Governance in the transition region

The collapse of communism triggered important social, political and economic changes across the transition region. The rapid and radical disintegration and transformation of state institutions created ineffective governance in many countries, where policy-makers were not held accountable for their decisions, leading to an increase in corrupt practices. And despite high-profile efforts by governments to combat corruption, it remains prevalent in many transition countries and continues to dominate reform debates.

Extensive empirical research has shown that corruption undermines social and economic development as well as people’s trust in society.3 More specifically, it distorts the composition of public expenditure, discourages foreign and domestic investment and leaves the poorest parts of the population at a significant disadvantage.

At a broader level, corruption also weakens political and economic systems. For example, the absence of trust caused by corruption may negatively impact the effectiveness of democracy, and the functioning and quality of institutions, including financial markets. Indeed, research suggests that trust is one of the key determinants of good governance and a well-functioning market economy.4

Although it is widely accepted that corruption in many transition countries has increased since the fall of the Berlin Wall, this is neither an inevitable nor an irreversible development.5 All three rounds of the Life in Transition Survey (LiTS) have explored the various factors that facilitate corruption and contain a series of detailed questions on citizens’ perceptions and experiences of it.6

Data from LiTS allow us to study how corruption affects institutional trust and public service satisfaction. More specifically, this chapter is interested in re-visiting the relationship between governance and corruption in the transition region to provide insights into:

• Changes in corruption perception and experience over the past decade
• The relationship between corruption and citizen satisfaction with public services
• The connection between experiences of corruption and institutional quality (such as media freedom, democracy and other governance indicators)
• Correlations between corruption and social trust.

As Chart 2.1 illustrates, the average perception of corruption has fallen across all regions compared to 2006, except Turkey and eastern Europe and the Caucasus. In fact, respondents in Turkey are among the most inclined in the transition countries to believe that bribes are necessary for dealings with public sector authorities and institutions. In contrast, there has been a significant drop in Central Asia – only less than 10 per cent of respondents believe that irregular payments are an issue. Similarly, respondents in central Europe and the Baltic States, south-eastern Europe and Russia report that perceptions of corruption in their public institutions have fallen since 2006. In total, the perceived level of corruption as measured by this indicator has fallen in 20 countries over the past 10 years.

The most remarkable reductions can be seen in Albania (a fall of 17 percentage points), Ukraine (13 percentage points) and Russia (8 percentage points). Levels of perceived corruption in many transition countries now compare well with the western European average (0.3 per cent for Germany and 2.1 per cent for Italy). Cyprus, Estonia, Latvia and Kosovo remain the least corrupt transition countries according to this measure, with lower levels of perceived corruption than in Italy. Altogether, the 2016 data indicate a general trend of convergence towards the low average levels of perceived corruption in Germany and Italy.

Chart 2.2 shows the perception of corruption broken down by public services and by region. Interestingly, the chart shows the perceived frequency of irregular payments within the health care sector (16 per cent) and to a lesser extent when dealing with traffic police (9 per cent) are particularly high in the transition region. Although corruption has decreased in all public services across the transition region since 2006, the levels remain well above western European comparator averages (Germany and Italy), where only less than 5 per cent of respondents believe that it is necessary for people to make unofficial payments to access public services.

Chart 2.3 shows the differences between respondents’ corruption perceptions and their actual corruption experiences. The darker coloured diamonds represent the proportion of respondents in each country who report that irregular payments to public sector authorities are necessary, while the bars display the proportion of respondents who state that they (or a member of their household) actually made an unofficial payment to public officials in return for services in the previous calendar year. The countries are sorted by the experience of corruption.

Similar to the findings in LiTS II (2010), the gap between perception and experience is the greatest in the countries where respondents report the highest levels of real corruption experience. This apparent underestimation of actual corruption is particularly pronounced in Russia as well as Central Asia and eastern Europe and the Caucasus. For example, only 11 per cent of respondents in Tajikistan state that unofficial payments were usually or always necessary. However, on average, 42 per cent of Tajiks report that they have in fact made irregular payments to the public authorities. By contrast, 35 per cent of Armenian respondents say that unofficial payments are usually or always necessary but only around 10 per cent of respondents state that they or a family member have actually made such unofficial payments, which is considerably lower than the reported perception of unofficial payments. In Russia, only 5 per cent of people believe that they need to make unofficial payments to access public services, while 18 per cent say that they have actually made an unofficial payment. This disparity might be due to the differences between the messages that people received from all forms of media (such as print, broadcast and online) and their daily life experiences.

There are only six countries – Bulgaria, Croatia, Estonia, FYR Macedonia, Poland and Turkey – in which the differences between perceptions of corruption and actual levels of it are strikingly small. Another noteworthy finding is that the levels of corruption (both perception and experience) in many central European countries (including the Baltic states) are low and have converged with the levels found in Germany and Italy. However, the average experience of corruption is higher than the average perception, often up to three times higher. This might reflect the different reasons for making unofficial payments (such as higher incidences of unofficial payments made in gratitude as opposed to extortive reasons).

Chart 2.4 illustrates how the nature of unlawful payments also differs by public services. Respondents who made unofficial payments or gifts were asked why they had done so and were given four possible answers.7 People most often resorted to unofficial payments while interacting with traffic police, health care workers and dealing with educational institutions. About one-quarter of irregular payments for the education category are likely to be motivated by the desire to express gratitude whereas unofficial payments to traffic police, civil courts or social security benefits are mostly made upon request or expectation. Irregular payments are also common when wishing to speed up a lengthier process with the use of unofficial “fast-track” services. Nevertheless, the percentage of respondents reporting that they made unofficial payments to access public services because they were asked (or it was expected) has fallen since 2010.

Chart 2.5 reveals that confidence in public sector authorities is relatively low. Overall, in all categories, the perceived corruption among public officials is substantially higher than the average for the western European comparator countries (9.6 per cent for Germany and 27.5 per cent for Italy). For example, about 40 per cent of respondents in eastern Europe and the Caucasus believe that most public officials are involved in corruption. Respondents in central Europe and the Baltic states are much more likely to be trusting of public officials, and in most cases the levels are comparable to Germany and Italy where, out of all public sector authorities, judges and police officers inspire the highest levels of confidence (at about 85 per cent).

Around 45 per cent of respondents in south-eastern Europe, as well as in eastern Europe and the Caucasus and Turkey, believe that their members of parliament and government officials are involved in corruption. However, the perceived corruption among presidents/prime ministers, police officers and business executives vary considerably across regions. In Russia, confidence in the office of president/prime minister is among the highest in the transition region and higher than the average for the western European comparators, but in Turkey it is one of the lowest. Significant differences can also be noted when it comes to confidence in the impartiality of judges, where we observe the largest difference in averages between the transition region and the two western European comparator countries, Germany and Italy. Another noteworthy finding is that confidence in religious leaders ranks quite low in Germany and Italy where 35 and 24 per cent of respondents think that “most of them” or “all of them” are involved in corruption.

This chart reveals that Turkey, Estonia and Lithuania have the highest average levels of service satisfaction. In these countries, the main reason for making unofficial payments or gifts is to express gratitude for the service received. At the other end of the chart, relatively low levels of service satisfaction can be found in Armenia, Azerbaijan and Tajikistan, where people are either directly coerced into making unofficial payments or gifts or do so because they know it is expected.

Charts 2.7 and 2.8 explore this issue for public health care and public education, respectively – two main sectors that LiTS respondents said they wanted their governments to allocate more public funding to. These charts take into account the fact that survey responses regarding satisfaction only apply to usage within the last 12 months. Additional statistical analysis from the LiTS III data (not presented here) indicates that highly educated and wealthier people are less likely to be satisfied with the quality of public services they receive.

As illustrated by Chart 2.7, there is a negative correlation at the country level between experience of corruption in the health care sector and the level of satisfaction with public health care services. This chart reveals that the highest average levels of corruption experience and service dissatisfaction among public health care users are found in Tajikistan, Moldova, Azerbaijan and Ukraine. Poland is a notable outlier – despite a low level of corruption experience, satisfaction with services in the public health care system is one of the lowest in the transition region. Interestingly, users of the Polish public health system who were asked to make unofficial payments are more than three times less likely to be satisfied with services received than those who were not asked to pay a bribe.

In the public education sector, there is also a negative relationship between the average level of service satisfaction and the average experience of needing to make unofficial payments. However, there are notable exceptions to this general association as well – in Russia, levels of corruption experience are relatively high but at the same time service satisfaction in public education is higher than the transition region average. At the other extreme, despite low levels of corruption experience, satisfaction with public education in FYR Macedonia is substantially below the transition region average.

There are strong reasons to believe that democracy would help to reduce corruption. For example, elections create disincentives for corruption because the majority of voters will rarely elect candidates who are known to or have the potential to abuse public resources for personal gain. In fact, research shows that electoral accountability, induced by the possibility of re-election, can discipline incumbent politicians and control rent-seeking behaviour.10 Moreover, democracy tends to go hand in hand with transparency and openness, which are vital components for functioning market economies. In a similar vein, strong checks and balances on government activities discourage corrupt behaviour as there is a higher probability of being caught.

Chart 2.10 shows a scatter plot of this relationship, plotting the democracy score against the average score on corruption experience when accessing the eight public services listed above for each country. On the horizontal axis, the polity IV Score (2015) captures the regime authority spectrum on a 21-point scale ranging from -10 (strongly autocratic, such as North Korea) to +10 (strongly democratic, such as Germany).

The polity scores can also be converted into regime categories in a suggested three part categorisation of autocracies (-10 to -6), anocracies (-5 to +5 and three special values: -66, -77 and -88), and democracies (+6 to +10).11,12 As this chart illustrates, respondents in democratic countries tend to report fewer experiences of corruption than their counterparts in less democratic countries. In other words, higher levels of democracy tend to be associated with lower levels of corruption in the transition region. However, there are notable exceptions to this general observation – for example, in Belarus, the level of corruption experience is quite low, at around 10 per cent, despite a low democracy score. Conversely, the democracy score in Moldova is relatively high but the corruption experience reported there is still considerably higher than the transition region average.

The LiTS findings are in line with the institutional quality indicators and scatter plots (Charts 2.11 and 2.12, Appendix Charts 2.A3 and 2.A4) exhibit strong country level correlations. This chapter has also used the dimensions from the Worldwide Governance Indicators (WGI, 2014) in order to see how better governance could be related to the experience of corruption.13

Chart 2.11 and 2.12 show scatter plots of the relationship between corruption experience and government effectiveness, and between corruption experience and rule of law by country. Analysis of government effectiveness captures perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government’s commitment to such policies. Rule of law captures perceptions of the extent to which survey respondents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police and the courts, as well as the likelihood of crime and violence. The aggregate indicators are reported in their standard normal units, ranging from approximately -2.5 to 2.5, with higher values corresponding to better outcomes.

Chart 2.11 shows that people who live in countries with more effective governments are less likely to experience corruption. This is unsurprising since the indicator mainly measures the quality of services and policies. Another point of interest is the visible relationship between the two variables across regions. Central Asian countries where irregular payments to public institutions are prevalent also have the lowest scores of good government effectiveness, followed by eastern Europe and the Caucasus, south-eastern Europe and central Europe and the Baltic States. For example, Tajik respondents report the highest level of corruption experience in the transition region and also their government’s effectiveness scored around -.7, whereas those in Germany reported one of the lowest corruption experiences in the survey and their government’s effectiveness marked close to 2.

Corruption within the law enforcement and justice systems weakens the rule of law by damaging the credibility and functioning of judicial institutions. Consequently, a dysfunctional legal system prevents a fair and transparent application of the law and allows crime to flourish. This is illustrated clearly in Chart 2.12 which plots the average corruption experience among those who have used public services in the past year against the rule of law scores taken from the WGI. There is a strong negative relationship between corruption experience and the presence of rule of law in a country. The highest corruption experience can be found on the left half of the chart (below 0), mainly in countries in Central Asia and eastern Europe and the Caucasus where the rule of law is particularly weak. The ranking of the regions is very similar to those shown in Chart 2.11.

In general, police, armed forces, the office of president/prime minister and religious institutions tend to be the most trusted. Trust (that is to say, the responses of “some trust” or “complete trust”) in banks and financial systems in the transition region has fallen from 41 per cent to 36 per cent of respondents since the previous LiTS in 2010. Although there is significant variation in these changes across countries, trust in banks is the lowest in Cyprus, Greece, Moldova and Ukraine (only around 10 per cent).

Conversely, respondents in the Baltic states and central Europe show the highest levels of trust in financial institutions in the transition region. While trust in foreign investors in the transition region has declined from 31 per cent to 27 per cent, it remains considerably higher than in Germany and Italy, where 14 and 11 per cent of respondents declare “some trust” or “complete trust” in foreign investors.

Cypriot and Greek respondents have extremely low levels of trust in their elected representatives and governments – only about 10 per cent of respondents say that they have “some trust” or “complete trust” in those categories.17

The levels of trust in local and regional governments vary enormously. Azerbaijan, Kazakhstan and Tajikistan exhibit the highest levels in the transition region (more than 60 per cent), substantially higher than the averages for the western European comparators (41 per cent for Germany and 23 per cent for Italy). However, in the Western Balkans and south-eastern Europe, only about 20 per cent of respondents say that they trust their regional or local governments.

The level of trust in trade unions, NGOs and religious organisations remains mostly steady. As observed in previous waves of the LiTS, south-eastern European countries exhibit a lower level of trust in trade unions (lowest in Cyprus and Greece) and a higher level of trust in religious institutions compared to two western European comparator countries, Germany and Italy. However, the latest survey responses indicate a significant decline in trust in religious institutions in Georgia, Kosovo, the Kyrgyz Republic, Slovenia, Turkey and Ukraine.

To measure the level of “generalised social trust” and “in-group trust” respondents were asked the following questions, respectively:

Generally speaking, would you say that most people can be trusted, or that you cannot be too careful in dealing with people?

To what extent do you trust people from the following groups: Your family? Your neighbourhood?

As with the other trust questions, respondents were asked to describe their level of trust in these institutions on a five-point scale, ranging from “complete distrust” to “complete trust”.

In-group trust focuses on trust in specific groups of people such as an extended family, neighbours or people of a different religion or nationality. Unlike generalised or institutional trust, this dimension of social trust focuses on the key dimension of social cohesion within families and neighbourhoods.

In 2016, 31 per cent of respondents in the transition region say that they have either “some trust” or “complete trust” in other people, compared to 34 per cent in 2010. This implies that, despite the socio-economic challenges that these countries have faced over the past six years, generalised trust has remained relatively stable in the region.

The level of trust reported in the transition region is also higher than in Germany and Italy, where 30 and 27 per cent of people say they generally trust others (see Chart 2.14). The highest levels of generalised trust among transition economies are observed in Estonia, Poland and Tajikistan. Turkey and Lithuania also saw some of the highest increases in generalised trust between 2010 and 2016. At the other end of the scale, Armenia, Azerbaijan, Greece and Cyprus have the lowest levels of generalised trust in the region. Only about 15 per cent of respondents in these countries say they trust others. Kazakhstan, Kosovo and Russia show the most pronounced declines (about 20 per cent) in levels of generalised trust.

Not surprisingly, levels of in-group trust in the transition region are high and comparable to western European comparator levels. They have also remained stable except in Turkey and eastern Europe and the Caucasus where in-group trust has fallen since 2010 (about 80 per cent) but is still comparable to some other transition countries.