Fighting corruption: patterns in Eastern Europe and in Central Asia

12 September 2006

Cheryl Gray, Sector Director for Poverty Reduction and Economic Management for Europe and Central Asia at the World Bank, presented its report on Anticorruption in transition 3: who is succeeding� and why?

She began by explaining that citizens in Eastern Europe and Central Asia said corruption was their “number one concern”. The EU also took a hard look at this issue in its membership negotiations with the countries of Eastern Europe.

Ms Gray outlined two major questions which the study had set out to answer: was corruption in Eastern Europe and the former Soviet Union getting better or worse, and what explains the changes? The report’s findings were based on a ‘Business Environment and Enterprise Performance Survey’ (BEEPS), which collected the views of 20,000 firms in 26 transition countries and six European countries (Germany, Greece, Ireland, Portugal, Spain and Turkey) to gauge the levels of corruption in enterprise-state interactions.

Corruption declining in the region as a whole

The survey found that corruption had fallen overall between 1999 and 2005, but countries still had some way to go before they reached Western European levels. Corruption had declined in Georgia, Slovakia, Bulgaria and Romania, but had actually risen in Albania and Kyrgyzstan. The study also found that the problem was worst in areas such as government contracts and taxes, while the situation had improved in relation to customs and the judiciary.

Slovakia, Slovenia and Estonia were the countries where there was least corruption, and these countries were level with Germany and Spain. Corruption was found to be the biggest problem in Macedonia, the Czech Republic and Romania.

The analysis found that the ease of doing business still varies among countries, with Lithuania, Estonia and Latvia performing best, and Uzbekistan worst, among all those surveyed. Ms Gray explained that corruption was most rife among new, small private firms, which are often the engines of growth in transition countries. In general, larger, older firms were less corrupt.

Transition countries are leading the world in business-friendly policy reforms and in 2005, Georgia and Romania were the world’s top two reformers. Good performers have introduced reforms in taxation, customs and the regulatory environment, made the judiciary more transparent, and enhanced transparency in public procurement (a sector riddled with corruption). Ms Gray also reported a trend in many countries towards adopting and strengthening legislation on transparency and accountability.

She said the greatest motivator for all these reforms has undoubtedly been the “carrot of EU accession”, with the period of greatest reform occurring during the accession process when countries were optimistic about, but not certain of, EU membership.

Summing up the report’s findings, Ms Gray said that corruption in state-enterprise relations was falling in many transition countries, that government policy and institutional reforms matter, that every country which had made significant process had a strong and committed leadership, and that it was vital for governments to continue with these reforms in order to prevent backsliding.

Heather Grabbe, Member of Enlargement Commissioner Olli Rehn’s cabinet, emphasised how important independent reports such as those by the World Bank were for the Commission in assessing candidate countries’ progress towards meeting the EU’s entry conditions. She also agreed that the imminent prospect of EU accession was the strongest lever for countries to cut corruption.

By including a comparison with existing EU members, the report showed the degree of diversity between EU countries, and between ‘old’ and ‘new’ members, said Ms Grabbe, with some new members performing better in some areas than the older ones. She also said that it was well-known that in former times, comparatively high levels of corruption had not proved a barrier to EU membership.

Describing the steps taken by candidate countries in the run-up to accession, Ms Grabbe said the Commission encouraged them to twin with new Member States to learn from their experience in cutting corruption. She added that candidate countries could achieve considerable reforms in a short time if the circumstances required it.

The Bank’s findings tallied with the Commission’s own assessments, said Ms Grabbe. It agreed with its conclusions about the diverse picture among South-east European countries. At present, Albania “was in a class of its own” for corruption, she said, and there was also a worrying downward trend in Serbia and Montenegro.

The Commission provides accession countries with financial and technical assistance, but while the EU can provide the tools and political incentives to bring about change, these are of no use unless they are taken up by national leaders.

Miklos Marschall, Regional Director Europe and Central Asia for Transparency International (TI), said his organisation’s findings were generally in line with the Bank’s findings, although they are based on household rather than business surveys.

He agreed that Georgia and Slovakia had made the most improvements, and that Estonia, Slovenia and the Czech Republic topped the list of the least corrupt countries in the region, with Russia and Kyrgyzstan the most corrupt. The greatest improvements had occurred in the tax administration and customs sectors, and the least in the judiciary and public procurement. In transition countries, citizens highlighted the police, customs, health and education sectors as the most corrupt, believing that they would accept bribes for favours.

Mr Marschall argued that while small-scale corruption on a daily basis was diminishing, new, larger-scale political corruption was emerging. He was also concerned about the backlash in several early transition countries such as Poland, Hungary and the Czech Republic, where he said the political agenda was being high-jacked by popularist politicians.

He concluded by agreeing with the other speakers that the European accession process had been a “real success story”, based on external pressure linked to internal inspection and fuelled by a desire to joint the EU. Sadly, he said, the second generation of eastern European politicians no longer shared this desire.

Eniko Felfoldi, Policy Officer in the Commission’s Directorate-General for Justice, Freedom and Security, opened her presentation with the results of a Eurobarometer survey which found that 72% of EU citizens thought corruption was a major problem in their countries and believed that the government, with EU support, should take measures to prevent it.

Eurobarometer found that politicians and rich institutions were seen as the two most corrupt groups, particularly when government officials had responsibility for issuing tenders and building permits.

Ms Felfoldi explained that the question of corruption had only recently been included in entry conditions for EU membership. The Union now stresses the importance of governments ensuring good treatment of public servants, developing codes of conduct in public administration and supporting the private sector in combating corruption. Governments can also use international instruments - such as those developed by the United Nations and the Organisation for Economic Co-operation and Development (OECD) - to fight corruption.