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DEPARTMENT OF BALKAN, SLAVIC AND ORIENTAL STUDIES

MASTER’S DEGREE IN

POLITICS AND ECONOMICS OF CONTEMPORARY EASTERN AND SOUTH EASTERN EUROPE

Instructor : Harry Papapanagos

Corruption in Romania

Thessaloniki, December 2012

Postgraduate Student: Chatzipoulidis Nikolaos

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CONTENTS

1. Abstract 2

2. Introduction 2

3. Corruption Profile 3

4. Most corrupted pillars (nests of corruption) 4

4.1 Parliament – Legislature 5

4.2 Political Parties 6

4.3 Judiciary 6

4.4 Public Sector 7

4.5 Business Sector 8

5. Conclusions and Policy Recommendations 10

References 12

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1. Abstract

In order to have a better understanding about Romania’s problem with corruption, we have to illuminate some key factors that are really helpful in the current situation. During this project, firstly, we will examine Romania’s Corruption profile and the peculiarities of the Balkan region. Afterwards, we will proceed with sources and causes of corruption both in the region and in the country. Moreover, we will examine the pillars that are heavily affected by corruption. The anticorruption strategy, that is proposed in this draft, has to do with the adoption of specific measures that will hit the root of the problem in the pillars that corruption nests. At the end of the essay, conclusions will be extracted and General Policy recommendations for the deterioration of the phenomenon will be pointed out.

Keywords: Corruption, Romania

2. Introduction

The country located at the intersection of Central and Southeastern Europe bordering on the Black Sea with 21.4 millions population. In this essay we will talk about corruption but what is corruption and why corruption is so important ?. Although there is not a precise definition there is consensus that corruption refers to acts in which the power of the public office is used for personal gain in a manner that contravenes the rules of the game (Jain, 2001). While in the political sphere corruption undermines democracy, economically it places Romania at the periphery of global economy and generally affects the business environment and market economy. Corruption may also result in negative consequences such as encoring cynicism and reducing interest of political participation people sustain from politics , political instability , reducing political competition distorting political development and sustaining political activity based on patronage, clientelism and money. The corruption can be categorized as grand and petty. The grand corruption enhance or generates the petty corruption through the “snowball” effect. If the Politicians and the Highly officials are corrupted if the law is not implemented and the institutions are undermined sooner or later citizens start to act at the same way and crime becomes culture .The citizen that lives not only in Romania but general in Balkans at the end can not conceptualize the term petty corruption because thinks that only corruption that exists is the grand corruption. When the Balkan citizens acts at a not transparent way the usual phrase is : That’s what we do in Balkans , or this is the way we do business here .Furthermore corruption generates poverty, inflation, imbalanced economic development, weakling work ethics and professionalism, hindrance of the development of fair in market structures and unhealthy competition there by deterring competition. The

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anti-corruption fight is a necessity but fighting against corruption is not an easy task it must prioritized as a national necessity. In order to have a better understanding we must examine Romania’s Corruption Profile (Coșpănaru et.al., 2011).

3. Corruption Profile

Αccording to the most recent Survey of Romania, by Global Corruption Barometer, which is the only worldwide public opinion survey on views and experiences of corruption, 83 % of people feel their government's efforts to fight corruption are ineffective. On the other hand 87 % believes that corruption in Romania, the latest years, increased and only 2% is persuaded for the contrary results.

(Source: http://www.transparency.org/research/gcb)

Table 1. (Source: http://www.transparency.org/research/gcb)

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Average

RO 2.8 2.6 2.8 2.9 3.0 3.1 3.7 3.8 3.8 3.7 3.6 3.25

Bal-13

3.8 3.6 3.4 3.3 3.4 3.6 3.9 4.0 3.9 3.8 3.7 3.7

Bs-10 3.0 2.8 2.8 3.0 3.0 3.2 3.3 3.3 3.3 3.1 3.1 3.1

EU-27

6.2 6.6 6.3 6.3 6.4 6.5 6.5 6.5 6.4 6.3 6.3 6.4

China 3.5 3.5 3.4 3.4 3.2 3.3 3.5 3.6 3.6 3.5 3.6 3.5

U.S.A 7.6 7.7 7.5 7.5 7.6 7.2 7.2 7.3 7.5 7.1 7.1 7.35

According to the table 1 (which was created by CPI data), from 2001 to2011 the country's score has been raised by 0.8points but still Romania occupies the flattering place of 25th among 27 EU member states, and as we can see from the table although we

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have a significant improvement of level of Corruption in Romania being above the average of BS-10 and near to china and the last years with Bal-13 too on the other hand there is a huge distance to be covered between the average of Romania (3.25) and EU-27 not to mention USA. After Romania joined the EU, public commitment of authorities against corruption affected by the withdrawal of major funding programs and this is the explanation in order to understand how from (3.1) level of corruption in 2006 reached (3.7) in 2007 (the year that Romania joined the EU) and why the situation not only from 2007 until 2011 didn’t get better but followed a stabilization and even deterioration orbit 2011( 3.6).The data of 2012 are not comparable due to change to the method that CPI uses (Cospanaru, 2011a). First of all the economic crisis that Romania experiences up to point until now raised the vulnerabilities to corruption. A large budget deficit in 2009 led to Romania borrowing heavily, eventually becoming the largest debtor to the International Monetary Fund in 2010. Worsening economic condition and Corruption scandals led to popular unrest and eventually to a political crisis in 2012 (Wikipedia, a). These problems added with others problems that have causes either on communist legacy of Romania a cause that cannot be ignored as Romania was one of the most centralized economies before the dissolution of CCCR and the adaptability in the transition period that take consider its past would have been a tricky task. The low degrees of CPI which means high level of corruption in scale (0-10)* can be explained through the communist legacy as not only Romania but also BS-10 and Bal-13the majority of them being former communist countries along with communist China have significantly higher level of Corruption low CPI average than the Capitalist EU-27 and USA.(Source: http://www.transparency.org/)The interim report issued by the European Commission (EC) today under the Co-operation and Verification Mechanism (CVM) says that anti-corruption bodies set up by Romanian authorities are starting to improve their track record .The 0,8 change is an outcome of reforms and the hole anticorruption activity.

4. Most corrupted pillars (nests of corruption)

Now in order to have a better understanding which are the problems, deficiencies and flaws of the Country regarding to corruption and also to be capable at the end to promote solutions policy recommendations or even design an anticorruption strategy it is of vital importance the examination of the most corrupted pillars where the corruption has its “nests” .In this point it is of great importance to highlight that the examination will focus not at law and regulations but what really happens in practice.

4.1 Parliament – Legislature

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According to a Gallup in January 2008 the Romanian institution with the least credibility is the Parliament almost 90 % of Romanian citizens have no or very little confidence to the Parliament. As we sough in the table the Romanian Parliament is with political Parties the most corrupt institutions evaluated with 4,5 score out 5. The overall pillar score is 62.5/100. (Source: http://www.transparency.org/ 2011)

First of all in order to have a clear view about the Parliament we must understand how it functions the central representative authority in Romania. The Parliament of Romania is made up of two chambers: The Chamber of deputies and The Senate Prior to the modifications of the Constitution in 2003, the two houses had identical attributes. A text of a law had to be approved by both houses. If the text differed, a special commission was formed by deputies and senators, that "negotiated" between the two houses the form of the future law. In 2009, a referendum was held to consult the population about turning the parliament into a unicameral body and reducing the number of representatives to 300 from 137 senators and 334 deputies  however up until today the necessary constitutional changes to achieve this have not been put into effect (Wikipedia, b).

Except that there is a total waste on resources as the funds focus in the wrong direction . The Romanian Parliament is hosted in the Palace of the Parliament. According to the World records Academy the Palace is the world's largest civilian building, most expensive administrative building, and heaviest building (Wikipedia, c). Not only that the low level of recourses are spent without consideration but also there is low level of expertise as the political personnel in the parliament is not specialized or trained due to the fact that the selection is not based on qualifications criteria but on clientelism and Patronage networks. That has as result the quality of legislative projects to be low.

Another serious case that we must take into account is that the MPs were accused by the media and by opponent political parties of protecting fellow MPs by not granting prosecutors permission to arrest an MP , although 13 MPs accused of corruption in a trial .Trials take many years and in many cases are continuously postponed or rejected. The corruption were said to be regarded as priority on the Parliaments agenda mostly because the anticorruption legislative proposals considered to be a part of the EU integration process. Although the legal framework for transparency laws exists there are many cases that it is bypassed as more and more emergency ordinances by the government and other Constitutional procedures that allows the Cabinet to pass bills without debate are adopted this is an indicative feature that the Legislature independence is limited (Lonean, 2011a).

4.2 Political Parties

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Political Parties are among the most corrupt organizations in Romania, receiving a score of 4.5 out of 5 and a very low Overall Pillar score of 34.03/100. (Source: http://www.transparency.org/)

Analysts and surveys agree that groups with specific interests (Lobby) and clientelistic relationships are ruling the political parties moreover local businessmen are recruiting the candidates of the political parties a phenomenon that enhanced from 2008 and then as the electoral system in Romania changed to a single candidate constituency. In many post-communist countries, a MP seat receives some degree of immunity from criminal prosecution, which is highly valued by business people operating in an uncertain legal environment (Protsyk & Matichescu, 2011).

The new party system based on patronage networks. That’s why corruption is evident both at local and central level. The term that media since 90s used in order to describe these local “actors” was “Local Barons” they took advantage of the power entrusted to local government for the management of public recourses for the common good and use it(power) in order to benefit specific groups and interests .Furthermore it must be mentioned that the legal process of establishing a party in Romania is extremely difficult because the new party must have at least 25.000 members and electoral threshold of 5%of votes the Political system in Romania is designed in order to prevent new parties to enter the political scene and conserve the existing (political scene).Nevertheless the law imposes limitations regarding private funding the political parties are under less scrutiny respect to other institutions. One of the biggest problems regarding this domain has to do with the transparency and specific the financing of both the activity and also the electoral campaigns. One major tend is that the Parties admit that all the funds come from their member which is legal but the parties are not obliged to reveal the exact number of member that they have as we can easily understand these member donations are the laundering of sponsorships. All the problems concerning the Political parties pillar have a common origin ,there is not an effective anticorruption strategy and also an effective financial oversight of Political parties and on the other hand the financing mechanisms of the parties are really sophisticated in order to avoid control. The Romanian Political system is called as Partycracy the most evident proof for this is the fact that the whole apparatus of the Executive not only the Cabinet Ministries, is changing when the Cabinet changes (Lonean, 2011b).

4.3 Judiciary

The Global Corruption Barometer places judiciary as the third most corrupt institutions in the country with a score 4 out of 5 and Overall pillar score 54.86/100. The judiciary system of Romania confronts many serious problems first of all the very unstainable legislative framework leads to contradictory decisions in similar cases another issue is the very long time that a case lasts before its closed also problems in transparency as the

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judiciary independence is debatable political interference and pressure on magistrates is still present however the legal provisions protecting magistrates are clear. The biggest obstacle that the judiciary system has to overcome is connected with the Parliaments common practice to delay the investigation and often denying them the number of final conviction is very limited at medium level officials and almost none at he higher level the poor quality of proofs and the lack of performance of the courts are two plausible explanations. The lack of performance has to do with inefficiencies of (NIM) which is responsible for the training of magistrates which is either perfect, for example the selection procedure for continuous training of the magistrates is an untrasparent procedure also the procedure of practitioners has significant flaws such as the subjects don’t allow the evaluation of the practical judgment capacity of the future magistrates. Another structural problem is that although the judges are independent and immovable by law prosecutors are under the authority of the minister of justice and they have only decisional independence (Cospanaru, 2011b).

4.4 Public Sector

Although the Public sector comes 5th among the most corrupted Pillars in Romania is considered as a major problem of the Romanian integrity system with an assessment of 3.8 out of 5 and overall pillar score the significant low 23.61 it is easy to understand that in this pillar exist considerable deficiencies and problems . Moreover the most recent GCB research in 2010 shown that 28% of the respondents paid bribe in the last 12 months ( Source: http://www.transparency.org/research/gcb).

Bribery in Romanian called “spaga” and describes a meaning of corruption that is part of everyday life. The most visible form of corruption in the is that of abuse of public office by public officials , allocating public funds in often accompanied by “spaga” which is the fee that paid for obtaining contracts. Moreover other significant deficiencies are : the recourses are assessed as insufficient and that means that a priori we have to deal with abnormal functioning of Public sector institutions. Moreover the lack of independence of the public sector and the constant political intervention cancels the efforts for a more transparent Public Sector (Precupetu, 2007)

In these faults must be added the deficiencies that economic crisis and austerity measures caused such as the reduction of salaries in the public sector from 25% to 50 %, generating inequality, poverty, lack of professionalism lessening of productivity and weakling work ethics. Moreover other main problems are the lack of professionalism the inadequate preparation of civil servants public education is evaluated with 0 the weak interest of civil servants to respond to citizen demands also the lack of transparency and integrity in “cleansing” the public sector as an outcome of clientelism has as a result talented people to not be attracted in order to enter the Public sector. Another problem is that although from 2004 public servants must not have political affiliation still the political interference

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is constant and prefects are changing after the government change this is the “Local Barons” which had mentioned earlier. Although in Romania the transparency of the Public sector is ensured by the legal framework there are action that undermine this effort such as when the Constitutional Court of Romania declared unconstitutional a number of articles that gave National Integrity Agency (ANI) an administrative jurisdiction. Last but not least it is of vital importance to point out that Romania is the only country in the continental law system that have a comprehensive Whistle-blowers Protection act a system that regulates the protection of persons who provide information both for criminal acts law violations regarding also corruption we will come up with the Whistle-blowers system later in the planning of the Anticorruption strategy (Lonean,2011c).

4.5 Business Sector

Diagramm 1.

Last, but not least, comes the pillar of Business according to the Heritage Foundation index of Romania in partnership with Wall street Journal Romania ranks 72nd out of 183 economies in Doing Business 2012, reflecting a decrease by 7 points compared to last year. Romania economic freedom score is 64,4 this score makes its economy to rank in the 62th place Romania is ranked 28th out of 43 countries in the Europe region and its

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overall score as we see from the diagram 1, below, is higher than the world average. (Heritage Organization, 2012).The top 3 obstacles for investments faced by firms and entrepreneurs in Romania as we can see are Tax Rates, an Inadequately Educated Workforce and Access to Finance. But what about corruption ? . Corruption continues to undermine the prospects for long-term economic development.We already referred to the rule of law problems or its unequal application . The judicial system suffers from political interference, inefficiency, and excessive workloads and poor performance due to the non perfect and not adjustable training that the magistrates receive. Although Romania is a signatory to international conventions concerning intellectual property rights, but enforcement of legislation protecting patents, trademarks, and copyrights is very weak. Mistrust of government continues due to widespread public-sector corruption there is also corruption in Political Parties such as partycracy networks, the phenomenon of entrepreneurs making arrangements with the “Local Barons” in order problems to not occur during a business procedure or a business plan. Αll these affect business .As we can see, what is depicted on the first graph the graph below compares Romania to the best and worst countries within the region and the world, around this aspect of corruption. On the second graph we can see the results of Heritage Foundation index of Romania in partnership with Wall street Journal Survey regarding the issue of what percent of the firms is expected to Pay the informal Payment the fee called in Romanian society as “spaga” to get things done (Heritage Organization, 2012).

Diagramm 2.

Diagramm 3.

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5. Conclusions and Policy Recommendations

Romania although had done steps forward these efforts are not an outcome of a National Plan and can be characterized as methodic but as an effort of solving problems partially and not taking under serious consideration the very important issue of corruption . In order the phenomenon of corruption to deteriorate my personal recommendations are : the National integrity system of Romania to be enhanced and a an effective anticorruption strategy to be drawn. This strategy must be designed in a way that not only fights corruption but the outcomes should be visible in every day life. This effort must be supported by the citizens of Romania because one of the biggest problems is according the survey that it was used in order to provide us information about the corruption profile of the country 83 % of people feel their government's efforts to fight corruption are ineffective and on the other hand 87 % believes that corruption in Romania the latest years increased. People had lost their trust and also their hope in the last elections the abstention rate was 60 % the numbers are indicative of citizens resignation (Source: http://www.presseurop.eu).

Almost everyone in Romania and a significant percentage of inhabitants in the BS-10 believes that not only nothing is changing towards a positive direction but corruption every year increases. The first task is to act in a manner that this self-sustaining situation will be interrupted hope and trust will generated . People must realize that petty corruption is a corruption form too and start to act in more transparent way people must stop conceptualize the state , the government or the institutions as an enemy and try to bypass them stole them or avoid them. It must be constructed a linkage between state – citizens based on mutual trust. In order all these to be accomplished trust and confidence

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must be born. The first measure that must be taken concerns the most corrupted pillar of all the Parliament. The Romanian Parliament is hosted in the Palace of the Parliament the world's largest civilian building and most expensive administrative building so the Parliament must be relocated in a smaller and more efficient place this specific measure not only will provides a better allocation of funds but will be a symbolic act declaring a new era of transparency .The story must be widely covered by the media in order this measure to bring us the expected results which is the enhancement of trust and the creation of a channel between institutions and the people. This linkage is very important because as it said before in Public Sector pillar analysis Romania has Whistle-blowers Protection act a system that protects persons who provide information both for criminal acts law violations regarding also corruption the goal is the people to became both the agents and the bearers of transparency.

Furthermore reforming judiciary system and implementing legislative reform is vital for the upgrade of the low quality of services that courts provide as the magistrates are not well trained. Another measure should be the clarification of legislature so phenomena of contradicting decisions about the same issue to be diminished. The judicial reforms have to provide protection from political interference and secure the independence of judiciary authority. The corpus of magistrates will be reorganized as better trained Judges and prosecutors will enter in its ranks, except that magistrates accused with misconduct and scandals should be removed from their positions. Legislative norms regarding the matter of removing of immunity should be introduced and the immunity from MPs should be removed without the permission of the Parliament.It is also recommended Higher salaries at (Public sector –Police sector – Judicial sector) our goal is to provide motives and attract talented people. Now towards a more conventional direction it is proposed the Implementation of economic reforms and providing sound business environment in order to attract foreign investment and also impose lower taxation lift barriers and obstacles .Also it was pointed out the issue of higher administration officials called” Local Barons” and how they misuse the public administration funds so towards that direction another specific measure is the introduction of a uniform quality management system in central and Local government system. Zero tolerance regarding the issue of Corruption at every domain. A decisive engagement against corruption by the authorities. Companies should make their anti bribery policies .At last it is proposed a measure under which the parties in order the electoral procedure to be more transparent not to receive funds for their electoral campaign in terms of transparency by actor and foundations which have a “debatable” reputation. In other words not receive funds which are the outcome of illegal activities or organized crime.

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References

Coșpănaru, I. , Lonean, I. , Mitică, R., Drăjneanu, Ti-Ro. (2011). Νational integrity system assessment Romania. Transparency International Romania. URL: http://www.transparency.org.ro

Coșpănaru, I. (2011a). Corruption Profile, in: Coșpănaru, I. , Lonean, I. , Mitică, R., Drăjneanu, Ti-Ro. Νational integrity system assessment Romania. Transparency International Romania, pp. 20-22. URL: http://www.transparency.org.ro

Coșpănaru, I. (2011b). Judiciary, in: Coșpănaru, I. , Lonean, I. , Mitică, R., Drăjneanu, Ti-Ro. Νational integrity system assessment Romania. Transparency International Romania, pp. 46-59. URL: http://www.transparency.org.ro

Heritage Organization. Romania: 2012 Index of Economic Freedom . URL: http://www.heritage.org/index/country/romania)

Jain A. (2001). Corruption: A review. Journal of Economic Surveys Vol. 15, No. 1, Blackwell Publishers , URL: http://darp.lse.ac.uk/PapersDB/Jain_(JES01).pdfLonean, I. (2011a). Legislature , in: Coșpănaru, I. , Lonean, I. , Mitică, R., Drăjneanu, Ti-Ro. Νational integrity system assessment Romania. Transparency International Romania, pp. 26-36. URL: http://www.transparency.org.ro

Lonean, I. (2011b). Political parties, in: Coșpănaru, I. , Lonean, I. , Mitică, R., Drăjneanu, Ti-Ro. Νational integrity system assessment Romania. Transparency International Romania, pp. 122-133. URL: http://www.transparency.org.ro

Lonean, I. (2011c). Public Sector, in: Coșpănaru, I. , Lonean, I. , Mitică, R., Drăjneanu, Ti-Ro. Νational integrity system assessment Romania. Transparency International Romania, pp. 60-71. URL: http://www.transparency.org.ro

Precupetu I. (2007). On the nature and Causes of Corruption in Romania – Evidence from a grounded Theory Approach. Crime and Culture, Discussion paper Series No 13. URL: http://kops.ub.uni-konstanz.de/bitstream/handle/urn:nbn:de:bsz:352-opus-116443/On%20the%20nature_Precupetu.pdf?sequence=1

Protsyk, Ol. and Matichescu, M.L. (2011). Clientelism and Political Recruitment in Democratic Transition Evidence from Romania.   City University of New York, Comparative Politics, Volume 43, Number 2, January 2011 , pp. 207-224(18). URL: http://www.policy.hu/protsyk/Publications/Articles/CPRomClient11.pdf Wikipedia a: Romania. (cited 12 December 2012) URL: http://en.wikipedia.org/wiki/Romania

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Wikipedia b: Senate (Romania). (cited 12 December 2012) URL: http://en.wikipedia.org/wiki/Senate_of_Romania

Wikipedia c: Palace of the Parliament. (cited 12 December 2012) URL: http://en.wikipedia.org/wiki/Palace_of_the_Parliament