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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