Finance & Economics
Corruption in ex-communist countries
Judge or be judged
Jul 27th 2006From 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?”: www.worldbank.org/eca/act3
Friday, July 28, 2006
Finance & Economics