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Prof. Dr. Alina Mungiu-Pippidi
(Hertie School of Governance)
Dr. Mihály Fazekas (University of Cambridge)
FROM HEADLINES TO REAL IMPACT Evidence-Based Anticorruption Strategies
This project is co-funded by the
Seventh Framework Programme for
Research and Technological
Development of the European Union
Contacts:
Kossow@hertie-school.org
againstcorruption.eu
anticorrp.eu
digiwhist.eu
One does not have to sail all the way to Panama….
Did you know that :
The loss of trust in EU between the two last rounds of EP elections is largely explained by how governments handle corruption (EB question)?
Before the fiscal pact, budget deficit was correlated with perceived corruption at national level?
If all EU MS would control corruption at the level of Denmark, the double of the EU annual budget would be earned?
Two of three Europeans claim that favoritism explains success in both public and private sector?
Our evidence
1. How harmful corruption is to EU
2. How uneven control of corruption EU has and what explains it
3. How misguided anticorruption often is
4. What lessons we can learn from countries which managed to control corruption in recent times
Corruption- any form of favoritism, legal or illegal resulting in privilege or discrimination of citizens or companies by a public authority
Causes of mistrust in EU: integrity enforcement
Causes of mistrust in EU: economic performance
Impact of corruption on innovation capacity
AUT BEL
BGR
CYP
CZE
DNK
EST
FIN
FRA
DEU
GRC
HUN
IRL
ITA
LVA
LTU
LUX
MLT
NLD
POL
PRT
ROM
SVK
SVN ESP
SWE
GBR
1
2
3
4
5
0 2 4 6 8 10
Glo
bal In
no
va
tio
n i
nd
ex
(0
-5 b
est)
WGI Control of Corruption (0-10 best)
Impact of corruption on braindrain
AUT
BEL
BGR
CYP
CZE
DNK
EST
FIN
FRA DEU
GRC HUN
IRL
ITA LVA
LTU
LUX
MLT
NLD
POL PRT
ROM
SVK
SVN ESP
SWE GBR
0
1
2
3
4
5
6
7
0 1 2 3 4 5 6 7 8 9 10
Bra
in d
rain
(1
-7 lo
we
st)
WGI Control of Corruption (recoded 1-10 best)
Impact of corruption on government effectiveness
FINNLD
DNKSWE
FRA
EST
GBRIRL
BEL
LUXDEU
AUT
LVALTU
PRT
ESP
HUN
CYP
MLT
GRC
SVN
ITA
SVKPOL
CZE
HRV
ROMBGR
-0.5
0
0.5
1
1.5
2
2.5
1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00
WG
I G
ov
ern
me
nt
eff
ec
tiven
ess
(-
2.5
to 2
.5 b
est)
IPI score 2014(1-10 best)
Impact of corruption on EU funds absorbtion
Procurement corruption risk & road unit prices
Tax havens & procurement corruption
2016.04.29.
11
Tax havens (Financial Secrecy Index)
higher corruption risks (single bidding, Corruption Risk Index) EU28, 2009-2014
Corruption risk for EU versus national funds Relative corruption risks of EU funded contracts
EU26, 2009-2014, TED
% single bidding of EU funded and non-EU funded procurement
Single bidder ratio, TED, EU, 2009-2014
How competitive are public funds distributted in the common market?
Europe’s regional procurement corruption risk
Corruption Risk Index averages across the EU/EEA
2009-2014
TED data
Large variation across EU, with EU institutions slightly better than the average
Single bidder %, 2009-2013, TED
But crucial bits of information are still not public
Contract implementation is a black hole
National procurement systems
What distorts competition?
• Political favoritism (e.g donors to campaigns versus kickbacks) – the majority
• Monetary favoritism
• Nepotism
2016.04.29.
18
Companies lose/win surprisingly when government changes
Hungary, 2009-2012
Surprise success
goes together with
procurement red
flags (CRI)
Politically driven company success, Hungary: paradigmatic case
2016.04.29.
19
Few companies lose/win surprisingly when government changes
UK, 2009-2012
Surprise success sometimes goes together with procurement red flags (CRI)
Politically driven company success, UK: exception to the rule
Favoritism in public construction contracts allocation 2007-2013 Romania
VALUES 2007 2008 2009 2010 2011 2012 2013 2007-2013
Single bidder 30,8% 24,1% 21,6% 26,4% 22,4% 12,9% 8,4% 20,2%
Political connection 23,4% 31,3% 20,3% 16,4% 19,7% 16,5% 13,6% 19,9%
Other capture 18,5% 11,8% 17,3% 20,9% 21,7% 9,3% 18,6% 17,0%
Total particularism 51,7% 52,9% 43,9% 53,0% 49,1% 34,0% 39,4% 45,8%
No CONTRACTS 2007 2008 2009 2010 2011 2012 2013 2007-2013
Single bidder 30,1% 27,6% 20,3% 24,0% 24,2% 17,6% 12,2% 22,4%
Political connection 22,7% 21,5% 19,9% 19,3% 19,7% 17,7% 17,3% 19,7%
Other capture 9,4% 8,5% 8,3% 7,4% 8,1% 7,5% 5,9% 7,9%
Total particularism 47,7% 45,3% 41,1% 42,7% 43,5% 37,2% 33,1% 41,6%
Conclusions 1
Corruption as a governance practice (through favoritism mostly) has regional and national impact, distorts merit-based system in society, market competition, ruins trust in government, and the foundations of economic growth
Corrupt practices tend to cut across sectors, national budget and EU funds alike
Wide difference across EU MS from corruption as exception to corruption as a norm
Instruments, but? - Control of Corruption before and after the introduction of ACA, EU 28
2.5
33.5
44.5
ICR
G C
ontr
ol of C
orr
uption
-5 0 50=year ACA came into power
ICRG Control of Corruption
Averages of the ICRG corruption scores measured at several point of time. Sources of
data: Political Risk Services’ risk of corruption indicator (1-6 best) and years since ACA
introduction from the ANTICORRP dataset; own calculation
33.5
44.5
55.5
ICR
G C
ontr
ol of C
orr
uptio
n
-10 0 10 200=year of FOIA introduction
ICRG Control of Corruption
Control of Corruption before and after the introduction of FOIA, EU 28
Averages of the ICRG corruption scores measured at several point of time. Sources of
data: Political Risk Services’ risk of corruption indicator (1-6 best) and years since FOIA
introduction from the ANTICORRP dataset; own calculation
When do anticorruption laws matter?
Evidence shows that taken in isolation few laws and institutions matter- none of the below tools bring any improvement
Party finance restrictions – actually can worsen situation
Financial disclosure for public officials
Freedom of information
Electoral legislation – can make things worse, but not better
ACA – mostly for the worse
Countries which adopt these (or more of...) do not do better than the rest, if context is not right
What context????
Explaining how corruption is controlled (or not)
PUBLIC INTEGRITY INDEX
R
e
s
o
u
r
c
e
s
C
o
n
s
t
r
a
i
n
t
s
Public integrity as interaction
Index of Public Integrity, EU – where you rank tells you what you should do http://integrity-index.org
jud.indp.
admin.burd.
tradeopen
budget trans.
e-citizens
free media
-0.5
-0.3
-0.1
0.1
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1996 2000 2003 2005 2007 2009 2011 2013
Co
ntr
ol o
f C
orr
up
tio
n
-2.5
(w
ors
t) t
o 2
.5 (
be
st)
Est…
0
5000
10000
15000
20000
25000
30000
35000
GD
P p
er
ca
pit
a P
PP
(2
011
co
nsta
nt in
tern
atio
na
l $
)
Est…
The quintessential achiever-
Estonia- Good governance dividend
Illustration- the Estonian recipe. Fix governance, and growth will follow
... What works- interaction of factors
Statistical evidence of interaction between
• Resources with constraints
• Red tape with judicial independence
• Budget transparency and E-Government users
• Strenght of civil society and freedom of information
• Freedom of the press and financial disclosures of
officials
Pro-integrity strategies have to consider both state
and society, both resources and constraints if they
are to be effective
Evidence-based strategies DIFFER RADICALLY WITH CONTEXT
Context A Context A-
corruption exception
Context B-
corruption norm
Public private separation Lobby regulation,
monitoring existing
private-public
separation
Nepotism and conflict of
interest basic
regulation, building
private-public
separation
Disclosure of corrupt
behavior
Whistleblower
protection acts for
individuals
Monitoring macro
indicators suffice-
corrupt behavior is open
Namig and shaming
Repression of corrupt
behavior
Sufficient; ordinary
agencies can do it
Insufficient and even
problematic if
enforcement is not
impartial
Prevention of corrupt
behavior
Largely works by self-
enforcement, good
regulation
Essential to fix
regulation cu power
discretion, monopolies
Action Indicator Benchmark
country
Reduce opportunity Natural
resources
Private management with public share of
proceeds established by broad
consultation and transparently spent
proceeds
Public report on spending
revenues from natural
resources
Botswana
EITI process
Reduce
discretion
Reduce red tape and enforce equal
treatment
Ombudsman also auditor and controller
Make resources transparent through
e-government
Ease of doing business;
indicators of equal treatment
Cases solved
administratively/cases solved
through prosecution
E-services as % as total
public services
Georgia
Chile
Estonia
Public
spending
Public spending concentrated on areas
such as health, education, research and
innovation with infrastructure funded
mostly through private-public
partnerships (FDI)
Existence of e-portal on online
tracking expenses for national
and local government
procurement
Uruguay
Formalizat
ion
Tax simplification
Tax collection by private agents
E-payments facilitation
Time of paying taxes
% increase in collection rate
yearly
Uruguay
What can be done?
Not universal, but tailor-made solutions (European prosecutor)
Online public expenditure tracking systems
Online statements of conflict of interest and assets for public officials
Monitoring and public disclosure of government favoritism based on open data formats for EU funds
Digital tools and e-citizens
Social accountability of EU funds- bring citizens in when you plan, budget, evaluate and audit 3
2
Action Indicator Benchmark
country
Judicial
independence
Tenure, appointment and sanctioning of
magistrates entrusted to magistrates’
bodies only with validation by 2/3rds of
upper chamber
One agency in charge
WEF Judiciary independence
(perception of businessmen)
Successful litigations against
government
Chile,
Botswana
Taiwan
Georgia
Civil society Ease of registering, ‘sunshine’ laws for
public consultations, civil society
component in every donor program,
separate or combined with assistance to
government, conditions on participatory
budgeting, auditing or evaluations
Number of NGOs
% public consultations from total
new legal drafts or policies
Existence and traffic of
watchdog websites
Facebook users per country
Estonia
Korea
Media
freedom
No government regulation for media
except anti-trust or cartel legislation
Political conditionality from international
community related to media freedom
Media sustainability indicators
News readership/audience
Estonia
E- citizens IT investment in education, training for
educators
Freedom of Internet
Internet connections per
household
Facebook users per country
% citizens using e-services
South Korea
Estonia
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