February 2016 – Transparency International (“TI”) recently published its Corruption Perceptions Index (“CPI”) for 2015, which surveys 168 countries and territories. Scores range from 1 to 100, from highly corrupt to very clean. The index is an imperfect tool, as it measures perceived levels of public sector corruption, but it is widely seen as one of the best benchmark of corruption.

The 2015 results are a mixed bag for countries in which Kinstellar operates. In Central, Eastern and South-Eastern Europe, they reflect an unsurprising blend of improvement (the Czech Republic, Romania), sluggishness (Slovakia and Serbia) and setback (Hungary, Turkey and Bulgaria). Further afield, Kazakhstan has not made much headway in 2015.

The Czech Republic and Romania improve their standing

The Czech Republic has been one of the few countries that has improved its standing significantly in 2015, jumping from 53rd to 37th overall, and improving its score to 56, 5 points above the 2014 mark. These results are in line with recent trends, and exemplified by positive assessments of multilateral institutions such as the Council of Europe’s Group of States against Corruption (“GRECO”) and the OECD.

After years of efforts, the act regulating the status of public employees, aimed at minimizing their corruption exposure, was finally adopted. There is still room for improvement of course. Bribery in the public sector should be interpreted more broadly to include all categories of employees, irrespective of whether they can influence a final decision in public procurement procedures. And whistleblower protection is still missing. But overall, the standards of anticorruption legislation are quite high and this was reflected in the country’s results.

The number of criminal proceedings initiated against companies has increased significantly (corporate criminal liability was introduced in 2012), as well as the amount of assets frozen in corruption probes. The fact that landmark corruption cases are still under investigation or pending before the courts has certainly influenced the public perception of enforcement in this area.

Romania’s CPI score and ranking have improved in 2015. The score went up 3 points from 43 to 46, while the ranking jumped 11 rungs, from 69 to 58. Still, Romania remains far below Western Europe’s average score of 60+, indicating that, although significant progress has been made, there is room for improvement.

The National Anticorruption Prosecution Directorate (“DNA”), which has earned the praise of the European Commission and foreign counterparts in past years, has continued to effectively clampdown on corruption. Notable cases include the indictment and pending trial of an acting Prime Minister, a first in the EU, and of the Mayor of Bucharest, also while in office. Other important public figures, such as former ministers and heads of local administrations, were charged with corruption crimes.

The DNA has also begun investigating companies for practices such as bribing and bid-rigging. Notably this past year, charges were brought against companies part of large international groups. The potentially serious outcome of DNA’s probes (fines and damages, debarment, reputational harm, drop in share value), and the risk that it spills over to other jurisdictions, has incited many companies to pro-actively ensure their anti-corruption compliance in Romania.

Overall, the 2015 CPI suggests that Romania’s fight against corruption is starting to yield consistent results. However, there is still a long road ahead, paved with many necessary changes in the way the public administration operates.

Stagnation for Slovakia and Serbia

Slovakia only marginally improved its ranking and score in 2015. It now stands in 50th position, which it shares with Hungary, and is one point above the 50-point watermark. There are still major concerns, most notably the lack of transparency in public procurement procedures and misuse of EU funds. The country was rocked by its share of scandals related to misuse of public funds, which led to the demise of some high-profile public officials.

But 2015 also witnessed a number of positive initiatives. The Slovak Parliament finally introduced a law on corporate criminal liability, which should enter into force in July. It provides for a broad range of sanctions applicable to certain criminal offences, although some serious ones, such as fraud or influence peddling, are missing from the list. The public procurement law was amended and now includes a requirement for bidders to register ultimate beneficiary(ies), a measure aimed at improving the transparency of the tender process. Another welcomed initiative is the overhaul of civil procedure rules, which should improve the efficiency of the court system.

For the second year in a row, Serbia has lost one point, with its score now at 40. It fell to 71st overall from 78th in 2014. The lost in rank is due in large part to the inconsistent implementation of the2013 National Strategy for Combating Corruption and related Action Plan, public authorities’ lack of transparency and the significant influence of political parties on the public sector and media.

Despite their poor showing in preventing corruption, Serbian authorities tasked with fighting corruption have maintained a relatively high level of enforcement, most recently with the arrest on corruption charges of 80 people, including a number of ex-government officials. However, older corruption cases remain pending, and the public is eagerly awaiting the first court-ordered repressive measures.

Setback in Hungary, Turkey and Bulgaria

Hungary’s rank dropped three places to 50 as a result of losing three points from the previous year. Hungary thus still lags behind most EU member states, and behind a few countries in the region. In the preceding five years, the country’s CPI rankings ranged from 46 to 54, and this year’s ranking is on par with 2010.

The lack of transparency in the distribution of public funds, for example by restricting access to data of public interest, and companies close to the government winning business through public procurement, are widely cited as reasons for the setback. But these justifications are not specific to 2015, and the drop in ranking may signal an overall negative sentiment towards other government actions. TI also noted some positive developments, such as the courts retaining their independence, and the newly introduced online cash registers contributing to a more transparent economy.

Turkey also lost three points this past year, with a score of 42 and an overall rank of 66. According to TI, the country is one of the worst performers in the last four years. Reforms that had improved its standing these past years deteriorated of late, explaining the poor results and why Turkey is falling behind EU states. Salient issues include the lack of prosecution of corruption offences and intervention in court proceedings. When these problems are coupled with the broader lack of anti-corruption reform and restrictions on freedom of expression, Turkey’s outlook for this year and future CPIs looks grim.

Bulgaria slipped from 41st to 69th in this year’s ranking. Enforcement efforts have remained largely ineffective. The institutions charged with combatting corruption lack coordination. Despite indications of politicians’, high-ranking officials’ and judges’ possible involvement in power brokerage and corruption, enforcement agencies have typically been hesitant to pursue such cases or have done so only after considerable external and internal public pressure. Although criminal investigations have been opened against several high-ranking judges and prosecutors, corruption charges in a number of probes against politicians, public officials and businessmen with political affiliations have faltered in court in 2015.

Attempts to reform anti-corruption law enforcement have faced difficulties as well. Although the Bulgarian government adopted a new comprehensive national strategy to fight corruption, its implementation has been derailed in its early stage, when the Bulgarian Parliament refused to pass new anti-corruption legislation.

Kazakhstan

Kazakhstan marginally improved its relative standing in 2015, climbing from 126th to 123rd overall, but lost one point on last year’s score of 29. Though the country fares significantly better than its Central Asian neighbours, corruption remains a serious challenge and the poor score is a reminder of the lack of coherence in the fight against corruption. Kazakhstan is also witnessing an increase in exported corruption, as many foreign companies operating there do not abide by the same principles of transparency they follow in their home jurisdiction.

But there is hope for improvement. The National Bureau for Combatting Corruption was set up at the end of 2015, replacing an agency that had been largely ineffective. In October the Parliament adopted the Law on Combatting Corruption and in December, the government approved rules aimed at encouraging public reporting of corrupt offenses. The country is also preparing to join GRECO. Finally, there have been some notable cases: the former Prime Minister was sentenced to 10 years’ imprisonment for abuse of power, embezzlement and bribery.

Only three countries in our region of operation (the Czech Republic, Hungary and Slovakia) score above the 50-point watermark; most others are still tackling serious corruption problems. What’s more, the recent downward trend in Hungary and Turkey is cause for concern. In TI’s words: “While a handful of countries in Europe and Central Asia have improved, the general picture across this vast region is one of stagnation. Also very worrying is the marked deterioration in countries like Hungary, […] and Turkey where we’re seeing corruption grow, while civil society space and democracy shrink. Corruption won’t be tackled until laws and regulations are put into action and civil society and the media are genuinely free.” (Anne Koch, Director for Europe and Central Asia).

Adlet Yerkinbayev and Roman Oleksik