State of Corruption in Europe – Lessons for Africa

European_Union

Corruption in EU -Lessons for Africa

-Report by Samuel Ouga

For many in Europe, corruption is assumed to exist only in other countries, particularly in places such as Africa. But recent surveys have shown that corruption is a “major problem” in Europe, and there is a strong correlation between corruption and the ongoing financial crisis in the Euro Zone. For Africa, the lessons are writ large: corruption has to be fought or, sooner or later, nations will suffer dire consequences.

For Africans who suffer “widespread corruption” by their governments, business-people, political leaders, and sundry officials, something happened in Europe in June that holds a lot of lessons for the continent. On 6 June, Transparency International (TI), the global anti-corruption NGO based in Berlin, Germany, published a comprehensive pan-European corruption report (done in conjunction with the Directorate-General Home Affairs of the European Commission) about the state of corruption in 25 member-states of the EU. It was titled “Money, politics, power – Corruption risks in Europe”.

Launched at the European Parliament, the report concluded that though corruption was a “major problem” across Europe, the countries currently undergoing financial crisis in the Euro Zone – Portugal, Italy, Greece and Spain (the so-called “PIGS”) – were among the most corrupt countries in Europe, and sadly they have done little in the past to combat it.

“The ongoing financial crisis”, the TI report said, “has brought into stark relief the price of complacency about corruption in Europe. While caused by a confluence of factors that differ from country to country, the failure to put in place adequate measures to prevent, detect, and sanction against legal and illegal forms of corruption are among [the most important causes of the financial crisis].”

The report went on: “Greece, Italy, Portugal and Spain top the list of the Western European countries found to have serious deficits in their integrity systems. Research also suggests a strong correlation between corruption and fiscal deficits, even in so-called ‘rich’ countries. Those countries that perform worst on global indicators measuring the ‘control of corruption’ also run the highest budget deficits.

“The national assessments of these countries provide ample evidence of systemic problems and failure to implement anti-corruption safeguards that may have contributed to the economic problems in Europe.”

Lessons for Africa

For Africa where corruption has become endemic in most countries, there is a hard lesson to be learned. And it is this: there is a high price to pay for failing to combat corruption – as shown in Greece, Italy, Spain and Portugal. No matter how strong a nation’s economic and political foundations, corruption, or the failure to fight it, can bring dire consequences.

According to TI’s report, it is not only traditional forms of corruption, such as bribery, that are linked to poor macro-economic outcomes. In the context of the ongoing Euro Zone financial crisis, weak oversight and ineffective regulations are linked to what may be called “legal corruption” which goes beyond bribery.

Legal corruption, according to TI, includes influence peddling, for example, the excessive and undue influence of lobbyists in the corridors of power in Europe, a trend which is promoted through opaque lobbying rules and the existence of revolving doors between the public and private sectors.

A “revolving door” is defined as post-employment for parliamentarians, members of the Executive, and senior public officials who leave or retire from the public sector and take employment in the private sector.

According to TI, post-employment restrictions are important for regulating conflicts of interest. But across Europe, the “revolving door” is not properly regulated, thus allowing retiring MPs, ministers and senior civil servants to use their former public office connections to unfairly and unethically leverage insider networks and knowledge for personal financial gain and also for the private companies they work for after leaving office.

Strangely, according to TI’s report, there are no post-employment restrictions at all for members of the Executive in eight EU countries – Czech Republic, Denmark, Hungary, Italy, Romania, Slovakia, Sweden and Switzerland.

In others, regulations are in place but are too vague (Ireland, Netherlands); contain too much scope for exceptions (Portugal); contain short cooling off periods after leaving office (Ireland, Poland); are not enforced and so potential conflicts of interest frequently arise (Bulgaria); or are overly reliant on voluntary compliance (the UK).

All these factors, TI says, have resulted in a more subtle form of corruption that skews decision-making to benefit a few at the expense of the many.

Definition of corruption

TI defines corruption as “the abuse of entrusted power for private gain”. While this is not a legal definition, TI says it serves to capture a wide range of unethical behaviour in the public, private, and other sectors that is harmful to society.

In the context of the above definition, corruption is found in virtually all countries of the world. However, due to a variety of circumstances, the problem is more acute in certain countries than others, to the great detriment of the majority of their citizens.

In many developing countries, such as those in Africa, the lives of ordinary citizens are made difficult by corruption, and they detest it. In some countries, corruption is a daily problem for ordinary citizens who find it difficult to access health care, education and other essential services without paying bribes.

Studies show that corruption can arrest economic development especially if it becomes entrenched – because rich and corrupt elites have a strong self-interest in retaining power.

“Corruption,” the TI affirms, “damages both individuals who are immediately affected and society as a whole, for example in holding back economic development and further excluding marginalised communities from the benefits of growth and opportunities for advancement.”

For this reason, TI urges that countries should put in place robust “national integrity systems” that provide checks and balances to those in power, whether elected representatives, economic power, or power in other forms. This is because “tone from the top” is particularly important: if leaders in government, politics, business, and other important sectors are perceived as corrupt, it has a corrosive effect throughout the system.

“When corruption is not checked, it creates a culture of impunity, in which those in power at all levels are able to act corruptly with little fear or danger of sanction,” TI says: “Once it takes hold, corruption feeds on itself, and can be extremely hard to reduce or eradicate.”

So, from a purely economic perspective, “there is a strong argument for countering corruption in all its manifestations,” says TI. “However, this is not just about economics – the [Euro Zone financial] crisis should be seen as a wake-up call for European countries to address underlying governance issues and to reform political systems so that corruption and maladministration can be seriously addressed.”

Africa, are you listening?

Corruption in Europe

Here, Transparency International puts it so poignantly: “For many in Europe, corruption is assumed to exist only in other countries, particularly in the developing world. This has meant that corruption prevention has not been a political priority in many countries of the region.

“[But] research carried out within the framework of the European National Integrity Systems project shows that this complacency is ill-informed and that when it comes to safeguarding against corruption, there is much to be done to get the European house in order…

“All countries in Europe, even those usually considered to be the ‘cleanest of the clean’, have some deficits in their anti-corruption frameworks… It is time for Europe to wake up to the corruption risks that it has so far failed to address.”

The TI report continued: “Across Europe, despite reluctance among politicians to prioritise the issue, there is growing concern among the general public that corruption is on the rise. Tl’s 2010-11 Global Corruption Barometer revealed that the majority of Europeans felt that corruption was on the increase in their countries.

“A 2012 Eurobarometer poll [also] shows that this concern has not disappeared, with 74% of Europeans stating that corruption is a major problem in their countries. Nevertheless, there are huge differences across the region: while 98% of respondents in Greece consider corruption a major problem, the corresponding figure is 19% in Denmark.”

According to the report, a number of EU countries stand out when it comes to the perception of increased corruption, namely Czech Republic, Greece, Portugal, Romania, Slovakia, Slovenia, and Spain.

National integrity systems

TI’s June report brought together the findings of 25 National Integrity System (NIS) assessments carried out across Europe in 2011 – in Belgium, Bulgaria, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the UK. An NIS assessment provides a clear picture of how resistant a country’s institutions are to corruption. An NIS is generally defined to comprise a country’s legislature, executive, judiciary, public sector, law enforcement agencies, supreme audit institutions, electoral management body, ombudsman, anti-corruption agencies, political parties, media, civil society, and business.

The EU NIS assessments (upon which the TI’s June report was based) were carried out in-country and were coordinated by TI’s national chapters. In each country, a lead researcher, or group of researchers, in consultation with an expert advisory group and TI’s national chapter, conducted the research between February and December 2011. So the data is as fresh as it comes.

The great surprise was that when it comes to corruption, no European country comes out with a completely clean bill of health. “Greater commitment from all sectors – politicians at national and regional levels, businesses and civil society – is thus needed to ensure that the weak spots in the integrity systems of Europe are addressed,” the TI report said.

Overall, the NIS assessments revealed what amounted to “the good, the bad and the ugly” in Europe. According to the assessments, a small group of European countries lead the pack on integrity issues, and they are all found in Northern Europe – Denmark, Norway and Sweden. These countries have entrenched transparency and accountability mechanisms.

Below the “good” comes relatively strong performers like Germany, Finland, Switzerland and the UK, which have strong systems overall but lack a coherent approach to fighting the not insignificant corruption risks embedded in their systems.

The above two groups of countries, however, are vulnerable to corruption risks because they take a light-touch approach to some aspects of the integrity system. In particular, said the TI report, Sweden and Switzerland have no mandatory regulation of party financing; and even in Denmark, Germany, and the UK where some regulation is in place, their party financing systems are far from exemplary.

Then comes the “bad”, and they include Belgium, France, and the Netherlands, which exhibit relatively robust national integrity systems but still have some notable weaknesses.

Central and Eastern Europe

Enter the “ugly”. Here, the TI report disturbingly revealed that eight years after their accession to the EU, and more than 20 years after the fall of communism, the EU’s “newcomers” – Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia – are bad at combating corruption.

“Of the new EU member states, Estonia, Lithuania, Poland and Slovenia have strengthened their integrity systems considerably in recent years,” the report said, “but they still suffer from a number of important flaws that require attention to ensure that the fight against corruption is consolidated.

“Of particular concern is that in some countries of Central and Eastern Europe – particularly Czech Republic, Hungary and Slovakia – there has been a rolling back of positive progress on anti-corruption since accession to the EU.”

Southern Europe

Overall, the TI report was particularly scathing about the countries of Southern Europe, the PIGS – Portugal, Italy, Greece and Spain – where serious deficits in public sector accountability and deep-rooted problems of inefficiency, malpractice, and corruption exist, but which are neither sufficiently controlled nor sanctioned.

“The links between corruption and the ongoing financial and fiscal crisis in these countries can no longer be ignored,” the report emphasised. “Here, corruption often constitutes legal but unethical practices resulting from opaque lobbying rules, trading in influence, and revolving doors between the public and private sectors.

“In Greece, despite extensive reported cases of corruption, approximately only 2% of civil servants have been subjected to disciplinary procedures. Following this trend, in Portugal, a recent study found that less than 5% of all corruption-related proceedings end in a conviction.”

Political parties

Strangely, the institution that breeds the politicians who govern Europe – political parties – happen to be one of the worst performers on corruption. According to TI’s report, there are a number of areas where political parties do not live up to transparency, accountability, and integrity standards, one of which is the inadequate regulation of party political financing.

“Large private donations are a risk to democracy, particularly when they involve companies with vast sums at their disposal developing close relationships with political parties and thus gaining substantial influence in a country’s politics and policies,” the report said.

In almost all the EU countries surveyed for Tl’s Global Corruption Barometer 2010-11, the public rated political parties as the most corrupt sector.

“In the vast majority of European countries,” the Barometer showed, “more than 50% of people stated that political parties were ‘corrupt’ or ‘extremely corrupt’. Most startling are the results at the upper end of the spectrum – in Greece, Ireland, Italy, Romania and Spain, more than 80% of people stated that political parties were ‘corrupt’ or ‘extremely corrupt’.

“One of the intersections at which parties and businesses meet – political party financing – is a particularly high-risk area, which even countries often described as ‘low corruption contexts’ have not managed to insulate themselves against,” TI says.

“In Switzerland, despite a tradition of open policy-making, political finance remains a black box, devoid of transparency. Given that public funding of political parties in Switzerland is minimal and the vast majority of party funding comes from private sources, when voters go out to cast their vote in a referendum or election, they can only speculate about the influence of companies and wealthy individuals on Swiss national politics.

“In Sweden, a light-touch approach has been taken to political financing regulations and while there is a voluntary agreement among most parties to disclose their budgets, the names of specific donors are not included.”

Even in the Netherlands where there are regulations, they are wholly inadequate as the rules only apply to political parties at the central level who choose to receive state subsidies. For all other political parties, [those who do not receive state subsidies], no rules on political financing exist.”

The report showed that in 2008-09, serious vulnerabilities were exposed in the political financing system in Finland, where a number of scandals emerged involving parties and politicians who failed to disclose the source of campaign funds amid speculation that business executives and others had been donating money to campaigns in order to garner favourable political decisions.

“This shows that countries that are generally considered to be ‘clean’ are far from immune to corruption and that every measure should be taken to ensure that political systems operate in an open and transparent manner,” the report urged.

Even in the European countries that have opted for a complete ban on corporate donations (such as Belgium, Estonia, France, Hungary, Latvia, Luthuania, Poland, and Portugal), the ban has been found to be no panacea as it is not accompanied by generous public funding of parties. This leaves the parties open to opaque means to fund themselves.

According to TI’s report: “While only about half of the European countries assessed have a ceiling in place for individual donations to political parties, there is a wide variation in the levels at which contributions are capped. In the UK, for example, the absence of any limit on the amount individuals or corporations can donate has contributed to the erosion of public confidence in the political process.”

In Germany, while the identity of donors of all contributions above 500 euros must be reported, public disclosure of the donor must only be made in the annual financial statement of the party concerned if the contribution exceeds 10,000 euros per year. However, contributions above 50,000 euros are disclosed immediately, but these thresholds have been criticised because they are too high to allow citizens sufficient insight into the sources of political party funding.

In some countries, the disclosure thresholds are being abused by a common practice of making donations just below the limit and thereby keeping them secret.

Latvia’s good practice

One good example that other countries can emulate comes from Latvia. To check abuses in the political parties’ disclosure regime, Latvia has enacted a Political Financing Law, which imposes comprehensive transparency requirements on political parties. It is a system that African countries – where political parties routinely buy votes and distort voting patterns – can learn from.

In Latvia, the regulatory framework envisages clear, timely, and comprehensive public disclosure procedures for both party revenue and expenditure. Parties are obliged to submit to the Corruption Prevention and Combating Bureau (CPCB) two kinds of report: (1) declarations of election revenue and expenditure; and (2) annual reports.

Not later than 10 days after the receipt of party declarations and reports, the CPCB is mandated to publish them in the official bulletin and online. And all citizens are guaranteed the right to request hard copies of the declarations and reports from either the CPCB or the respective parties.

The law also makes it mandatory that within 15 days after a party receives a donation, it must inform the CPCB; and the CPCB must publish the information on its website.

Latvia’s database of donations also provides searchable and up-to-date information (as recent as one day old) on recipients, sources, and the value of donations. Similar online databases are available about membership dues paid to parties and party declarations and annual reports.

Parliaments

The crying shame is that among the more worrying trends about corruption in Europe come from parliaments – the fundamental cornerstone institution of any democracy. TI’s June report sadly showed that in Europe, parliaments were not living up to transparency, accountability, and integrity standards.

The NIS assessments found that only three out of 24 national parliaments in Europe had appropriate and well-functioning integrity mechanisms for their MPs. No wonder public confidence in parliaments has sank to a low ebb, on account of the numerous scandals involving MP expenses (the UK), pension fraud (Norway), patronage (Czech Republic), and various cases of conflict of interest between MPs and business people (Bulgaria).

Some parliaments, however, emerge as relatively strong and have robust oversight mechanisms. In particular, parliaments in Germany, Norway, Sweden and Switzerland have the legal and practical mechanisms to provide strong oversight of the Executive.

But generally, European parliaments are seen as falling short in putting forth and enforcing anti-corruption safeguards. In two of the countries assessed – France and Slovenia – MPs’ declarations are not made available for public scrutiny at all, making the declarations useless as a public accountability mechanism.

Private sector

Another corruption-prone area in Europe is the private sector. The NIS assessments showed that Europe’s private sector was not playing a meaningful role in preventing and combating corruption. Across all the countries, only two (Norway and Sweden) have a private sector that adequately engages with government and civil society on anti-corruption measures.

In all the EU countries, TI found that the internal standards of corporate governance and integrity in the business sector are weak. This is exemplified by the recent Barclays Bank scandal in the UK where the bank was fined nearly £300m by regulators in Britain and the USA for rigging inter-bank lending rates. The rigging was to Barclays’ advantage, but at the great expense of financial services’ customers worldwide.

Lobbying

Lobbying, which remains veiled in secrecy in Europe, is another corruption-prone area. According to TI’s June report, opaque lobbying rules in Europe result in skewed decision-making which benefits a few at the expense of the many. Only 6 of the 25 countries assessed (France, Germany, Lithuania, Poland, Slovenia, and the UK) have regulated lobbying to any degree, and in many cases the implementation of lobbyist registers is severely lacking.

“When undertaken with integrity and transparency,” TI says, “lobbying is a legitimate avenue for interest groups to be involved in the deliberative process of law making. It is when lobbying is non-transparent and unregulated that problems arise.

“Corporate lobbying in particular raises concerns because it often involves companies with vast sums at their disposal developing close relationships with lawmakers and thus gaining undue and unfair influence in a country’s politics and policies. Overall, the findings suggest that lobbying in the national parliaments of Europe remains opaque and inaccessible to the average citizen.”

Interestingly, an estimated 3,000 lobbying entities have offices in Brussels (the EU headquarters) and target European institutions to influence legislation. According to TI: “It is crucial for transparent EU decision-making that the goals and methods [of lobbying firms] are made clear.”

The European Parliament and European Commission have had registers of lobbyists since 1996 and 2008 respectively, and these were merged in 2011 to create a single “Transparency Register”. However, the greatest shortcoming of this register is that it remains voluntary, and lobbying firms can ignore it with impunity.

Public administrations

Like elsewhere in the world, public administrations in Europe exhibit major corruption risks and vulnerabilities. This is particularly evident in Bulgaria, Slovakia, Czech Republic, Greece, Italy, Portugal, Romania, and Spain; and it often relates to public procurement processes.

Disturbingly, across Europe, “public procurement is a corruption risk hotspot”, says TI. “Public procurement has long been considered the government activity most vulnerable to waste, fraud and corruption due to its complexity, the size of the financial flows it generates, and the close interaction it entails between the public and the private sectors.”

Estimates show that in 2008 the total value of public procurement contracts in the EU was around 1.7 trillion euros or 15% of the EU’s GDP. Though EU member states are subject to European regulation in this area, high profile scandals involving public procurement projects continue to occur.

According to TI: “Problems appear to be most acute in Bulgaria, Czech Republic, Italy, Romania, and Slovakia. Legislative frameworks have been brought in line with EU law, but the rules are often systematically circumvented with impunity.”

In the Czech Republic, for instance, a survey in February 2010 found that “it is impossible for small- and medium-sized companies to win a public contract without resorting to bribery, a kickback, or some other incentive,” said the TI report.

To check these abuses, some countries have moved from the traditional procurement systems to e-procurement regimes.

A “good” example comes from Switzerland where a robust e-procurement system has effectively reduced the opportunities for corruption.

“First, the system’s online platform is particularly comprehensive,” says the TI report. “Awards are given based on value for money and all calls for tender and documentation are published… If a supplier gives false information, or has made agreements that eliminate or substantially impair effective competition, [the supplier] is reliable for debarment from future calls for tender.”

Whistleblowers

Another area where European countries are failing is in whistleblower protection, which is crucial to ensuring transparency and exposing corruption, wrongdoing, and mismanagement in both public and private sectors.

“Protecting those who have the courage to speak up and act according to their conscience contributes to a vibrant democratic culture,” TI emphasises. “It is an instrument whose usefulness is being increasingly recognised across the globe.

“Yet protection for whistleblowers is severely lacking in Europe. Of the 25 countries assessed, only six have dedicated whistleblower legislation – Hungary, Netherlands, Norway, Romania, Switzerland and the UK – and in all but two of the countries assessed (Norway and the UK), whistleblowers do not have sufficient protection from reprisals.

“The result of this legislative patchwork is that the practice of whistleblowing remains extremely rare in most European countries, and whistle-blowing suffers from stigma and negative connotations.”

Recommendations

TI’s report came complete with a long list of recommendations on how to fight corruption, Its, however, too long for me to put here. Suffice it to say, however, that for Africa, there are a lot of lessons to be learned from the European experience. Africa cannot continue to live “comfortably” with corruption as it has been doing since the continent achieved political independence 50 years ago.

The current financial crisis in Europe proves that corruption has dire consequences for countries and their people. No wonder Africa has been treading water for the last 50 years. Something has to give – and it is corruption that must go.

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