Case study

1)  Please tell first what the story is about ? What are the facts ?

It starts with an American business man with Ukrainian roots that want to set up a subsidiary
of a software development center in Kiev, Ukraine, he is working with his Ukrainian business
partner Kostya Hnatyuk.
The main issue of the text is about corruption of national institutions in Ukraine. The first
one to show up is for the installation of the communication line by a state-owned company.
Officially, it would take up to three years to set the line from Kiev, what is dodgy is that in
exchange of some extra money the installation could take only a week.
Then the main bribe issue occurs when a state tax agent come to their office to tell them
they have forgotten to fulfill some bureaucratic clauses and have to pay penalties for delays
(about $16 000)

2) What are the mistakes Pavlo Zhuk made? 

 Corruption indexes show that it is quite common in the country. That being said they
had to prepare or at least. They did not consider corruption when settling in Ukraine.
 He didn’t ask for advices to the headquarter in America regarding settling business in
Ukraine and procedures to follow in such extortion situation.
 He was about to do business like he was doing business in America
 He should have taken more time to think about the situation and to collect
information before he went back to Ukraine.
 He deliberately paid his programmers high wages in a country in crisis, led by
communist political views. From a local point of view, he is a foreigner trying to build
a business model that goes against the state policy. Moreover, his company
competed much better than local firms. Those factors made him being considered as
a real threat for the local economy.

3) Give some solutions for firms going to set up business in countries with low
corruption-scores

 Bargain with the local government before establishing the business. Making them
understand why this is also important for them to have this business. Convince them
they have more interest in having you making money and employment.
 Don’t do business in countries with low corruption-scores
 Establish a written terms condition regarding corruption and bribery that they ask the
government or local authorities to sign.
 (pay the bribes shhhht, need to keep up with competition)
 Work closely with international corruption focused NGOs to get a better knowledge, be
more prepared, know if you have any chances to bargain of if it’s a lost battle.