World Bank, November 2006World Bank, November 2006
Anticorruption in Transition 3 Anticorruption in Transition 3 – Who is Succeeding … And Why?– Who is Succeeding … And Why?
www.worldbank.org/eca/act3www.worldbank.org/eca/act3
The Big QuestionsThe Big Questions
Is corruption in Eastern Europe Is corruption in Eastern Europe and the former Soviet Union and the former Soviet Union
– – including Moldova – including Moldova –
getting better or worse?getting better or worse?
What explains the changes?What explains the changes?
A Tool for Monitoring CorruptionA Tool for Monitoring Corruption
““Business Environment and Business Environment and Enterprise Performance Survey” (BEEPS)Enterprise Performance Survey” (BEEPS)
Joint initiative with EBRDJoint initiative with EBRD 20,000 firms in 3 rounds (1999, 2002, 2005)20,000 firms in 3 rounds (1999, 2002, 2005) 26 transition countries26 transition countries 6 European comparators in ‘05: Ireland, Germany, 6 European comparators in ‘05: Ireland, Germany,
Greece, Portugal, Spain, Turkey (+ Korea and Vietnam)Greece, Portugal, Spain, Turkey (+ Korea and Vietnam) Focus on corruption in enterprise-state interactionsFocus on corruption in enterprise-state interactions
Corruption Indicators used in BEEPSCorruption Indicators used in BEEPS
Frequency of bribery Frequency of bribery • TaxTax• CustomsCustoms• Business LicensingBusiness Licensing• ProcurementProcurement• JudiciaryJudiciary
Bribe “tax”Bribe “tax” State captureState capture Corruption as a problem for businessCorruption as a problem for business
Is corruption getting Is corruption getting better or worse?better or worse?
……and how do transition countries and how do transition countries compare with European comparators?compare with European comparators?
Corruption is falling for the Corruption is falling for the region as a wholeregion as a whole
(though not yet to W. Europe levels)…(though not yet to W. Europe levels)…
2.7 2.62.4
1.8
1
2
3
4
5
6
1999 2002 2005
ind
ex
of
bri
be
fre
qu
en
cy
1=
ne
ve
r
6=
alw
ay
s
Transition Countries
Comparator Countries
Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?
… … but not in all countries …but not in all countries …Bribe Frequency by country, Bribe Frequency by country,
2002-20052002-2005
0%
25%
50%
75%
100%
Geo Slk Bul Mol Rom SAM Alb Kyr
pe
rce
nt
"fre
qu
en
t"
Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?
… … and not in all sectors.and not in all sectors.Bribe Frequency by sector, 2002-2005Bribe Frequency by sector, 2002-2005
0%
5%
10%
15%
20%
Fire andBlg Insp.
Courts Customs Bus.Licenses
Taxes Gov.Contracts
per
cen
t "f
req
uen
t"
comparator countries
2005
transition countries
2002-2005
Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?
Many Moldovan firms see corruption Many Moldovan firms see corruption as a problem for business…as a problem for business…
but fewer than in 2005.but fewer than in 2005.
59%
32%
41%50%
30%37%
0%
25%
50%
75%
100%
Mol EU-8 CISperc
en
t o
f fi
rms s
ayin
g c
orr
up
tio
n i
s a
p
rob
lem
Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?
Moldovan firms report the highest levels Moldovan firms report the highest levels of corruption in the following areas:of corruption in the following areas:
• CustomsCustoms (improving but still high)(improving but still high)
• Business licensingBusiness licensing (no change over 3 years)(no change over 3 years)
• TaxTax (major improvement but still significant)(major improvement but still significant)
• Government procurementGovernment procurement (rising)(rising)
……and state capture is still relatively high and state capture is still relatively high in Moldova and other SEE countries.in Moldova and other SEE countries.
New private firms continue to pay New private firms continue to pay the most bribes.the most bribes.
0%
5%
10%
15%
20%
25%
30%
35%
small, new private,domestic, firms in the
city
larger,older, state orforeign, firms outside of
the city
Pe
rce
nt
of
firm
s s
ay
ing
th
at
bri
be
ry is
fre
qu
en
t
transition countries 2002
transition countries 2005 comparators countries 2005
Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?
Why the improvement Why the improvement in ECA?in ECA?
A Tool for Monitoring A Tool for Monitoring Policies and InstitutionsPolicies and Institutions
“Doing Business”
Survey of accountants and lawyers on Survey of accountants and lawyers on time and cost of:time and cost of:
• Starting a businessStarting a business• Dealing with licensesDealing with licenses• Hiring and firingHiring and firing• Registering propertyRegistering property• Getting creditGetting credit• Protecting investorsProtecting investors• Paying taxesPaying taxes• Trading across bordersTrading across borders• Enforcing contractsEnforcing contracts• Closing a businessClosing a business
Transition countries lead the world in Transition countries lead the world in business-friendly policy reforms…business-friendly policy reforms…
0 25 50 75 100
South Asia
East Asia & Pacific
Latin America and Caribbean
Middle East & North Africa
Sub-Saharan Africa
OECD high-income
Eastern Europe and Central Asia
Percent of Countries that Made at Least One Reform in 2005
Source: Doing Business in 2007
3 of the top 10 reformers in 2005 3 of the top 10 reformers in 2005 were in ECA…were in ECA…
1.1. Georgia Georgia2. Romania2. Romania3. Mexico3. Mexico4. China4. China5. Peru5. Peru6. France6. France7. Croatia7. Croatia8.8. GuatemalaGuatemala9. Ghana9. Ghana10. Tanzania10. Tanzania
Source: Doing Business, 2007
… … and reforms are in many areas.and reforms are in many areas.
Tax Tax • Low rate, broad based taxes (e.g. Baltics and Slovakia)Low rate, broad based taxes (e.g. Baltics and Slovakia)
Customs Customs • IT, risk-weighted inspections (SE Europe)IT, risk-weighted inspections (SE Europe)
RegulatoryRegulatory environmentenvironment• deregulation; less frequent inspections (Georgia)deregulation; less frequent inspections (Georgia)
CourtsCourts• independence, efficiency, transparency (Romania) independence, efficiency, transparency (Romania)
ProcurementProcurement • transparency and capacity-building (Poland)transparency and capacity-building (Poland)
However, the ease of doing business However, the ease of doing business still varies widely among countries.still varies widely among countries.
Ukraine
Moldova
Poland
Hungary
Slovenia Bulgaria
Czech Republic
Slovakia
Latvia Estonia
Lithuania
rank for ease of doing business1=best 175=worst
rest of ECABulgariaEU-8
Moldova 103
Uzbekistan=147
Source: Doing Business in 2007
Lithuania 16Lithuania 16
Moldova ranks well in a fewMoldova ranks well in a fewpolicy areas but not most…policy areas but not most…
[note: lower score is better][note: lower score is better]
1
88
175
Labor Licenses Taxes InternationalTrade
Credit InvestorProtection
Startup ClosingDown
Courts Registration
Do
ing
Bu
sin
es
s R
an
k
EU-8 (median)
Moldova
Source: Doing Business in 2007
… … and some progress has been made in and some progress has been made in addressing accountability and transparency.addressing accountability and transparency.
0
4
8
12
AssetMonitoring
Conflict ofinterest
Freedom ofInformation
Immunity
Qu
ali
ty o
f A
nti
co
rru
pti
on
La
ws
MD
EU-8 average
RO
LT
Source: World Bank project on Actionable Indicators; update of Dorhoi (2005)
What motivates What motivates change?change?
The “carrot” of EU Accession has The “carrot” of EU Accession has been a strong motivator of reform.been a strong motivator of reform.
0
25
50
75
Cze, Est, Hun,Pol, Sln
Lat, Lit, Slk Bul, Rom Cro, Mac Alb, Mol, Ukr
Imp
rove
men
t in
an
tico
rru
pti
on
in
stit
uti
on
s
1995-2002
2002-2003
Source: Anticorruption in Transition 3 – Who is Succeeding … and Why?; based on the Anticorruption Assessment Index in Dorhoi (2005).
Most importantly, every country that has Most importantly, every country that has made significant progress has hadmade significant progress has had strong and committed leadership.strong and committed leadership.
To summarizeTo summarize
1.1. Corruption in enterprise-state relations is falling in Corruption in enterprise-state relations is falling in many transition countries...including Moldova.many transition countries...including Moldova.
• but wide variation among sectorsbut wide variation among sectors
2.2. Policy and institutional reforms matter.Policy and institutional reforms matter.• Customs, business licensing, taxation, and public Customs, business licensing, taxation, and public
procurement are some key areas for Moldovaprocurement are some key areas for Moldova
3.3. Strong leadership is essential, and countries need to Strong leadership is essential, and countries need to continue their efforts.continue their efforts.
• Still a distance from EU normsStill a distance from EU norms• Complacency is not an option in today’s globalized Complacency is not an option in today’s globalized
world world
Anticorruption in Transition 3:Anticorruption in Transition 3:Who is Succeeding … And Why?Who is Succeeding … And Why?
www.worldbank.org/eca/act3www.worldbank.org/eca/act3
For more information on For more information on economic policy and governance:economic policy and governance:
www.worldbank.org/eca/econwww.worldbank.org/eca/econ