held. The General Prosecutor considers the mere fact that there was the commencement of legal process to be a big victory for himself and the result did not particularly worry him. Lutsenko does not want to see that the procedure of conviction giving a lot of loopholes for lawyers of the fugitive president, and any deviation from the accepted European understanding of the process of conviction will give the opportunity to successfully appeal the decision to the ECHR.

If we consider the merits of the case, the basic allegations of Yanukovych are based actually on a single action – the so-called appeal of Yanukovych to Russian President Vladimir Putin with a request for sending troops to restore order in Ukraine. But there are serious doubts that the prosecution will be able to comply with the requirements of part 1 of Article 23, part 3 of Article 99 of the Criminal Procedural Code and will provide the court with the original letter, and the examination will state the authenticity of the signature. In the absence of the original, the defense may argue that the letter did not exist at all or to claim that the text of the letter was distorted. That is, without the original document the case is in a procedural impasse.

The decision of Interpol on the termination of the international investigation of the former president and his team was also unexpected and very unpleasant decision for Yuriy Lutsenko on the eve of consideration of the case of Viktor Yanukovych by the Ukrainian court. The fact is that Article 3 of the Charter of the Interpol says that he can't be involved in political, religious and racial disputes. And the documents filed by the Ukrainian side stated that Viktor Yanukovych became President of Ukraine, headed an organized criminal group, consisting of the Prime Minister, Ministers and so on. Criminal procedural legislation of Ukraine in this context is also imperfect, because Viktor Yanukovych, despite the open proceeding is not a person to whom the measure of restraint “detention” was applied. And according to the rules of Interpol, the person in respect of whom no measure of restraint in a form of detention was chosen cannot be declared in the international search.

Also, the office of Yuriy Lutsenko held a number of searches, which was accompanied by a bright covering in the media. For example, the GPO searched the two mayors of the cities of Bucha and Irpin, Kyiv oblast – Anatolii Fedoruk and Volodymyr Karpliuk, who were accused of illegal allotment of land plots to people close to them. We speak about 890 acres of priceless forests near Kyiv. However, no arrests took place, and mayors calmly continue to work at their jobs.

The Prosecutor General's Office raided the estates of the former head of the presidential administration of Yanukovych Andrii Kliuiev and former Deputy Secretary of the NSDC Volodymyr Sivkovych, suspected of involvement in the events on the Maidan, but they did not bring any result.

The GPO sent to the Verkhovna Rada a request on deprival of Oleksandr Onyshchenko of the parliamentary immunity, he is suspected of embezzlement of public funds in especially large scale. The MP was deprived of immunity, but at that time Onyshchenko was far away from Ukraine.

Lutsenko personally, not once, tried to convince MPs to withdraw the immunity of the oligarch and representative of the “Opposition bloc” Vadym Novinskyi, who was a suspect in the kidnapping. The deputies supported the idea of Lutsenko, but that was it.

One of the key issues of GPO against the previous government is a proceeding against the former head of the fraction of Party of Regions Oleksandr Yefremov, who is suspected of high treason, organizing and carrying support for the “LPR”. But one of the main witnesses in this case – Volodymyr Medianyk was released. The case against Yefremov is now being considered in a court of Starobilsk in Luhansk region. It is not excluded that Yefremov may escape punishment, because as practice shows, the GPO constantly makes procedural violations.

Also, the GPO has still not finished investigation into the circumstances of illegal actions of officials within the Ministry of Defence of Ukraine and General Staff of the Armed Forces of Ukraine, which could lead to a decrease in the level of national defense. Also a criminal investigation into the events in Ilovaisk has not been completed.

If we speak in the language of statistics, Lutsenko gave 43 promises (the data of the portal “Word and business”) at the office of the General Prosecutor, of which only 5 were kept.Thus, the Prosecutor's Office in Ukraine has always been a political authority and a tool of repressive actions. During the work of Yuriy Lutsenko politicization of the Prosecutor's office reached its peak, because he has his own political ambitions and considers the current position as a kind of career springboard towards the presidency. In the matter of personnel policy the Prosecutor decided not to go into conflict with the system, although several times he has rudely violated the guarantees of independence of the prosecutors. In the matter of implementation of the changes to the Constitution in the direction of the transformation on the GPU in a system of justice, Yuriy Lutsenko has not offered any plan to reform the institution, but rather lobbied for the extension of the powers of prosecutors by limiting maneuvers for NABU and SAPO. The most high-profile cases under the auspices of Yuriy Lutsenko collapsed in the courts, or are being slowed down in the absence of evidence against the suspects.

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Internal Policy

Еconomic and banking reforms towards Ukraine’s European integration

On behalf of the Henry Jackson Society and the International Center for Policy Studies (ICPS), we invite you to participate in an expert discussion on the topic “Еconomic and banking reforms towards ukraine’s european integration”, which will take place on the 20th of December 2021 at 17:00 (Kyiv time) in online format in Zoom.   The link for participation is the following: https://us06web.zoom.us/webinar/register/WN_imT6teDhS7W6O0euLvFcMg   Background Since Ukraine signed an Association Agreement with the European Union (EU) in 2014, the country has introduced a wide range of reforms towards its integration into a Deep and Comprehensive Free Trade Agreement (DCFTA) and achievement of a visa free regime with the Schengen Zone. However, despite positive achievements, there is a number of “blind spots”. The banking sector was also an important area where these reforms took place and its overhaul contributed towards Ukraine’s fight against corruption. Increasing the capacity of banks to effectively prevent financial crises and to provide services is seen as a necessary prerequisite for successful economic policy. At the same time, the impact of problematic factors of the global pandemic, in particular the slowdown in the world economy and the quarantine restrictions in the country have affected the banking sector of Ukraine. The panel will discuss what areas of reforms need to be improved as part of Ukraine’s European integration. The invited experts, representatives of the banking sector and interested organizations and institutions will outline the current state of state of reforms and will cover the following points: What are the main successes and failures of key economic reforms in Ukraine on the road to the EU? What are the main economic achievements of the year 2021 and the forecast for 2022? Are there any "blind spots" of the current reforms? What are the results of long-term banking reform? Is the current NBU management effective and independent? Will banks be able to become a driver of the Ukrainian economy and help bridge the gaps in economic development?

16.12.2021
Internal Policy

ICPS issued an assessment of local/regional measures for August - September 2021

In this bulletin, the experts collected interesting materials about the measures that were implemented in different parts of Ukraine and analyzed their impact on the community and regions. In particular, they assessed an important measure that will bring Ukraine closer to energy independence and reduce the dependence from the Russian Federation: the opening of a storage facility for used nuclear fuel in Chernobyl by the 30th anniversary of Ukraine's independence. Measures in the field of education are important for Ukraine's approach to intellectual independence. Experts positively assessed the launch of the public budget for schools in order to involve students in the development of public space and in the cooperation with local governments in Ternopil. This practice is being picked up and implemented by other cities in Ukraine. These measures will have a positive effect in the future. Also, given the lack of schools in large cities and the lack of good conditions in educational institutions in many regions of the country, the renovation of the school in Odessa with the support of the European Investment Bank will affect the quality of education of schoolchildren and increase the level of education in general. An expert from the city of Khmelnytsky tested on her own experience whether a rail bus was launched on the route "Shepetivka - Kamyanets-Podilsky", which the residents of Khmelnytsky region were waiting for and the launch of which, according to the official website of Khmelnytsky Regional State Administration, is the first example of successful cooperation between local authorities and JSC “Ukrzaliznytsia”. The text is supplemented by author's photos of the train. The development of the new "Open Data Portal" in Dnipro was positively assessed, however there is a number of comments and questions from experts. It was also interesting to analyze the work of the Institute of Commissioners for Prevention and Detection of Corruption in Local Self-Government Bodies and its impact on corruption. The measure has received the lowest evaluation from experts; however, such cases are worth considering to work on errors and to develop effective action plans for the future.   RANKING OF BEST AND WORST MEASURES Case Quality [-3; +3] Relevance [0%; 100%] Final score [-300; 300] Ranks Opening of a storage facility for storage of spent nuclear fuel in Chernobyl 2.5 88.33 220.83 I Involvement of students in the development of the territorial community in Ternopil 2.67 81.67 217.78 II Odessa: renovation of the school with the financial support of the European Investment Bank 2.5 85 212.5 III The suburban train connected the north and south of Khmelnytsky region 2.33 71.67 167.22 IV A new "Open Data Portal" has been developed in Dnipro 2 60.83 121.67 V The work of the Institute of Commissioners for Prevention and Detection of Corruption in Local Self-Government Bodies -2.2 60.6 -133.32 VI   In addition, this publication summarizes the policy evaluation results for 2020-2021.   The final rating of the 2020-2021 measures is as follows:   Ranks Case Final score [-300; 300] Summary edition* 1 The first open auctions for the sale of amber were held in Volyn region 257,36 3rd edition 2 Malashivets landfill degassing 228,89 3rd edition 3 Opening of a storage facility for storage of spent nuclear fuel in Chernobyl 220,83 5th edition 4 Involvement of students in the development of the territorial community in Ternopil 217,78 5th edition 5 Implementation of the first automatic cameras for recording violations of traffic rules in Western Ukraine 217,78 2nd edition 6 Odessa: renovation of the school with the financial support of the European Investment Bank 212,50 5th edition 7 Development of tourist infrastructure of Ivano-Frankivsk region 208,33 2nd edition 8 Airport renewal in Chernivtsi 192,80 1st edition 9 All Transcarpathian wood will be sold through the ProZorro-Sale system 189,60 1st edition 10 The airport in Zhytomyr is preparing for the reconstruction and acceptance of international flights 175,00 4th edition 11 Implementation of the investment plan in the Berdyansk port 169,72 2nd edition 12 Interactive panels for schools of Stanychno-Luhansk district 169,17 2nd edition 13 The suburban train connected the north and south of Khmelnytsky region 167,22 5th edition 14 Organization of the educational process during a pandemic 162,50 4th edition 15 Dnipro city program to promote condominiums 140,56 3rd edition 16 Challenges towards implementation of local reforms 140,00 3rd edition 17 Creation of a GIS portal in the Kherson region 130,00 2nd edition 18 Approval of co-financing for the Katerynopil Center for Primary Health Care (Cherkasy region) 128,30 1st edition 19 Kryukiv Wagon-Building Plant: difficulties and further prospects 122,22 4th edition 20 A new "Open Data Portal" has been developed in Dnipro 121,67 5th edition 21 Development of tourism in Kropyvnytskyi 118,80 4th edition 22 Rivne territorial community and e-ticket 100,00 4th edition 23 Loan and grant agreement for the Solid Waste Infrastructure Modernization Project was signed between "Spetskomuntrans" and the EBRD (Khmelnytsky city) 96,00 1st edition 24 Mykolaiv region: QR-codes for tourism development 80,97 2nd edition 25 The largest state flags with flagpoles 40,83 3rd edition 26 About the creation of the municipal non-profit enterprise of the Mariupol city council "Hockey club" Mariupol" -27,20 1st edition 27 Kharkiv region: payments to doctors in case of COVID-19 illness -70,00 3rd edition 28 500 million loan for Odessa -80,70 1st edition 29 The work of the Institute of Commissioners for Prevention and Detection of Corruption in Local Self-Government Bodies -133,32 5th edition 30 Sumy region: abolition of wastewater control of enterprises -204,44 4th edition     The analysis of measures implemented by local governments is a relevant and important factor in determining their effectiveness - both economic and social. In addition, it provides an opportunity to identify different aspects of the measure and to build a strategy for further decision-making and elimination of shortcomings. The detailed evaluation and the full document can be found here: Monitoring of Local and Development Policies in Ukraine (August 2021 - September 2021)     *The first publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/ua_local_measures_oct_2020_eng_.pdf The second publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/ua_local_measures_jan_2021_eng_.pdf The third publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/local_measures_apr_2021_eng.pdf The fourth publication can be found by the link: http://icps.com.ua/assets/uploads/images/files/ineko/local_measures_jul_2021_eng.pdf   **The current summary was developed within the project “Strengthening democratic resilience of key public institutions in Ukraine”. The initiative is being implemented by the International Centre for Policy Studies (ICPS) in partnership with the Institute for Economic and Social Reforms in Slovakia (INEKO) and is financially supported by the Embassy of the United States in Kyiv, Ukraine. The project aims to improve the efficiency of the state administration, self-government and civil society in the area of creation and oversight of regional policies. It also aims to increase transparency and independence of key regulatory and judiciary institutions as well as transparency and financial stability of the biggest state-owned enterprises and local authorities in Ukraine. The main objective of this publication is to improve the quality of regional and/or municipal regulation and legislation through publishing a regular expert assessment of the socio-economic measures proposed or implemented by local governments in Ukraine. The purpose of the evaluation is to describe and promote reform and anti-corruption practices that can be transferred to other localities as well. At the same time, the critical assessment of non-transparent and inefficient measures should discourage representatives of local and regional authorities from their implementation. The policies included in the current summary were identified and analyzed with the support of the Evaluation Council experts who were selected by the International Centre for Policy Studies on the basis of their experience. In this bulletin, experts collected 6 measures implemented by local governments during August - September 2021. window.dataLayer = window.dataLayer || []; function gtag(){dataLayer.push(arguments);} gtag('js', new Date()); gtag('config', 'UA-122353741-2');

28.09.2021
Internal Policy

ICPS issued an assessment of local/regional measures for May - July 2021

The current summary was developed within the project “Strengthening democratic resilience of key public institutions in Ukraine”. The initiative is being implemented by the International Centre for Policy Studies (ICPS) in partnership with the Institute for Economic and Social Reforms in Slovakia (INEKO) and is financially supported by the Embassy of the United States in Kyiv, Ukraine. The project aims to improve the efficiency of the state administration, self-government and civil society in the area of creation and oversight of regional policies. It also aims to increase transparency and independence of key regulatory and judiciary institutions as well as transparency and financial stability of the biggest state-owned enterprises and local authorities in Ukraine. The main objective of this publication is to improve the quality of regional and/or municipal regulation and legislation through publishing a regular expert assessment of the socio-economic measures proposed or implemented by local governments in Ukraine. The purpose of the evaluation is to describe and promote reform and anti-corruption practices that can be transferred to other localities as well. At the same time, the critical assessment of non-transparent and inefficient measures should discourage representatives of local and regional authorities from their implementation. The policies included in the current summary were identified and analyzed with the support of the Evaluation Council experts who were selected by the International Centre for Policy Studies on the basis of their experience. In this bulletin, experts collected 6 positive measures implemented by local governments during May - July 2021. Selected cases of this issue show the lack of in-depth analysis before making a decision by local authorities, ignoration of the interests of various participants in the process, as well as lack of strategic planning and vision of the results of decisions, absence of financially sound indicators and other problems. The decision of the Sumy City Council to abolish the control over wastewater of enterprises has significant risks for the environmental situation in the city and region (and the health of citizens), as well as for the financial condition of the utility company engaged in wastewater treatment. The adoption of such a serious decision by deputies without proper justification does not comply with the principles of proper public and accountable governance, exacerbates the problem in the field of environmental protection and defends a small number of stakeholders. The introduction of an electronic fare system is a very important task for all municipalities in Ukraine. However, in Rivne for a long time the city authorities cannot decide on the choice of provider to implement an electronic ticket system. The lack of explanation for the delay by local governments and the non-transparency of the decision-making process regarding the selection of a contractor (that is beneficial to the city) is a source of distrust and concern for the community. During the period of the pandemic spread, the issue of providing quality educational services throughout Ukraine is also acute. In this bulletin, experts evaluated the decision to purchase laptops for teachers. The solution is good; however, such an initiative should have been introduced after the first wave of the epidemic. Tenders will stretch the buying process in time and it will not be completed until the beginning of the third wave of the epidemic. It is also important to implement a comprehensive approach to ensure the quality educational process. Almost every bulletin contains material on the development of tourism in a particular region. This bulletin contains a block dedicated to the tourist forum held in Kropyvnytskyi. The city and Kirovohrad region have a good potential to attract tourists, which will contribute to the formation of a positive image of the region and increase the interest of tourists and business. At the same time, the management's decision-making (especially regarding the direction of budget funds) should be preceded by the calculation of the economic effect of implementation of measures and evidence that the interests of the community are be taken into account in the first place. The presence of the airport significantly increases the capabilities of any region, and, therefore, the desire of the Zhytomyr authorities to reconstruct their airport is quite understandable and logical. However, from the point of view of expediency, the priority of state support for the reconstruction of this airport may raise questions due to there are two airports in Kyiv (150 kilometers away) and the airport in Rivne (200 kilometers away), which also have international status. The decision to open the new airport should be made only after a careful analysis of the fact that this airport indeed covers an area where it can generate significant volumes of passenger traffic and can be profitable in its activities. Also, this bulletin reviews the problem of government procurement, which constantly arises in PJSC "Kryukiv Carriage Plant". The enterprise is an important object of industry of Poltava region. However, its operation depends on government orders and timely payments for the execution of orders. Due to there is no clear plan at the state level to upgrade the country's railway depot, the company cannot plan the operation of its own production facilities. This situation should direct management forces to find new ideas for the company or to find potential customers who can ensure the stable operation of the plant.   RANKING OF BEST AND WORST MEASURES   Case Quality [-3; +3] Relevance [0%; 100%] Final score [-300; 300] Ranks The airport in Zhytomyr is preparing for the reconstruction and acceptance of international flights 2.33 75 175 I Organization of the educational process during a pandemic 2.17 75 162.5 II Kryukiv Wagon-Building Plant: difficulties and further prospects 1.67 73.33 122.22 III Development of tourism in Kropyvnytskyi 2.2 54 118.8 IV Rivne territorial community and e-ticket 1.5 66.67 100 V Sumy region: abolition of wastewater control of enterprises -2.67 76.67 -204.44 VI Thus, a detailed analysis, calculation of the economic and social impact of the measures will help to make better use of available resources, to consider more effective decisions and to ensure the interests of the majority of the community, which in turn will increase the trust and support of the local government and will ensure sustainable development. The detailed evaluation and the full document can be found here: Monitoring of Local and Development Policies in Ukraine (May 2021 - July 2021) window.dataLayer = window.dataLayer || []; function gtag(){dataLayer.push(arguments);} gtag('js', new Date()); gtag('config', 'UA-122353741-2');

31.07.2021
Internal Policy

Ukraine’s Customs Service vs. Smuggling: Shadowboxing?

One should not underestimate the role of customs in the Ukrainian economy. In 2020, its contribution to the budget amounted to 360 billion UAH, constituting 33% of the budget’s total revenues. According to the latest data, in January-June 2021, the State Customs Service contributed 207.5 billion UAH to the Ukrainian budget, thus exceeding the revenue plan by 108%. However, these figures fall short of the potential that customs could bring to Ukraine’s economy. To improve its efficiency, the State Customs Service began work in the format of a single legal entity starting from July 1, 2021. However, it remains to be seen whether the changes will solve systemic problems of the customs. Following the present-day needs and the memorandum concluded with the International Monetary Fund, the customs was reformatted into a single legal entity – the State Customs Service subordinate to Ukraine’s Ministry of Finance. However, the new format may fail to change the substance. As per the ICPS’ recent study on the independence of state institutions, the State Customs Service and the State Tax Service of Ukraine proved to be the least legally protected from interference and external influence, having a plethora of legislative loopholes and shortcomings. In the study, they were negatively underscored in the areas of the appointment and dismissal of senior management, sovereignty, the transparency of the appointed management’s income, as well as the transparency of the competition for the position to head these institutions. The lack of changes in the legislative field regarding the State Customs Service only confirms the fears that the change of form may not lead to the change of its content. This, in turn, is just a part of the problem. Overall, according to various data, losses from gaps in legislation, the "inefficiency" of customs and smuggling reach over 4-5 billion USD per year. These figures were named by Ukraine’s Minister of Internal Affairs Arsen Avakov, former head of the State Customs Service Maksym Nefyodov, and Minister of Finance Serhiy Marchenko. The numbers are rather impressive, as these funds could be used to address key economic and social issues of the Ukrainian economy. The money could also diminish the need to attract loans from the IMF, the EU and the World Bank, which now serve as a burden to the Ukrainian budget. With this, it’s quite easy to evaluate the extent of the institution’s "inefficiency". It’s enough to compare official data on exports and imports from Ukraine with the corresponding statistics on Ukraine coming from the state’s trading partners. For example, in 2020, according to Ukraine, the country’s exports to the EU amounted to $18.66 billion. As per the EU data, the figure was $19.57 billion. Similarly, as per Ukrainian statistics, imports amounted to $23.74 billion, while European statistics showed $27.43 billion. Surely, akin discrepancies could arise for various reasons; however, smuggling is one of the key problems accounting for the said differences.  According to the State Border Guard Service of Ukraine, cars, tobacco and alcohol predominate among the smuggled goods. It’s worth noting that the scale of smuggling and the scale of the shadow economy are interrelated. At the same time, the volume of the latter ranges from 30% to 50%. This, in turn, may be a "normal phenomenon" during the economic recession (creating a "safety cushion" and smoothing the "sharp corners" of public policy, but it’s a highly negative occurrence during economic growth. It hinders the prospects for development and creates asymmetries. At the same time, no systemic solutions to combat the shadow economy and "gray" imports have been proposed. Reformatting, hiring new staff, dismissing chairmen and employees has not led to the desired effect. Moreover, the Economic Security Bureau was invented to deal with smuggling. There is also Bill № 5420 on establishing criminal liability for smuggling and inaccurate declaration of goods. Nevertheless, the bill is rather ambiguous, as it provides for higher fines on goods worth 50-100 thousand UAH. This, in turn, may affect regular citizens of Ukraine. Unfortunately, all the measures described above target "small fish": they deal with symptoms rather than causes of the problem.  With this, it’s worth highlighting the recent decision of the National Security and Defense Council to impose sanctions on top smugglers, even though its results will not be felt immediately. Moreover, it remains unclear whether high-ranking officials involved in smuggling would be affected by the decision. As a result, smuggling shall remain one of the main causes of Ukraine’s budget loss for quite a while. The problem is rather multifaceted: on one hand, there are efforts of small businesses to survive and compete; on the other hand, big businesses strive to minimize the costs.  Customs officers and officials, in turn, desire to make money in the face of weak institutions and relative impunity. The solution is simple – minimizing the human factor.  Additionally, some of the recommendations are: • To strengthen interdepartmental cooperation; • To synchronize import-export databases, conducting information exchange with major trading partners; • To introduce the New Computerised Transit System (NCTS); • To strengthen diplomatic ties and accelerate the above-mentioned cooperation process; • To diminish legislative loopholes in the functioning of customs; • To accelerate the implementation of the Law "On Economic Operator" and the Law "On Joint Transit"; • To annul the decriminalization of smuggling on a particularly large scale; •  To develop domestic production of substitutes and complementary goods; • To review the customs tariff grid (the higher the duty or excise duty, the greater the "gray" imports); • The issue of illegal export of forests and natural resources deserves special attention. Surely, the list is not exclusive. In general, the attempts to solve current problems (such as combatting cross-border small-scale trading and the restrictions imposed on individual entrepreneurs) fall under the Pareto principle, though not in the best way.  According to the principle, roughly 80% of consequences come from 20% of the causes. In the case of Ukraine, 80% of work – requiring significant effort and time – may lead to merely 20% of the results. Clearly, the 20% of work should be targeting “big fish”.  However, there is not enough political will to do that. Large-scale smuggling cannot exist without political protection. While the Security Service and the Ministry of Internal Affairs divide the spheres of influence in regards to customs, Ukrainians shall face another peak of debt payments in the fall. Having customs as a single legal entity – or not – will not solve the major problem.

02.07.2021