Anti-Corruption Programmes in Turkey compared to Bulgaria and Romania

Contents

Abbreviations

1 Introduction

2 Corruption Theory
2.1 Definition and Nature
2.2 Scope and Forms of Corruption
2.3 Is Corruption measurable?
2.4 Causes
2.5 Costs
2.6 Is corruption always bad?

3 Anti-Corruption Programmes
3.1 Requirements
3.2 Types
3.3 Combating Corruption in Bulgaria
3.3.1 Extent of Corruption
3.3.2 Country-Specific Causes
3.3.3 Reform Programmes
3.3.4 Players and Involvement
3.3.5 Obstacles, Weaknesses and Future Challenges
3.4 Combating Corruption in Romania
3.4.1 Extent of Corruption
3.4.2 Country-Specific Causes
3.4.3 Reform Programmes
3.4.4 Players and Involvement
3.4.5 Obstacles, Weaknesses and Future Challenges
3.5 Combating Corruption in Turkey
3.5.1 Extent of Corruption
3.5.2 Country Specific Causes
3.5.3 Reform Programmes
3.5.4 Players and Involvement
3.5.5 Obstacles, Weaknesses and Future Challenges

4 Can Turkey learn from Bulgaria and Romania?
4.1 The Question of Comparability
4.1.1 Is the Situation Comparable?
4.1.2 Are the Programmes comparable?
4.2 Differences and Learning Effects
4.3 What is the Best Strategy for Reform Programmes in Turkey?

5 Conclusion

Literature

Annex

Abbreviations:

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

The time frame for this study is mainly set with the mid and late 1990s and reaches until 2005. The examined period coincides with an international recognition of corruption as a severe problem and its addressing and with first attempts in combating corruption in a structured and systematic way by Turkey, Bulgaria and Romania.^[1] The thematic core of the study centres on corruption in the public sector – the private sector is only dealt with when it touches the aforementioned.

The main question of this thesis is whether Turkey can learn from Bulgaria and Romania in their efforts in anti-corruption activity. This question can only be answered if a general comparability is proven beforehand. Therefore the situational context as well as the programmatic context is compared. After such an initial stage, lessons learned may be incorporated into the Turkish framework and a best suitable strategy can be derived for curbing corruption in Turkey.

The methodology is based on a programmatic comparison at the core. Flanking national perspectives as the extent, causes, key players and their involvement, obstacle weaknesses and future challenges are needed in order to gain a comprehensive picture of the issue. The national programmes and circumstance are then combined in a final chapter, in which the comparison culminates in addressing the overall question. A prior introducing theoretical framework is fundamental for the further elaboration of the study. Key concepts of corruption like the definitions, forms, causes, measurability and the possibility of value enhancing are discussed in this part. The phenomenon of corruption is an interdisciplinary issue^[2] and therefore embraces several perspectives.

Bulgaria and Rumania are chosen due to their similar situation with which they are confronted. They are - just as Turkey, the pivotal country in this study - on the road towards EU-membership and statistics show comparable data on corruption. As their goal of accession to the EU is very close - 2007 is the planned year of EU entry - they might serve Turkey as a guide. The external democratisation forces, which are pulling the discussed troika towards the EU, seem to be the prime driver in the accession process which also sets the goal of reducing corruption substantially.

2 Corruption Theory

2.1 Definition and Nature

Corruption is commonly defined as the use (or abuse) of public office for private gain.^[3] By defining the notion closer, we find that it is an illegal action between at least one public employee and at least one non-public player.^[4] An important pre-condition is that the official holds a high position which gives him discretionary power and thus a monopoly in economic terms.^[5] A corrupt transaction can be regarded as a trade which occurs voluntarily or by using force^[6] and is agreed by the at least two involved players. The transaction bears high risks for both players. A monetary or similar gain from this illegal behavior has to be weighed with certain factors like the moral/psychological fear of getting caught, losing the position or job, etc. Corruption is often reduced to bribery, but this ignores theft of public resources.^[7] These resources can be diminished, for instance, by a public official who unrightfully claims that he is sick or by a minister’s use of state owned airplanes for reaching his holiday domicile. The number of potential players in this trade is limited due to moral market entry barriers, which construes a subjective criterion in order to initiate a trade. Furthermore, the public official has to possess a tradable asset as an objective criterion and the counterpart has to be equipped with sufficient return.^[8] The clandestine process and the relatively low number of potential players results in huge costs in order to find an appropriate counterpart if it is a single transaction. The involved parties are furthermore deterred by controls inside the organization which leads to a principal-agent problem.^[9] Corruption markets tend towards bilateral monopolies due to the fear of being discovered.^[10]

Corruption in the public sector can consist either of political or bureaucratic (administrative) nature.^[11] The distinction can be seen on various points. Political corruption, for instance, is carried out by high level politicians like presidents, ministers or top officials who are not in direct contact with the citizens in their illegal doing. Whereas in bureaucratic corruption, low level officials are engaged in implementing the policies and are therefore in direct contact with the public (e.g. customs, police, hospitals, tax administration etc.). A significant distinction of the two groups can be made by the amount of bribes or other gains which are obtained. Mostly, bureaucratic corruption is thus characterized as petty and political corruption is defined as grand corruption.

2.2 Scope and Forms of Corruption

Corruption is mostly associated with bribery by the layman. Although bribery is an essential part of the issue, there are also other forms of corruption. Hence, the main forms of corruption are bribery, embezzlement, fraud, extortion and favoritism.^[12] Research on corruption also builds on the study of rent-seeking, which sometimes shows very similar patterns and is difficult to distinguish.^[13]

Bribery is defined as the payment in monetary or similar terms for a certain corrupt activity.^[14] Several terms are used as equivalents like kickbacks, gratuities, baksheesh, sweeteners, pay-offs, speed- and grease money. Bribery is an instrument which can be used for several goals, such as buying political support, lowering the tax burden, getting around environmental regulations, purchasing monopolies, import/export licenses, accessing large state contracts to name just a few.

Embezzlement is defined as theft of resources by public servants.^[15] This form does not involve the civilian side directly but it hurts the general public as a whole because it deprives the public of funds. Straddling as subdivision of embezzlement occurs when authority is abused by public officials in order to increase, enter or expand private businesses.^[16]

Fraud is another example which aims at private benefits. This goal is achieved by manipulating information or by distorting facts and expertise including trickery and deceit. The principal-agent theory is also applicable because and agent (official) is endowed by tasks of his principal (superior official) and gains privately by manipulating information.^[17]

Extortion is the label for extracting monetary and non-monetary resources by using coercion, violence, threats and force.^[18] Methods including blackmailing, intimidation or harassment follow mafia structures. Mafiosi and criminals trade the extortion of resources with the supply of “security” or “protection” from their clients in a form of hidden tax paid for not getting harmed by the perpetrators. Sometimes the state itself becomes the mafia by using secret services and paramilitary units in order to extract state resources.

Favoritism occurs when public officials “… give preferential treatment to certain people”.^[19] Here, public power is abused in order to distribute state resources in a corrupt manner. Preference is given to close friends, family members or other persons. Kin relationships (family ties, ethnic, religious or regional groups, clans or tribes) are at the core when favoritism is based on clientelism. Nepotism is the preferential treatment of one’s own kinship, for example, family members.

The abuse of authority by gaining self-benefit is an interdisciplinary problem and not limited to economics. It is a “complex dynamic system” which is embedded in the social, economical and political system of a country and deeply rooted in the evolved culture of the population and its administrative structures.^[20]

2.3 Is Corruption measurable?

For a certain period of time corruption and its measurement were, until recently, rather diffuse terms since “… acts of corruption do not take place in broad daylight”.^[21] Recently measurement, based on perception, became a reliable source and hence fighting corruption became possible. The perceived level of corruption is calculated through surveys. Transparency International introduced the so-called Corruption Perception Index (CPI) in 1995, which became the most famous.^[22] It started first with the assessment of 41 countries and evolved to the 2004 index which includes 146 countries. Other surveys are the Global Competitiveness Report,^[23] the Political Risk Services^[24] and the Political and Economic Risk Consultancy.^[25] The Governance Indicators also include a chapter on Corruption Control.^[26] Although these surveys are based on subjective evaluations and on different techniques, they are reliable due to their similar results. These outcomes have proven over the years that corruption is measurable and that perception itself is already an indicator for investment decisions, growth and political conduct of the populace.^[27]

2.4 Causes

The origins of corruption are manifold and are addressed below by showing an economic distinction of supply (public officials) and demand (the public) of corruption. These individual factors have been formed by the country specific cultural, social, political and economic development of the respective country.

Direct factors can be traced back to the activities of the government and the state authorities which are in a position of creating a fertile ground for corruption. Corruption often relates to the state’s monopoly and discretionary power. By taking a closer look we can define regulations and authorizations, taxation, spending decision, provision for goods and services at below market price, other discretionary decisions and party financing as the demand side. ^[28] It affects the public, meaning the public which is engaged in bribing public officials.

Regulations and Authorizations

The abuse of public mandate for private gain often occurs when people have to apply for a license, need an authorization or a special document at a public authority.^[29] The variety of these can include visa documents, certificates for a business transaction, permissions for constructions, etc. These authorizations hand a discretionary power to the bureaucrat. Thus he is in a position to delay or not accept the bid of the applicant. With such a behavior, the public official can try to obtain a bribe if he finds himself in a position of monopoly.

Settings of the Tax system

The incentive for bribing a tax inspector rises, the more in-transparent tax laws exist, the more direct contact with the tax payer is involved and the more complicated the tax laws are designed.^[30] Within taxation there are a lot of determinants which affect the likeliness of corrupt acts. For instance, corruption is more likely if the salary of the tax supervisor is at a relatively low level. Unclear laws provide space for interpretation in which the public administrator can abuse his power. The potential for bribery also mounts when there is lack of supervision and when there is soft punishment or no punishment at all. Generally, a principal-agent problem may occur when the state (principal) is weak in controlling the tax inspector (agent).

Spending decisions

Government spending is another weak point generating various opportunities of corruption. The structure of the budget can serve as an indicator for corruption opportunities. Illegal benefits are easier to gain with high-volume budgets. For examples, large infrastructure projects or military spending in form of the acquisition of weapons can give corrupt officials kickbacks from the budget. Obviously, a bigger share of the contract volume can be obtained by the involved public employee who is in charge of allocating such a project. Absence of institutional budgetary controls and missing transparency is another stimulus for corruption. Development assistance, for instance, can be partly channeled to public administrators without the necessary supervision. Extra-budgetary spending is also an instrument of avoiding control mechanisms; the sale of natural resources, like gas or oil, is one example.

Services and goods given below market price

Governments often sell services or goods below market prices.^[31] These areas are especially exposed to corruption because the public officials habitually have to decide on the limited goods and services and have to distribute them among the usually exceeding number of applicants.

Other discretionary decisions leading to high-level or political corruption

If public officials are in a position to decide important issues, the outcome can result in corruption at a high political level. Decisions concerning privatization, the use of government-owned land, the sale of public assets (natural resources), monopoly power over export or import activities, and the authorization of major foreign investments can be purchased by enterprises. The firms can benefit from such activities, even if the amount for bribery is being subtracted.

Party financing

Political parties need funds for their activities such as electoral campaigns. As their financial potential is limited in legal ways, illegal methods can be used to fund their activities. The electorate is able to eliminate a politician by voting him out in the next election but democracies also provide the opportunity for buying into politics.^[32]

Indirect factors construe the supply side in the economic model of corruption and are attributed to public officials. These factors define the quality of the bureaucracy or governmental institutions that are affected.

Recruitment and Promotion System of Public Servants

The degree of corruption can be reduced through the recruitment process. Hiring and promoting of public administration staff should give priority to the merit of the applicants. Studies showed that the more recruitment is based on the abilities of the hired people, the degree of corruption is lower.^[33] Human resource policy is often a result of political tradition in a country. Nepotism, patronage and clientelism provide fertile grounds for corruption.^[34] The reason for this is, that in such an environment, bureaucrats are less motivated and competent and thus more vulnerable to corruption. The linkage between recruitment and promotion conditions in an administration and the quality of the institution itself has already been pointed out in the sphere of sociology.^[35]

Level of public sector wages

Another cause for corruption in a country relates to the fact that public employees are equipped with power but low salaries. Such a situation gives the employed person incentives for corrupt acts.^[36] The absolute salary of the public servant is not of importance but the wage relative to alternative incomes in the private sector like the average manufacturing sector wage. The decision to raise the wage level in the public sector can thus reduce corruption. But this is an exclusive approach, which limits corruption as an economic problem while neglecting its political, cultural and sociological aspects.^[37] Bringing corruption down to a relatively low level would be a heavy burden for any budget. On the other hand, increased wages could also have the effect of rising demand for bribes. High wages elevate the opportunity costs for losing the job, but the tendency of striving to private gain might remain the same.^[38]

Penalty systems

The type of punishment applied for corruption is an important factor for the likelihood of such criminal behavior.^[39] Thus, the amount of corruption can be reduced by imposing higher fines and harshening punishment for breaking the laws. But therefore, the assumption that the penalty system of a country is crucial for the determination of the degree of corruption has to be recognised. In reality, a big gap exists between the laws for penalties and the low degree of punishment for illegal actions that are intended for private gain. If the judiciary itself is embedded in these criminal activities, deterrence through penalties is not likely to work efficiently.

Institutional controls

As discussed earlier, the probability of getting caught affects the decision on perpetrating a corrupt act by a civil servant negatively.^[40] Therefore, controls of the institutions have to be in place in order to prevent the spread of corruption. The architecture and strength of these controls depend on the political will and the approach of the political leadership towards the problem. Controls which work best are those which operate inside the institutions.^[41] The control measures should be implemented and supervised by a politically independent body with ample resources and highly integer staff. The auditing process should, ideally, strictly follow clear and transparent rules. For a proper functioning, this body should have enforcement power or at least a partner in the judiciary which can enforce penalties. Merely reporting to the legislative bodies or confidentially to the president or prime minister is more than doubtful in order to make controls effective.

Transparency of rules

Corruption is often the result of unclear and in-transparent processes, rules, regulations and laws. Especially when rules are confusing and if they are not shared with the public they lead towards corruption. Also, rules have to be set in a way that more than lawyers are able to understand them. Therefore, the wording of laws and regulations needs to be clear and should not leave room for interpretation. “Opportunity creates corruption” as Borner et al noticed.^[42] Lack in transparency provides opportunities for public officials.

Commitment of leadership

The role of the top political leaders is also crucial for the extent of corruption in public administration. Engaged and incorruptible heads of high-level political institutions give a good example for officials of lower rank. On the other hand, if the political elite itself is not strongly averse to corruption either because it is itself engaged in corrupt activities or it protects political friends, or relatives, the consequence is that other public servants tend to behave similarly.^[43]

2.5 Costs

Negative consequences of corruption were examined by a wide range of scholars and most of them agree that the abuse of public office for private gain leads to lower economic performance.^[44] Corruption has a direct impact on several factors discussed below as examined in empirical cross-national studies.

Domestic investment is reduced by corruption due to the uncertainty it creates and due to higher costs of searching and finding a counterpart.^[45] Consequently, growth is also hampered. This quantitative effect can be used by a country in levering its growth by lowering corruption. Apart from the correlation it remains unresolved whether a country is poor because it is corrupt or vice versa.^[46]

Foreign Direct Investment is also affected by corruption which can take the form of a virtual tax.^[47] Lower levels of corruption attract more FDI. A reduction in the level of corruption would thus lead to a greater inflow of foreign capital. A lot of countries would not be obliged to attract foreign companies by offering low tax rates to them in order to compensate for the risk of corruption.^[48]

Corruption also influences the state’s budget. Firstly, public revenues are reduced due to the impact on the customs and tax administration.^[49] These means are missing for financing the state’s duties on the expenditure side. Moreover, in countries with a high level of corruption one can witness an increase of public spending in public investments with an accompanied reduction of productivity.^[50] Like the above mentioned administrative bodies, public investments are prone to corrupt activities. At last, corruption also leads to a shift in the composition of expenditures.^[51] Investments in education and health tend to be reduced, while more manipulable projects with higher discretion like large scale defense projects are extended.

The linkage of corruption and the hidden economy ^[52] is also well established.^[53] The hidden economy needs some kind of political and administrative protection for its existence. Illegal behavior of the public officials bolsters corruption and secures the informal economy. As underground activity leads to corruption, the mechanism also can be turned upside down when mainly corruption – not tax rates – causes hidden markets.

Another general consequence is the increase in income equality, where especially the poor are hurt more severely.^[54] In countries with immanent corruption, poverty is likely to spread more easily. In general, corruption undermines governmental institutions and administrative bodies which leads to social, economic and political instability.^[55]

Negative consequences as discussed above are based on general level of corruption in a country. Beside these broad relations the specific type of corruption and its structure has to be taken into account when discussing country cases^[56] - as we will see below.

2.6 Is corruption always bad?

When hearing the word corruption there is always a negative connotation linked to it. Yet some scholars confirm positive effects of the abuse of public power for private gain. One topic is the so-called “grease-the wheels” argument. It says that bribery can be an efficient tool to avoid heavy regulations and ineffective legal codes.^[57] According to the argument, corruption can be useful if the overall market regulation is bad.^[58] Opposed to this view, it can be said that corruption nourishes itself because the bureaucrats have discretion over the creation and reading of these burdensome regulations.^[59] Therefore, a country can be excessively regulated while escorted with bureaucratic discretion, which poses new incentives for corruption. Grease money can lead to monopolistic structures when the administrator intends to limit the amount of competitors for a contract or a market.

Another point which might justify corruption is the “speed money” argument. It says that “bribing strategies…minimize the average value of the time costs of the queue…[and the public servant]…could choose to speed up the service when bribery is allowed.”^[60] The argument of speed-money seems justified when bad government is taken as an exogenous factor. Nevertheless, managers of companies who pay relatively more bribes also tend to spend more time in the bargaining process with public officials.^[61] On these grounds, the exogenous hypothesis can be rejected.

3 Anti-Corruption Programmes

3.1 Requirements

As the abuse of public office for private gain is an interdisciplinary problem, the discourse on how to fight it has to embrace different sciences.^[62] Fighting corruption has to be based on holistic programmes. Furthermore, the overall success of anti-corruption programmes in a country is highly correlated to the knowledge of the causes, effects and cures of corruption.^[63]

A crucial starting point is to make a diagnosis on the causes and effects of corruption.^[64] The results of such an underlying activity is that the public on the one hand becomes more aware on the causes, extents and drawbacks of corruption and on the other hand that it serves as a foundation for putting the emphasis in the fight against corruption. In a national strategy, priorities can be derived from the diagnosis and the administrative bodies most vulnerable can be set at the core.

Campaigns against corruption can only be successful if they have a large time horizon. Generally speaking, as a country develops economically the level of corruption tends to go back in the long run.^[65] The same effect seems to be true for an opening for trade and a democratisation process, although the latter has to be constant over decades. As we see, reducing the level of corruption requires a long-term perspective. The long-run campaign has to be backed by a political consensus. Lip-services by political parties for winning national elections endanger the decisive battle against corruption. Therefore, the civil society has to play a key role in advocating the cause and measuring the government on its achievements in anti-corruption reforms.^[66] Best conditions for tackling the problem would be a combination of true confession of political leadership and an active and involved civil society flanked by an active media.

3.2 Types

Anti-Corruption programmes will be divided here into three main forms according to Steves and Rousso.^[67] The first form is based on legal reforms. The focus here is put on drafting and amending laws in special areas like political party financing, civil service, financial regulation, public procurement but also on strengthening law-enforcement institutions. The second group of reforms is characterized by the compliance with international conventions. Here, governments try to build alliances with other governments and participate in transnational programmes. International conventions, resolutions, codes and standards stem from international organisations like the United Nations,^[68] the Council of Europe (CoE)^[69], the OECD,^[70] the EU,^[71] the IMF,^[72] and the World Bank^[73]. A disadvantage of this form is that conventions only comprise minimum requirements.^[74] The third form is represented by so-called omnibus programmes. In this kind the governments usually conceive a concept document, issue an anti-corruption law, set up an anti-corruption agency, present an action plan for implementation and install a monitoring mechanism.

3.3 Combating Corruption in Bulgaria

3.3.1 Extent of Corruption

Bulgaria improved its performance in the Corruption Perception Index (CPI) steadily (see Table 1). On a scale from 0 (totally corrupt) to 10 (free of corruption) it leaped forward by one point and reached the aggregate mark of 4.1 out of 10 different surveys. This means that Bulgaria turns from being a systemic corrupt country to a moderate one.

Table 1) Corruption Perception Index

illustration not visible in this excerpt

See also Annex I.

In a second evaluation Bulgaria also advanced positively in perceived corruption from a value of –0.62 to –0.17 in a time-span of six years (see Table 2). The indicator, which ranges from –2.5 (highly corrupt) to 2.5 (highly clean), became also more reliable due to the increased number of used surveys.

Table 2) Control of Corruption

illustration not visible in this excerpt

In a strategy paper issued in 2004, the European Commission stated that “Bulgaria has implemented several measures in the fight against corruption (see 3.3.3), but it remains a problem. Renewed efforts are needed, including tackling high level corruption.”^[75] In its regular report on Bulgaria, the Commission also stated that although corruption continues to pose a serious threat to the society there are some signs of progress, especially in petty corruption, but the extend of high level and local corruption remains unchanged.^[76]

Corruption is constantly perceived by the public in Bulgaria as one of the top five problems in the post-communist era.^[77] Nevertheless, corruption is internalised by the public and its usage is declining rather slowly.^[78] Areas of special suspect for corruption embrace the customs administration, public procurement, political party finance and eventually the judiciary, the health system and the police.^[79] The period from 1998 to 2005 could not reduce high level corruption in public procurement, which means that one out of two or three contracts is accompanied by improper payments.^[80]

Regarding the economic sphere, large-scale privatisations, public procurement and especially the regulatory burden, which ranks as one of the three most cited problems in the interaction between companies and the government.^[81] Corruption threatens the Bulgarian economy and in interaction with the hidden economy it re-distributes economic resources outside the regular markets and institutions and therefore destabilizes the economy and the democratic structures. Nevertheless, a positive trend is the decline in the share of the hidden economy in Bulgaria.

3.3.2 Country-Specific Causes

According to an opinion poll, in which the most important reason for corruption was asked, weaknesses of the legislation was reported as the major reason (18.9%).^[82] The second most influential factor is the possibility for public officials to obtain illegal benefits (17.6%). On the third and fourth places follow the lack of effective measures and sanctions (17.4%) and the low wage level of public servants (16%). Insufficient political will for dealing with corruption is stated by 11% of the interviewed people. Of further importance were the widespread bureaucracy (8.8%) and the extensive prerogatives of public officials (4,2%).

The democratic development in Bulgaria since 1989 is marked by clientelism, in which “the bureaucrats are used to trading in the services offered and the new business elite has nothing against buying them”.^[83]

[...]

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^[1] Speech of World Bank President Wolfensohn in 1996, which for the first time stated its commitment to “fight the cancer of corruption”. See World Bank 2000 p.1. Several International legal instruments were introduced in the same year such as the UN Declaration against Corruption and Bribery in International Commercial Transactions and the International Code of Conduct for Public Officials which paved the way for further UN, OECD or Council of Europe (CoE) initiatives.

^[2] Political science (Huntington 1968), anthropological/sociological/cultural (Weber 1947), economic (Rose-Ackermann 1997), public administration and criminal law perspectives all contribute to a large variation in the input of corruption study.

^[3] Among others used by the World Bank see World Bank 2000.

^[4] See Engerer 1998 p. 1

^[5] See for instance Tanzi 1998 p.10 and Engerer 1998 p. 1.

^[6] Some scholars disagree and include also blackmailing, e.i. forced involvement as possible part of corruption. See for instance Andvig et al 2000 p. 17.

^[7] See Kaufmann 1997 p. 3.

^[8] See Engerer 1998 p. 3.

^[9] See Engerer 1998 p. 3.

^[10] See Rose-Ackerman 1975 p. 198.

^[11] See Andvig et al 2000 pp. 18-20.

^[12] See Andvig et al 2000 p. 14-18.

^[13] See Tanzi 1998 p. 9 and Mauro 1997 p. 1&2.

^[14] See Andvig et al 2000 p. 15.

^[15] See Kaufmann 1997 p. 3.

^[16] See Andvig et al 2000 p. 16.

^[17] For instance Eskeland and Thiele studied corruption in a moral hazard framework. See Eskeland et al 1999.

^[18] See Andvig et al 2000 p. 17.

^[19] See Andvig et al 2000 pp. 17&18.

^[20] See Situngkir 2004 p. 10.

^[21] Tanzi 1998 p. 8. See also Wei 1998 p. 4.

^[22] The Corruption Perception Indices (CPI) are available at www.transparency.org/surveys#cpi, access on 7.7.2005. See Annex I.

^[23] GCR Index is based in Geneva, www.weforum.org/site/homepublic.nsf/Content/Global+Competitiveness+Programme, 17.9.2005.

^[24] Appears since 1982 and is based in Syracuse USA. See www.prsgroup.com/icrg/icrg.html, 17.9.2005.

^[25] Based in Hong Kong, www.asiarisk.com, 17.9.2005.

^[26] See Kaufmann et al 2003 pp. 32-39 and Kaufmann et al 2005 p. 1.

^[27] See Treisman 1999 p. 2.

^[28] The following causes for corruption are classified according to Tanzi 1998.

^[29] See Tanzi 1998 p. 10.

^[30] See Tanzi 1998 p. 11.

^[31] For instance credits, electricity, water, public housing, rationed goods, access to educational and health facilities etc. See Tanzi 1998 p. 13.

^[32] See Rose-Ackerman 1997.

^[33] See Tanzi 1998 p. 16.

^[34] See Wei 1998 p. 18 or Andvig et al 2000 pp. 17&18.

^[35] See Weber 1947.

^[36] See Van Rijckeghem/Weder 1997 p. 31 or World Bank Development Report 1997.

^[37] See Situngkir 2004 p. 9.

^[38] See Tanzi 1998 p. 18.

^[39] See Borner et al 1999 p. 27 or Tanzi 1998 p. 18.

^[40] See Becker 1968 pp. 169-217.

^[41] See Tanzi 1998 p. 19.

^[42] See Borner et al 1999 p. 37.

^[43] See Tanzi 1998 p. 20.

^[44] Despite several theories of scholars like Leff, (1964), Huntington (1968) and Lui (1985).

^[45] See Mauro 1995.

^[46] See Engerer 1998 p.7 or Lambsdorff 1998.

^[47] See Tanzi 1998 p. 29.

^[48] See Wei 1998 p. 9-10.

^[49] See Tanzi 1998 p. 29.

^[50] See Tanzi and Davoodi 1997

^[51] See Mauro 1997.

^[52] In the light of simplification the terms informal and hidden economy are used interchangeably and used as business activities opposing the formal economy measured in the GDP. For a comprehensive overview, which also includes grey and black economy see Krakowski 2005 p.5 and Center for the Study of Democracy 2005 p. 75.

^[53] See Andvig et al 2000 p. 101.

^[54] See World Bank 2000 p.1 or Kaufmann 1997 p. 4.

^[55] See Doig/McIvor 1999 p. 660.

^[56] See Andvig et al 2000 p. 102.

^[57] See Leff 1964 p. 11.

^[58] See Engerer 1998 p. 4.

^[59] See Kaufmann 1997 p. 2-6.

^[60] Lui 1985 p. 760-781.

^[61] See Kaufmann and Wei 1999.

^[62] Like politics, sociology, law and economics. See Situngkir 2004 p. 10.

^[63] See Andvig et al 2000 p. 130.

^[64] See Kaufman 1998 p. 154&155 and World Bank 2000 p. 23-28.

^[65] See Andvig et al 2000 p. 130&131.

^[66] See OECD 2002 86-96 & 2003 p. 7.

^[67] See Steves/Rousso 2003 p. 4-7.

^[68] United Nations: Actions against corruption (UNGA Resolution based on the Report of Committee No. 3,

55th session, 28.01.1997). See Annex II Selected Relevant International Legal Instruments on Corruption.

^[69] SPAI (Stability Pact Anti-corruption Initiative), PACO (Programme against Corruption and Organized

Crime in South-Eastern Europe). Other initiatives of the Stability Pact include: Civil Law Convention on

Corruption (ETS 174 (1999); GRECO (Group of States against Corruption) set up by Resolution R (98) 7

adopted by the Committee of Ministers on 5 May 1998 (102nd session); OCTOPUS (Joint Programme

between the European Commission and the Council of Europe on the Fight against Corruption and

Organised Crime in States in Transition), 15.12.1998. See Annex II.

^[70] Organization for Economic Cooperation and Development: OECD Convention on combating bribery and

corruption in international business transactions. In effect from 15 February 1999. The Convention was

signed by all 29 OECD Member States (including Turkey) and by 5 non-member countries: Argentina, Brazil, Bulgaria, Chile and the Slovak Republic. Further to the endorsement of Israel's application to accede to the Convention by the OECD Council, the non-member signatories became six. See Annex II.

^[71] European Union: Convention on the Fight against Corruption. See Annex II.

^[72] The IMF introduced several standards for the financial, statistics, and fiscal area in order to strengthen transparency like the Financial System Stability Assessments (FSSAs) and the Financial Sector Assessment Program (FSAP) in 1999 or the General Data Dissemination Standard (SDDS), established in March 1996.

^[73] Mr. Wolfensohn the then president announced the fight against the “cancer” of corruption as priority in 1996, a strategy was endorsed by the Board of Executive Directors and a report laid the foundation of the World Bank’s engagement promoting its “Multipronged Strategy for Combating Corruption”. See World Bank 1997a and 2000 p. 1 & 21-36.

^[74] See Karadjov 2001 p. 7.

^[75] European Commission 2004e p.9.

^[76] See European Commission 2004a p.19.

^[77] Besides unemployment, low incomes, crime and poverty. See Center for the Study of Democracy 2005 p. 24.

^[78] See Center for the Study of Democracy 2005 p. 25.

^[79] See Open Society Institute 2002a p. 82.

^[80] See Coalition 2000 1998 p. 57-68.

^[81] See Center for the Study of Democracy 2005 p. 73-104.

^[82] TI Sofia/National Public Opinion Center 2000 p. 8.

^[83] Sazho cited in Karadjov 2001 p. 4.