Despite the assurances of the Ukrainian government to combat the shadow economy, illegal business in the neighboring country, by contrast, is thriving. There are several tens, or even hundreds of illegal businesses, but we should probably focus on the most basic and the most profitable. This is deforestation, amber mining, makeshift coalmine, sand and gravel extraction, production of alcohol and petroleum products, currency exchange, smuggling of cigarettes. And all of this is without taking into account such kinds of “business” as the arms trade, drug trafficking and prostitution, although Ukraine in these areas is even more than ‘okay.’
Let’s take a more detailed look at some shady ‘enterprises’. For example, foresters cash on the sale of the forest about 100 million dollars a year, the share of the illegal market is about 80%. There are a few schemes. In forestries, for example, valuable timber wood is sold as less valuable species. The quality of wood for export is also manipulated. Wood is offered as business in the domestic market and for exports comes as technological raw materials, several orders of magnitude cheaper. Also the foresters cut down ‘illegal wood’ in the guise of technical cuttings, sanitary or reforestation. That is, they cheat the alleged ‘unnecessary’ trees, and in fact more than marketable timber.
In my opinion, we have all heard about the case of ‘amber mafia,’ which was engaged in illegal extraction of amber. The share of this illegal market is almost 100%. From 10 to 80 thousand people are engaged in this lucrative business. Their net income reaches $ 300 million per year.
Another moneymaker is selling rates. Naturally, there is a corruption component as well. Illegal exchangers are supposedly being closed, but business is booming. In fact, closing of exchange offices is just the facade of the struggle. Here is how the ex-head of the SSU’s Department for Combating Economic Crimes Michael Prytula commented on the situation: “Why is there a network of exchange offices? Probably, our tax law assumes that for people it is more profitable to go to the ‘money changers’ in the streets than in the bank. The organiser is not an ordinary man, believe me. All these systems are connected to employees of the tax service.”
According to the head the State Fiscal Service of Ukraine Roman Nasirov, a large part of the agricultural sector is also working in the ‘shadow.’ As acknowledged by the Ukrainian officials, “in some areas half of land is unaccounted: people clear up the land, something is sown there, but there are no lease agreements, no documents on the origin of the goods. Some agricultural companies buy such products for cash or foreign currency, and then take the documents from some other legal entity.”
Profitability of cigarette smuggling business brings 300% profit. The scheme is very simple. Businessmen buy in Ukraine cheap cigarettes of unknown brands and without excise taxes, and then resell them to Poland three times more expensive. Sometimes they are caught with the goods at the customs, and the whole batch is confiscated. But in any case there is a risk.
These types of ‘businesses like coal mining, oil and gas generally require a separate topic for consideration. In detail, it is a network of illegal mini refinery located in western Ukraine. Tie-in pipelines are made and oil that is pumped is processed into diesel fuel. But it is, on the little things, on millions. The oligarchs of Ukraine, at their level of corruption of power and opportunities, crank more interesting schemes that worth tens of billions. Not hryvnia, of course.
In general, no matter how the Minister of Economy of Ukraine tries to deceive the population with the figures, statistics suggests otherwise. According to his conviction, the shadow economy is up to 30%, while the statistics shows about 50%. I think this is done in order to ostensibly give a signal to society that something is changing. But in fact, it is not true. If deshadowing was done, economic growth would be present.
However, the minister Stepan Kubiv in his speech stated that the shadow economy is good, and it is necessary for the country as it contributes to economic development. Ukrainian know-how!
For us, the citizens of the Donetsk People’s Republic, today the most important thing is to overcome this legacy left by Ukraine and build a truly socially just state in which there is no place for such shadow schemes devoted solely to enrich certain oligarchs and looting of an entire people.
Marina Zheynova, the DPR People’s Council deputy