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A glance at the corruption/smuggling “ports issue” – Odessa

July 8, 2015

When Governor Saakashvili was appointed, within an hour some initial thoughts were published regarding certain priorities relating to Odessa were outlined.

Amongst them, “He (and whatever team he appoints around him) will have several difficult battles ahead – the most obvious being with the notoriously corrupt customs at Yushni, Illichovsk and Odessa ports. By extension, that will also bring him head to head with organised crime and the Odessa mafia, as well as some other nefarious vested interests within the ports – such as the current Mayor. There is also the small matter of Odessa traditionally being the unofficial supply route to Transnistria..”

Unsurprisingly, within a few days of that entry, Governor Saakashvili very quickly went on to make smuggling and the associated corruption through the ports a priority issue – rightly.

However, it remains an issue, thus far almost untouched by the regional administration despite all the rhetoric.  That said, it is not an easy, nor necessarily cheap fix.

Thus yesterday’s entry is relevant as it was an issue raised, and an issue should those with political and diplomatic will, and money want to tackle it, that can put parameters upon the level of corruption and smuggling – though naturally not eradicating it entirely.

“Another long term project should be the ports/docks. They are after all the economic centers of Odessa. Customs e-clearance, porto fanco/free ports etc, and other such ideas have their pluses – but also their minuses. Impact analysis not only upon economics but also criminality would be a sensible prerequisite, together with a review of the structures within the customs and borders agencies. If customs procedures are to be relaxed under e-clearance and/or porto franco then intelligence led checks take primacy. The Iran, Turkey, Odessa, Poland/EU corridor an obvious target of a few.”

If certain parties are intent on tackling this issue, then perhaps some thoughts upon GAP analysis relating to managing the opportunities for corruption and smuggling should be floated – for those parties considering such “intervention” do read this blog.

So to a less than erudite, nor exhaustive, list of areas to cast a discerning eye over would seem appropriate – “broad brush” as they are.

Bribes at the ports are easily achievable.  It is not hard for a customs official to turn a blind eye to the fact that a manifest does not cover all the imported/exported goods in the cargo.  It is not difficult to ignore transit goods making their way into domestic supply chains.  To reclassify/wrongly classify goods is not more than a slip of the pen.  Naturally speeding up clearance can be achieved given the right incentives.

Manipulating the country of origin and any special arrangements with those nations is not difficult.   A cargo missing inspection or having a “relaxed inspection”, the under-invoicing of cargo, release bonds with insufficient (or non-existent) supporting documentation, influencing audit outcomes,  and perhaps the most prevalent of “rent-seeking” options – pre-declaration and the use of “fashionable brokers”.

“Fashionable brokers” are the agents that insure no delays, inspections etc for a fee and can be found in Odessa.

port

There is then the issue of the private companies that control the weight bridges, container ports, and transport infrastructure in and out of the port sides.  The corruption issues are not all related to the State customs and borders agencies.

No differently from the new “Police” whom receive better than average pay compared to their counterparts of commensurate service, there is a need to recognise that in restructuring the customs and borders services at the ports of Odessa, it is highly unlikely that officials will wholeheartedly support any major reforms that remove opportunities for ‘rent-seeking’ and improve transparency – unless they are combined with meaningful improvements in their conditions of employment.

Clearly, given the (less than exhaustive) listed opportunities for corruption above, a customs system that would separate face to face contact between customs officials and traders would reduce opportunity for direct bribery.

How greatly e-clearance (or other single window electronic clearance systems) or a porto franco “relaxed” customs systems would remove the opportunity for corruption is open to question.  Neither is it clear whether it would actually encourage organised crime to make the most of those systems rather than dissuade them.

Do such systems increase or decrease the risks for organised crime?  That may depend upon whether freed man-hours are then used for targeted high risk and/or intelligence led checks.  The Iran, Turkey, Odessa route is an obvious target from several.

Random checks that are truly random as a deterrent?

Bespoke, specially trained, carefully recruited anti-smuggling teams?

Regular “testing” of the Ukrainian system by “friendly” nations to highlight any gaps?

A public auctioning of all seized illicit goods (other than which must be destroyed) and a percentage going to the Odessa ports customs teams, thus providing legitimate bonuses based on genuine team performance?

The idea of “outsourcing” the current mess really doesn’t have any legs unless that time is used to completely restructure, train and mentor a new customs and borders team for the Odessa ports.

Whatever the case, it would seem appropriate to greatly restrict the current exceptionally wide scope of discretion afforded any customs officer and the face to face interaction.

Within the terms of the DCFTA, Ukraine has committed itself to customs and borders that reach “international best practice” – and the DCFTA enters into force in less than 6 months.

Should those spoken with yesterday decide this is the fight they will fight (and it is to be hoped they do) then there are large tomes of useful Odessa ports-centric background information and analysis to be found with the Odessa based EUBAM team.  Indeed, try to catch Francesco Bastagli before he leaves his post as Head of Mission for pastures new.  He is a very clever man (and a friend).

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