The Business Ombudsman Council’s (BOC) report on Reducing the Risk of Corruption and Attracting Investment to the Construction Industry examines different aspects of corruption within the Ukrainian construction industry and poses policy solutions to the problem. The BOC recognizes that the Ukrainian government must intervene in the construction process to prevent abuses of power and unsafe construction, yet overregulation hampers the construction process and can lead to corrupt practices. The report addresses three areas of concern: issues faced in the construction process, misuse of governmental power, and clarity of governmental supervision.
Problems at Stages of Construction
Administrative processes throughout the stages of construction, ranging from obtaining postal addresses and transferring land ownership to construction standards, remain unclear, prolonging the construction process and harming business efficiency.
Local governments inadequately maintain urban planning records, preventing developers from visualizing the layout of buildings, utilities, and property lines. It is illegal to issue land for construction without up-to-date zoning plans, yet illegal construction continues to occur. Records must be updated across the board to create a more transparent construction process.
The government requires equity contributions from developers, which act as an additional tax on construction projects. The government dictates the sum of the equity contribution, up to a ceiling of 10% of the value of the construction project, with no system of appeals except by negotiation with local officials. This informal process gives officials great discretion and creates opportunities for corruption. The BOC recommends that equity contributions be disbanded or amended as decentralized governmental spending could adequately replace this practice.
Abuses in the Oversight and Supervision of Architecture and Construction
Construction permit issuances must follow official timelines set by Ukrainian law. Yet, unjustified refusals to issue construction licenses continue to occur. Permit requests are frequently denied due to technical or classification errors, extending the construction timeline and accumulating costs for developers in the process. These unfounded refusals have created avenues of corruption for officials.
The BOC recommends strengthened oversight of permit issuing agencies to identify employees who unreasonably hold up the process. It also recommends that Information Consultation Centers be established to aid businesses in identifying minor errors that impede the permit process. Finally, it recommends that an appeal system for construction halts and fines be created.
Transparency and Public Oversight in the Construction Industry
According to the BOC, the government utilizes a flawed procurement process, issuing inaccurate calculations of project costs. In addition, the procurement process is rigid in the face of inevitable changes in budgets, timelines, and progress. Sometimes, the government even forgoes payment to developers when facing economic uncertainty with exchange rates and high inflation. Therefore, greater educational efforts on public projects must be established to accurately calculate project costs, establish a clear timeline of payment, and allow for adaptation without leaving room for corruption.
NOTE: This summary is produced by the Rule of Law Collaborative, not by the original author(s).