Administrative Corruption on Decline in Eastern Europe and Central Asia, Reports World Bank

February 3, 2011

Washington, February 9, 2011 - Countries of Eastern Europe and Central Asia (ECA) made substantial progress in reducing administrative corruption and the regulatory burden on firms, according to a new World Bank report Trends in Corruption and Regulatory Burden in Eastern Europe and Central Asia. Neither corruption nor the regulatory burden that firms face are a bigger problem for firms in ECA countries than for countries at similar income levels in other regions.

The new study assesses the levels of and trends in corruption and the administrative burden from government regulation on private firms from 2005 to 2008. It is largely based on the fourth round of the EBRD-World Bank Business Environment and Enterprise Performance Surveys (BEEPS) covering over 11,000 firms in 29 ECA countries, and presents an update of the analysis provided in the earlier Anti-Corruption in Transition reports.

“Since 2005, private firms in most of the ECA countries are paying fewer bribes, though the progress is not even across all countries,” said Gregory Kisunko, co-author and Senior Public Sector Specialist in the World Bank’s Europe and Central Asia region. “Overall, it is very encouraging to see the positive trends in firms’ payments of administrative bribes over the last decade continue.”

A significant and steady decline in administrative corruption from 1999 to 2005 continued over the 2005 to 2008 period. In 2005, about 20 percent of firms in 27 transition countries reported that bribes were frequently needed “to get things done with regards to customs, taxes, licenses, regulations, services, etc.” For the same countries in 2008, less than 14 percent reported that bribes were frequently needed.

According to the report, Southeastern Europe (SEE) shows the greatest improvement between 2005 and 2008, while the countries of the former Soviet Union (FSU) as a group have not improved. Bribe frequency tends to be lower in countries with higher per capita incomes, although there are exceptions: Georgia, where incomes are among the lowest in the region, has a low level of administrative corruption. On the other hand, in some countries, for example, the resource-rich countries of the former Soviet Union, bribe frequency is much higher than predicted by income level.

The analysis finds that tax administration is the area demonstrating the most impressive progress in terms of administrative corruption across countries. Significant progress was also made in the area of customs regulations. A decrease in bribe-paying in the courts is especially important as it marks a reverse in an unfavorable trend noted in the previous reports. However, overall perceptions of court performance remain unfavorable for the majority of firms, particularly those firms that have actually used the courts.

The report shows that bribery in public procurement is an exception to the favorable trend in administrative corruption. The frequency and size of informal payments necessary to obtain government contracts remains essentially unchanged from 2005 to 2008 for the region overall. Sizeable improvements were observed in countries of South Eastern Europe; however, there were increases in the percentages of government contracts paid as bribes in several countries from Central Asia to the new EU member-states.

Overall, the cross-regional analysis of a range of corruption and regulatory burden indicators finds that transition countries are comparable to other developing countries at similar income levels. This finding suggests that the transition process – from central planning to markets – has receded in importance as a common factor determining the challenges that transition countries face on their reform paths.

Enforcement of anti-corruption laws and regulations is critically important to reducing levels of corruption,” explains Gregory Kisunko. “Data shows that bribe frequency tends to be lower in countries that are best able to enforce their anti-corruption laws and rules, such as Poland. Passing anti-corruption laws is just a first step which needs to be followed by their proper enforcement.”

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