Corruption in ex-communist countries
Judge or be judged
Jul 27th 2006
> > From The Economist print edition
In the ex-communist world corruption seems to be declining. Mostly
TURNING an aquarium into fish soup is simple. Turning the fish soup back
into an aquarium is not. For the ex-communist countries, stabilising
economies and introducing market mechanisms has proved the easy bit.
Remaking public institutions, and making them clean and efficient, is much
harder to do and to measure.
A new study published this week by the World Bank* casts an optimistic
light. It asked almost 10,000 firms in 26 ex-communist countries
(Turkmenistan was excluded) and Turkey about the cost and frequency of
bribe-giving, and their views about the nature and nuisance-level of
corruption. This time, for comparison, it included five other European
countries.
Compared with the previous surveys, in 1999 and 2002, it suggests corruption
in the region is becoming a bit less frequent, costly and damaging. Although
some countries are doing better than others (Georgia is a strong performer,
Russia a weak one) nowhere is it getting comprehensively worse. In many
countries corruption is falling on every count.
The trend is favourable-but, the authors note, still reversible. The Czech
Republic, for example, scored well in 2002 and seems to have gone backwards
since. But there’s a twist. That firms complain more about corruption may be
a good sign if it means they are becoming less tolerant of it. The most
depressing feature of the report is the high incidence of firms in
Russia-fully a fifth-that say they pay bribes often but do not regard it as
a problem. That figure is four times higher than in the eight nations now in
the European Union.
Most progress has been made in customs administration, which used to be slow
and predatory but is now quick and clean. That reflects the changes in the
countries that have joined the EU and those in the Balkans that are eager to
join. The average "bribe tax"-the share of turnover paid by those firms that
pay bribes-has declined from 3.6% to 2.9%, though booming economic growth
means that the total of bribes paid is probably rising.
The report says corruption hurts private firms more than state-owned ones,
small more than large, new more than old, locally owned more than foreign.
In short, the weak suffer more than the strong.
One big remaining problem, especially in the poorer ex-communist countries,
is the justice system. In the early post-communist years, the trend was to
give judges great independence but low salaries. That was a recipe for
corruption. The new approach is to pay them more and police their activities
more strictly. That is working-particularly in Romania-but it is a slow slog
elsewhere.
Other kinds of corruption are harder to deal with. Public procurement is
notably dirty-though not noticeably worse than in some countries of "old
Europe". High-level political corruption, or "state capture" in the jargon,
is also a lingering curse. That is when bribery affects not just the
implementation of policy, but its conception. As the Russian proverb says, a
fish tends to rot from the head.
* "Anticorruption in Transition 3: Who is succeeding and why?":
Selected Points made in the World Bank Report
Corruption as a problem of business: a slight increase in Armenia
between 2002 and 2005 indicating that firms do not view corruption
as a problem to the same extent as elsewhere in the CIS (Georgia,
Azerbaijan and Turkey as comparator all higher but Georgia heading
in the right direction)
Bribe Frequency decreased somewhat between 2002 and 2005 in Armenia
but was overhauled by Georgia’s startling improvement
Bribe Tax (percentage of annual revenue paid in bribes as reported by
firms themselves) no significant change the rate in Armenia between
2002 and 2005 but the rapid growth in the economy implies that the
total amount of bribery increased substantially
State Capture (corruption in the laws-making process that distorts in
favour of a few privileged insiders) Armenia significantly worsened
between 2002 and 2005
Policy and Outcomes
Though Armenia set up an Anticorruption Strategy and Action Plan in
2003 and created a high-level Anticorruption Council chaired by the
Prime Minister in 2004, the 2005 results in many dimensions were
significantly worse than in 2002. This contrasts with Georgia and
Turkey where there is some success in their developments.
The introduction of merit-based entrance examinations to law studies
in Armenia and Georgia should yield improvements in future.
Tax and Customs
There has been some deterioration in frequency of bribery in tax
administration and patterns of changes in customs-related bribery. In
both areas, Georgia has made significant improvements.