The Anticorruption Report. Volume 3: Government Favouritism in Europe

This volume reunites the fieldwork of 2014-2015 in the ANTICORRP project. It is entirely based on objective indicators and offers both quantitative and qualitative assessments of the linkage between political corruption and organised crime using statistics on spending, procurement contract data and judicial data. The methodology used in the analysis of particularism of public resource distribution is applicable to any other country where procurement data can be made available and opens the door to a better understanding and reform of both systemic corruption and political finance. The main conclusion of this report is that public procurement needs far more transparency and monitoring in old Member States, where it is far from perfect, as well as new ones and accession countries, where major problems can be identified, partly due to more transparency and monitoring.This policy report is the third volume of the policy series “The Anticorruption Report” produced in the framework of the EU FP7 ANTICORRP Project. The report was edited by Prof. Alina Mungiu-Pippidi, PhD from the Hertie School of Governance, head of the policy pillar of the project.

Print and e-book versions of all full reports can be purchased here.

Reviews for this publication

Public infrastructure projects and other types of government procurement almost everywhere in the world suffer from favoritism and corruption, if not outright criminality. The spoils always go to the people with the right connections, wealth, or the willingness to use or threaten violence. This is among the most difficult aspects of governance for scholars to study: those who talk don’t know, and those who know don’t talk. This slim volume summarizes detailed studies of favoritism in Bulgaria, Croatia, Hungary, Italy, Romania, Turkey, and Ukraine. A final chapter shows how criminal organizations in many countries—including Mafia-like groups in Bulgaria and Italy—infiltrate national and EU-level public spending projects. Each chapter is packed with a remarkably rich set of charts, graphs, and statistical analyses that capture how much corruption exists and how it works. These succinct and eye-opening quantitative estimates of what really goes on beneath the surface of government make for indispensable reading and should straighten out anyone who doubts that the powerful always find ways to reinforce their influence and wealth, even on the “cleanest” of continents.

Andrew Moravcsik, Professor of Politics and International Affairs, Princeton University in Foreign Affairs

Report on Bulgaria on institutions in public procurement for the infrastructure sector

The Bulgarian public procurement market constituted 9% of national GDP on average from 2009 – 2013, which is lower than the EU average. Public procurement has been particularly important for the construction sector in the country, with approximately a third of total sector turnover deriving from public procurement in 2013. Since the onset of the economic crisis in 2008 the survival of the construction sector in Bulgaria has essentially hinged on public procurement, coming mostly from EU funds. This concentration of market power in the hands of the public administration, coupled with a history of lack of effectiveness, integrity and control, and persistent structural governance deficiencies imply significant corruption risks. Although the legal framework has continuously improved, it is subject to too frequent changes to ensure proper implementation.The firm-level analysis of the public procurement contracts awarded to the top 40 construction companies included in the paper, confirms the trend of concentration of the construction sector. The data does not confidently detect a specific type of favouritism but corruption risks are detected in specific cases, especially involving large-scale construction projects in the infrastructure and energy sectors. Anecdotal evidence abounds that powerful private operators exert pressure on the public administration to channel public procurement to major companies, linked either legally and/or through circles of influence to them.

The Splintering of Postcommunist Europe

There are two radically different versions of the postcommunist narrative. One tells the triumphal tale of the only world region in which the reforms recommended by the “Washington consensus” worked. The other and more realistic account speaks of a historic window of opportunity that lasted for only a quarter-century, during which efforts by the West and patriotic elites of Central and Eastern Europe managed to drag the region into Europe proper, leaving Europe and Russia pitted against each other along the old “civilizational” border between them. This essay argues that while Institutional choices matter in the postcommunist world, geopolitical and civilizational boundaries still set the horizons of political possibility.

Anti-corruption as last chapter of democratic revolutions

by: Alina Mungiu-Pippidi

Tarek al-Tayeb Mohamed Bouazizi was a 27 years old Tunisian street vendor who set himself on fire on 17 December 2010, in protest at the confiscation of his wares following an accusation by officials that he was trading illegally. That started the fires of the Tunisian Revolution and then the wider Arab Spring, and he was instantly cast as a hero – after all, then-President Zine El Abidine Ben was a typical predatory leader with a wife who had built herself an unauthorized villa at the UNESCO heritage site of Carthage. But the hero of the Tunisian revolution was in fact avoiding paying tax, like most petty traders in poor countries all around the world. He saw himself as acting legitimately in doing so because the state had done so little for him and his family in his life, while President Ben Ali and his wife prospered. The state could have argued in return that since people like Mr Bouazizi had never paid taxes there were insufficient public resources to offer them much. It might turn out that the money spent on Mrs Ben Ali’s villa and other spoils was insufficient to provide for all those in need of education and health care but who were not paying taxes. In other words, beyond the paradigm of predator and victim, what seems to be the problem in the Tunisian situation is the absence of an agreed social contract between them to avoid both corruption and evasion. Only such a contract would give development a chance.

1280px-French_support_Bouazizi
Photo credit: Antoine Walter (Flickr)

Crowds in the streets of New Delhi, Sofia and Rio have only recently raised corruption as one of the main banners of their protests.  It is not difficult to see why. Most of the 114,000 respondents in 107 countries interviewed for the 2013 Global Corruption Barometer believe that corruption has increased, not decreased in the previous year, two out of three consider that favouritism is the rule rather than the exception in their public services (only a quarter having resorted to bribes in the year previous to survey), over 50% believe their government is captured by vested interests and for every nine people who consider national anti-corruption strategies ineffective we find one who believes they are working.

The reasons why people complain of corruption become obvious when we survey the countries where such perceptions are dominant. New research from the EU FP7 ANTICORRP project shows that corruption comes with a score of malign phenomena which hinder development and well-being. High perception of corruption is significantly associated with low public expenditure on health (the queues outside Brazilian hospitals), but high expenditure on various government projects – from Brazil’s expensive World Cup to Mr. Ben Ali’s grandiose empty mega-mosque – along with reduced absorption of assistance funds, low tax collection, poor returns from public investment and brain drain. In 2013 only citizens in Northern European countries agreed that for the most part advancement in the public or private sector is based on hard work and competence, while for the rest of Europeans favouritism through connections, the most insidious and widespread form of corruption, seems to be the ticket to success in their societies.

Why are elections not taking care of that and in new democracies we continue to have the same problem, which we can document with evidence ranging from the poor rate of tax collection to the fact that the number one source of wealth continues to be power and authority? Why does control of corruption work in most old democracies (though not in all) and in so few new ones (over eighty countries which hold regular free elections are systematically corrupt)? Because for a society to prevent those with power to allocate public resources to their benefit elections seem not to be sufficient- they alone cannot guarantee that whoever gets elected rules by the law and the state treats everyone equally and fairly. In many new democracies political parties are structured as “spoiling machines” of public resources, a historically more evolved organizing vehicle for group benefit after family, clan or tribe, who have learned to coexist fairly well with apparently modern organizations by informally draining them of their impersonal and objective character. The most widespread example is the politicization of the public service in corrupt countries (including hospitals and schools, where jobs are seen as party spoils).

Over 160 countries in the world ratified the United Nations Convention against Corruption pledging to evolve to modernity. But seeing that corruption at a systemic scale is simply an abuse of power, anti-corruption is necessarily a political act.  The few countries which succeeded to build control of corruption over the last forty years – countries like Uruguay or Estonia – did not do it through anti-corruption agencies or other silver bullets promoted by the international community, but because a critical mass managed to balance power and elect people who ended the old vicious circle and initiated new rules of the game. For our generation the elimination of privilege and favouritism is the only way to accomplish in full the democratic revolutions started in 1989. Integrity is a public good, and this is why its construction is fraught with collective action problems and translates in this new wave of global discontent – it’s only discontent with the outcome of imperfect democracies and not with democracy itself.

The results of the ANTICORRP project cited here are published in Alina Mungiu-Pippidi (editor) Anticorruption Report 1 (Controlling Corruption in Europe) and Anticorruption Report 2 (The Anticorruption Frontline) which came out from Barbara Budrich publishers in 2013 and 2014.

Alina Mungiu-Pippidi chairs the European Centre for Anticorruption and State Building (ERCAS) at the Hertie School of Governance in Berlin.

Waging Battle on The Anticorruption Frontline

ruslanThe demand for good governance is on the rise everywhere, from Kiev to Sao Paulo, Paris to New Delhi. But has any measurable progress been made recently? Do we know which countries are succeeding and why? Do anticorruption experts and policy makers understand public concerns about corruption?

The Anticorruption Frontline, the second volume of the FP7 ANTICORRP project policy report launched last week at the Hertie School of Governance in Berlin, finds less than encouraging answers to these questions: Despite increased effort to fight corruption worldwide, there remains little progress on the ground. Even in countries which have shown improvement, the use of public office for private gain remains an issue. Public opinion surveys tracking concerns about corruption are frequently misunderstood – by those being surveyed as well as those proposing anticorruption policy solutions.

New research by Prof. Alina Mungiu-Pippidi of the Hertie School of Governance shows that decreased confidence in the EU, especially in Western and Southern Europe, is linked closely to citizens’ perceptions of their national government’s ability to control corruption. This confidence has been eroded in the wake of the euro crisis, most markedly in countries with the worst growth performance. Central and Eastern Europe, however, remains the last bastion of trust in EU institutions, which is perceived largely as a counterweight to untrustworthy national institutions.

Two European case studies from The Anticorruption Frontline illustrate that EU funding regulations and anti-corruption legislation alone are no panacea for the rampant favoritism inherent in extant particularistic systems. Despite an improved Bulgarian anticorruption rating according to most accepted measures, findings from the Center for the Study of Democracy on Bulgarian governance show that the avoidance of market competition in areas such as public procurement remains the rule rather than the exception. In another chapter, Mihaly Fazekas’ unique data mining method on the awarding of EU structural funding uncovers systemic corruption in Czech, Slovak, and Hungarian public contracting methods.

Such preferential treatment – and its inherent abuse of power – is one of the most insidious forms of corruption facing the world today.  Further case studies from The Anticorruption Frontline include deeper analysis of Qatar and Rwanda, two countries singled out for their improvements on anticorruption measures, yet both of which still exhibit favoritism in public procurement, as well as a look into the corrupt bed of Ukraine‘s gas market, exposed in the wake of 2014’s uprising. As every case in the book makes clear, traditional measures of corruption often fail to measure the existence and subsequent impact of such exploitation of public trust for private gain.

The Anticorruption Frontline argues that further EU regulation is not the solution. As a multidimensional phenomenon, fighting corruption requires tailored policy approaches as well as sustained support in areas such as improving transparency and strengthening civil society. The answer instead may lie in a transition from EU co-financing of large public projects – where the risk of corruption is higher – to a more universal and non-discretionary allocation of EU funding, such as an Europe-wide unemployment benefit scheme.

The Anticorruption Frontline is available for purchase via Barbara Budrich Publishers.

The Anticorruption Report. Volume 2: The Anticorruption Frontline

From Turkey to Egypt, Bulgaria to Ukraine, and Brazil to India, we witness the rise of an angry urban middle class protesting against what they see as fundamental corruption of their politicalregimes, perceived as predatory and inefficient. Corruption is near the top of all global protesters’ list of grievances – from the Occupy movement to the Arab Spring. There is increasing demand for good governance resulting in quality education and health systems, and denunciation of sheer bread and circus populism. Volume 2 of the ANTICORRP Anticorruption Report tackles these issues across key cases and developments.

Print and e-book version of the report can be purchased here.

Background paper on Bulgaria

The Worldwide Governance Indicators show that Bulgaria has made significant progress in the area of “control of corruption” since 1996. This finding contrasts with the general opinion of the Bulgarian population who perceive Bulgarian institutions as corrupt, and contradicts the decision of the European Commission to continue monitoring Bulgaria’s progress in fighting corruption and organized crime. Hence, there is a need for careful consideration and analysis to understand how much progress Bulgaria has really made in the fight against corruption. Can Bulgaria be considered an anti-corruption success story?

Bulgarian Anti-Corruption Reforms: A Lost Decade?

The Worldwide Governance Indicators show that Bulgaria has made significant progress in the area of “control of corruption” since 1996. This finding contrasts with the general opinion of the Bulgarian population who perceive Bulgarian institutions as corrupt, and contradicts the decision of the European Commission to continue monitoring Bulgaria’s progress in fighting corruption and organised crime. Hence, there is a need for careful consideration and analysis to understand how much progress Bulgaria has really made in the fight against corruption. Can Bulgaria be considered an anti-corruption success story?

In this paper, the authors seek to answer the above questions by providing a background analysis on Bulgaria’s governance regime. According to research, Bulgaria has made some progress in its transition from patrimonialism to open access order but the main features of its governance regime remain these of competitive particularism. In legal terms Bulgaria displays some open access order features but they do not translate into practical implementation.

Following the country’s EU accession in 2007 progress has been uneven, and has mostly been driven by civil society demands for change, which culminated in mass street protests in 2013. Progress in the political corruption domain has been limited. Power distribution in Bulgaria has opened up to competition but is still concentrated in few political party leaders and powerful business conglomerates, interlinked in a complex web of dependencies with former secret service and communist party elites, which still have privileged access to state resources. Convictions, in particular of high-ranking politicians and administrators are non-existent or rare, a sign that the rule of law and accountability have not yet taken hold in the country.

Bulgarian Anti-Corruption Reforms: A Lost Decade?

The Worldwide Governance Indicators show that Bulgaria has made significant progress in the area of “control of corruption” since 1996. This finding contrasts with the general opinion of the Bulgarian population who perceive Bulgarian institutions as corrupt, and contradicts the decision of the European Commission to continue monitoring Bulgaria’s progress in fighting corruption and organised crime. Hence, there is a need for careful consideration and analysis to understand how much progress Bulgaria has really made in the fight against corruption. Can Bulgaria be considered an anti-corruption success story?

In this paper, the authors seek to answer the above questions by providing a background analysis on Bulgaria’s governance regime. According to research, Bulgaria has made some progress in its transition from patrimonialism to open access order but the main features of its governance regime remain these of competitive particularism. In legal terms Bulgaria displays some open access order features but they do not translate into practical implementation.

Following the country’s EU accession in 2007 progress has been uneven, and has mostly been driven by civil society demands for change, which culminated in mass street protests in 2013. Progress in the political corruption domain has been limited. Power distribution in Bulgaria has opened up to competition but is still concentrated in few political party leaders and powerful business conglomerates, interlinked in a complex web of dependencies with former secret service and communist party elites, which still have privileged access to state resources. Convictions, in particular of high-ranking politicians and administrators are non-existent or rare, a sign that the rule of law and accountability have not yet taken hold in the country.

Bulgarians Continue to Protest against Corruption in the Government

Bulgaria anti-corruption protestsAt a moment where citizens take it to streets in several countries around the world to express their deep dissatisfaction with governments and deficit in their political representation, Bulgarians continue to gather in Sofia and other cities in the country demanding that their newly formed socialist government step down. Protesters are also calling for deep reforms to improve democracy and representation in the country, including changes in the Electoral Code to facilitate entry of new parties and favour changes in the political status quo, and measures to strengthen media freedom and judicial independence.

Following the spirit of the street movements, a group of 60 prominent Bulgarian intellectuals, lawyers, political activists and journalists have proposed the “Charter 2013” to end the plutocratic system that dominates politics in the country. Other civil society organisations have analysed the current situation and manifested support for the claims presented in the demonstrations. One such example was the memorandum circulated by ERCAS’s partner Centre for Liberal Strategies, authored by its chairman Ivan Krastev. The text below, published on 25 June 2013, provides a valuable insider look at the present civil society movements and the perspectives for future positive changes in Bulgaria.

 

“MEMORANDUM

 

Tens of thousands of people have been marching for 11 days now on the streets of the capital Sofia and in some of Bulgaria’s major cities. The mass protests were sparked by the decision of the Bulgarian Parliament to appoint Mr. Delyan Peevski as chief of the State Agency for National Security. After his resignation on the second day of the protest, its main demand became the resignation of the government of Mr. Oresharski, which has been built by the Bulgarian Socialist Party and the Movement for Rights and Freedoms representing the Turkish minority (together, both parties having exactly half of the seats in Parliament). Yet the government cannot survive without the support of the far-right populist party Ataka.

According to representative polling data, 85 per cent of Bulgarians support the protest against the appointment of Mr. Peevski, a media mogul and politician, a front-man of corporate interests with strong influence over the last three governments. The respondents put remarkably little confidence in the current government and parliament at the beginning of their term (23 and 14 per cent, respectively – lowest point since the 1990s), while only 18 per cent reckon Oresharski’s cabinet will fulfil its full mandate.

Bulgaria protests for a second time in less than half a year, with the mass protests in February against the electricity monopolies having brought down the centre-right government of Mr. Borissov. The unrests from the last 11 days should be seen as a second wave of Bulgarian citizens’ anger with the political establishment from the transition who in society’s view has betrayed the values of democracy in the service of behind-the-screen corporate interests.

For the first time in years the civil society of Bulgaria is voicing strong demands for genuine reform of the ailing state institutions and for effective democracy. These demands for reform are home-grown and have a grass-roots pedigree. They are not the result of external pressures (e.g. from EU or international organisations). In fact, external bodies so far have been largely supportive of the status quo: for instance, both the Party of European Socialists and the European Popular Party have recently expressed support for the political leaders of the Bulgarian Socialist Party (member of PES), and GERB (member of the EPP), the former ruling party.

These views are apparently not shared by the Bulgarian citizens. As their slogans demonstrate, the Bulgarians are protesting:

–        against the merging of public institutions with nationwide gray-economy groups: “No to the oligarchy!”

–        against clandestine  political deals: “No to behind-the-screen deals!; Transparency!

–        against the promotion of corporate interests presented in democratic garb: “No to façade democracy!”

–        against Bulgaria’s reneging on its European commitments and the accommodation of extreme nationalist-populists in power: “Bulgaria is Europe!”

The peaceful protests in Bulgaria are momentous for the future of democracy in this country. They show that there is committed civil society which will no longer tolerate corporate takeover of public institutions, or unprincipled coalitions with nationalistic or irresponsible parties. Our hope is that the lack of violence and the civilized behaviour of the protesters will not make this protest go largely unnoticed internationally. In our judgement, the moment demands broad support for the democratic efforts of Bulgarian society.

 

25 June 2013

Sofia

 

Ivan Krastev

Chairman

Centre for Liberal Strategies”

 

(The picture featured above is from presstv.ir.)

 

Corruption in Bulgaria on the Rise

The Centre for the Study of Democracy (CSD) in Bulgaria has been periodically monitoring corruption in the country for many years. The methodology developed by the centre in partnership with Vitosha Research, called Corruption Monitoring System (CMS), has recently generated a new assessment, revealing that administrative corruption has actually increased in Bulgaria since 2011.

The study released by CSD evaluated how often people engaged in corrupt activities from 2011 to 2012 and whether they felt pressured to do so. According to their survey, approximately 150,000 bribes were paid to civil employees every month in 2011. The number is higher than that for the previous year, when the results of the assessment had shown some improvement in the figures. Moreover, about 25% of those surveyed for the study gave money or gifts to public employees for regular bureaucratic services in 2011.

These results corroborate other assessments of Bulgaria as one of the countries with highest levels of corruption in the European Union. In 2011 the EU’s Eurobarometer ranked Bulgaria fourth in terms of corruption pressure, after Romania, Lithuania and Slovakia, as was reported by Trustlaw. These findings have been taken as evidence of the current government’s inefficiency in curbing corruption. However, the current level of corruption is still lower than it was during the previous government (2005 – 2009), CSD’s study reports. This is due to the implementation of certain reforms as a result of the conditions imposed by the European Union for Bulgaria’s accession in 2007.

The report also highlighted the inefficiency of the judiciary in addressing the problem of corruption, as no top political figure has been charged for corruption crimes so far. One author of the study explains that “due to the impunity with which corruption is carried out at the higher levels of power… Bulgaria is one of the few – if not the only – European countries with no proven political corruption,” despite Prime Minister Boiko Borisov’s promise to end the cooperation between high level officials and organised crime, reported Eurobrussels.

That being said, authors point out that “this problem cannot be solved with law-enforcement tools alone […] but requires fundamental reform in the public administration. Fighting corruption implies understanding the source of the problem”. The study concluded that corruption pressure in Bulgaria is associated with the structure of public administration and the lack of a more customer-oriented approach in the provision of public services to the society, and that a sustained improvement in control of corruption requires measures to systematically change this scenario.

 

New Report Published on Anti-Corruption in Bosnia and Herzegovina

The Center for the Study of Democracy (CSD) in Bulgaria has published the report “Countering Corruption in Bosnia and Herzegovina 2001 – 2011”, which was presented to policy makers and stakeholders in Sarajevo at an anti-corruption policy forum on June 12, 2012. The forum is part of an effort by the European Union to empower the civil society in the country in its fight against corruption through exchange of experience with similar organizations in the region.

The report provides an overview of the state and dynamics of corruption and anti-corruption developments in Bosnia and Herzegovina for the aforementioned period. It builds on the local insight of the Center for Investigative Reporting (CIN) in Sarajevo and CSD’s 15 years of experience with regards to monitoring corruption and anti-corruption trends in Bulgaria. The findings are based on the Corruption Monitoring System (CMS), a state-of-the-art tool developed by CSD for monitoring the dynamics of corruption at the national level. This methodology measures not only attitudes and perceptions of corruption, but also actual experiences (i.e. victimization) of citizens. At the forum, CSD’s Program Director Mr. Ruslan Stefanov highlighted that CSD and CIN complemented each other’s efforts as CMS captures the administrative corruption while investigative reporting helps catch political (large scale) corruption.

According to the report’s findings, during the past 10 years corruption pressure in Bosnia and Herzegovina has increased, while the actual participation of citizens in corrupt activities has subsided. It is, however, worrying that despite their reduced encounters with corruption, citizens perceive the phenomenon as ever more widespread and their trust in state institutions to fight corruption is fading. According to Mr. Stefanov, while eradicating corruption is a historically slow process, it is of paramount importance that the justice system restores citizens’ trust in the institution through punishing corruption at the highest level.

Additional information on the Anti-Corruption Policy Forum can be found at csd.bg.

Beyond Perception: Has Romania’s Governance Improved since 2004?

Romania and Bulgaria encounter today problems in joining the visa-free Schengen area. The main one in the public eye is corruption. Both countries pledged to improve their rule of law when signing their accession treaties in 2005, yet little progress is perceived by observers or captured with governance measurements relying on perception, such as CPI and World Bank Governance indicators. This paper explores real policy, with fact-based indicators, to trace progress in the area – or lack of it – since 2004 to the present.

A Diagnosis of Corruption in Bulgaria

Corruption is a complex phenomenon which refers to different practices from the political, social and economic spectrums. Therefore, is hard to be described in just couple of sentences and it is even harder to be measured. Yet, international institutions and non-governmental organizations have developed different indexes and tools to actually measure corruption.

The current report presents some of the best known instruments in a case study examination of the level of corruption in Bulgaria for the last ten years. Based on the provided overview of the corruption environment the report elaborates on some of the best examples of civil society anti-corruption initiatives in Bulgaria in order to highlight those organizations, which activities actually improved the general situation in the country.

A Diagnosis of Corruption in Bulgaria

Corruption is a complex phenomenon which refers to different practices from the political, social and economic spectrums. Therefore, is hard to be described in just couple of sentences and it is even harder to be measured. Yet, international institutions and non-governmental organizations have developed different indexes and tools to actually measure corruption.

The current report presents some of the best known instruments in a case study examination of the level of corruption in Bulgaria for the last ten years. Based on the provided overview of the corruption environment the report elaborates on some of the best examples of civil society anti-corruption initiatives in Bulgaria in order to highlight those organizations, which activities actually improved the general situation in the country.

Youth initiative against corruption in Sliven

The project aimed to change the attitude of young people towards corruption through initiation of anti-corruption course in high-schools in the Sliven region. For the purpose, the project developed a program for anti-corruption education that included group simulations, case resolution in areas such as mediation and lobbying, money laundering, conflict of interests etc. Some of the project outputs included: 1. a sociological survey; 2. a round table with municipal representatives, lawyers, non-profit youth organizations, the civil association Public Barometer and students from the four surveyed schools; 3. development of a three-module training program; 4. a press conference.