Economic Science Faculty

IBBS 33.334 Bogomaz Artyom

Second year student

Economic Science Faculty

Specialization: Finance and Credit with the knowledge of English

Petro Mohyla Black Sea State University

BLACK MARKET PROCESSES AND THE CURRENT ISSUES OF CORRUPTION IN UKRAINE

The issues of the Ukraine’s black market economy sector in the context of the problems relevance is analyzed in the article. The peculiarities of the comprehensive approach in dealing with the illegal underground market’s emergence are defined. A special attention is paid to the analysis of the conflict between business and state, leading to the self-generation of “shadow” and corrupted relations and according structures

Key words:

Black market, shadow economy, illegal production and distributions, bribery.

Actuality

“Shadow” sector is common for economies of most countries in the world. However, in Ukraine it has become a national problem. The strategic goal for the state in this context should be the reduction of the black market down to 10-15% of GDP.
Connection with scientific research

(Kondratieff E.A.) "Shadow" processes: economic and financial aspects of the national and international dimension.

(Krichesvsky N.A.)The many faces of corruption. Identifying vulnerabilities at the sector level of the economy and public administration.

(Stiglitz J. Y.) Economics of the public sector and its problems.

Goal

To analyze and find out the peculiarities of black market processes in Ukraine, and the corruption’s influence on the national economy.

Task

To determine the possible causes of black market emergence in Ukraine.

To describe the “shadow market”, analyze the shadow economy in Ukraine and to consider its impacts on the Ukraine economy as a whole

Body

A shadow market or black market is the market in which goods or services are traded illegally. The key distinction of a black market trade is that the transaction itself is illegal. The goods or services may or may not themselves be illegal to own, or to trade through other, legal channels. Because the transactions are illegal, the market itself is forced to operate outside the formal economy, supported by the established state power. Two common motives for operating in black markets are to trade contraband, or to avoid taxes or price controls. [1] Typically the totality of such activity is referred to with the definite article as a complement to the official economies, by market for such goods and services, e.g. "the black market in bush meat". Shadow” activities of the economic subjects significantly impacts on the most important macro-economic factors, on financial and economic results and business’ prospect development. Without accounting the black market operations it is impossible to have an objective idea and understanding of the economy and its branches’ real measure, likewise, a systematical analysis of the national economic processes is also impossible.

The spread in Ukraine of socioeconomic phenomenon known as the “shadow economy”, as well as volumes of production and financial resources that are traded in this area represent a significant obstacle to the sustainable economic development. A major problem is that the vast majority of transactions that can be attributed to the shadow, can be done in the legal regulatory framework, and prove the fact of shadow activities require considerable effort by public authorities.

The term “shadow economy” emerged in the development of organizational and legal measures to combat money laundering and capital of illicit origin. [2] O. Turchynov proposed by shadow economy as aware of the economic activity that is not included and is not controlled by official government agencies, and (or) aims to generate income through the violation of the law. [3]

Domestic economists Shevyakova O.Y. and Nikolaev M.I. considered the most comprehensive concept defined by Feyh: “shadow economy includes all economic activity, which for some reason not included in official statistics and does not fall in GDP”. [4] Important also is the problem of division of the shadow economy in some sectors. According to the American economist Blades, to the shadow economy attributes:

1. Production completely legal product that is hiding from the authorities because of reluctance to pay taxes;

2. Production of illicit goods and services prohibited;

3. Hidden income in kind.

According to the version of the System of National Accounts, recommended by the UN and Eurostat, the shadow economy refers to the economy:

1. “Hidden” — allowed by law, but not shown;

2. “Informal” — the activities of enterprises operating lawfully owned by households and ensure the activities of these farms;

3. “Illegal” — illegal production and distribution services.

According to the Ministry of Economy, the Ukraine’s black market level on the basis of the second quarter of 2009 is 36% of official GDP [4]. Shadow economy of Ukraine in terms of financial and economic crisis has become a total character and estimated individual experts and researchers of up to 60% of GDP, which represents nowadays a real threat to national security. This informed the scientists of NAS in the national report “Socio-economic situation in Ukraine: Implications for People and the State”. Most experts believe that 25-50% of the turnovers of private enterprises are not reflected in documents of accounting (shadow turnover). The level of the corruption depends on what kind of enterprise, who runs and so on. Most small “shadow” businesses can reach 80-90%. According to independent experts, the most common types of informal activities are: optimization of taxes, prostitution, drug trafficking, illegal immigrant labour, gambling. In the shadow of the common species is also illegal return value added tax, unofficial wages “in envelopes”. Very high levels of corruption in areas that carry energy supply, land allocation for construction, operation of commercial real estate (rental) and privatization of state property. Here there is a significant gap between market and “sales” prices for “goods” and therefore the possibility of obtaining high profits that are the source of bribery.

The share of black market in the domestic economy is roughly 45.4% of the size of official GDP. [5] The absolute amount of unaccounted GDP, which created the invisible workers in 2009, is 420 billion. The study also identified other parameters of the underground Ukrainian economy. Analysis of official statistics showed that most shaded sector of Ukrainian economy among the legitimate activities of the study, was trade — the level of shadow economy here reaches 50% of the size of official GDP, which is formed in this sector. The next level of black market sectors is construction and real estate. It covered 37%, or in monetary terms it is about 7.4 billion USD. Third and fourth place is occupied by the financial sector and agriculture. Here hidden activities take up roughly 27%.

For much of the domestic business, partial or complete translation of the black market also turned out to be the only way to avoid bankruptcy. Shadow business is not burdened with excessive debt burden, is not subject to the tax burden and not subject to bureaucratic obstacles. Due to this such businesses are resistance to crisis. As long as accountability to the state economy rapidly declines, the informal sector will not change much in absolute terms, but even the official GDP will increase markedly [5]. To date, very urgent need is present to identify and calculate the level of shadow economy. These calculations are designed to assess the shadow economy’s level in the national economy, in general and in specific types of economic activity through indirect calculations at the macroeconomic level, the cost of goods (and services) that intentionally or lowered entities in statistical reporting. The level of shadow economy in Most appropriate for determining the black market in the current statistical base are the following methods: «spending — retail turnover» the financial, monetary, electric. The method of loss firms is used to assess the minimum and maximum ratios, within which is the level of shadow economy. [6]

Bribes are given to ensure that public services are delivered either in time or at all. [7] Ukrainians stated they give bribes because they think it is customary and expected. [7] Some of the biggest bribes involve more than 1 billion US$ According to a 2008 Management Systems International (MSI) sociological survey, the highest corruption levels were found in vehicle inspection (57.5%), the police (54.2%), health care (54%), the courts (49%) and higher education (43.6%). [8] On June 8, 2011 Ukrainian President Viktor Yanukovych stated that corruption costs the state budget US$2.5 billion in revenues annually and that through corrupt dealings in public procurement 10% to 15% (US$7.4 billion) of the state budget "ends up in the pockets of officials".[9]

According to the United States Agency for International Development (USAID), the main causes of corruption in Ukraine are a weak justice system and an over-controlling non-transparent government combined with business-political ties and a weak civil society

.

Conclusion

In Ukraine, one of the largest on-going, socioeconomic issues remains an acute problem of corruption, drug trafficking, illegal manufacturing and sales, fictitious contracts and transactions. State of the country’s economy remains imperfect.

Unstable legislation discourages entrepreneurs from legalizing their activities and forced to go in the “shadow”.

Shadow economy in Ukraine — it is not a solitary phenomenon, but the result of a systemic crisis of the economy.

Reference

1. http://en.wikipedia.org/wiki/Black_market

2. Турчинов О. Тіньова економіка: закономірності, механізми функціонування, методи оцінки / О. Турчинов— К.: Ін-т Росії НАН України. — 2008. — 260 с. 3

3. Ламанова Т. Тіньова економіка— визначення, структура, методи оцінки / Т.Ламанова // Економіка, фінанси, пра-во.—2009.— №3.— С. 22—26. 5.

4. Головнин С. Д. О классификации явлений теневой экономики / С. Д. Головнин // Вестн. МГУ. Сер.6, Экономика. — 2008. — № 1. — С. 40 — 47.

5. Лазовский В. О сущности, структуре и субъектах «теневой экономики» / В. Лазовский // Эконом. науки. — 2009. —№ 8.— С. 62 — 67. 7.

6. Юринець В. Особливості функціонування тіньової економіки в Україні / В. Юринець, С. Лондар // Економічний часопис. — 1999.— №11 —12.—C. 42—45.

7. Corruption, Democracy, and Investment in Ukraine, Atlantic Council (October 2007)

8. Top- 100 biggest bribes in Ukraine, UNIAN (October 6, 2009)

9. nder Yanukovych, Ukraine slides deeper in ranks of corrupt nations, Kyiv Post (1 December 2011)

У статті аналізується економічна доцільність в контексті актуальності проблеми. Виявлено особливості утилізації побутових відходів у відповідності з умовами економічної вигоди. Перспективи розвитку переробки відходів в Україні були визначені шляхом порівняння та аналізу світового досвіду.

Ключові слова: економічний аналіз, переробка відходів, економічна доцільність, перспективи розвитку переробки відходів, домашнє господарство.

В статье анализируется экономическая целесообразность в контексте актуальности проблемы. Выявлены особенности утилизации бытовых отходов в соответствии с условиями экономической выгоды. Перспективы развития переработки отходов в Украине были определены путем сравнения и анализа мирового опыта.

Ключевые слова: экономический анализ, переработка отходов, экономическая целесообразность, перспективы развития переработки отходов, домашнее хозяйство.

Summary

Дата добавления: 2015-11-04