Effects Of Corruption On The Public Procurement Efficiency In Ukraine

In Ukraine, where government spending accounts for 48.5% of GDP, efficiency in public procurement becomes an extremely important issue. There may be numerous reasons responsible for inefficiencies in public procurement, and in this research we want to investigate the effects that corruption and transparency could have in this regard. According to the 2012 Corruption Perception Index, Ukraine was ranked as 144 out of 176 countries and territories with the score 26 out of 100 possible. This indicates the importance of this issue for Ukraine and corruption prevalence in public and private sectors of economics. Considering the unusually high share of government spending in Ukrainian GDP, it can be expected that the largest flows of bribe payments are related to public procurement. Numerous journalist investigations support this assumption. For example, huge scandal related to purchasing of oil derrick for over 400M USD in 2011 became widely known even outside of Ukraine. In this case, unknown company registered in Great Britain and owned by 2 offshore companies earned around 150M USD by selling one oil derrick to the Ukrainian state owned enterprise. Journalist investigations proved that the winner-company and its only rival during the tender were connected by their ultimate owner – 71-year old tramp from Latvia, who lost his passport long time ago and is apparently, only fictive owner.