corruption again

Tom Lehman uswa12 at
Tue Nov 9 08:07:45 PST 1999

Doug, this is hot stuff! Where on the World Bank website is this story located or is it from one of their e-mail newsletters.


Tom Lehman United Steelworkers of America Lynn R. Williams Learning Center 3315 W. 21st Street Lorain, Ohio 44053 440-282-6015 phone 440-282-3704 fax

Doug Henwood wrote:

> [from the World Bank's daily clipping service]
> A survey of more than 3,000 East European companies paints a sobering
> picture of
> endemic corruption, favored lobbies, and continuing state influence over
> business 10 years after the collapse of communism, reports the Wall Street
> Journal (p.A21) and the Wall Street Journal Europe. The survey by the World
> Bank and the EBRD, published yesterday as part of the EBRD's annual Transition
> Report, concludes that bribery and corruption remain widespread due in part to
> the continued reliance of companies on direct ties to government officials.
> Among the findings is that companies in Eastern Europe pay bribes of an average
> of two percent of annual revenue in Croatia to eight percent in Georgia. "When
> added to what is already considered by firms to be an extremely high level of
> official taxation, the bribe tax imposes a severe burden on enterprises in the
> region," says the survey. The average bribe tax in the former Soviet Union-5.7
> percent of revenue-is almost twice that in Central and Eastern Europe, 3.3
> percent of revenues.
> Surprisingly, though, bribery remains widespread in countries considered
> transition success stories, according to the survey. Companies surveyed said
> firms that bribe "frequently or more" totaled 31.3 percent in Hungary and 32.7
> percent in Poland, compared with 29.2 percent in Russia. Private-sector
> companies pay a larger share of their revenue in bribes than do state
> companies.
> Of most concern to the EBRD appears to be the impact on small companies, with
> some 40 percent of those surveyed saying they frequently pay bribes compared
> with 16 percent of large enterprises. EBRD President Horst Koehler said new
> companies are critical in driving economic growth in transition countries and
> must be protected and encouraged.
> The study's sharp words about corruption and powerful business oligarchs
> represent a radical departure for the EBRD, which in the past has been cautious
> about publicly criticizing slipshod business practices in the region, the story
> says. While Koehler has sought a more outspoken role for the bank since taking
> over last year, some EBRD bankers advocate a lower profile to avoid alienating
> governments in the 26 East European and Central Asian countries where it
> operates.
> The study found that while direct state intervention in the region's economies
> has shrunk dramatically since the collapse of central planning, "bargaining
> between the state and firms has not ceased but rather changed form."
> Governments continue to favor some companies over others by giving explicit or
> implicit subsidies, including tax breaks and tolerance of debts. Meanwhile, a
> small group of powerful companies exert undue influence over
> government policies
> in many of the region's countries. "The evidence suggests that in most
> transition countries a small group of firms exercises influence over state
> policies that affect the activities of many firms across the
> economy," the study
> found.
> Despite its critical assessment of business practices in East Europe, the EBRD
> was quick to applaud areas where progress has been made over the past 10 years.
> "Freedom of economic and political choice has advanced significantly in
> virtually all of the countries (in which the EBRD operates)," EBRD Chief
> Economist Nicholas Stern said. "We have to recognize those achievements."
> The EBRD said it expects average economic growth in the region to accelerate to
> more than three percent in 2000, from about 1.6 percent this year. It also
> predicted that foreign direct investment into Russia would jump to around $3.5
> billion this year from $1.2 billion in 1998.

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