Corruption in Croatia: A Short Guide for Visitors

Zagreb 19.Sept.2006

When?

Corruption: The six phases• 1990–1995 War and Corruption• 1995-1999 Cohabitation with

Corruption

• 2000–2003 The Time of Compromise

• 2003-2006 The return to issue

• 2006-- War

against corruption• 200....

How much corruption?

1. CPI index

2. Corruption barometar

3. Public opinion

4. Public Scandals

5. Economic indicators

Position on the list

Index 3,4Position 70 from 159

Results

2004 2003 2002 2001 2000

3,5 3,7 3,7 3,9 2,7

-0,2 -0,2 -0,4 +0,8

Results -

2005 (3,4) (0,44)2004 2003 2002 2001 2000

67 from 146

(0,45)

59 from 133

(0,44)

52 from

102

(0,51)

47 from 91

(0,51)

77 from 90

(0,86)

Corruption in Croatia: Beyond the facts

• CPI contribute to a knowledge map on which policy action can be taken.– No single index contains the concept in its

entirety.

• To provide a cardinal or ordinal index as a basis for comparison.

• Common units does not imply comparability of meaning.

BEEPS World Bank

Slight improvement

Slight improvement

Maeasure of SC

Stagnation

Nations in Transit 2006Croatia:Corruption

12

34

56

78

9

S1

S2

0

100

200

300

400

500

600

Corruption/dem.Score

Series1

Series2

GfK Septembar 2006

Corrupt State

86

84

84

82

77

76

75

64

52

49

30

0 10 20 30 40 50 60 70 80 90

Ukraine

Russia

Slovakia

Croatia

Slovenia

Bulgaria

Romania

Hungary

Czech Republic

Poland

Austria

We live in a corrupt state.„positive answers“

%CEE AVERAGE: 69%

Against Corruption

Nations in Transit

Numerous surveys highlight the public perception that corruption has actually gotten worse overthe past year. According to the European Bank for Reconstruction and Development's 2005Transition Report: "Croatia was among the few transition countries (Hungary, Azerbaijan,Armenia) in which corruption in 2005 was higher than in 2002."Transparency International indicates in its Corruption Perceptions Index for 2005 that Croatia hasdropped three places from the previous year, which places it in the company of Burkina Faso,Egypt, and Syria.

Citizens feel that corruption is especially widespread among political parties, in the judiciary, and in representative bodies. On a scale of 1 to 5, with 5 representing total corruption, political parties scored a grade of 4, followed closely by representative bodies with 3.9 and the judiciary with 3.8.

Citizens evaluated NGOs, the military, and the church as being the least corrupt.Hospitals were among the institutions with the worst reputations. Agence France-Presse reports that

90 percent of Croatians feel that bribing doctors is not out of the ordinary.bribery, nepotism, and political patronage are a legacy of the former regime and the nation’s past.Numerous surveys also highlight that corruption is perceived to be widespread in land registration.

3. Anti-Corruption Policy

Dimension specific results

Main Components of Anti-Corruption Policy

3.1 Anti-Corruption Legal Framework & Adoption of International Conventions

3.2 Anti-Corruption Strategy3.3 Promotion of Good

Governance and Reliable Public Administration

3.4 Transparency

Preliminary findings

• Croatia has made solid progress in signing and ratifying key international conventions and has aligned key components of criminal legislation to international standards.

• Conflict of interest policy has improved (e.g. wealth declaration of public managers) but still inconsistencies in the legislation and the institutional basis for resolution of conflicts must be strengthened.

• Although public procurement is largely in line with the acquis communautaire, rules and procedures for fair and transparent procurement are not always respected according to the private sector.

• Croatia needs to develop a clear plan to tackle corruption with customs officials. Training of customs officials is still largely insufficient.

• Public/private consultation, monitoring and evaluation and public awareness campaigns should become more extensive if the national strategy is followed.

Sub-dimension

Preliminary

EvaluationComments

Anti-Corruption Legal Framework & Adoption of International Conventions

• Croatia has signed and ratified key international conventions related to corruption, such as:

• The UN Convention against Corruption

• The Council of Europe (CoE) Criminal Law Convention on Corruption

• The CoE Convention on Laundering, Search, Seizure and Confiscation of Proceeds of Crime

• The CoE Civil Law Convention on Corruption.

• Significant progress has also been made in aligning the legislative framework with international standards.

• Criminal offences include active and passive bribery (including private sector corruption), money laundering, account offences and trading in influence.

• The Act on the Liability of Legal Persons for Acts of Crime was passed in 2003 (Official Gazette 151/03).

Anti-Corruption Strategy

• A new national anti-corruption strategy and an Action Plan has been recently adopted but now needs to be implemented.

Promotion of Good Governance and Reliable Public Administration Conflict of Interest Policy

• Croatia has taken steps to improve its conflict of interest policy (e.g. introduction of wealth declaration of public managers).

• However, the most recent SIGMA evaluation identified inconsistencies and other shortcomings in various pieces of legislation.

• For example, the Law on Election of Representatives to the Croatian Parliament (LER) and the Law on Prevention of Conflict of Interests in Pursuance of Public Offices contradict each other with regard to the ability of MPs to serve on the boards of SOEs.

• Furthermore, implementation of conflict of interest policy needs to be improved, namely by strengthening the Commission for the Resolution of Conflicts of Interest.

Dimension specific results

Anti-Corruption Policy

Preliminary findings

Promotion of Good Governance and Reliable Public Administration

• Until recently the Croatian civil service remained highly politicised due to:

• Inadequate provisions for merit-based recruitment and promotion.

• Lack of obligation on the part of civil servants to maintain impartiality or political neutrality in the performance of official duties.

• Staffing of senior civil service positions mainly with political appointees.

• Changes have been made to the Law on Civil Servants and Employees in 2005. It is too soon to evaluate the implementation or the results of these changes.

• Croatia should develop an anti-corruption strategy for customs. There are plans to introduce an e-system for customs administration.

• The legal framework for public procurement is largely in line with the Acquis communautaire, although some changes are still needed to fully align the system with EC Directives. According to private sector, public procurement is not always conducted in a transparent way.

• As is the case in many SEE countries, anti-corruption training programmes for customs, tax and law enforcement officials need significant strengthening.

Transparency • A monitoring council is planned to oversee implementation of anti-corruption strategy. Representatives from the private sector will be included on the council.

• Oversight bodies, namely the State Audit Office and the Ombudsman institution, have been established and are functioning. The State Audit Office submits reports to Parliament and has uncovered several cases of misconduct. However, strengthening the capacity of the Ombudsman institution is needed.

• A public awareness campaign is anticipated in the anti-corruption strategy.

Dimension specific results

3. Anti-Corruption Policy: Good governance

Preliminary findings

National Strategy

• Second Strategy• Political Will• Operationalization• Credible leadership• Entry point • Diagnosis • Assessment of the political culture • Sequencing

National Program

The first challenge that all transition countries face in launching an anticorruption strategy is credible leadership. A serious anticorruption program cannot be imposed from the outside, but requires committed leadership from within, ideally from the highest levels of the state. Yet it is precisely the credibility of the state that is undermined by pervasive corruption, creating a potential vicious circle in which entry points for an anticorruption strategy are hard to find. Building a demand for reform amongst the general public through diagnostic survey work can be an effective way of convincing the political leadership that serious anticorruption efforts will win them popular support.

Research Tools

The third challenge is to develop a detailed diagnosis of the nature and extent of corruption in the particular country. Experience has already shown that domestic surveys of households, firms, and public officials can be a powerful tool in any anticorruption strategy. The purpose of such an exercise is to gain essential information about the nature of the corruption beyond the general categories analyzed in this report and to identify possible entry points (see below) into effective anticorruption work. The process of implementing surveys, running workshops, and developing a dialogue within civil society on the nature of the problem can play a major role in galvanizing support for an anticorruption strategy and building constituencies at various levels of the system.

Who: Actors in Corruption

• Political parties

• Health

• Judiciary

• Local Government

Money and Politics

• “There are two things important in politics. The first is money

• and I can’t remember what the second one is”.

• Mark Hanna,1904

Learning or tricks/lerning tricks

The party finance reform and regulation of electoral campaigns, beside the manifest goals have effects in development of participative political culture. It is a learning and constructive process and not a set of tricks to make politics a vocation for the honest people

The changing nature of political campaignes

• Increase of costs• Professionalism• Public relations• Electronic media• Trading of influence• Lobbyng costs• Oligarhisation

Inside the parties: soft money

• Oligarhization and concentration of power and knowledge on finances

• Records and secrecy, books and soft money, audit

• Connections and influence of donors (“no free lunch”)

Croatian legislation

• Law on Political Parties (LPP: Zakon o političkim strankama OG 164/98, 111/96, 76/93)

• Law on Elections in Sabor (LES: Zakon o izborima zastupnika u Hrvatski drzavni Sabor,OG 116/99)

• Law on Presidential Elections (LPE: Zakon o izboru predsjednika Republike Hrvatske ,OG 22/92).

• Law on financing of Campaign for Election of the President (Zakon o financiranju izborne promidžbe za izbor predsjednika RH OG 22/94). 21.July 2004

Elements Of The Party System: Croatia

• Non for profit entities

• Financed by membership fee and state budget (0,056%)

• 20% equally + 80% mandates

• etc.

Croatia -Campaign Finance

• The right for compensation of costs from budget if the have representative elected

• Limit of 5% of votes

• Obligation to disclose the estimation of costs

• Minorities

Article 20.1.

• PP are “obliged to publicly disclose source and assignments of their financial funds in calendar interval”

• If not “ the amount of money from budget will be designated to humanitarian actions”

Law on financing of Campaign for Election of the President¸2004

Disclosure regulations ?.Bans against certain

types of contribution?. Local budgets, state owned companies, business corporations, trade unions or foreign organisations and foreign citizens.

Money lies at the root of

several political evils:

(1) Corruption. Politicians and parties may be tempted to give improper favours in return for political contributions. The search for founds has often led to corruption.

(2) Unfairness. Money may lead to unfairness and may distort electoral competition.

(3) Financial barriers against standing for political office. The health of democracy demands that members of every group – rich or poor - should be able to undertake a career in politics.

Types of Regulations

Contribution limits. Restrictions on the amounts an individual is permitted to donate.

Disclosure regulations. Mandatory declaration of the names of contributors to campaigns and to parties and disclosure of the amounts contributed by each.

Bans against certain types of contribution. For example, the regulation or restriction of political payments by business corporations, trade unions or foreign organisations and foreign citizens.

Public subsidies: Financial payments to parties or

candidates from public funds.

Rational balance of financing (public and private)

• Fair criteria for distribution• Strict rules and limits of

private donations• Limits to overall costs of

campaigns• Full transparency of

accounts• Independent auditing

body • Sanctions

Why are Political Financing Regulations Often Evaded ?

 (1) Loopholes. Although contributions to political parties and to election campaigns are two of the most important and most direct channels through which money may be use to influence politics, they are not the only ones. Restrictions on the financing of parties and elections are likely to prove ineffective if other forms of 'politically relevant' financing remain unchecked.

(2) Inadequate enforcement. In a field as controversial and complex as the funding of parties and campaigns, laws require effective supervision and implementation. Election law has been a burgeoning field of activity - and of profit - for the legal profession.

Emphasis and Highlights

• Financing of political parties is priority in anti corruption

• Standards and principles of regulation are developed, in spite of loopholes and abuses

• Respect for local circumstances» The Role of Civil Society

• Internal organizational issues of political parties

Health

Corruption in Judiciary

Excessive Taxes and Regulations

Street Crime/Theft/Disorder

Organised Crime/Mafia

Malfunctioning JudiciaryPolicy Instability

Inflation

Financial Instability

Croatia

Eastern Europe Average

Former Soviet Union Average

Governance Obstacles to Business

Note: The thick blue line represents the severity of each obstacle for business performance in the country you chose. Distance from the origin indicates higher obstacles, and thus poorer governance performance on each dimension. The thin green line represents the average severity of each obstacle in the countries in the Former Soviet Union. The thin red line indicates the average severity of each obstacle for the countries in Eastern Europe (outside the Former Soviet Union). To select a different country, please click on the "Input" tab below .

Results are based on the firms' perceptions of how much each of these factors affect their performance. Results are scaled from 0 (no obstacle, least negative influence on the firm) to 1 (serious obstacle, maximum negative influence on the firm).

Based on relative rating of each obstacle by the country's enterprises

Source: "Seize the State, Seize the Day: State Capture, Corruption, and Influence in Transition" (PRWP 2444, http://w w w .w orldbank.org/w bi/governance/).

Estimates are subject to a margin of error, and thus precise rankings ought not be inferred. These charts are based on research in progress, and in no way reflect the official position of the World Bank, its Executive Directors, or the countries they represent.

Korupcija (WB)Korupcija (WB)

Corruption Barometar

• More then 70% Bolivia, Brazil, Peru• 51% - 70% Argentina, Bosnia and Herzegovina, Bulgaria, Cameroon,

Costa Rica, Ecuador, France, Greece, Israel, Italy, South Korea, Latvia, Lithuania, Nigeria, Philippines, Poland, Romania, Taiwan, Turkey, Ukraine, Uruguay, Mexico

• 31% - 50% Albania, Canada, Croatia, Czech Republic, Georgia, Germany, Ghana, India, Indonesia, Ireland, Kenya, Macedonia, Mexico, Moldova, Pakistan, Portugal, Russia, South Africa, Spain, USA

• 11% - 30% Afghanistan, Austria, Denmark, Estonia, Finland, Guatemala, Hong Kong, Japan, Iceland, Kosovo, Luxembourg, Malaysia, Norway, Singapore, Switzerland, UK, Venezuela

• Less 10% Netherlands

Local Government

Un presidente de Mexicoentro cantando la letra de la anti-corrupcion

y salio con las maletas llenascantando la misma cancion

A president of mexico/began singing the verse of anti-corruption and left with full

suitcases/singing the same song. Corruption in Croatia, especially at high levels of government, is

endemic¸and systemic. Officials typically excuse Croatia with the empty phrase “corruption is a problem in all transition countries”. The too frail international strategy emphasises “process” and “capacity building” – the passing of laws and the training of officials to, as one official says, “reduce the opportunities for corruption”. It is both naïve and negligent to rely on weak indigenous watchdogs like the USKOK, the Anti-Corruption Council, or the media and civil society, to stand up alone to the corrupt elite.

A dramatically different mind-set is needed. Croatia is not “just another transition country” but an inherently weak state with external and internal challenges to its very existence.