Corruption vs. Innovation

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Corruption vs. Innovation

Your reading this text means we have hit the target we aimed at, following the Industry Control 2016 project. Our effort has ultimately resulted in regular research on the infrastructure market, upon which an industrial platform is built to bring together representatives of business, expert circles and the state, enabling them to discuss their acute concerns and challenges posed in the industry.

If you keep reading about Industry Control 2017, why not consider innovations? No, I am not deviating from this year research into corruption in the transport sector. Instead, I am offering to take a slightly different view of it. What we can see now is an unprecedented and global demand for innovations, including those in the infrastructure sector. People want to travel faster, in more comfort and security. News covering advances in the transport industry sound, at times, like sci-fi film teasers. Unmanned aerial vehicles and drones, vacuum trains and flying taxis, electro- and hydrogen car races, rockets coming back from the space, and preparation for Mars colonization. Smart cities and Intermodal logistics centers, where there is a program to control the traffic and traffic lights, and the freight system. These may continue endlessly. Let us look into the situation in Ukraine. Here is the news feed. Here is a piece of news: "Kyiv Metro decides to substitute plastic tokens for contactless cards". The gap observed is just dramatic. The benchmarking of the technological foundation underlying our infrastructure against that used across the globe is the subject matter for our future research; with that, it is so obvious that as of now the development of the domestic infrastructure based solely on the innovative approach is, in my opinion, of little promise. If a bridge is crumbling away, neither "tunnel trains" nor even artificial intelligence will cause it to regain its former safe condition, but thorough overhaul (though sometimes, even simple repair works may prove innovative if their budget is not siphoned off). In case of infrastructure innovations, the "havoc" will give the effect of multiplying by zero, where the «havoc х innovations = havoc».

Let us look a year back. Our last year research under Industry Control failed to bring the technical condition of the infrastructure to the top industry problems, though it called corruption the number one problem preventing the transport industry from developing. This year, analyzing the industry corruption, I have arrived at a comforting conclusion that our infrastructure does have prospects for innovations. These prospects unfold by combating corruption.

Looking into the human nature, I find that a human is somehow, deep in his bones, predisposed to corruption. Being unable to change a decision-maker, we may end up capitulating to corruption. Our chance to win is to eliminate the human factor in the public sphere, wherever possible. Just as in unmanned transport, to take the steering wheel out of the man's hands and place him at the back seat, rendering him into an observer, and to entrust the program code with all decision making. This is where innovations come as something we cannot do without!

Thus, it is public procedures and registers, open data and automation, blockchain and smart contracts that may consign corruption to the dustbin of history. There is just little left to do: facilitation of innovative developments and solid political will.

The Technological Battlefield

Innovative solutions can considerably reduce corruption risks that result from the human factor effects. The opening of data, using of the blockchain and smart contracts are the most promising areas.

The fight against corruption can be continued (assuming that it has already begun) in a traditional way: by uniform application of the law and its instruments of legal pressure on corrupt officials, such as bans and restrictions, sanctions and punitive measures, re-education. However, we doubt that the anti-corruption crusade centers around the legal coercion, as evidenced by our common empirical experience of living in Ukraine. Nevertheless, we can see the future opportunities in innovations which will reduce to the minimum or eliminate the human corruption factor completely. Let us take a closer look at such promising development areas as the opening of data, blockchain and smart contracts.

The more openness, the more transparancy

According to the latest Global Data Index study, Ukraine propelled up to rank 24th in terms of data openness, having jumped through 30 places at once and leaving behind all European neighbors that participated in the study. We succeeded in such areas assessed to generate the rating as the openness of state budget and trade register data. Yet, data on air and water quality, national maps and landowners data are among the areas for Ukraine to improve on. Over the past few years, Ukraine has incredibly changed in terms of data openness. To see the progress, you just have to visit the Internet portal www.data.gov.ua launched by the Social Boost platform in April 2014. As at the time of this publication, there were about 15,900 data sets on the portal, which demonstrates the growth of over 50% only as from the start of 2017. Check this information out today and make sure that the situation is constantly progressing in this area. Later, Social Boost implemented an incubator (www.1991.vc) to develop projects based on open data, including in the infrastructure sector.

Undoubtedly, much remains to be done in the area of data openness in general, and in the infrastructure in particular. The government and other public data holders are in no haste to grant the society and business full access to information. Often such reluctance is associated with the intention to benefit from corruption, possessing non-public information. At the end of the day, it is de facto possible in Ukraine to obtain certain data on legal entities (for example, their financial statements or statistical data on their foreign economic activities), or specific information about the transport sector, which is non-public by law. However, this is the case not only with us. For example, you can access statistical data on Ukrainian companies through renowned international analytical systems, though there is low likelihood that these providers can clearly explain where they obtained this information.

What makes open data so important in fighting corruption? For the first thing, you cannot illegally sell what is already publicly available. For the second thing, publicity in itself implies more chances to reveal or even prevent corruption. For example, in 2016 Ukraine took a small step up in the Corruption Perceptions Index by Transparency International. The rating experts unanimously noted the implementation of the ProZorro system as one of the most significant improvements. In our view, this system's key advantage is its openness. Besides, ProZorro database gave rise to a number of interesting projects that further develop this initiative. To name a few, the Anticorruption Monitor project analyzes all ProZorro tenders for corruption risks and enables government agencies, businesses and the public to identify and challenge suspicious tenders. www.declarations.com.ua integrates to ProZorro and monitors tenders associated with PEPs. Another project that is also worth mentioning is the monitoring portal www.dozorro.org aimed to influence the transparency of public procurement by filing complaints about specific tenders. Analyzing corruption risks in the infrastructure sector and their possible solutions through publicity, we have identified a wide range of data sets to be disclosed. They particularly include the following information:

  • availability, distribution and movement of railway wagons;
  • lessees of public property in sea ports and other state-owned enterprises in this industry, lease payment rates and other terms and conditions to use the public property;
  • interactive maps with links to legal information;
  • non-core assets of state-owned enterprises;
  • statistical data on the weight control on highways;
  • contractual and technical details of dredging, road repair and construction works;
  • international transportation quotas;
  • distribution of passenger traffic routes;
  • statistical data both on regular dishonest bidders in public tenders and on failed, challenged and unfulfilled public procurements.

And many others.

Smart contracts

Of particular interest are technologies that will allow for open data and in other ways impact the human factor in the administrative decision making process in the infrastructure sector. Blockchain is the distributed database technology. The unique cryptographic blockchain architecture ensures the maximum reliability of information storage and its publicity. A document written in the blockchain is extremely difficult or almost impossible to amend, forge, or destroy. As far as this is a distributed ledger, with its original being stored on a multitude of nodes, it becomes impossible to conceal the document entered in the ledger. In this context, the blockchain is an advanced technological tool to maintain public records. "For nothing is secret that shall not be made manifest".

Once the blockchain becomes mandatory for approval, acceptance, publication and storage of bureaucratic decisions, an official will take them, understanding all legal and technical implications. A smart contract is another unique blockchain feature. This is not a contract in the conventional sense, but a program code, an algorithm that can cause legally significant events to occur once certain conditions are met. For example, the automated logistics systems send and the program receives their information about the delivery of goods, arrival of flights or their delays; then the program, all of its own, effects a payment for services, or payment of penalties, or creates the necessary source documents, etc. The required prerequisite for implementing smart contracts is a decentralized environment that excludes manual (malicious) interference with it. This is exactly what we are seeking to fight corruption. The smart distributed ledger system can control the distribution of wagons, issue of all kinds of permits, transportation licenses, route assignments, etc.; besides it analyzes the stated criteria compliance, makes decisions publicly, automatically and without any manual processing.

It is fair to say though, that as of today these innovative proposals look more like an idealized representation of the future. Yet, the world is progressing by leaps and bounds, all these developments accompanying it. Here, Ukraine stands a unique chance (unlike our obsolete infrastructure) to take the driving seat in the fight against corruption and in the development of our society through technology and innovations.

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