February 2017 – Transparency International (“TI”) has recently published its Corruption Perceptions Index (“CPI”) for 2016, which surveys 176 countries and territories. Scores range from 0 (highly corrupt) to 100 (very clean). The index is an imperfect tool, as it measures perceived levels of public sector corruption, but it is widely seen as one of the best benchmarks of the perception of corruption.
None of the 176 countries in the index achieved a perfect score of 100 (very clean). In fact, over two thirds of the countries and territories ranked in the 2016 index “fall below the midpoint” of the scale, with the global average score being 43, “indicating endemic corruption in a country’s public sector”, Transparency International said.
Only two countries in Kinstellar’s region of operation (the Czech Republic and Slovakia) scored above the 50-point mark; most others are still tackling serious corruption problems. What’s more, the recent downward trend in most other countries of the region is cause for concern. According to TI, high-profile scandals associated with corruption, misuse of public funds or unethical behaviour by politicians in recent years has contributed to public discontent and mistrust of the political system.
Slight improvements for Romania and Ukraine
Romania
Romania’s CPI score and rankings have slightly improved for 2016: the score has improved from 46 to 48, while the ranking went up from 58th to 57th this year. Compared to neighbouring countries, Romania’s score (i) is equal to Hungary (both countries recording a score of 48) and (ii) is higher than Bulgaria (41), Ukraine (29), Serbia (42), Moldova (30) or Turkey (41). Notably, Romania surpasses other EU countries, such as Italy (47 points) or Greece (44 points).
Still, Romania remains far below Western Europe’s average score of 60+, indicating that, although significant progress has been made, there is room for improvement. CPI suggests that Romania’s fight against corruption over the past two years is starting to yield consistent results. However, there is still some road ahead, paved with many necessary changes in the way the public administration operates. A worrying development was the recent decision of the Romanian government to bypass parliament and decriminalise some forms of corruption by officials. However, following five days of mass public protest, the government withdrew its controversial decision, demonstrating that public accountability remains a potent force to strengthen the fight against corruption.
Romania’s CPI score should perhaps also be read in conjunction with the Co-operation and Verification Mechanism Report issued by the European Commission for Romania on 25 January 2017. This report also emphasises the consistent progress made by Romania in the past year. In addition to the constant good track record of the National Anti-Corruption Prosecution Unit in terms of number of cases brought forward to justice — given its limited resources — and the percentage of cases won in court trial, two measures are mentioned as important for the fight against corruption and the transparency of the public authorities’ activity: (i) the PREVENT system, which will be used in order to perform ex-ante conflict verifications in public procurement procedures for example; and (ii) the establishing of the National Agency for the Management of Seized Assets, which started its activity in January 2017. This agency is seen as having an important role regarding the seizure of assets during criminal proceedings and the recovering of prejudices caused by the perpetration of criminal offences.
Ukraine
Ukraine shows an improvement by two points on this year’s index. It ranks 131st, with 29 points. This is quite a modest result for the country, whose leaders have declared fighting corruption as the top national priority. The most tangible improvements are the launch of the e-declaration system, which allows Ukrainians to see the assets of politicians and senior civil servants, including those of the president; broad implementation of the public electronic procurement system “ProZorro” across the state sector; the launch and development of the National Anti-corruption Bureau of Ukraine (NABU) and Specialized Anti-Corruption Prosecutor Office (SAPO) activity; and the long-awaited launch of criminal court proceedings against the former president, Viktor Yanukovych, scheduled at the beginning of March 2017. However, the key drivers of the real changes are civil society activists and volunteers, not politicians. The enforcement of the rule of law and reform of the court system still leaves much to be desired.
Stagnation or set back across the rest of the region
Bulgaria
Bulgaria slipped from 69th place in 2015 to 75th place in this year’s ranking, making it the last of all 28 EU countries. Its score of 41 points, however, remains unchanged. The perception of the levels of corruption in the country’s public sector is largely due to the limited pace of long-contemplated judicial reform and the introduction of efficient anti-corruption legislation.
Certain changes to the institutional framework were made in 2016. However, they did not fully match the expectations set by the wider public and the European Commission’s recommendations under the Co-operation and Verification Mechanism (CVM). The impression of ineffectiveness or even of bias on the part of local prosecutors has persisted as a result of revelations of the possible involvement of politicians and high-ranking judges in power brokerage and possible misuse of power, which the prosecution office had decided not to probe.
Proposed anti-corruption legislation did not receive sufficient support from the major political stakeholders, which left the impression of a political class unwilling to target and cope with bribery within the higher ranks of the state.
These topics are a recurring theme also in the recently published CVM report by the European Commission on progress in these two areas. Further recommendations have also been made regarding needed additional institutional and legislative changes.
All this has led to mounting pressure on political actors from society and the professional magistrate community. As a result, judicial reform and the fight against corruption have become platforms on which candidates in the recent presidential elections ran and which is now expected to be high on the policy agendas in the upcoming parliamentary election in March 2017.
Czech Republic
The Czech Republic (still the “cleanest” country in the region) dropped from 37th place last year to 47th this year and scored 55 points, one less than last year. The country is still missing big criminal investigations of bribery of foreign officials, and there are large instances of bribery or domestic corruption by officials that are not dealt with effectively by the prosecution or courts. There were unresolved high profile cases, such as the David Rath corruption case focused on the former minister and regional governor, or that of former prime ministerial aide Jana Nečasová, all if which affected the Index result. There were also number of large criminal matters in relation to violation of public tender rules or misuse of European and domestic grants, which were brought to the courts last year and is probably one of the reasons why the perception of corruption has increased. TI claims that government pledges to curb corruption were largely ineffective last year with warnings that interest groups are “capturing” the state and that despite a pledge to combat corruption by the current government, the country fell short.
There is no comprehensive whistleblowing regulation in the Czech Republic that would protect whistleblowers (currently, only state employees are protected by a rather vague regulation prohibiting retaliation and any form of discrimination against them). The OECDs working group on bribery will meet with representatives of the Czech Republic this week and review the country’s efforts to combat the corruption of foreign officials. Kinstellar will be one of the representatives for the Czech Republic and report about the result of the OECD’s working group on bribery evaluation.
Hungary
Hungary’s rank dropped 7 places to 57th with 48 points, losing three points from the previous year. Hungary’s score has been dropping since 2012. Hungary is now the fifth-most corrupt country in the European Union, behind only Bulgaria, Greece, Italy and Romania, according to statistics released by Transparency International. The lack of transparency in the distribution of public funds, for example by restricting access to data of public interest, and companies close to the government winning business through public procurement, are widely cited as reasons for the setback. The drop in scores may signal an overall negative sentiment towards other government actions. TI also noted some positive developments, such as the courts retaining their independence, and the newly introduced online cash registers contributing to a more transparent economy.
Serbia
Serbia did not record progress either and fell one place from to 72nd from 71st last year, with 42 points versus 40 last year. The loss in rank is due in large part to the inconsistent implementation of the 2013 National Strategy for Combating Corruption and related Action Plan, the public authorities’ lack of transparency and the significant influence of political parties on the public sector and media. Despite their poor showing in preventing corruption, Serbian authorities tasked with fighting corruption have maintained a relatively high level of enforcement, most recently with the arrest on corruption charges of 80 people, including a number of ex-government officials. However, older corruption cases remain pending, and the public is eagerly awaiting the first court-ordered repressive measures.
The unchanged position of Serbia on the CPI list is not surprising and adequately reflects the failure of the Serbian state to make any improvements in the anti-corruption struggle in Serbia during the last year. A through and systemic approach by the state on this issue is missing in almost all of its aspects.
In the prevention area, one of the activities that might be considered as an attempt directed towards improvement in the field of the fight against corruption is the planned adoption of a new law regarding the Anti-Corruption Agency. The new draft law aims to lay down a modern set of rules that would regulate in a more precise and clear manner issues such as the responsibility of officials, as well as improve the Serbian Anti-Corruption Agency’s efficiency and strengthen its independence. Another objective of the new draft law on the Anti-Corruption Agency is to harmonise the legal framework related to the Agency with the strategic documents in the field of the fight against corruption, such as the National Strategy for the Fight Against Corruption in Serbia for the period 2013–2018 and pertaining to the implementation of the action plan, as well as the Action Plan for Chapter 23 – Sub-Chapter “Fight Against Corruption” of Serbia’s EU accession negotiation process.
So far, activities of competent state bodies, i.e. the Anti-corruption Agency and Anti-corruption Council, are mostly limited to producing opinions and reports and holding meetings and panels, while any serious anti-corruption campaigns or communications of the state directed towards the general population or sensitive professions are absent. Furthermore, the failure of the state to protect whistle-blowers in several cases additionally discouraged the promotion of activities on anti-corruption, which are mostly carried by various NGOs, e.g., the website www.pistaljka.rs, and KRIK (the network of independent journalists).
In the enforcement area, the anti-corruption struggle is marked by occasional activities of the police i.e., arrests of various suspects, which are often covered by dramatic media coverage and used as a marketing tool for political parties. However, the general impression is that such police actions are usually directed against minor cases of corruption and very often certain people politically well-connected are excluded from the criminal prosecution related to such cases.
Slovakia
Slovakia fell from 50th position last year to 54th, with 51 points, one point above the 50-point watermark. There are still major concerns, most notably the lack of transparency in public procurement procedures and the misuse of EU funds. The country was rocked by its share of scandals related to the misuse of public funds, which led to the demise of some high-profile public officials.
Corruption appears to remain relatively widespread in Slovakia, most notably in public procurements and among high-ranking public officials. Despite being constantly brought up by the media, corruption in these areas remains largely unprosecuted. From this perspective, it is unsurprising that Slovakia’s score remained unchanged.
Nevertheless, a recently adopted Act on the Register of Partners of the Public Sector, has been set up to help put matters onto the right track. Under the Act, all parties and their subcontractors doing business above certain thresholds with state-owned enterprises, public authorities or municipalities, must register in the newly-created Register of Partners of the Public Sector. Each registered entity is obliged to supply information on the ultimate owner of the company, i.e., the ultimate beneficiary, among other things, so that financial flows are more transparent. Lawmakers celebrated the high levels of transparency brought about by the Act. As the Act becomes effective starting from February 2017, the new system will be put to the test very soon.
Turkey
Turkey’s rank has lowered significantly to 75th place from 66th last year, with a score of 41 points. According to TI, the country is one of the worst performers in the last four years. Reforms that had improved its standing in past years have deteriorated as of late, explaining the poor results and why Turkey is falling behind EU states. Salient issues include the lack of prosecution of corruption offences and intervention in court proceedings. When these problems are coupled with a broader lack of anti-corruption reform and restrictions on freedom of expression, Turkey’ outlook for this year and future CPIs looks grim.
Kazakhstan
Kazakhstan dropped dramatically too, from 123rd last year to 131st, but kept last year’s score of 29. Though the country fares significantly better than its Central Asian neighbours, corruption remains a serious challenge and the poor score is a reminder of the lack of coherence in the fight against corruption.
Despite the lower rank, Kazakh legislation on combatting corruption underwent significant changes aimed at improvement during the past year. Thus, adoption of a new law on combating corruption (which became effective as of 1 January 2016) and the new code of ethics for state officials, as well as the formation of the Agency for State Service Affairs and Combatting Corruption (which is directly answerable to the President) triggered a number of high-profile scandals and public arrests in state officials suspected in corruption. As reported by the newly formed Agency, most of the corruption cases involve state procurement.
Kazakhstan is also witnessing an increase in exported corruption, as many foreign companies operating there do not abide by the same principles of transparency they follow in their home jurisdiction.
For more information contact Jitka Logesová, Partner and Head of Kinstellar’s Compliance, Risk and Sensitive Investigations practice, at .
Jitka Logesova, Bogdan Bibicu, Csilla Andreko, Branislav Maric, Dessislava Fessenko, Tolga Semiz, Adlet Yerkinbayev and Roman Oleksik contributed to this article.
* The full results of the 2016 CPI are available at Transparency International’s website. You can read our past commentary on Transparency International’s 2015, 2014, 2013 and 2012 CPI.