>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.
It's not on their public website - it's part of a secret, password-protected subset for recognized, ha ha, journalists. But it's based on a WSJ story, which follows.
Doug
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Wall Street Journal - November 9, 1999
Bribery, Corruption Are Rampant In Eastern Europe, Survey Finds
By JOHN REED and ERIK PORTANGER Staff Reporters of THE WALL STREET JOURNAL
LONDON -- A survey of more than 3,000 East European companies by the World Bank and the European Bank for Reconstruction and Development paints a sobering picture of endemic corruption, favored lobbies and continuing state influence over business 10 years after the collapse of communism.
The survey, published Monday as part of the EBRD's annual Transition Report, concludes bribery and corruption remain widespread due in part to the continued reliance of companies on direct ties to government officials. To assess the size of the so-called bribe tax, researchers from A.C. Nielsen polled entrepreneurs and businesspeople in 20 countries about their dealings with the state, and associated obstacles to doing business.
Among the findings: Companies in Eastern Europe pay bribes that amount from as little as 2% of annual revenue in Croatia to 8% 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," the survey said.
The average bribe tax in the former Soviet Union-5.7% of revenue-is almost twice the 3.3% of revenue in Central and Eastern Europe. Surprisingly, though, bribery remains widespread in countries considered transition success stories, the survey said. Companies saying firms in their country they bribe "frequently or more" totaled 31.3% in Hungary and 32.7% in Poland, compared with 29.2% in Russia. Private-sector companies pay a larger share of their revenue in bribes than do state companies.
Of concern to the EBRD is the impact on small companies, with about 40% of those surveyed saying they frequently pay bribes compared with 16% of large enterprises. EBRD President Horst Koehler said new firms 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 are a departure for the EBRD, which has been cautious about criticizing slipshod business practices in the region. While Mr. 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.
The corruption study found that while direct state intervention in the region's economies has shrunk 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 exerts undue influence over government policies in many of the region's countries.
Despite its critical assessment of business practices in East Europe, the EBRD was quick to applaud areas where progress has been made during the past 10 years. "Freedom of economic and political choice has advanced significantly in virtually all of the countries [in which the EBRD operates]," said Nicholas Stern, the EBRD's chief economist. "We have to recognize those achievements."
The EBRD said it expects average economic growth in the region to accelerate to more than 3% in 2000, from about 1.6% this year. It further predicted foreign direct investment into Russia would jump to about $3.5 billion this year, from $1.2 billion in 1998.