Unit 26 Economic Activities of Bodies of Power and Government

Economic activities of bodies of power and government were their natural and characteristic function under the conditions of planned economy.

The removal of direct interference of the state in economic relations, the transition from the branch system to the functional system of management in the course of economic reforms create conditions for essential contraction of economic activities of bodies of power and government. The sector of the economy in which combination of power and economic functions takes place, however, remains very significant in Ukraine.

The significant restriction or complete removal of competition from those markets where economic activities of bodies of power and government take place is an integral result of that sort of combination because state power, by its nature, is a monopoly power and there can be, in principle, no equality between a body of power operating as an economic entity on the certain market and other participants of the same market, the equality which is the necessary pledge of competitiveness among entrepreneurs.

The cases of the above mentioned power and economic dualism can be subdivided into four basic groups.

The first group comprises the cases where power and government functions are primary and economic functions are secondary. The State Service of Guards under the Ministry of Internal Affairs of Ukraine, the «Ukrzaliznytsia,» the «Ukravtodor» (building of automobile roads), bodies of the State Committee of Ukraine on Standardization, Metrology and Certification are examples of such bodies of state government that are directly engaged in economic activities. That sort of situation is legitimatized by the relevant normative and legal acts, has deep traditions, is based on the use of professional potential of specialists and the available material and technical basis of the relevant bodies or is caused by the peculiarities of the budget and tax system.

The second group includes the cases of giving functions to manage such property of enterprises that is owned by the state. This creates, for the mentioned bodies of power and government, incentives to insure, with respect to their subordinate enterprises, the maximum favorable conditions for making profits, in particular by means of establishing ungrounded privileges for «their» enterprises, restrictions with respect to competitors of those enterprises, introduction of entry market barriers. The considerable part of the detected and terminated cases of discrimination practiced by bodies of power and government against entrepreneurs is associated with the fact that those bodies distinguish «friendly» and «strange» enterprises among the participants of the market.

The third group of the cases of combining economic activities of bodies of power and government with power functions comprises cases of delegating those functions to economic entities. That sort of delegating those functions takes place, in particular, with respect to the Corporations - «Ukroliyazhyrprom», - «Ukrmetalurgprom,» «Ukrtrubprom». The State Committee of Ukraine on Housing and Communal Economy, by its decisions, gave economic entities, namely to bureaus making technical inventories, exclusive rights to register rights of ownership with respect to real estate and to value it, to acknowledge the authenticity of documents concerning that sort of rights. As a result, mass abuses of monopoly position on their part were detected in 1996-97.

Combination of authority powers and economic functions in the three mentioned cases, as a rule, is fixed by legal acts and, due to the fact that is has an objective basis, cannot be removed quickly even on condition that the relevant changes have been introduced in legislation.

In the fourth group of cases, as it is in the first one, economic activities are, for bodies of power and government, secondary activities, but, as a rule, those bodies or their subordinate bodies are engaged in that sort of activities as a result of taking unlawful decisions by those bodies. That sort of situation is often resulted from the urge of bodies of power and government towards compensation of the chronic shortage of finances allocated from the state budget.

For example, state ecological inspectorial offices of the Ministry of Protection of Environment and Nuclear Safety of Ukraine, having the authorization given by the ministry, render services requiring payment associated with making analysis of documents before giving their authorization to throwing polluting substances to the atmosphere and reservoirs. At the time, it was found that the Kostiantynivka State Ecological Inspectorial Office (the Donetsk region) required payments for such services that were not needed by its contractors and that had already been paid in accordance with the general tariff (for example, for «inputting the data into a computer») and owing to that the cost of its services was overstated in 2.5 to 12 times.

Ex. 1. Read and translate the text.

Ex. 2. Answer the following questions:

1. Why does the sector of the economy remain very significant in Ukraine?

2. What does the first group comprise, having power and economic dualism?

3. What does the second group include?

4. What is combined in the third group of power and economic dualism?

5. What are the economic activities in the fourth group of cases?

Ex. 3. Read the following false statements and correct them:

1. There is equality between a body of power operating as an economic entity on the certain market and other participants of the same market.

2. The government functions and power are not primary in the first group of entities.

3. The second group of entities is not owned by the state.

4. The third group of combining of economic activities of bodies of power and government with power of functions doesn’t comprise the cases of delegating those functions to economic entities.

5. The combination of authority powers and economic activities in the three mentioned cases is illegal.

6. In the fourth group of cases economic activities are not the subordinate bodies of power and government.

Ex. 4. Translate into Ukrainian:

The solution of the problem concerning the State Motor Transport Inspectorial office in Ukraine becomes more and more pressing because of both significant negative consequences for the economy and the fact that a tendency to terminate the practice of power and economic dualism and prevention of its revival in the future spreads in the world. For this purpose, it is advisable:

to set a strict external control over economic activities of bodies of power and government in the cases when the dualism of power and economic functions cannot be removed quickly. The control can consist of the introduction of the procedure of regulation of prices and tariffs by other state bodies;

to narrow gradually the circle of functions whose fulfillment by bodies of power and government is associated with the possibility of getting self-supporting profits by them owing to payments for the relevant activities from the state budget or, vice versa, owing to the separation of self-supporting structural subdivisions from bodies of power and government and with or without their further privatization;

to regulate strictly powers to manage property of enterpises which remains as state property, to repeat ungrounded cases of conferring powers of that sort and, in perspective, to delimitate those powers and powers to form and implement state policy in the relevant branches of the economy, to insure real transition to function economic management;

to fix absolute amounts of such deductions from profits of enterprises that are directed towards maintenance of bodies of power and government to which the enterprises are subordinate and to approve the relevant estimates in the course of adopting the State Budget;

to stop the practice of delegating power authorities to economic entities, to stop unlawful self-supporting activities of bodies of power and government, to recall previously conferred powers.