Fighting Corruption in SEE countries: the EU Factor

06/06/2005

Romania's expected entry into the EU in 2007 is proof of the dramatic progress the country has made. But several areas of concern still exist, with one of the most important being the widespread problem of corruption. Polls repeatedly show that corruption -- especially as it applies to the judicial system -- is among the top frustrations and concerns of the country's citizens. While optimists are confident in the ability of structural and institutional reforms to reduce unethical behavior, others point with alarm to the problems of "path dependency" and traps of underdevelopment. The EU itself could become the catalyst needed to force a breakthrough in problem areas, argues economist and former Romanian Finance Minister Daniel Daianu.

By Daniel Daianu for Southeast European Times in Bucharest -- 06/06/05

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EU country reports underscore Romania’s progress in the quest to join the EU in 2007, but they also single out corruption as a damaging social and economic phenomenon. There is hardly a domestic poll that does not mention corruption and the poor functioning of the judicial system as one of the top frustrations and concerns among the country's citizens. What, then, are the prospects for tackling these problems?

Two trains of reasoning can be detected with respect to explaining behavioral patterns during transition. Both can be extrapolated to developing economies in general. The first, more optimistic one emphasises the institutional weakness of post-communist societies, the precarious functioning of checks and balances, and a corrupted judiciary combined with feeble law enforcement capacity. Ideally, the steady advance of structural and institutional reforms would allow transition societies to reduce unethical behavior considerably over time. Both micro-inefficiencies and resource misallocation would diminish and economic performance would gradually improve. The rule of law would also become a reality.

One version of this hopeful line of reasoning points to the strong performance of a series of emerging economies -- especially in South East Asia -- that have had problems with wide-ranging corruption and cronyism. These examples suggest that corruption, on a massive scale, may be an inescapable companion of the transition out of poverty, while reducing it is a time-consuming affair.

Romanian President Traian Basescu (right) and Romanian Prime Minister Calin Popescu Tariceanu (left) after the new government was sworn in on 29 December 2004. The change of government was made possible by Romanians’ longing for truth and fairness, but decisive progress is still unseen. [AFP]

Joining the EU can be seen through the lens of this upbeat logic. Membership would, arguably, provide an extraordinary anchor for systemic transformation and economic progress. Accession would mean the "Big Push", that the economist Paul Rosenstein Rodan mentioned more then six decades ago in the British Economic Journal, highlighting what Southeast Europe needs in order to defeat the traps of underdevelopment. Indeed, Romanian citizens are counting on EU accession to help deal decisively with the country’s social and economic weaknesses, including widespread "rent-seeking" and other forms of corruption. The entry of eight transition countries into the Union on 1 May 2004 seems to substantiate this line of reasoning.

However, there is also a more pessimistic vein of thought which stresses "path dependency" and points to the persistence of widespread corruption, precarious institutions and malfunctioning markets in large parts of the world. Latin America offers a glaring example in this regard. What explains the persistence of bad social equilibrium and poor economic performance over long stretches of time? Why is it that vicious circles and traps of underdevelopment are so hard to break away from? Why has the economic rise of a series of Asian countries been more the exception than the rule in modern history, even though their advance has not been devoid of corruption and cronyism?

The experience of Latin American countries provides a cautionary tale for less advanced transition countries in Southeast Europe and the former Soviet Union. In the Balkans, for instance, weak state syndrome and the fragility of institutions, as well as the large degree of criminality in economic life should be a cause of deep concern for those who hope to reverse an unfavorable path dependency. True, the EU can provide an extremely powerful anchor and transformation tool for the whole region, as it has done for Central Europe. But there is little doubt that the process could be made more time-consuming and painful because of specific local conditions, including political and interethnic conflicts.

Joining the EU will offer Romania an extraordinary opportunity to improve its public policies and, consequently, its economic performance; in addition, it will have the chance to combat corruption more effectively. The "social engineering" inherent in implementation of the Acquis is bound to change institutional structures (the judiciary included) for the better. More transparency, more rule of law, more clear rules of competition (and state aid) are part and parcel of this process.

Even after EU accession, many decisions will remain in the hands of Romanian policy-makers. [AFP]

The change of government in November 2004 was made possible by Romanians’ longing for truth and fairness, but decisive progress has not yet been seen. The ineffectiveness of the special bodies that were set up to deal with corruption is notorious, while media reports have exposed the unsavory links between politics and justice. To put it bluntly, Romanian politics abounds with hypocrisy, prevaricating rhetoric, arrogance and lack of accountability. More than a few top notch officials are indifferent to conflicts of interest; some nonchalantly use their office for the pursuit of private gain. The fuss and procrastination surrounding lawmakers' declarations of personal wealth was quite telling. Again, one thinks ahead to EU entry as the event that is most likely to trigger the needed change in mindset.

Certainly, the country needs better trained, more responsible people at the very top -- people with a sense of the urgency of the times and of the challenges facing Romania’s endeavour to join the EU under the best possible premises. For EU accession, of course, will not shape Romania’s future in a predetermined manner. Much would stay in the hands of Romanian policymakers, and much will depend on responsible politicians pursuing intelligent and effective public policies; policy ownership is far from being a meaningless concept.

Romania's Western counterparts, whether in the state or private sector, should do their part by being more candid and by abiding by the same rules of transparency and ethical behaviour which they encourage transition countries to emulate. If, for instance, a Romanian policymaker continually shuns the correct tender procedures for handling public money, Western colleagues should not hesitate to inform that person that such an approach is not acceptable. While corruption is also found in affluent countries of Western Europe and in the United States, in those societies the rule of law is solid, and checks and balances operate effectively in the end.

For this reason, the West should always use "best practices" when they deal with Romanian officials or companies. When raison d'etat impedes what is meant by "best practice", this should be stated clearly, with justification. In this way, Romania’s progress toward accession and what follows would be enhanced, for the benefit of its citizens. Consequently, the propensity for playing unethical games would be kept under control. After 15 years of transition, Romanian citizens deserve a better functioning democracy and economy.