After my post on Singapore, this time I will focus on another Asian Tiger - South Korea. According to Corruption Perceptions Index 2016, South Korea holds the 52nd rank, between Rwanda and Namibia. In comparison to Ukraine's 131st rank position, it is not bad. But South Korea, unlike Ukraine, has long been one of the fastest growing economies in the world, often referred to as the "economic miracle on the river Han". Remaining Asian Tigers have a better situation with corruption perception: Singapore ranked 7th, Hong Kong - 15th and Taiwan - 31st.
I am curious, how South Korea manages to unite permanent economic development and a level of corruption – the highest among all Asian catlike?
I suppose many of you have heard about explosive corruption scandals in South Korea involving huge “chaebols” (financial and industrial groups, mainly family-owned that exercise monopolist or oligopolist control over industries) - Samsung, Hyundai, LG etc. Why South Korea is the “economic tiger” of Asia and Ukraine is one of the poorest countries in Europe?
On the one hand, economic growth of South Korea is attributable to chaebols' torrid growth, based on export-oriented development, rapid industrialization, introduction of new technologies, and expansion of education. Chaebols might be compared with “conglomerates” of the United States and “zaibatsu” of Japan which appeared allegedly because of “clientelism” - unequal distribution of state contracts to specific families. Quite similar to so called rules from behind the scenes for oligarchs in Ukraine, right?
However, on the other hand, development of chaebols is called to lead to unfair state preferences, non-transparent structure and cash flow, hardship for development of small and medium-sized business, violation of minority shareholders' rights and higher level corruption than other Asian Tigers. Very similar symptoms of what we have in Ukraine, isn't it? Yet, Korean giants have profits comparable with more transparent US companies, like Intel and Apple, and notably, this is happening in a very high-tech sphere in a severely competitive environment. It seems that some corruption is not an obstacle to economic growth and these can even nicely co-exist together.
As the corruption perception index shows, corruption in South Korea is still not high. South Korea is an example of "culture of transparency" and model of good governance with such tools as the online system “OPEN”, anti-corruption laws, Anti-Corruption and Civil Rights Commission (ACRC). Moreover, South Korea is one of top performers in budget transparency in the Asia-Pacific region according to Open Budget Index (OBI 2015) due to reforms in e-governance and budget transparency (online procurement and online public engagement systems).
Since 1999 South Korean online system “OPEN” made a real sensation among national anti-corruption programs, preventing unnecessary delays or unfair consideration by officials. It is used for monitoring applications of businesses and citizens by city government officials and dynamically publishes information about the entire flow of administrative work in real time. It went far beyond the conventional static systems as displays activities of state officials from consideration of citizens' application to decision-making process on-line and allows citizens to influence if any violations are noticed.
It may be interesting for Ukrainian ethical businesses to learn the ingredients of South Korea approach that I noticed in order to request the same effects from Ukrainian reforms:
(1) Preventive measures – abolition and simplification of state regulation in all administration areas, officials review applications from different districts.
(2) Repressive measures – zero tolerance to corruption. Government officials are punished for every offense, information on which is obtained by sending reply paid letters to those who dealt with officials recently.
(3) Transparency – online monitoring of citizens' applications and publication of anti-corruption indicators for each administrative unit make officials' judgments better.
(4) Anti-corruption clauses in agreements – obligation not to take bribes goes as a part of agreements between officials and citizens. The parties agree they will be duly punished in case of breach.
(5) Effective laws - gifts limited to a maximum of $25, code of conduct for civil servants, protection and rewards for whistle-blowers, application of anti-corruption laws to journalists, teachers in public and private schools.
Many economists and politicians around the world are convinced that corruption and economic development are incompatible; however, South Korean experience proves that moderate level of corruption allows economic development. However, as in South Korean example, it requires that corrupt politicians are prosecuted and punished rigorously. Therefore, it might be an option if Ukraine will concentrate on economic development in parallel with fighting corruption since economic transformations will contribute to improvement of living standards, decrease the role of government officials and eliminate corruption risks through simplification of bureaucratic procedures.
Olga Burlachenko is attorney-at-law admitted to the bar in Ukraine and Czech Republic.
Prior to her current job in leading Ukrainian state oil and gas company, Olga worked as senior in-house counsel in Austrian and Czech companies and as a senior associate at top tier Ukrainian law firm.
Olga graduated from the law faculty of Kyiv-Mohyla Academy.