With Ms Daniela Mineva, Senior Analyst, Economic Program, Center for the Study of Democracy, Bulgaria and one of the co-authors of the publication “Rolling Back State Capture in Southeast Europe”, we spoke about how SEE countries are dealing with the anti-corruption integrity of the public procurement systems. She was one of the presenters during the “Workshop on Conflict of Interest in the Security Sector” held in Podgorica, ME, organized by RACVIAC – Centre for Security Cooperation in partnership with the Regional Anti-Corruption Initiative – RAI and the Ministry of Defence of Montenegro.
The Regional Good Governance Public-Private Partnership Platform (R2G4P), coordinated by the Center for the Study of Democracy, Bulgaria updated its anti-corruption diagnostics of the integrity of the public procurement systems in nine SEE countries (Bulgaria, Croatia, Hungary, Romania, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, and Serbia).
- What is the Regional Good Governance Public-Private Partnership Platform (R2G4P)?
The R2G4P initiative, coordinated by the Center for the Study of Democracy, Bulgaria aims to deliver shared anticorruption solutions to increase the accountability of state institutions and strengthen civil society and the rule of law in SEE through capacity building on implementing best practice European social research innovation instruments. The action aims to close anticorruption policy implementation and public procurement gaps across SEE, which will amplify the impact of the planned increase in EU infrastructure support until 2025. The focus is placed on nine countries (Bulgaria, Croatia, Hungary, Romania, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro, and Serbia).
The public-private partnership approach allows target groups to share solutions across EU and non-EU borders in SEE, based on four pillars:
- Established Regional Good Governance Public-Private Partnership Platform (R2G4P) which combines RCC and RAI’s public sector cooperation capacity with SELDI.net’s expertise to create a sustainable regional public-private partnership for shared good governance solutions.
- Increased capacity of public institutions and CSOs to diagnose and tackle corruption risks through specialised three-day regional trainings.
- Designed shared management and policy anti-corruption solutions, through producing annual SEE Good Governance Reports, each accompanied by nine anticorruption reviews for public institutions, based on MACPI and Opentender.eu methods.
- Communication and engagement strategy, including an opening conference, annual policy forums, and a closing summit.
The R2GP4 initiative benefits from a € 1.5 million grant from Iceland, Lichtenstein and Norway through the ЕЕА and Norway Grants Fund for Regional Cooperation.
- The report on anti-corruption diagnosis of the integrity of the public procurement system brings together the results of nine SEE countries (Bulgaria, Croatia, Hungary, Romania, Albania, Bosnia and Herzegovina, North Macedonia, Montenegro and Serbia). How long did it take for the data to be collected, analysed and consolidated into one such extensive report?
Our analyses follow an annual cycle. The research is based on a combination of statistical (quantitative) data and narrative (qualitative data). The narrative data is provided by our R2G4P members located in the countries analysed. The quantitative public procurement data however, needs to be obtained from public sources, such as EU and national-level procurement registers, sometimes over the course of several years. This task is performed by our partners at the Government Transparency Institute, Hungary.
- What problems/difficulties did you encounter when collecting data in these 9 countries, if there were any?
Not all data is machine-readable and could easily be downloaded in bulk, as it is usually presented on a case-by-case basis, as a HTML or searchable PDF file. Thus, it has to be obtained through official requests for information, or scraped from the public websites. The process is explained in detail in Analyzing Public Procurement Risks: Training manual. Page 20 in particular notes the challenges we face in obtaining the data and the various errors observed in public registers (duplications, missing attributes, etc.). For more information, please see: Opentender.eu.
- How much do you think the results can affect the further prevention of corruption in this region and who specifically can they serve?
I believe our recommendations could prevent, decrease and punish corruption to a great extent, as long as there is an efficient civil society – government cooperation and political will. Unfortunately, this is not always the case, and anti-corruption reforms could take 5-10 years, and more. To facilitate the process, we have formed a public-private partnership platform, which features representatives from the government sector and CSOs in nine countries. So far, we have provided policy recommendations in the area of public procurement, management of energy state-owned enterprises, the use of asset declarations, and we are currently researching the integrity tools that are applied at the local level.
- Ms Mineva, in your opinion, when it comes to corruption in general, what do you think gives the best results in preventing it? Is there a mechanism that works?
This is a very complex question, which has been researched in multiple policy and scientific papers. There is no universal solution, as the historical, cultural, economic and political specifics of each country should be taken into account. However, what we could recommend is to:
- Find strong-willed reform-minded policy makers, who can push forward needed reforms in the Parliament.
- Establish anti-corruption measures and procedures, based on the best EU and international standards.
- Establish working cooperation mechanisms with the civil society, the business sector, and the media.
- Use big data and inter-connected registers to form red-flags and thus focus the checks and audits on the high-risk people and companies.
- There is no need to reinvent the wheel and create multiple anti-corruption bodies, committees, and laws. What is needed is for the existing anti-corruption measures and procedures to be consistently applied every day, and not just at an ad-hoc basis.
Strengthen the sanctioning of high-level corruption cases.
- How do asset declarations serve in prevention of corruption and as a risk assessment instrument?
Asset declarations are a strong, yet currently under-utilised instrument for preventing corruption and illicit finance among civil servants, and in particular among PEPs in SEE-9. The media and civil society in the region, along with international organisations, continuously investigate and report on the many evident gaps between the living standards of politicians and their families, and what they officially declare to the public as assets and income. All SEE-9 countries have in place a legal framework regulating asset declarations as part of their anti-corruption toolboxes. However, these regulations are rarely enforced in a consistent manner, and instead mostly result in shortlived annual scandals or occasional repression campaigns against political opponents.
There are some good practices in SEE-9, that could serve as an inspiration and example to the rest of the countries from the region and beyond. These include: the use of electronic platforms which provide automatic integrity warnings in Romania; the gathering of information on the ultimate beneficial owners in Albania; the cross-checks in multiple registers, increasing the scope of the people obliged to declare assets, and awareness raising practices in Croatia; and expanding the authority and the role of other public bodies in checking suspicious circumstances and filing criminal charges as well as setting procedures for lifting immunities in Serbia. While the procedural and legal gaps differ across the countries, several key prerequisites for efficient checks of asset declarations stand out:
- Central e-submission of asset declarations
- Cooperation and data exchange among all relevant bodies
- Inter-connected registers and cross-checking of data from multiple sources (national and international)
- Existence of specialized checking body/department(s)
- Established unified checking procedure across all public bodies based on red flags/ indicators (with focus on: undeclared assets, held abroad and/or by friends and family members)
- Updated legal base
- Efficient prosecution and punishment
Asset declarations and final penalty decisions published online
- Who are “politically exposed persons (PEPs)” and “persons with high political power”?
The term “politically exposed persons (PEPs)” usually refers to individuals who are or have been entrusted with public functions, as well as their family members and close associates. PEPs are potentially in a position to misuse their influence for personal gain. While there is no internationally recognized list of the types of officials defined as PEPs, guidance in this respect can be found in the glossary of the Financial Action Task Force (FATF) and in European Union Commission Directive 2006/70/EC. Still, researchers and international organizations such as the World Bank consider that the definitions used by Directive 2006/70/EC and FATF should be expanded to include other categories (e.g. mayors, judges and prosecutors).
Thus, for the purposes of the current report, the term “politically exposed persons” includes not only the types of officials listed in Article 2 Commission Directive 2006/70/EC, but also all “persons with high political power” (prime ministers, ministers, mayors, municipal counsellors, district governors, rectors – including all their deputies – as well as Members of Parliament, members of governing boards of state-owned enterprises, commissioners, and the chief architects).
- Are there any groups of people who are not obliged to declare assets and how does this affect the prevention of corruption?
Some PEPs, as well as other categories of civil servants in SEE-9, are not obliged to declare their assets, and as a result, their wealth remains hidden from state institutions and the general public. This problem is most pronounced with regard to senior managers, directors, and board members of state-owned companies. These individuals are not obliged to declare their assets to any extent in Serbia (unless they are appointed by the government) and in Bosnia and Herzegovina (BA). In addition, despite the continuing legal efforts, the information that individuals are obliged to declare is rarely all-encompassing, which hinders proper prevention and enforcement. Legal loopholes allowing disclosure avoidance are prevalent across the region. For example, loans from private individuals do not always have to be declared in Hungary, and presents to close family members are not made public at all. In Bulgaria and Croatia spouses and cohabitants are not legally obliged to inform their partners of the assets they own, providing an escape route for non-declaration. In both Hungary and North Macedonia, PEPs are required to declare ownership of shares in companies but not the assets held by these companies. Thus, personal assets can be written off as corporate property.
- Which are the risk indicators for checking asset declarations?
We recommend that all countries utilise risk indicators, such as the ones presented in the figure below.
- Could you please give a couple of examples of how PEPs most often find a way to avoid (severe) punishment?
There are four key methods, observed in the SEE-9 countries, for avoiding punishment or at least reducing its severity. These include:
- Omitting to declare assets, or under-evaluating the declared assets;
- Influencing the public authorities to drop the investigation/prosecution and/
or to replace a severe penalty (e.g. imprisonment) with a looser sanction
(e.g. a fine); - Retroactively changing the assets declaration document, so that the
irregularity no longer exists on paper; - Changing the legislation so that certain types of public officials (or
their relatives) are not obliged to declare assets, company or family
relations.
Serbia once again presents a particular case in that regard. Despite the fact that the country has a rigid penalty system, many cases of false disclosure, concealment and undeclared assets resulted in failed prosecution cases. This is due to the legal possibility for public officials to avoid criminal charges by paying money to charity organisations, weakening the prosecution efforts upon the Principle of Opportunity.
- In which area (of activity) is the highest degree of corruption reflected and which country is leading in relation to the others? Is it possible to single out the country that records the highest level of growth in the fight against corruption?
There are good practices and governance gaps in all countries. However, out of the nine analysed countries, Romania stands out as the country with the biggest number of sentenced high-level politicians, highest number of checked asset declarations per year, and the use of the e-DAI and PREVENT online systems.
In terms of activities with the highest degree of corruption, these could also vary by country. However, it should be noted that the issue of the petty, administrative corruption is no longer a main issue of concern. The main problem is state capture – a form of corruption which leads to a systematic and permanent delivery of private goods to the captors or privatizers of the institutions. State capture relates to the abuse of good governance rules (which is also abuse of power) in the process of drafting, adoption and enforcement of the rules themselves in favor of a small group of captors at the expense of society and business at large. In general, state capture is the virtual long-term privatization of the state functions which ensures a systemic privilege for the captors.
- What is the meaning of this report, i.e. who could it help in future work, who is it most aimed at?
The current report builds upon international and EU measures to strengthen the rule of law, and highlights the critical areas of impact that could be achieved through public-private partnerships. This second SEE Good Governance Report focuses on the big data tools necessary to identify the existence of ill-gained assets hidden by politically exposed persons (PEPs). These tools could help counter state and media capture practices in the region, preventing authoritarian tendencies, including foreign malign influence, from threatening the Euro-Atlantic democratization process of South East Europe.
It is highly recommended that a unified checking procedure is introduced across all public bodies, based on a predetermined set of red flags. The current report provides an example of a comprehensive list of risk indicators for checking asset declarations, which could help national authorities to focus their scrutiny on a smaller number of persons and related companies, aiding the work of national anti-corruption bodies and internal integrity units.
- How did COVID-19 affect the public procurement procedures in the region?
All the countries in the region went through an emergency period due to the COVID-19 outbreak, resulting in the changes in legislative regulations of public procurement. Usually, these changes in regulations were introducing emergency procedures for COVID-related products, allowing for more expedient procedures but also resulting in less transparent procurement, which was therefore more prone to corruption. The newly introduced procedures usually included direct negotiations under which the procuring body was freed from objective assessment and fair specification and evaluation of bidders. For almost all of the countries in the region, the emergency period due to COVID-19 was lifted during spring 2022.
- How can, in your opinion, new technologies and technical solutions help in prevention of corruption?
The new technologies could support the quick exchange of information among the authorities, the inter-connection of the registers, the digitalisation of asset declaration gathering, the creation and use of red-flags, the easier anonymous submission of tips for irregularities, and the gathering of evidence. However, the new technologies could also be used for hiding and moving illicit wealth (e.g. cryptocurrencies), or for spreading disinformation.
- What policy recommendations could be suggested to the SEE-9?
In addition to the policy recommendations listed above, it should be noted that antimonopoly laws in the region need to be made effective, including through the empowerment of antimonopoly commissions and the tracking of legislation for loopholes allowing the monopolisation of sectors or bias towards specific private interests. A critical issue in ensuring that governments are held
accountable is transparency of media ownership, newsroom independence and safeguarding media
freedom from political interference. The underlying conditions which influence integrity
reforms are different in each country, making the EU the regional stabilising factor for these reforms. The EU and the countries from the region would need to ensure however that the benefits of closer economic integration with the Union do no accrue exclusively to a small clique of privileged elites and oligarchs.
- What is R2G4P’s next project?
Any future projects will take into account the latest geo-political developments, new emerging challenges, as well as the EU-level priorities in the rule of law and good governance area. These include, but are not limited to: public procurement integrity, anti-money laundering, the enforcement of the Whistleblowing Directive, use of appropriate investigative tools by law enforcement and prosecutors, fighting tax evasion and any other illegal activities affecting the EU’s financial interests. The focus will be placed on misappropriation, trading in influence, abuse of functions, as well as obstruction of justice and illicit enrichment related to corruption offences at EU, national, sectoral and local level.
Daniela Mineva works as a Senior Analyst at the Center for the Study of Democracy and has 20 years of experience working on EU and other donors’- financed projects in the areas of anti-corruption, management of EU funds, Cohesion policy, innovation policy, competitiveness, and hidden economy. Since 2006 she has been a country correspondent for Bulgaria supporting the elaboration of the IMD World Competitiveness Yearbook. Daniela Mineva has worked on a 2010 Feasibility study on establishing a European platform for cooperation between labour inspectorates, and since 2016 she has been implementing a Service Contract to Support the European Platform tackling undeclared work, which analyses the possibilities for collaboration between public bodies and social partners from different European countries in tackling undeclared work, irregular migration, social securities and tax fraud, social dumping, etc. The initiative is implemented by the ICF Consulting Services Ltd., and was initially commissioned by DG Employment. As of 2021 it has been commissioned by the European Labour Authority.
In 2012-2013 Ms Mineva participated in two projects related to the development of the Smart Specialisation Strategy for Bulgaria. Since November 2012 she has been involved in the project Civil Society for Good Governance and Anti-Corruption in South East Europe: Capacity Building for Monitoring, Advocacy and Awareness Raising (SELDI), funded by DG NEAR. The SELDI initiative (www.seldi.net) includes 34 CSOs partners and 5 anticorruption agencies from the Western Balkans. She was also involved in the project State Capture Estimation and Monitoring of Anticorruption Policies at the Sectoral level (SceMaps) (https://scemaps.eu) (2019-2021), and is currently coordinating the Regional Good Governance Public-Private Partnership Platform (R2G4P) (2021-2023), funded by EEA and Norway grants (https://seldi.net/r2g4platform/objectives/).
