Since the beginning of the 1990s, Latvia has experienced several high-profile corruption scandals. Additionally, the country ranked 57 out of 84 countries, one step higher than in 1999, on the 2000 Corruption Perceptions Index by Transparency International (TI), a Berlin-based watchdog on corruption. These factors have created an image of Latvia as a deeply corrupt country, an opinion that seems to be particularly strong among the Latvian public. The real situation, however, may not be as grim, and the future prospects not as morbid, as they seem at first glance.
Administrative corruption and "state capture"
If corruption in Latvia is to be analyzed using the World Bank's typology—which divides corruption in transition economies into two types, political corruption (state capture) and administrative corruption—the level of the latter is one of the lowest among the 22 transition countries surveyed by the World Bank in 2000. The level of administrative corruption—by the World Bank's definition, bribing public officials in order to avoid compliance with existing laws and regulations—was determined by asking businessmen to provide the percentages of their companies' annual turnover spent on bribes. In Latvia, "bribing expenses" constitute 1.4 percent of the turnover, while the average in CEE countries is 2.2 percent.
In contrast to relatively low administrative corruption, the level of state capture—which the World Bank defines as actions of individuals, groups and firms to influence the scope of laws, court rulings, government decisions and actions of political parties—has put Latvia among such "leaders" as Russia, Ukraine and Kyrgyz Republic.
Latvian anti-corruption activists, however, have some doubts about the high index of political corruption found by the survey. The significant difference between the two corruption indexes, which are supposed to be correlated, indicates that the authors might have encountered the ever-present problem in corruption research, namely, basing judgment on the respondents' perception of corruption, not real numbers, said Inese Voika, head of the anti-corruption NGO Delna, Riga-based affiliate of TI.
While the survey determined the level of administrative corruption by the amount spent on bribes, it measured state capture in each country by asking firms to assess the direct impact of political corruption on their business, regardless of whether they engaged in such corruption. Thus, according to the authors, "capture is measured not by how many firms engage in it, but by the share of firms whose business is directly affected by it."
Moreover, the authors admit in the foreword that they know "comparatively little about the economic, political and historical factors underlying the persistence of corruption in the region." In Latvia, Voika says, quite a few factors—an exaggerated media coverage of corruption scandals, the public's sensitivity toward corruption, distrust of the government—have exacerbated negative perceptions of the problem.
Delna, currently the most prominent national anti-corruption organization, has found a large discrepancy between real corruption and the public perception of corruption. In its 2000 survey, "The Face of Corruption in Latvia," the organization, whose name translates into English as "open palm," analyzed public opinion on corruption and compared it to the actual data on corruption in different government institutions. Opinion matched with the real data amounts only in evaluation of the Traffic Police, where about two-thirds of those questioned said sanctions for traffic rule violations are often avoided by bribing police officers. Public perception exaggerated corruption in customs and local governments by about 20 percent and in courts by 16 percent.
Still, concerning political corruption, the World Bank's survey is correct in pointing out an already well-known fact: most influential Latvian political parties are closely associated with economic groupings. As Voika puts it, there is a lack of transparency in decision-making, as many decisions are actually not taken within official power structures, but rather through "private deals" struck in intertwined political-economic clusters where there is room for corruption. The public has no knowledge of how, when and by whom the decisions are made, and therefore cannot influence the outcomes. Nevertheless, state capture can be curbed substantially by transferring the authority to government agencies, thereby excluding the unofficial, "gray" circles from the decision-making process, Voika adds.
The government's anti-corruption efforts
The Latvian government has shown a willingness to find solutions to corruption. In 1995, Parliament passed a law on corruption prevention, leading to the fall of the government in 1997 when some top officials were found retaining positions in private companies despite having joined the government. The ensuing "corruption scandal" received monumental media coverage, although what was mistakenly called corruption was actually a conflict of interest. However, the devastating newspaper headlines led to public opinion that Latvia was a terribly corrupt country, Voika said.
In 1997, the government founded a Corruption Prevention Council, later expanded to include representatives from civil society. In the beginning of 1998, the government launched a Corruption Prevention Program to fight corruption through education and the enforcement of laws. It was the first program of its kind in Central and Eastern Europe.
Although launching the program was a positive initiative, a review by Delna revealed that more than a third of the program's tasks have not been carried out. For example, corruption of public procurement still remains one of the biggest sources of corruption in the country. Also, the program targets corruption by individuals, but does not deal with corruption by powerful economic groups, which influence the government and legislature by financing political parties.
Another obstacle to the fight is the inefficient implementation of the Freedom of Information Law, passed in 1998. While Latvia is among only a few countries in Eastern Europe that approved the law, a Delna survey showed that a commonly accepted interpretation of the law is lacking, as well as loopholes and inconsistencies in its implementation. Moreover, the government authorities are generally reluctant to share the information and demand high fees for the service.
At the political level, there has been an increasing awareness of corruption and greater political will to deal with the problem. Several legislative initiatives are in the pipeline at the moment, and finalizing them will depend on public and NGO pressure, Voika said. Recently, there have been positive changes in a number of government agencies. For example, the State Revenue Service Modernization Project, under the guidance of the World Bank, is helping to increase revenue by promoting voluntary compliance, reducing corruption and tax evasion. Another project at the Ministry of Finance is designed to strengthen transparency and efficiency management and operations. Recent taxpayers' surveys indicate a slight rise in taxpayer satisfaction.
Where does the problem lie?
In contrast to the increasing awareness of corruption-related problems and the improving relations between public officials and people seeking public services is the inability of police and other law enforcement agencies to actually fight corruption. The corrupt are seldom charged or punished. The inability of the law enforcement agencies to catch bribers and bribe-takers red-handed leads them to act without fear or caution. Delna's survey shows that the propensity people have to bribery is still very high—more than half the respondents admitted they would be ready to bribe in order to meet their goals. Moreover, the number of people susceptible to corruption could be even higher, as more than a third of respondents admitted that they did not bribe because of their lack of financial resources.
Voika said the solution lies in enhanced transparency in public services to monitor and stop illegal deals before the bribing occurs. A number of publicly available computerized databases, including a 40,000 name registry of public officials and registries of real estate, businesses, guns and motor vehicles, could be of great help in such efforts. At the moment, the government is working to establish an anti-corruption bureau that would examine public officials' income declarations, thus advancing the implementation of the Corruption Prevention Law.
Also, Voika states, there needs to be a change in the courts' treatment of the economic crimes. Latvia's outdated Criminal Code is still based on its Soviet-era version, which does not consider economic crimes to be as serious as other criminal offenses. This explains why most economic offenders in the 1990s were put on probation instead of receiving tougher sentences.
The role of NGOs and civil society
The non-governmental organizations are taking an increasingly active part in the anti-corruption fight. Delna has been the leader in setting an example of cooperation with government agencies and public officials on anti-corruption projects.The three previous LASCO privatization failures caused the collapse of government. Unfortunately, the Latvian Shipping privatization failed for the fourth time last week when the two bidders for the state's 68 percent stake in the company failed to pay the required pre-auction security deposit of USD five million. Economy Minister Aivars is no facing a no confidence vote in Saeima.
In the beginning of the year, Delna became the first Latvian NGO ever to sign a memorandum of cooperation with the Latvian Privatization Agency (LPA). The two agreed that Delna would monitor the privatization process—which has been unsuccessful three times—of the Latvian Shipping Company (LASCO).The three previous LASCO privatization failures caused the collapse of government. Unfortunately, the Latvian Shipping privatization failed for the fourth time last week when the two bidders for the state's 68 percent stake in the company failed to pay the required pre-auction security deposit of USD 5 million (3.1 million Latvian lats). Economy Minister Aivars is no facing a no confidence vote in Saeima.
The basic goal of Delna is to ensure that no influence peddling occurs in the decision-making process. Delna has undertaken to inform the Latvian public about the process of the LASCO privatization, while simultaneously abstaining from disclosing confidential details. The organization has also created a precedent in signing the Integrity Pact, a TI cooperation document with a government agency, in which LPA and Delna pledged to avoid any bribing, misconduct or misuse of information.
Delna's experience monitoring the LASCO privatization has proven that corruption is often mystified and exaggerated by politicians, who use it as a political device, Voika said. Clearing the thick clouds of suspicion and rumors surrounding the privatization process helps to see the real problems, which, it turns out, are not insurmountable.
Why is public opinion so negative?
Despite positive anti-corruption efforts, the public still feels dissatisfied by the slight improvements that can be seen in public services. According to Delna, public opinion polls show a low opinion of government efforts to reduce corruption. "Agencies are unable to ensure that information about their positive accomplishments reaches the public. This reduces the confidence in the government's program," Delna wrote in its report.
Government agencies and laws have changed faster than people, who have not yet disposed of their Soviet "heritage," Voika said. Individuals are still involved in what she calls "kitchen-style politics"—they choose to passively criticize and complain about the state of affairs, but they are not yet ready to personally engage in changing negative practices. The society still lives in crisis mode, where there is no tomorrow, just today. Thus, people are willing to give bribes to get public services as quickly as possible, rather than spending more time to reach the same result in a lawful manner. Nevertheless, a change in attitude is slowly spreading throughout Latvian society.
Ieva Raubiško, 30 April 2001
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