INTERNATIONAL CONFERENCE
Sofia, 23-24 March 2001
Program

H. E. Ambassador Sten Ask, Embassy of Sweden, Sofia

I. Introduction

First, I would like to thank the organisers - Coalition 2000 - for this opportunity to present some views on the fight against corruption in Bulgaria.

I would also like to praise Coalition 2000 for their engaged and professional efforts to tackle deep-rooted corruption in Bulgaria. The staunch commitment of Coalition 2000 provides not only a stimulus but also a hope in the struggle against corruption. Successful change cannot only be induced from above but needs strong support from below in the form of active NGO's, civil society and truly independent media.

II. The negative consequences of corruption

Our prosperity, democratic values and our capacity to combat corruption are interdependent. When corruption contaminates the actions of policy-makers, it brings about a waste of common resources, hinders investment and causes disillusion among voters.

There is a strong necessity to combat corruption in the name of democratic values. Hardly anybody would argue against that proposition - at least in public - even those who do not grasp the full scope of the negative consequences of corruption. But only by portraying its full effects - direct as well as indirect - a culture of zero tolerance can be fostered.

Corruption is a cancer in the body of society which not only undermines its morals but also holds back the fundamental dynamics of economic growth and development. It is the poorest people who bear the heaviest burden. Without growth it is very hard to pull people out of poverty.

Corruption works against growth and development in at least four ways.

First, corruption has a negative effect on allocative efficiency. When a corrupt few monopolise the channels for enrichment, resources are not distributed as compensation for a contribution to public wealth, nor in a manner which secures the highest rate of return on investment.

Second, corruption weakens motivation and labour productivity. Illegal activities, including the acceptance of bribes, hampers the motivation for sound effort which reduces labour productivity. It also shifts economic activities to the shadow economy. With corrupt incentives human capital investment does not necessarily guarantee higher future wages. Thus, corruption can discourage investment in one's own skills and undermine the motivation for education and vocational training.

Third, corruption raises public tension and contributes to social disintegration. The conviction or even only the suspicion that there is an inequitable distribution of national income and a practice of taking advantage of public jobs for private gain erodes the credibility of government policy and may even lead to action against the government.
Fourth, corruption betrays and destabilises expectations. In a climate of fragile expectations, outcomes become less predictable, so that investment decisions are hampered or biased.

We must not be naive. Corruption is a phenomenon that is not so easy to eliminate. Aid transition economies like Bulgaria's are a special case because of the vacuum of "neither plan, nor fully fledged market economy". The features are particularly prominent within three areas: privatisation, deregulation, and the news media.

Privatisation is corruption-prone since denationalisation is a vast process and the potential for illegal activities is great. People often argue that the sooner there is nothing left to privatise and the sooner the connection between the state bureaucracy and denationalisation is cut, the easier it will be to curtail corruption. I think there is much truth in this.

The second stand-out feature of transition economies is the large number of regulations left over from the over-regulated planning regime. It is obvious that an overly regulated economy is corruption-prone, since it is sometimes easier to pay or collect bribes than to comply or force compliance with the regulations. Moreover, it takes time to deregulate and to re-regulate. This process may be as important as the liberalisation in itself.

Debates about corruption take place publicly with the lively engagement of the media. If corruption is understood as an exchange of favours for money, then the news media may be at least as exposed to corruption as is the government and its bureaucracy. Business circles may influence the media for their own purposes. There is no easy way of exposing them to the judgement of public opinion because of the ties between the news media and interest groups.

III. The case of Bulgaria

In Bulgaria today, corruption is perceived as one of the most severe problems - not only by investors but also by its citizens. Bulgaria's position of ranking in Transparency International's annual corruption assessment is not a flattering one.

Bulgaria can do better than this - much better. What does that mean in practice? It means strengthening the rule of law and law enforcement. It means that the self-interest of the few shall not be allowed to triumph over the will and the rights of the people in a fair, democratic market economy. Above all, it means responsibility, and responsible politicians, businessmen and citizens.

In the near future Bulgaria and other candidate countries will be members of the European Union and an integral part of the internal market. To ensure an effective and prosperous Union it is crucial that the present standards in the candidate countries are levelled up to the countries with the cleanest business environment. An opposite process of levelling down the corruption standards in Europe would be disastrous. There is an imminent risk that corrupt circles in the candidate countries may join forces with illegal groups in the present Union.

It is imperative that the rule of law is undisputed before the accession of new member countries to the EU. Therefore, speeding up the reforms in the judiciary and in the police are important tasks in the candidate countries in order to qualify for EU-membership.

I believe it is of great importance that the Government and leading Bulgarian politicians now do recognise the existence and problems of corruption in Bulgaria. This gives me hope for the future. Only by acknowledging the problem of corruption can fundamental change be achieved.

The naive expectation that market forces alone can regulate economic activities and prevent corruption can only disappoint.

Corruption is not a problem that can be attacked in isolation and rooted out in one decisive effort. It is not sufficient for criminal law just to search for "bad apples" and punish of them. Only constant vigilance and structural reforms can solve the underlying problems of corrupt incentives built into the operation of government and businesses.

The public, politicians and members of law enforcement organisations should be aware of the sanctions that exist for transgression of rules, procedures or laws. More importantly, the application of such sanctions and the public visibility of measures taken against corrupt persons in Bulgaria must be improved. People who have been caught in dealing with organised crime should not be walking the streets of Sofia and Varna. They should be behind bars.

I use cancer as a metaphor for corruption in society. Getting rid of this tumour in Bulgaria will cause some pain. I am aware of the financial strait jacket that holds back important efforts in the Bulgarian society. But more resources must be transferred to the judiciary, police and prosecution to combat corruption. . Political priorities not supported by necessary budgetary means lose credibility by default. Less than 2 per cent of the state budget is presently allocated to the judiciary. This is not enough and it casts some doubts of the real political commitment. Less than 50 cases of corruption are taken to court - less than 0,1 per cent of all court cases - this does not reflect the high level of corruption in Bulgaria today.

But let's make it clear - in the long run, combating corruption is a rewarding project. Short-sighted profit from illegal corruption acts far from compensates for the damage done to the trust in the legal system and in the business and investment climate.

We know, for instance, that Swedish companies, fostered in one of the cleanest business environments in the world, are in general more successful in countries with a low level of corruption. To attract more Swedish investments, Bulgaria must be able to ensure a more predictable institutional infrastructure.

I see a very urgent need to launch an overriding strategy for combating corruption in Bulgaria. Only with a strong commitment from the highest levels of the state can the problems be successfully tackled. The political forces that now aspire for power in the upcoming elections must respond adequately to the even greater call for strong and systematic action.

All countries serious about fighting corruption must carry out a detailed assessment where corruption is most harmful and where it can be most effectively attacked. This should provide a way for setting priorities and formulating an action plan.

A comprehensive anti-corruption strategy should include:

Furthermore, business has a special responsibility to ensure that its activities promote a sound economic environment. I do hope that the public out-cry against corrupt companies will become as prevalent as it is on environmental issues today.

Strong efforts should also be made to mobilise a wider degree of private responsibility in the combat against corruption. And I do not agree with o those who say that power corrupts people. Rather, it is the other way round, people without morality corrupt power.

I wish you every success with this conference. Thank you.