December 2012 – Transparency International (TI) released its 2012 Corruption Perceptions Index (CPI) this week. The 2012 CPI surveys 176 countries and territories (seven fewer than last year).
The results may seem at first glance encouraging for several emerging European countries, but, on closer examination, they are not particularly impressive. TI has changed its scaling system (the scale now ranges from 0 to 100, from most to least corrupt) as well as its methodology: it now uses raw scores from its data sources rather than a country’s relative position. Though this will improve the accuracy of rankings and comparisons over time, this year’s scores cannot be directly compared with last year’s.
As its name suggests, the CPI only measures perceptions of corruption, not corruption itself. The scoring of countries may have been affected by the changes in methodology, and the ranking position of one country may have changed even when the local situation has not evolved, due to changes in other countries’ scores. The index has its limits and cannot be viewed as a scientific measure of corruption. Nonetheless, it is widely seen as the best available reference benchmark of corruption.
We have reviewed the results for the countries in which Kinstellar has offices, namely the Czech Republic, Hungary, Romania, Serbia, Slovakia and Turkey. None of them has shown significant improvement on last year, though some seem to be faring better than others. Romania, Hungary, Turkey and Serbia have marginally progressed in their standing, while the Czech Republic and Slovakia’s perceived levels of corruption have not.
Romania. The country is ranked 66th overall, up from 75th in 2011. This advancement was perhaps a response to positive initiatives, such as the unbundling of the state-owned power monopoly and the revaluation of investment contracts, which have boosted investors’ confidence. And in 2012, a number of cases finally came to a close and some high-ranking officials were handed jail sentences for graft. Despite recent progress, more remains to be done to consolidate Romania’s fight against corruption, and the EU has maintained its monitoring process there.
Hungary. Despite criticisms for stifling democratic principles, Hungary moved up to 46th place overall. Though corruption remains a challenge, this modest ascent may have something to do with the launch earlier this year of the country’s anti-corruption programme – including the introduction of measures to regulate lobbying and protect whistle-blowers, the reinforcement of public prosecutors’ capacities, and the State Audit Office making the fight against corruption in the public sector its priority.
Turkey. The country improved its standing slightly in 2012 and now occupies the 54th place, which it shares with the Czech Republic. Earlier this year, Turkey was awarded a Public Service Award by the UN for preventing and combating corruption in the public service. However, corruption is still considered widespread in the country.
Serbia. The new government’s recent anti-corruption measures seem to be paying off, the country having moved up slightly to 80th place. Fuelled by its aspirations to EU membership (the European Council confirmed Serbia as a candidate country in March), the country has intensified both its review of privatisations and its crackdown on certain businessman, including ex-ministers. Whether this development constitutes genuine anti-corruption action or simply reflects political rivalry and attempts at point scoring remains a question. Despite this, Serbia is still perceived as one of the most corrupt countries in Europe. Organised crime, the excessive involvement of political parties in the public sector, opacity in public spending decisions and weak enforcement are some of the factors contributing to the poor score.
Slovakia. Despite the high profile Gorila scandal, which brought to light alleged secret deals between government officials and private investors in 2006 and ushered in a new government on an anti-corruption platform in the March 2012 election, Slovakia has made little progress in its fight against corruption. It is the 5th worst ranked country in the EU and the lowest ranked of the Central European countries, which reflects a lack of genuine interest in tackling big corruption cases.
Czech Republic. The Czech Republic has seen some high-profile cases in recent months, with prosecutors and police intensifying their clampdown on corruption, including the arrest in June of David Rath, the former governor of the Central Bohemian region. In August, the EU released funding that had been blocked due to corruption scandals. But the country’s 54th place in this year’s index testifies to stagnation rather than progress. It is unclear whether the enforcement actions and high profile cases amount to political score settling or actually reflect a genuine anti-corruption drive.
Emerging Europe’s marginal improvements in 2012 probably have as much to do with other countries worsening their own positions by comparison as they do with positive developments inside Emerging Europe. Greece and Italy, two of the EU countries most affected by the financial crisis, have dropped in the rankings, a reflection of their inability to tackle corruption in difficult economic times.
More significantly, all countries reviewed here, with the notable exception of Hungary, scored below 50, which denotes serious corruption problems. Most countries in Emerging Europe are still plagued by a rather weak culture vis-à-vis corruption, a judiciary sometimes prone to political interference, a lack of transparency and accountability in the financing of political parties, strong political ties in public companies’ management, public tender rigging, red tape and opacity in the business sector, vulnerability of prosecuting bodies to political influence and misuse of EU funds. And though most countries in the region have adopted sweeping anti-corruption programmes, few have backed them up with adequate human and financial resources to administer and prosecute the laws on their statute books.
But change is happening. Its main driving force is the increased prosecution of corporate corruption abroad – with an impact on business in these jurisdictions. The public is less blasé about the issue and many, especially among the younger generations, are steaming mad about it. This is sure to give rise to more and more whistle blowing and media attention. Companies caught on the wrong side of this anger can expect ‘blowback’. As corruption is less and less tolerated in the region, ensuring compliance in all business ventures is bound to become a priority.
For further information, please contact Jitka Logesová, head of Kinstellar’s Compliance, Risk and Sensitive Investigations practice: , +420 221 622 111