bachelor thesis - corruption kopi -...
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Corruption in Bulgaria /Korruption i Bulgarien
Why does Bulgaria seem to have difficulties meeting EU’s
Benchmarks for fighting corruption?
By Beryle Amondi Bachelor thesis 6. May 2013
Counselor: Amin Alavi
English/European studies Aarhus University
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Abstract Bulgaria is a transitioning country that after years under totalitarian rule now is trying to adapt to the
democratic way of life. In doing so, it figured that the best way possible for ensuring a successful
transformation was to join the European Community, which for decades had made that possible, for its
then, 25 member states. However, what Bulgaria had not expected was the many obligations for
reform that the accession would demand. This has now led to an agreement where Bulgaria produces
yearly reports on the progress made in areas including its anti-‐corruption strategies. The agreement is
known as the “cooperation and verification mechanism agreement” of 2006, of which benchmark 4 and
5 refer to its high level of corruption, which need combating.
This paper, through a theoretical analysis, will explore the underlying reasons for:
Why Bulgaria seems to have difficulties meeting the EU’s benchmarks for fighting corruption?
The paper found that the reason why the benchmarks have not been meet is primarily due to
Bulgaria’s inefficient legal system. This is because corruption is a covert affair, which public officials
themselves partake in, making it difficult to create changes to the legal system. They are the ones with
the power to create change, by following their moral and ethical conscious, to not use their public office
for private gains. Needless to say, this is their duty, as they only were entrusted with discretionary
powers, by the people who elected or appointed them, trusting them to work in the publics’ interest.
However, with the introduction of anti-‐corruption strategies, another issue has erupted, as the
institutions’ capacity to implement the rules has proven inadequate. This has led to little progress in
the field, with perception indexes ranking Bulgaria as the second most corrupt country in the EU. Even
the public has a negative perception of its institutions, which has led to a rise in people resorting to
common means, by bribing their way out of situations. This is a dangerous warning for the
incumbents, who will need to deal with these corruption issues, before the corruption becomes
systematic, and in the worst case, cultural. Bulgaria’s current economic performance might well be
considered somewhat admirable despite high corruption levels, but if it had not been for the latter, the
macro-‐economic numbers might have been even more impressive. Therefore, the paper proposes that
Bulgaria continues in equipping its institutions through mechanisms, which from evidence have
proven effective many other EU member states.
Number of characters excl. of blanks 2. 186
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Indholdsfortegnelse
Introduction ................................................................................................................................ 4
2.0 Theory ................................................................................................................................... 5 2.2 The corruption equation ....................................................................................................................................................... 6 2.3 Types of corruption ................................................................................................................................................................. 6 2.4 Causes of corruption ............................................................................................................................................................... 7 2.4.1 Institutional Factors ............................................................................................................................................................ 7 2.4.2 Cultural Factors ..................................................................................................................................................................... 8 2.4.3 Economic Factors .................................................................................................................................................................. 9
2.5 Conclusion. ............................................................................................................................................................................... 10 3.0 Method ................................................................................................................................ 11 3.1 Critique and Relevance of theory ................................................................................................................................... 11 3.2 Critique and relevance of Methodology ...................................................................................................................... 12
4.0 Measuring Corruption .......................................................................................................... 12 4.1 The frameworks ..................................................................................................................................................................... 13 4.2 Operational issues ................................................................................................................................................................ 14 4.3 Conflict of interest ................................................................................................................................................................ 15 4.4 Terminology issues .............................................................................................................................................................. 15 4.5 Conclusion ................................................................................................................................................................................ 15
5.0 Analysis ............................................................................................................................... 15 5.2 EU Concerns ............................................................................................................................................................................. 16 5.2.1 High-‐level corruption ........................................................................................................................................................ 17 5.2.2 Public administration ....................................................................................................................................................... 17 5.2.3 Public procurement ........................................................................................................................................................... 17
5.3 Bulgaria: Actual Condition ................................................................................................................................................ 17 5.3.1 Institutional condition ..................................................................................................................................................... 17 5.3.4 Cultural conditions ............................................................................................................................................................ 19
5.4 The Government .................................................................................................................................................................... 20 5. 5 Economical conditions .......................................................................................................................................................... 22 5.5.1 Economic Growth ............................................................................................................................................................... 22 5.5.2 Policy trends ......................................................................................................................................................................... 23
5.6 Conclusion .................................................................................................................................................................................. 24
6.0 Discussion ............................................................................................................................ 25 6.1 Institutional Factors ............................................................................................................................................................. 25 6. 2 Cultural Factors .................................................................................................................................................................... 26 6.3 Economy .................................................................................................................................................................................... 27
7. 0 Final Conclusion .................................................................................................................. 28
References ................................................................................................................................ 29
Appendix ................................................................................................................................... 31
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Introduction When Bulgaria joined the European Union in 2007, it was not on unconditional terms. Prior to
accession it had managed to meet most of the Copenhagen criteria needed for admission, however, the
Commission was not satisfied with its unambitious progress in the fields of corruption, judicial reform
and organised crime. Therefore, in the special "cooperation and verification mechanism" agreement of
2006, Bulgaria agreed to meet six benchmarks for combating these issues. The Country would be
monitored yearly through reports handed to the Commission. Yet, five years on, the country has failed
to meet these benchmarks; the resulting Commission’s verdict report has led to Bulgaria’s exclusion to
Schengen membership.
However, that will not be the focus, but merely the motivation for this dissertation. This current event
has more interestingly lead to extra pressures on Bulgaria to implement anti-‐corruption reforms and
supporting procedures to combat the massive corruption levels within the country. Corruption,
defined as: “the misuse of public office for private gain”(Treisman 2000), is a range of threatening
behaviours practiced between the judiciary, business and political environments, within a continuous
circle. It is important for all EU countries to establish an anti-‐corruption strategy, as the phenomenon
can retard a society, not to mention a democratic society, in ways which contradict the European
Community’s objectives for promoting and respecting its democratic values stated in the treaty of the
European Union. In order for Bulgaria to become a fully-‐fledged member of the EU it will have to prove
its commitment by accommodating benchmark 4 and 5, in the 2006 agreement, which prescribes the
country to:
Benchmark 4: Conduct and report on professional, non-‐partisan investigations into allegations of high-‐level corruption. Report on internal inspections of public institutions and on the publication of assets of high-‐level officials
Benchmark 5: Take further measures to prevent and fight corruption, in particular at the borders and within local government.(European Commision 2012)
However, Bulgaria is now entering its sixth year under the merits of the "cooperation and verification
mechanism" agreement and has still not met the benchmarks, which makes one wonder if they ever
will? With that said, this dissertation will explore the underlying reasons for the issue, by raising the
question:
Why does Bulgaria seem to have difficulties in meeting EU’s benchmarks for fighting corruption?
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The analysis will cover EU’s main concerns and Bulgaria’s current condition, which will ultimately be
discussed in respect to the causes of corruption.
This will practically be done by firstly covering the causes of corruption, that leading scholars’ like
Ackerman (1999), Treisman(2000) and Montinola(2002) have found imperative for investigation.
Secondly, the critique and relevance of theory and methodology will be covered, as the section will
help to enhance the reader’s understanding of the phenomenon’s nature. Thirdly, in a ”measuring
corruption” section, an outline of the most important frameworks will be provided, as they will be
applicable to my analysis.
2.0 Theory There exits multiple factors and causes for corruption, which scientists have studied. However, having
reflected on the nature of my research question, I have chosen to look at theories, which primarily deal
with corruption at the macro level, since the fundamental issue concerns a nation state’s functioning.
Nonetheless, the micro level aspect of corruption will briefly be covered, as the very act of corruption
involves an interaction between,and starts, within people. I will start, by accounting for the three
approaches for studying corruption, essentially done, to structure and highlight my chosen direction of
only focusing on the enrichment of public officials. Next, I will describe the different causes of
corruption, which leading scholars like Ackerman (1999), Treisman(2000) and Montinola(2002) have
discovered to be essential for analysing case studies, subject to corruption.
2.1 The three approaches for studying Corruption
It is imperative to acknowledge that the phenomenon known as corruption is a covert affair, which
leaves it up to the individual to estimate its very existence in society. In other words, corruption is a
perceptual notion linked to societies issues of political power, struggles and structures. However, the
emphasis and analysis to be undertaken is highly debated amongst scholars, who all have a preference
in how to approach the issue.
Scholars like Montinola and Jackman, suggest that corruption is a cultural matter, exemplified by their
findings in a cross-‐country research(Montinola 2002). They discovered that the countries belonging to
the third-‐wave of democratization, which begun in 1974 (Montinola 2002, pp.148-‐149), rationalized
corruption through the cultural approach, where corruption was believed to stem from the countries
social norms of gift giving and loyalty to their families (Montinola 2002, p.149).
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Then came the revisionist approach, which claims that there’s an interrelationship between a country’s
level of corruption and its development stage. Revisionists argue that corruption will be inherent in a
modernizing economy with administrative inflexibilities and struggles of capital formation. Notably,
the corruption will function as an efficiency-‐enhancer until the economy has stabilized
itself(Montinola 2002, p. 149).
Nevertheless, most applicable to my research, the political approach, defining corruption as; “the
misuse of public office for private gain”(Treisman 2000, p. 399), which can be applied to all societies.
The political approach has been assigned, as the normative definition applied by intergovernmental
and international non-‐governmental organization such as, The World Bank, OECD, WTO, and most
importantly, Transparency International(Ackerman 1999). The definition applies to both the private
and public sectors. In this context, the world’s leading organization fighting against corruption;
Transparency international mainly performs data on political and administrative aspects of corruption
involving public officials, politicians and civil servants, made available in their CPI index (Corruption
Perception Index). However, that will be elaborated in my methodology section.
2.2 The corruption equation In trying to understand the phenomenon, Klitgaard proposes that it should be looked at, as a system
with two analytical points. Firstly, he offers a formula to enhance one’s comprehension of an
environment perfect for corruption to flourish, which he calls the corruption equation(Klitgaard 1998):
C=M+D-‐A Put in other words, corruption levels will be high (C) when a person/organization has monopoly powers
over a given resource (M), further granted that the responsibility comes with discretionary powers to
decide how, when, where or whom their allocated to (D), and additionally is not held accountable for
its action (A). Secondly, corruption is a crime of calculation, where the will to participate in corrupt
acts will be greater, if bribes are large, chances of being caught are low, whilst potential penalties are
small. Basically, the idea resembles a cost/benefit analysis offenders will make, known as the
potential economic rent of a corrupt crime. Economic rent refers to the difference in gain, whether
having partaken in a corrupt act or not. Therefore, to lower corruption levels in a country the
government is expected to create an environment where the legal framework/system supports an
eradication of the abovementioned parameters.
2.3 Types of corruption Corruption refers to a range of different behaviour, which in connection with the political office
definition usually links to the following acts:
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When concerned with political corruption, the institutional location where the corruption takes place
can be used to specify the parties involved. These locations can either be specified as upper-‐ or lower-‐
level corruption. The former includes presidents, ministers, members of legislature, governors and
high-‐ranking officials, with the latter involving civil servants(Morris 2011)1.
2.4 Causes of corruption
2.4.1 Institutional Factors
The historical traditions of countries are believed to account towards their current corruption levels,
wherein legal theories focus on the historical legal system of countries, which affects the effectiveness
of government. Firstly, findings show that national societies with common laws are usually less
corrupt than countries with civil law systems (Treisman 2000, et al.)2. The tradition of common laws
developed as a defence against sovereign states, where parliament was trying to regulate in areas
property owners found unjustifiable. Civil laws, on the other hand, were developed as codes
commissioned by the sovereign state, with the objective of increased controls and regulations.
Common law systems are therefore associated with better government performance, as the greater
protection of property functions as an additional democratic element. Secondly, scholars disagree as
to whether centralized states are found to be more or less corrupt than federation states. One
1Also known as high and low-‐level corruption. 2Common law: Uncodified. Decisions are based on precedents from similar cases. Civil Law: Codified. Decisions are based on a comprehensive set of codes made by legislators.
Types of corruption (developed from CESifo Report)
Bribery/kickback: Illegal payment for state-‐sanctioned, authoritive act
eg."speed money"
Extortion: abuse of power to induce payment/bribe.
Embezzlement/graft: theaft of public funds for
favorable outcomes Fraud:
establishment of fake iirms, money laundering, price
iixing ect.
Nepotism/favoritism: conilict of interest acts e.g appointments of family and freinds
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argument states that as local officials are in closer contact with the civil society, they have a monopoly
in being the first authority that individuals would meet in bureaucratic dealings. This creates a bigger
incentive for local officials to extract higher bribes than governmental officials would, consequently,
driving businesses out of the market, since their competitive advantage diminishes, as the abnormal
costs for doing business would result in bankruptcy. Another argument proposes, that the existence of
autonomous federal states creates a competitive environment between levels, as resources will be
split, thereby eradicating monopoly on either level. The competitive element will thereby drive the
potential economic rent down towards zero, just as we know from Adam Smith’s economic
descriptions of market forces. Continuing on the note of legal systems, democracy has often been related to the level of corruption.
Firstly, longer experience of democracy causes a stronger democratic culture within nations that in
turn will experience greater public and organizational trust towards their democratic institutions. This
can be explained by looking at the general meaning of democracy, which basically means popular
control; the degree by which the public can monitor and punish elected politicians(Kunicová og Rose-
Ackerman 2005). In order for public officials to be monitored, the democratic state needs to create its
counterpart by creating a freedom of association and press. This way, the civil society can become
more engaged and motivated to expose corruption by having the law on their side. Secondly, countries
undergoing political changes, which in recent years has been focused towards democratization,
usually experience higher levels of corruption than fully democratized or authoritarian countries, as
the transition makes way for loopholes that can be corrupted (Montinola 2002). Montinola and
Jackman state that there are inconsistencies between the public to private sector ratio, as one might
suggest that a large government ruins the economic competition, thereby fostering rent-‐seeking
practices. However, combined with the right amount of capital to invest in higher wages for officials,
incentives for rent-‐seeking activities will be limited.
2.4.2 Cultural Factors Another theory based on the historical tradition of a country is that of its legal culture, which refer to
“prevailing practices and expectations about how the law is administered”(Treisman 2000, p.401).
Treisman has based his research on former British colonies, where he found correlations between low
levels of corruption and societies that had adopted the so-‐called British legal culture. Corruption tends
to be lower in these countries, as there is a tradition of respecting the procedures more than the
hierarchy and authority of institutions. The culture’s stress on the procedural aspect of law-‐making
usually becomes an ingrained ritual practiced by judges, whom feel a moral obligation to follow
procedures in spite of their superiors’ expectations.
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Religion is another factor, which seems to be associated with corruption levels(Treisman 2000, p.403).
Corruption levels tend to be lower in societies where individualistic religions such as Protestantism
are predominant. As opposed to hierarchical religions, such as Islam and Catholicism, individualistic
religions have a low regard to social hierarchy, making what Edward Banfield calls “familism” a less
accepted practice, within society. Familism, refers to the loyalties individuals may feel toward their
families, which can have an impact on public officials decisions in office. They might for example
appoint a family member to a position that more qualified candidates were applying for. This
ultimately results in high levels of nepotism, another term the practice has become known as. In
addition, traditions of gift-‐ and tip giving are also found more prevalent in these traditional societies
2.4.3 Economic Factors Political instability and low growth within a nation has proven to increase politician’s incentives to
commit acts of corruption for several reasons. With poor economic performance comes a small
prospective of sitting politicians being re-‐elected, whereby they will feel a bigger need to resort to
corrupt means. Also, with that realization, they will utilize the state for their own gain, while still in
office. The possibilities for enrichment will furthermore be limited in countries with lower economic
growth, consequently, increasing people’s desire to get involved in the public sector in preference to
the private sector (Ackerman 1999).
As mentioned, the size of the economy also matters, but mostly in terms of looking at the benefits
officials can extract. Holding a position in a larger office that controls more resources to steal from is
often an ideal scenario, and when combined with a large state sector with more officials, the
corruption levels will of course increase (Montinola 2002). In this context, Ackerman(1999) suggests
that reforms promote a private sector, which can challenge the public, as the latter is the main arena
for corruption. The paying of bribes, especially, from private firms to public officials has a significant
impact on the socio-‐economic environment. Private firms bribe public officials, because it increases
the level of efficiency for private firms, by ensuring that the service paid for is being delivered at a
faster pace, than it initially would, if complied with the bureaucratic procedure (Ackerman 1999,
p.25). However, this action may also be a sign of frustration with arbitrary government rules and
regulations, which can work as an incentive for bribery, and therefore needs to be resolved before it
becomes a second form of market competition. This usually takes place in countries that allocate
subsidiaries to private firms, where below-‐market state supplies are assigned to the highest bribers
(Ackerman 1999, p.10).
Treisman(2000) finds that the degree of an economy’s openness relates to the level of corruption,
where an open economy is preferred. Developing neoliberal policies that can limit restrictions on
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import and trade will lessen the level of corruption, as bribery won’t be a necessity to oversee tariffs
and other barriers to trade. Again, a neoliberal policy corresponds with the previous point about the
merits of having a private sector that can challenge the public, as corruption can be reduced, by
moving assets from state control into the market. Creating neo-‐liberal policies will furthermore
encourage foreign direct investments (FDI), due to the lower risks investors will have to consider
when investing.
Natural resources are another factor that has been associated with high levels of corruption(Treisman
2000, 429). The governments of mineral rich countries are usually highly involved in its extraction,
creating a favourable situation for corrupt officials. Still, this only applies in conditions where the
exportation of minerals accounts for a high proportion of total exports, and the state is therefore
highly dependent on their profit.
2.5 Conclusion In line with Klitgaard, Ackerman, Treisman and Montinola’s findings, I can submit to following
assumptions of factors, which were all negatively associated with corruption levels.
Firstly, the findings indicate following assumptions about a country’s institutional factors. In terms of constitutional design, countries where: (a) Public officials are held accountable (b) The common law system dictates the law procedure The effectiveness of the legal system will tend to be greater, hence corruption levels lower. However, there are inconsistencies about the state composition (centralized vs. federation) and corruption levels. Secondly, the Cultural factors were assumedly linked to corruption, as following. In countries where: (a) the British legal culture prevails, and (b) a tradition of Protestantism dominate (c) a longer experience with democracy, and (d) a freer press and engaging civil society, exist Corruption levels will tend to be low. Thirdly, assumptions about the Economic factors and corruption indicated that countries where: (a) There is economic growth (b) a balanced ratio between the public/private sectors (c) a open market (d) and a smaller proportion of natural resources, Corruption levels will tend to be low.
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3.0 Method 3.1 Critique and Relevance of theory The phenomenon Corruption is as aforementioned, a perceptual matter that can only be measured by
the eye of the beholder. The reason why, is that the very act of corruption, is in itself, a covert affair,
which the agent and principal obviously want to remain unknown. However, what is known is the fact
that there are several factors, which statistically, have been proven to be linked with corruption,
hence, my previous selection of cultural, institutional and economic factors (see 2.0). Still, we can’t be
certain whether these factors are causes or consequences of corruption, which political scientists refer
to as endogeneity or reciprocal causality, meaning when something is both effect and cause(Ehrlich og
Lui 1999).
So, in an attempt to measure corruption levels of countries, Transparency international, the world’s
leading organization in the field of anti-‐corruption, has in a timespan of years, aggregated qualitative
survey results from private risk firms and other organizations, thereby, making the development of
corruption possible to be studied and analysed, as a quantitative research method (see.4.0).
Also, the public office definition of corruption has also been subject to scrutiny, as according to many
scholars, has its flaws. The definition distinguishes between an official’s private and professional life,
which for many scholars seems problematic, as Ackerman explains:
“This definition, however, simply assumes that a distinction exists between one’s public and private roles.
In many societies no such clear distinction exists...people in developing countries do make distinctions
between appropriate and inappropriate behaviour in terms of their own cultural norms.” (Ackerman
1999, p.91).
The aforementioned cultural aspect of corruption seems completely excluded in the public office
definition, which furthermore, is the reason why many scholars currently are attempting to create
alternative definitions. However, the public office definition seems to work universally, in the way that
it constraints the behaviour of public officials by defining the duties of holding a public office,
objectively; you are not to abuse your positional powers for personal gain. Nonetheless, the underlying
reason for this to be evident, stems from an ancient concept, which Kurer calls “the impartiality
principle”, that notes that states should treat equally, those who deserve equality (Kurer 2005, p.223).
Additionally, corruption is a covert phenomenon measured in terms of individuals’ perceptions of
corruption in their respective countries, which makes corruption rates seem subjective and relative in
any case(Montinola 2002, et al.). Kurer further argues that the respondents of perception analysis
account for consequences of the corruption, which can still be useful information, on the basis of it
generalizability (Kurer 2005, p.225).
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3.2 Critique and relevance of Methodology I cannot stress how many uncertainties and disagreements that exist within the study of corruption.
The main issue is the phenomenon’s operationability, which primarily concerns itself with the
reduction of the phenomenon in a single country to a single measure and the averaging in such
measures (Lancaster 2001, et. al). Nonetheless, there are two different approaches, which academic
scholars can take when conducting a measurement, being either variable or holistic(Treisman 2000). In
variable researches the focus is on generalizability and is therefore interested in the testing of
hypotheses embedded in theoretical explanations. The nation state is the unit for analysis, as in the
holistic approach. The holistic approach, however, is case oriented and seeks to focus on the
complexity of the phenomenon by giving a contextual richness and in-‐depth analysis of the case. It
emphasizes on the whole being greater than the sum of its parts, moreover, asserting: “relations
among variables can’t be consistent from case to case” (Lancaster 2001, p. 4). Being that my research
deals with Bulgaria as the case of investigation, I will design my analysis using the holistic approach
and support my results with existing literatures, which I will analyse in my empirical data section
(4.0). The holistic approach offers me a better chance to explain the conditions for corruption
specifically in Bulgaria, than the variable approach, as it is best used on cases that deal with outliers.
Also, my quest isn’t to strive for meaningful generalizations, which later can be used in a cross-‐
national comparative study, but merely to answer my research question as to why Bulgaria can’t seem
to meet EU’s benchmarks for fighting corruption?
4.0 Measuring Corruption Although corruption, as a phenomenon is difficult to measure (see 3.0), a few institutions have made it
their specialty and one of these is Transparency International (TI). TI is as mentioned the world’s
leading organization, in the fight against corruption and has existed since 1993. Formed by former
employees of the World Bank, its vision is as written on their homepage, to create a transparent world
free of corruption: “A world in which government, politics, business, civil society and the daily lives of
people are free of corruption”(Transparency International 2012). It has become an essential actor in the
fight against corruption, by actively creating and disseminating databases, and is dispersed in 90
states across the globe helping to keep track and guide the respective countries in dealings about
corruption. It aggregates and standardizes the collection of information from other institutions, finally
interpreting the results and making it available to the world community.
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4.1 The frameworks One of its notorious frameworks is known as the Corruption perception Index (CPI). The CPI is a “poll
of polls” that combines survey results from multiple organisations3 rating different countries in terms
of administrative and political corruption within their public sectors, relative to one another. The
scores go from a scale between 0-‐100, where 0 indicates that the perceived level of corruption in the
country is high and rife, whilst 100 its absence, clean.
A second tool is The National Integrity system assessment of Bulgaria that provides a framework to
analyse the effectiveness of institutions in preventing and fighting corruption(Transparency
International 2011). This is done, by researching the discrepancies between institutions legal
framework and actual practices, which is important to distinguish in order to evaluate anti-‐corruption
measures’ effectiveness in the given environment. The research relies on a standardised methodology,
where publicly available sources, combined with in-‐depth expert interviews of local’s in the field and
public opinion research, constitute to the findings. The study covers the most important institutional
pillars that the respondents have to relate to in terms of their Governance, Role and Capacity4. The
scale of scores range from 0-‐100, with 100 indicating cleanliness and 0 extreme corruption. The
Category Governance refers to the quality of respective institutions’ governance, in terms of
transparency of decisions, the personnel’s integrity and its level of accountability. Role refers to the
output of institutions or “the ultimate result of their activity in relation to the fight against
corruption”(Transparency International 2011, p5).The pillars’ specific function and profile determines
how they are assessed, as the law enforcement bodies are judged on their successful anti-‐corruption
measures and generated public trust, similar to the courts, whom in addition, are assessed on the basis
of their exercised controlling function, compared with the government and administration. Capacity
refers to the extent to which the institution is an independent efficient policy-‐making and
implementing body. This is done by determining its resources and autonomy, vis-‐á-‐vis to other actors
and authorities.
The third and newest addition to TI’s corruption indexes is the Global Corruption Barometer (GCB),
which investigates the general public’s perception of corruption levels and their government’s efforts
to fight corruption within their country(Transparency International 2012). The GCB represents more
than 100,000 household’s experience with corruption in 100 countries, and is therefore the largest
3 13 data sources were used to estimate 176 countries/territories, in 2012. For a full list see CPI
4 Figure 1 in Appendix p.32
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cross-‐country survey in the field. TI acknowledges the general public’s opinion, as they are the victims
of corruption, who furthermore can possess the most important power to eradicate the phenomenon,
if equipped with the right tools. The Barometer probes the frequency of bribery, reasons for paying a
bribe in the past year and attitudes towards reporting incidents of corruption5. In TI’s latest barometer
of 2010/11, following examples were amongst enquired questions:
• In the past 12 months have you or anyone living in your household paid a bribe in any form to
each of the following institutions/organizations?
• To what extent do you perceive the following categories in this country to be affected by
corruption? (Followed by an institution)
• In the past 3 years, how has the level of corruption in this country changed?
TI’s many perception indexes have especially become a useful tool for commercial companies like The
Political Risk Services (PRS) and The Economist Intelligence Unit (EIU) that assess and forecast
countries’ risk rates, in the form of country reports. They both provide a comprehensible overview of
countries’ political and economic risks, which are made available for policy makers to use as a general
overview, as well as business executives in their strategic decisions on making potential investments.
Where the EIU provides an in-‐depth investigation of several micro-‐levelled factors, the PRS does the
same, but also incorporates a rating system that allows for comparative assessments. This is done, by
summarizing the information into one letter ranging from A+ (least risky) to D-‐ (most risky), in three
investment areas6. A transaction of information between TI and the two advisory firms (amongst
others), continuously challenge governments to act, as the aggregated results can have significance
importance for their countries performance, wherein their corruption issues are examined. However,
these frameworks might not always work in their intended ways single handily, for several reasons.
4.2 Operational issues Firstly, TI recognizes that the CPI has its flaws, mainly, as it cannot estimate absolute corruption levels,
but merely outline those in the position to asses corruption, in the public sector. The inadequacy of
data stems from the phenomenon’s covert affair, which only makes it possible to measure through
subjective opinions. Also, the CPI lacks consistency in its year-‐on-‐year selection of countries. If a
country isn’t included in at least three data sources, it will not be featured in the rankings, which
makes it difficult to follow up on a respective country. Furthermore, this makes the basis on which the
results rely on problematic, since the 2012 results build on previous surveys(Byrne, Arnold og Nagano
6Financial transfers (banking and lending), foreign direct investment (e.g. retail, manufacturing, mining), and exports to the host country market.
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2010). Secondly, the validity of a country’s scoring becomes questionable, due to the many indexes’ and
different measurement methods used to accumulate a single scoring in the CPI.A single score does not
reveal what type of corruption a country is dealing with, and where the corruption occurs, whilst the
CPI can in this respect not stand on its own.
4.3 Conflict of interest Thirdly, the NIS’s biggest weakness clearly lies in its methodology. The selection of respondents
especially, the local experts from the fields troubles the validity of the results, as a conflict of interest
might exist. Additionally, the locally developed surveys cause grounds for scepticism, as the
respondents’ background and premise to participate in the surveys are unknown.
4.4 Terminology issues Fourthly, because the GCB survey focuses on the experience and not perception of corruption, one
should not make comparisons with the GCB and the CPI. However, the second question, uses the term
perceive, which might confuse the respondent and ultimately influence the end result. The terms are
incompatible since, “the ‘distance’ between opinions and experiences varies haphazardly from country to
country” (Abramo 2008, p. 6)7. Therefore, assuring that the terms are completely understood in terms
of entailment is a difficult task, due to countries’ different traditions and cultures (2.0). However, as
reputable organizations use these perception indexes, a full understanding of the terminology used
should, at a minimum level, be expected. Again, advisory firms like EIU and PRS use them in risk
frameworks, which can have a series of consequences for a country’s future performance.
4.5 Conclusion Nevertheless, when combined, I believe that the three indexes, the risk assessments and current
articles, will give me a more reliable outcome. Their combination will allow for the in-‐depth analysis
that my methodology sets forth, as the different tools are directly applicable to my analysis.
5.0 Analysis 5. 1 Structure of analysis
In 2012, Bulgaria ranked 75 out of 176 countries/territories, placed second worse after Greece within
Europe. The data is retrieved from Transparency international’s annual index, which shouldn’t be
taken lightly. Corruption in Bulgaria is at a high and needs to be confronted, as it jeopardises its
membership with the European Community, thus demands change in order for the country to become
a fully-‐fledged member. To shed light on the current situation in Bulgaria, I will outline EU’s concerns
7(Byrne, Arnold og Nagano 2010)
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and Bulgaria’s current conditions. This will be done through an analysis of both the EC’s 2012 report
and the above-‐mentioned country reports on Bulgaria.
5.2 EU Concerns All countries applying for accession into the European Community are by the Copenhagen Criteria
obliged to have (European Commision 2012):
• stable institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities;
• a functioning market economy and the capacity to cope with competition and market forces in the EU;
• the ability to take on and implement effectively the obligations of membership, including adherence to the aims of political, economic and monetary union.
However, when Bulgaria in 2007 got accessed, the EC had determined to set up a special agreement in
areas, which needed improvements. This agreement got known, as the "cooperation and verification
mechanism agreement” (CVM) of 2006.According to the CVM, Bulgaria needs to accommodate
benchmarks 4 and 5, which deals with anti-‐corruption(European Commision 2012, p. 14):
Benchmark 4: Conduct and report on professional, non-‐partisan investigations b into allegations of high-‐level corruption. Report on internal inspections of public institutions and on the publication of assets of high-‐level officials
Benchmark 5: Take further measures to prevent and fight corruption, in particular at the borders and
within local government.
5 years on, the EC reports back on Bulgaria’s progress so far:
“Since 2007, Bulgaria has developed a comprehensive administrative framework and prevention
measures to combat corruption. Risk assessment tools are available and specific methodologies have been
implemented for key areas such as asset declarations and conflict of interest. Reforms among border
police and customs have reduced corruption opportunities in these areas. However, implementation has
remained patchy.”(European Commision 2012, p.15)
The Commission clearly acknowledges Bulgaria’s efforts of trying to develop reforms, which
somewhat showed in their successful ability to meet the technical requirements when assessed for
Schengen membership. The main concern now lies with the implementation of the many reforms and
the lack of independent institutions, which could be given the power to create proposals in the area of
anti-‐corruption and drive them into action.
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5.2.1 High-‐level corruption Benchmark 4 specifically points to the high-‐level corruption, where a joint team in 2012, was
established with the purpose of investigating and prosecuting in high-‐level corruption cases, which
sadly has been an unsuccessful venture so far. If it’s not a problem dealing with the importance of
cases not being heard, it’s the slow appealing process or even the large number or unexplainable
dismissed cases, causing the Commission frustration. We clearly have a case of an inefficient legal
framework with systematic insufficiencies, illustrating the serious challenge Bulgaria is up against, as
serious adjustment, if not reformation, is demanded, from its, hopefully, future member states.
5.2.2 Public administration Moreover, the public administration is the second area in need for review, as the Commission believes
that the administration can complement the law enforcement institutions by: “identify transgressions
of rules, to apply sanctions and to develop preventive measures” (European Commision 2012, p.17) In this
light, a comprehensive administrative framework has been created including a body complementing
the Council of Ministers in overseeing the development and implementation of Bulgaria’s strategy plan
against corruption, a commission for the prevention of conflicts of interest, a risk assessment and
sanctioning tool, to name a few. However, it has failed to follow up on inconsistencies of other
authorities, thereby not effectively benefiting from the system of asset control, managed by the
National Audit Office. Consequently, verification of illicit enrichment cases have not been achieved,
only boosting the public’s skepticism about their government institutions.
5.2.3 Public procurement Public procurement is a third area, in which the Commission finds shortcomings, especially in the
implementation of legislation developed to simplify matters and to strengthen administrative controls.
EU has specific public procurement rules that Bulgaria will need to abide to, given that it will, and
already receives EU funds for its activities. The Commission has already detected several cases of
serious violations of the rules, which in addition is worrying, as this form of corruption not only harms
the quality of delivered public service, but also is a waste of public money, the Commission states.
5.3 Bulgaria: Actual Condition
5.3.1 Institutional condition
5.3.2 Political stability Bulgaria is a Parliamentary Republic, which until recently was lead by a Centre-‐right coalition called
Citizens for European Development of Bulgaria (GERB). GERB’s leader and the country’s Prime
Minister, Boyko Borrisov resigned, as a result of street protests against high-‐energy bills, poverty and
corruption. As of now, the administration is lead by a caretaker government with diplomat Marin
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Raikov at the head, to steer the country into elections due in May(BBC 2013). It seems as if the
country is in shackles, since none of the main political parties are willing to participate in the caretaker
government, meanwhile, still hoping for the country to gain accession into the European community
that demands stability, but most importantly, accountability. The Economist intelligence Unit
performed their latest country report on Bulgaria in October 2012 where they forecasted:
“The government is prone to inconsistent policymaking. Together with the slow economic recovery, this
has weakened its popularity from previously high levels. The government will remain under pressure,
especially if economic growth remains sluggish in 2013.”(Economist Intelligence Unit 2012)
As forecasted, the government fell under the pressures from the public and the EU, which furthermore
was due to its unsuccessful attempt at implementing reforms regarding the fight against organized
crime and corruption, noticeable, in the aforementioned mishandling of EU funds. The political Risk
services concurs and inserts that the capacity of the law enforcement is limited, as authorities only
pursue low-‐level corruption cases with predictable outcomes (Political Risk Services 2013). Ultimately,
high-‐level corruption cases dealing with public procurement, especially the big energy infrastructure,
are not being trailed, while millions of Leva are tapped from the state treasury. It all comes down to
the laws and regulations that are already developed to combat the existing corruption. Sadly, serious
measures are not being taken, adding to the dissatisfaction of the general public and previous progress
made by reform. Furthermore, the checks and balances practice, which aims at monitoring
institutions, remains weak.
5.3.3 Constitutional design Bulgaria is as mentioned a Parliamentary Republic, which furthermore entails a division between
head of government and state currently held by Marin Raikov, and president Rosen Plevneliev,
respectively(Political Risk Services 2013). The foundation of Bulgarian legal system lies in the Bulgarian Constitution of 1991 and is the supreme law, whose provisions apply directly with no other
laws contravening it(National Assembly of the republic of Bulgaria 2013)8. The constitution states that
Bulgaria is a democratic and unitary state, governed by the rule of law, with members of parliament
representing and are held accountable, to the entire people. The government structure is very much
alike most western countries characterized by Montesquieu’s three-‐branch arrangement of the
legislative, executive and judicial branch, building on the principal of a “separation of powers”. The
legal system, however, differs as it is based on the civil and not common-‐law system.(Country Watch
2012).
8Article 5.1 in the constitution
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5.3.4 Cultural conditions Nevertheless, Bulgaria’s past constitutional designs couldn’t have been anymore different to its
current westernized form, characterized by its ruling, made up by corrupt empires. For instance,
Bulgaria was once governed by the Romans under the Byzantine empire, which furthermore
introduced the country’s main religion Orthodox Christianity, which comprises 84% of the population,
to the country. Then the Ottoman Empire reigned from 1396 until 1878, and lastly, the Soviet Union
running the country under totalitarian rule between 1947-‐1989(Country Watch 2012). The media in
Bulgaria is granted the freedom of the press, which has a vital importance, given that law, thereby
protects journalists’ sources in theory. However, on the 8th of April 2013, more than 100 journalists
saw it necessary to gather outside the palace of justice, in a protest against a violation of freedom of
speech(AEJ 2013). The journalist felt threaten by the state prosecution, as their fellow journalist Boris
Mitov’s had been forced to reveal his sources in a wiretapping scandal, as the revelation had caused a
disclosure of an important state secret. Luckily, the journalists had the option of referencing their right
to article 10 in the European convention for human rights. As external pressure was added to the case,
this might eventually have affected the prosecutor’s decision to drop all charges. The media is like any
other institution regulated, which in this case is done by the Council for electronic media (CEM). It
reports that there currently seems to be an issue with the lack of clear rules on transparency in the
sector. It’s important to disclose ownership of media, as this first and foremost gives the public a
chance to evaluate the information, from an objective point of view. But on the other hand the CEM
itself suffers from credibility issues, due to its composition and existence ground. The CEM members
are all politically appointed and state guaranteed through state subsidy. This of course might cause
concerns about their conflicting interests, as it only scores an overall 45,83, illustrated in the national
integrity system below(Transparency International 2011).
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5.4 The Government In the GCB, 72% of the Bulgarian respondents claim that corruption levels over the past three years
have either stayed the same or increased (Transparency International 2012). When asked:
• To what extent do you perceive the following categories in this country to be affected by
corruption?
The general public evaluates the Judiciary system as the most affected institution (4,3)9, followed by
political parties (4,1) on a second place and parliament/legislatures alongside public officials/civil
servants (3,9), on a third place. Moreover, when asked:
• In the past 12 months have you or anyone living in your household paid a bribe in any form to
each of the following institutions/organizations?
10,4% admitted to have paid a bribe to the Judiciary system. The judicial system clearly plays a big
role in the high corruption levels, as we have seen, has the ability to hold the offenders accountable
through sentencing, and is traditionally therefore also the least trusted state institution, which both
the GCB statistics and the temple graphic illustrates(Transparency International 2011)10.
The judicial pillar only scores mid-‐way (50) in governance, which expresses Bulgarian experts’
negative perception of its level of transparency, integrity and accountability. One may have predicted
it to be lower, but with the introduction of an ethical code and asset declaration mechanisms, TI
reports that improvements have in fact been made. With a score of 37.50 in the judiciary’s Role, its
fight against corruption seems weak, as it further indicates the aforementioned lack of public trust in 9 On a scale from 1-‐5, 1: not corrupt at all and 5:extremely corrupt 10figure 1. In appendix p. 31
scores for most of the pillars. The most apparent exceptions from this trend are the judiciary and the
electoral management body. The problems around the Supreme Judicial Council and its personnel and
disciplinary practices account for most of the exceptions in the judiciary in this regard, while for the
electoral management body the problems in part relate to its institutional set up, and in part to the
complexity and lack of clarity of the new Electoral Code.
Finally, the low score of the law enforcement bodies (mostly the prosecutors and the police) in terms of
their role in anti-corruption cases corresponds well to the general view of the public and the analysts that
the efficiency of these bodies and the coordination among them is unsatisfactory. It is no surprise that
they are not able to generate significant public trust and that they are often at the receiving end of
criticism from European partners.
Overall scores for the thirteen pillars (in descending order)
Pillar Overall Score Capacity Governance Role
1. Supreme audit institution 61.11 75 75 33.33
2. Ombudsman 58.33 58.33 66.66 50
3. Executive 52.77 66.66 54.16 37.50
4. Public sector 52.77 50 66.66 41.66
5. Judiciary 52.08 68.75 50 37.50
6. Civil society 52.08 56.25 50 50
7. Legislature 51.38 75 54.16 25
8. Political parties 47.91 56.25 50 37.50
9. Law enforcement agencies 45.83 58.33 54.16 25
10. Media 45.83 62.50 33.33 41.66
11. Electoral management body 43.05 50 41.66 37.50
12. Anti-corruption agencies 40.41 43.75 40 37.50
13. Business 40.28 62.50 33.33 25
Strengths and weaknesses
Legislature
The parliament is by definition an institution with a high degree of transparency. Yet, there are obvious
deficiencies in its work in two areas: first, it has failed to pass a code of ethics for MPs or a law on
lobbying. Second, the policy expertise of the legislature is rather limited, which prevents it from being an
effective check on or an instrument of review and improvement for the legislative initiatives of the
government. Hence regardless of the consistent improvements both in the legal framework and the
practices, which guarantee independence, transparency and accountability, the role of the Bulgarian
parliament in promoting and assuring integrity is still rather limited.
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its ability to conduct case persecution with actual sentencing outcomes. Likewise, does the high
scoring in Capacity; allocated resources do not help the situation, as it only illustrates successive
governments’ prioritization of the pillar. In 2007, Bulgaria adopted an amendment that established the
Supreme Court Council (SJC) in line with EU’’s requirement to: Conduct and report on professional, non-‐
partisan investigations into allegations of high-‐level corruption. The SJC now functions as a watchdog
over the Judiciary and is composed of 25 members, whom either, were appointed by the National
Assembly, selected from the judicial system or serve due to previous positions in government
(Political Risk Services 2013, p.19).
The judiciary currently suffers from allegations of nepotism, transparency issues in its selection
procedure of cases, and outside influences from the business and political world. An article from
Novinte, for example writes about the controversial magistrate Veneta Markovska, who is postponing
her oath to office, due to allegations of corruption and trading influence(Novinte 2012). Markovska
was recently in a bid for a seat as a Constitutional judge, but has since been advised by Borisov himself
and the general public, to give up on her magistrate duties all together. The case is adding to the
pressures from the EU, as the EC has issued a warning for an emergency report highlighting the case,
under the merits of the Verification Mechanism agreement. Likewise, has the Interior Ministry, which
intends to help Markovska, by finding the author of the tipoff, has been accused of misusing the
Constitution for his personal interest. Consequently, the branch ends on a low, with an overall score of
52.08.
The legislative branch is failing in promoting and assuring the integrity of MP’s, as no credible efforts
towards implementing a code of ethics against lobbying has been made. Even though the branch
introduced the Supreme Judicial Council to oversee the performance of the judicial system, it is still
accused of having a low level of policy expertise that otherwise could have promoted better initiatives
for checks and instruments for legislature reviews. The numbers speak for themselves, as the branch
only scores a 25 for its Role in fighting corruption, but a staggering 75 in Capacity. The latter indicates
it’s obvious ability in policy-‐making, but which the level of effectiveness remains questionable.
The executive branch has undergone many changes since the 2010 and 2011’s administrative reforms
and cuts on resources. It has managed to increase transparency of the decision-‐making process and
introduced a formal integrity framework, consequently receiving a semi high score of 66.66 in
Capacity. Things are seemingly improving, however, there’s a severe need for the integrity framework
to be applied, as the integrity of executives is under attack from the media’s many disclosures of
corrupt cabinet members, who can’t seem to separate their public and private business roles. The
blurring of roles creates a conflict of interest, which results in its low Governance score of 54,16. In
addition, its 37.50 score in Role proves to the fact that the branch needs improvement in its execution
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function, once anti-‐corruption policy wins momentum over current issues relating to the economic
crisis.
5. 5 Economical conditions Bulgaria has overall done well, in terms of its economic performance, which the figure below clearly
illustrates. It has between 2007-‐2011 earned a top 50 % place with most of its rankings placed in
either the best or next best 25%.
5.5.1 Economic Growth Like with any other factor examined in this paper, the economic growth of a country is believed to
have a significant impact on corruption levels, as poorer countries have shown to be more susceptible
to higher corruption levels than rich countries(Ehrlich og Lui 1999, et. al). Bulgaria faced a recession in
2009, which slowly improved in the following years. In 2009, there was a 5.7% shrinkage in real GDP,
which has improved to a growth of 1 %, by the second quarter of 2012. By heavily relying on its export
growth as a main driver, the crisis in the Euro zone affected the export numbers negatively, but is
forecasted to rebound, with the GDP growth numbers projected to end at 1,9 % in 2013. Bulgaria has a
large export portfolio of raw materials(Economy Watch Content 2010)11, which experienced the highest
growth, in 2011’s total export, categorized as “crude materials, inedible (except fuel)” and “chemicals
and related products”. Combined they amount to 17, 9% of export goods.12.
11Iron, copper, coal, bismuth 12Figure 2 in appendix p.32
Bulgaria Country Forecast
14-May-2012 Comparison: Bulgaria
Current Data 14-May-2012 • Page 9
Reproduction without written permission of The PRS Group is strictly prohibited
Regional Current Account/GDP (2011): East Europe
-8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0
Ukraine
Poland
Romania
Czech Republic
Slovakia
Bulgaria
Hungary
Russia
(percent)
Economic Performance ProfileCountry's Ranking Relative to All Countries
Covered by Political Risk Services2007-2011
� 6486
� 1.9
� 6.0
� 8.1
� 26.9
� -0.1
� -11.8
� 3.9
� 1.8
BEST 25% NEXT 25% NEXT 25%
GDP Per Capita ($)
Real GDP Growth (%)
Inflation (%)
Unemployment (%)
Capital Investment (% of GDP)
Budget Balance (% of GDP)
Current Account (% of GDP)
Debt Service Ratio
Currency Change (%)
WORST 25%
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In line with the trend of privatization of state-‐owned companies, Bulgaria is considered a relatively
open market that welcomes foreign investors to partake in the market, with a right to ownership and
establishment. A competition law is in place, to promote competition and consumer protection, in line
with EU rules that forbids “monopolies, restrictive trade practices, abuse of market power and unfair
competition”(Political Risk Services 2013, p.4).
Domestic demand was strained 2012 for several reasons. High unemployment rates (11.1%)(Political
Risk Services 2013, p.9), expensive borrowing conditions, and limited investment spending are
amongst reasons for sluggish private consumption, which combined with low government spending,
has resulted in constraint for domestic demand.
The main income in the coming years will take form of EU funding, of which Bulgaria will only need to
help co-‐finance 20%, hence, the EC’s demand of effective absorption (Political Risk Services 2013, p.1).
The government’s 2012 budget allocated double the amount of money from the year before, to
development projects financed through EU-‐funds. In this connection, Bulgaria’s former agriculture
minister Miroslav Naidenov, recently became the first of the Borisov government, to become charged
with corruption allegations. Reuter writes that, Naidenov is accused “of favoring a food producer to win
a tender in 2010 to supply an European Union-‐backed program to distribute food to disadvantaged
people”(Reuters 2013). In addition, he is being charged of promising a bribe to a senior government
official at the agricultural fund, which disburses EU aid to farmers.
5.5.2 Policy trends Because, the Leva is tied to the Euro, and the Bulgarian national bank (BNB) therefore has minimal
authority to change its monetary conditions, the government felt a need to utter its concerns about the
euro zone crisis, in July 2012(Political Risk Services 2013, p.4). Provided that the crisis isn’t resolved,
Bulgaria has no intentions of joining neither the EU’s exchange-‐rate mechanism (ERM2) nor the Euro.
For this reason, no serious changes in its monetary policy has been made, as the arrangement set by
the currency board allows it restricted opportunities of making any drastic alterations, but more
importantly, there is no indication that the Bulgarian competitiveness has or will be affected.
In terms of fiscal policy, the government is trying to limit its redistributive role by reducing the public-‐
sector workforce and rationalizing state holdings in industry. It is aiming at privatizing Sofia Airport,
the Bulgarian stock exchange-‐Sofia, freight railways, and not to forget, several share packages in
energy companies. This is done in attempt to bring down the budget deficit, which in 2011 was at
2.1%, while also bettering the condition of infrastructure and businesses, contingent that EU funds can
be better absorbed.
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As a result of the abovementioned conditions, the Political Risk Services has forecasted that there is a
low risk for international business to consider, when dealing with Bulgaria in the next 18
months(Political Risk Services 2013, p. 1). However, this is of course only if, during elections in May the
Center-‐Right coalition gets reinstated. In terms of the financial transfer risk it states that: No exchange
controls, or other barriers to financial transfer, and little likelihood that controls will increase in the
forecast period (A-‐). The export market risk are as following: “Stable politically and economically; low
trade barriers and adequate foreign reserves to allow for prompt payment; little chance that conditions
will deteriorate” (A-‐), and the direct investment risk as: “Few restrictions on equity ownership in most
industries; few controls on local operations, the repatriation of funds, or foreign exchange; taxation
policy that does not discriminate between foreign and domestic business. Little likelihood that
restrictions will increase, and little threat from political turmoil.” (A).
5.6 Conclusion The EC’s main concern clearly deals with Bulgaria’s many unsuccessful efforts of implementing reform
to its incompetent state institutions. Corruption on the higher levels is a widespread problem and
should therefore be dealt with in a more serious manner than demonstrated thus far. Inconsistencies
in the public administration are not being followed up upon; whereby corrupt public officials are given
a free pass to gain illicit enrichments. The public perception and experiences with its institutions
further indicates the massive task Bulgaria has ahead, in fighting the high levels of political corruption.
The economic conditions are surprisingly decent, as the country has experienced a great streak of
growth, which is forecasted to improve in the coming years. Likewise the neo-‐liberal policy trends a
positive sign of Bulgaria’s commitment to harmonizing its market, in accordance with EU’s objective of
promoting prosperity. However, having ranked second worst in the CPI index, the country is
undeniably in need of ambitious reforms, which can create an environment where state officials would
be held accountable for their corrupt practices.
Political Risk Services 18-Oct-2012 Reproduction without written permission of The PRS Group is strictly prohibited.
Country Update 18-Oct-2012 • Page U-1
Bulgaria
Country Update MOST LIKELY REGIMES AND THEIR PROBABILITIES 18-Month: *Center-Right Coalition 45% Five-Year: *Center-Right Coalition 45% FORECASTS OF RISK TO INTERNATIONAL BUSINESS
Turmoil Financial Transfer
Direct Investment
Export Market
18-Month: Low A- A A- Five-Year: Low B+ A- B+ ( ) Indicates change in rating. * Indicates forecast of a new regime. KEY ECONOMIC FORECASTS
Years
Real GDP Growth %
Inflation %
Current Account ($bn)
2007-2011(AVG) 1.9 6.0 -5.52 2012(F) 0.7 2.9 -0.20 2013-2017(F) 3.2 3.5 -2.90 Implications
x A general election is required next year, and recent polls paint rather different pictures of exactly how vulnerable the incumbent GERB is to defeat at the hands of the leftist BSP. In any case, Prime Minister Boyko Borissov’s party is likely to lose enough seats to rule out the possibility that he might be able to continue to govern without reaching an agreement with at least one coalition partner.
x With that in mind, GERB has floated a proposal to change the electoral rules such that the winning party would automatically be awarded enough additional seats to ensure an outright majority. The plan has rather predictably failed to gain any traction, but the mere fact that it was suggested underscores GERB’s diminished confidence in its prospects for winning re-election.
x Former European Commissioner Meglena Kuneva has refused to rule out the possibility that her party might join a coalition government headed by either GERB or the BSP, although the center-right orientation of Citizens for Bulgaria
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6.0 Discussion 6.1 Institutional Factors At this point, there ‘s no doubt that Bulgaria’s legal framework carries a great responsibility in the high
corruption levels. With its constitutional design complementing an institutional framework that
respects its citizen’s fundamental freedoms and human rights, the real issue now revolves around
Bulgaria’s lack of adherence to the imperative” rule of law” clause (National Assembly of the republic of
Bulgaria 2013)13. The rule of law clause ensures citizens legal certainty, as they in reference to the laws
of the country can hold anyone accountable for their actions. The clause has become one of EU’s main
principles, in a quest for promoting democratic values, within its member states. However, the
objectives can only be met provided that a proper legal system is in order, which then can enable
people to demand justice. As a result, this would mean that no one, including the government, would
be above the law. Sadly, this is difficult to detect in the Bulgarian case.
As findings showed, the public has a low perception of its legal system, which in 2012 resulted in a low
score of 41 out of 100 in the CPI index. The incumbents obviously lack creditability, which should be
restored, before the civil society loses all faith and start participating in this corrupt game. This would
be detrimental to Bulgaria, as this self-‐reinforcing circle is difficult to bounce back from, when started.
With such a negative perception of their system, people will feel a need to participate in the
corruption, as this will become a way of life, if offenders aren’t being punished for the crimes. As
Klitgaard’s corruption equation illustrates, accountability is the essential element in the eradication of
corruption, as this is the only possible way of effectively condemning the practice collectively, within
society. For this reason, the judiciary enjoys a right of judicial independence, which protects judges,
investigators and prosecutors from being influenced from external forces. This is done to ensure that
the decisions made in court remain impartial, by only referencing to the laws of the country, without
any external influences. However, if it weren’t for the set-‐up of the Supreme Judicial Council, which is
supposed to oversee the branch, the law would properly work as intended. The SJC is composed of
insiders from the government and judiciary, whom already might have established loyalties towards
previous colleagues. I claim that the appointment practice literally compares to that of nepotism,
which inevitably will create situations where their several interests might conflict with their work in
the SJC. However, this is indeed old news, as the judiciary evidently is known for its nepotistic and
lobbyist practices that the Markovska case brought to life, consequently illustrating the incompetence
of the SJC. In other words, the legal system protects the judiciary without protecting it from itself. This
is at least what most observers would conclude, as the corrupt appointment process is difficult to
13 Article 4. In constitution
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overlook. The inefficiency of the judiciary is also one of EU’s main concerns, as it especially makes it
difficult for Bulgaria to meet the first part of benchmark 4:
Benchmark 4: Conduct and report on professional, non-‐partisan investigations b into allegations of high-‐
level corruption. Report on internal inspections of public institutions and on the publication of assets of
high-‐level officials.
The internal inspections and publication of assets of high-‐level officials is another issue that needs to
be confronted, as these mechanisms can help create transparency, in the public administration. The
National Audit Office is responsible for keeping track on public assets, by collecting and publishing
asset declaration, but has so far failed, as only a few cases with inconsistencies have been followed up
on. The institution was left with fewer cases to report back on, to the EC, because the cases couldn’t be
verified. Consequently, the EC blames part of the administration, on the officials’ illicit enrichments.
(European Commision 2012, p.18).
Bulgaria does indeed follow the civil law procedure, which theory assumes to be associated with high
corruption levels. Given that judges in their decisions only rely on the comprehensive set of legal
codes, theory states that the level of justice in the ruling is minimized. This furthermore takes away
power from the judges, since it is the legislators, who are responsible of creating and updating the
codes, ultimately, giving them a tremendous amount of power, or in Klitgaard’s words, monopoly.
However, more interestingly is the state composition, which claims to be a unitary state with self-‐
governed local units. This might resemble the make up of a federation state, but since the local
governments don’t enjoy autonomy, it is classified as a centralized state, given that the central
government is supreme14. Whether local officials are more corrupt than central officials is difficult to
detect, as there’s a general lack of information about corruption cases with sentencing outcome. Also,
there is a possibility that the two levels are working together in a bottom-‐up practice, where low-‐level
officials buy their superiors silence.
6. 2 Cultural Factors The Bulgarian history clearly indicates why contradicting trends exist in today’s Bulgaria. The legal
system of 1991 is aiming to lead the country into the 21st century, but former traditions of rulings and
religion seem to still have an impact on today’s society. Firstly, The Byzantine Empire introduced the
eastern orthodox religion, which currently is the most popular religion. However, it differs from
Protestantism by having its followers rely on the church councils’ interpretations, instead of the
individual’s own. It furthermore, takes great pride in having preserved the traditions and doctrines of
the early church, which undeniably is incompatible to the liberalistic transformation path.
14 Constitution, article 2: (1) The Republic of Bulgaria shall be an unitary State with local self-government. No autonomous territorial formations shall be allowed to exist therein
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Secondly, the legal system allows for a procedural practice of law-‐making, prosecution ect , but
regardless of its intended function, the widespread corruption seems to resist the necessary change.
Furthermore, the constitution ensures a free press and right for public mobilization, but what good
does it make, when prosecutors use their discretionary powers to hush journalist? Or when disclosed
crimes aren’t being prosecuted? The press is an important institution in any society, because it
functions as an effective watchdog over public officials, and should therefore be protected by any
means possible. One could have only hoped that Bulgaria’s 20 years of being a democratic state, would
have challenged its people’s, including officials’ worldview, as the democratic state’s merits and values
would become an aspirational goal to reach in unity. Sadly, this doesn’t seem to be the case. However,
as Treismann predicts, transitioning countries are usually more susceptible than either fully
democratized or authoritarian states, which furthermore might suggest that Bulgaria’s transformation
still isn’t complete.
6.3 Economy The Bulgarian economy is surprisingly descent, despite the high corruption levels in the country. The
neo-‐liberal policy trends are helping the country to adapt to the single market, which was evident
through the technical requirements it managed to meet. This will overall further exportation
opportunities in the future, when the economic crisis has settled to a level where it’s EU member
states can afford to increase their dealings with Bulgaria. Also, economic growth will be helped by the
top ratings the country received, by encouraging foreign direct investments and hopefully enhancing
the public’s view on the economy, and ultimately stimulating domestic demands. The Bulgarian
economy has done relatively better than most member states in the EU and it may attempt to use it as
strategy to avoid improvements in the area of corruption? It has already “threatened” the EU to resist
membership to the EMU before the economic crisis is stabilized, so at least it has some kind of trick up
its sleeves. However, there is no doubt that Bulgaria, without the widespread corruption could have
achieved an even better result, which is an important fact to keep in mind. On the contrary, just
because the consequences of corruption can’t be measured in dollars and dimes, doesn’t mean that the
economy hasn’t been affected. For example, an issue with the public administration still remains, as
Bulgaria is set to receive more EU funds for development projects. At this point, Bulgaria isn’t abiding
to EU’s public procurement rules, which can have a range of significant consequences on not only its
membership, but the economy as well. The favoritism of private firms, which the Naidenov case
exemplifies, can mean that EU will sanction its funding. In order to convince the EU, the public
administration will need to improve on its supervision skills. According to Treisman, the country’s
high proportion of natural resources is another cause for concern, as this usually will create a
favorable situation for officials to corrupt. Sadly, not much data on this type of corruption exist.
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7. 0 Final Conclusion Bulgaria has through its application to the EU committed to meet whatever conditions the EU has
made for its accession. This includes a commitment to benchmark 4 and 5, which deals with exact
strategies that the country will perform, in order to lower its high corruption levels. However, the
country is now entering its sixth year under the merits of the CVM, with an incomplete result. The
failure to meet the benchmarks is primarily due to the incompetent state institutions, where
corruption practices are widespread. The government has through the development of
comprehensive frameworks and strategies, attempted to show the EU its engagement in the process.
But, whenever the measurements have been implemented into the institution, the low integrity of
public officials has prevented it from being a success. Yet, the high corruption levels can be avoided, if
only an efficient legal system is set in place.
Firstly, this legal system should provide a function where Bulgarian public officials will be punished
for their actions. This will ensure that they are held accountable to the people, who entrusted them
with the discretionary power, to work in their interest. Secondly, the efficient legal system will
improve peoples’ perception of their institutions, thereby preventing a vicious circle from starting.
Thirdly, it should eradicate the nepotistic appointments in the Supreme judicial Council, as this will
allow for impartial decisions. However, most importantly, the legal system should improve the check
and balances system, as this will help detect corruption. This will include the National Audit Office
becoming an independent body, which could improve the asset declaration system.
Cultural factors such as the conditions for the freedom of press and civil society, is another area the
Bulgarian government will need to improve. As of now, journalists feel threaten, as revengeful officials’
who have been exposed for their corruptive practices are challenging their freedom of speech. This
should not occur, as in a democratic state a watchdog function should exist, to expose such covert and
illegal affairs.
The Bulgarian case is most definitely complex, as these adjustments cannot be put in place over night.
Although the comprehensive framework shows proof of commitment, the attempt still seems weak.
The EC has provided it with clear instructions and benchmarks, which after six years has still not
changed the corruption level noticeably. In other words, Bulgaria seems theoretically, but not
practically engaged. Hopefully, it will prove us wrong in the future, but until then, I won’t hold my
breath.
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References Ackerman, Rose-‐Susan. Corruption and Government -‐ causes, consequences and reform. New York , New York : Cambridge University Press, 1999. AEJ. www.AEJ-‐Bulgaira.org. 8. . April 2013. (senest hentet eller vist den 3. May 3013). Retrived from:http://www.aej-bulgaria.org/en/2013/04/bulgarian-journalists-protest-against-violation-of-press-freedom-by-the-state-prosecution/#more-1525 BBC. »Bulgarian president names new caretaker government .« BBC, march 2013. Retrived from: http://www.bbc.co.uk/news/world-‐europe-‐21753607, Byrne, Elaine, Anne-‐Katrin Arnold, og Fumiko Nagano. »Building public support for anti-‐corruption efforts-‐why anti corruption agencies need to communicate and how.« Worldbank.org . 2010. www.worldbank.org (senest hentet eller vist den 13. April 2013). Retrived from:http://siteresources.worldbank.org/EXTGOVACC/Resources/CorruptionWhitePaperpub31110screen.pdf
Country Watch . »Bulgaria Country review.« Business Source Complete. 2012. Economist Intelligence Unit . Bulgaria. Country Report . Business Source Complete, october 2012. Economy Watch Content. www. Economywatch.com. 10 . march 2010. (senest hentet eller vist den 3. may 2012). Retrived from: http://www.economywatch.com/world_economy/bulgaria/export-‐import.html Ehrlich, Isaac, og Francis T. Lui. »Bureaucratic corruption and endogenous economic growth .« Journal Of Political Economy 107. no. 6. Business Source Complete , 1999. Retrieved from: http://siteresources.worldbank.org/EXTGOVACC/Resources/CorruptionWhitePaperpub31110screen.pdf
European Commision . »ec.europa.eu.« 7. July 2012. http:// www.ec.europa.eu/ (senest hentet eller vist den 25. April 2013). Retrieved from: http://ec.europa.eu/cvm/docs/com_2012_411_en.pdf Fairchild, Mary. About Christianity. 2013. (senest hentet eller vist den 3. may 2013).retrived from:http://christianity.about.com/od/easternorthodoxy/a/orthodoxbeliefs.htm Klitgaard, Robert. »International cooperation against corruption.« Finance & development. pg. 3. Prod. IMF/world Bank. 1998. Kunicová, Jana, og Susan Rose-‐Ackerman. »Electoral Rules and Constitutional Structures as Constraints on Corruption .« British Journal Of Political Science 35. no. 4. 573-‐606. Business source Complete , 2005.
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Kurer, Oskar. »Corruption: An Alternative approach to its Definition and Measurement.« Political studies, 22. may 2005, vol. 53 udg.: 222-‐39. Lancaster, D. Thomas and Montinola, R. Gabriella. »Comparative Political corruption: issues of operationalization and measurement.« Studies in comparative international developement, fall 2001, vol: 36 udg. Frontpage picture: MIA. www.MIA.mk. 7. March 2013. (senest hentet eller vist den 5. May 2013). Retrived from: http://www.mia.mk/en/Inside/RenderSingleNews/289/102986110 Montinola, R. Gabriella and Jackman, W. Robert. »Sources of corruption: A cross-‐country study.« British Journal of Political Science, january 2002, vol. 32 udg.: 147-‐170. Morris, Stephen D. »Forms of corruption .« DICE report. 2. CESifo, 2011. National Assembly of the republic of Bulgaria. »parliament.bg.«The Constitution. 2013. (senest hentet eller vist den 13. April 2013).www.parliament.bg/en/const
National Statistical institute. Statistical Reference Book. Sofia, 2012. Retrived from:http://export.government.bg/ianmsp/en/foreign-trade-of-bulgaria Novinte . Novinte.com. 12. November 2012. www.novinte.com (senest hentet eller vist den 27. April 2013). Retrived from:http://www.novinite.com/view_news.php?id=145040- Political Risk Services. »Country Conditions; Bulgaria County report.« Political Risk Yearbook . 1-‐20. Business Source Complete, 2013. Reuters. "Bulgaria ex-‐minister faces corruption over EU food scheme". 26. march 2013. www.reuters.com (senest hentet eller vist den 29. april 2013). Retrived from: http://www.reuters.com/article/2013/03/26/us-‐bulgaria-‐crime-‐minister-‐idUSBRE92P0VH20130326 Transparency International . transparency.org. 2012. www.transparency.org (senest hentet eller vist den 13. april 2012). Retrieved from: http://www.transparency.org/whoweare/history, http://www.transparency.org/whoweare, http://cpi.transparency.org/cpi2012/results/ Transparency International. »National Integrity System .« www.transparency-‐bg.org. 2011. (senest hentet eller vist den 13. april 2013). Treisman, Daniel. »The causes of corruption: a cross-‐national study.« Journal of public
Economics , 2000: 399-‐457.
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Appendix Figure 1
Retrived from: Transparency International. »National Integrity System .« www.transparency-‐bg.org. 2011. (senest hentet eller vist den 13. april 2013).
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Figure 2.
Retrieved from: National Statistical institute. Statistical Reference Book. Sofia, 2012. P. 176
176 Statistical Reference Book 2012
Exports by main trade partner countries
!e geographical distribution of the data on exports is presented according to the countries of destination of the goods. !e graph shows exports to the top 10 Bulgarian trade partner countries.!e distribution of exports according to the Standard International Trade classi"cation shows the biggest share of manufactured goods classi"ed chie#y by material, followed by machinery and transport equipment.
Figure 3. Exports to the top 10 Bulgarian trade partner countries in 2011
Exports and imports of goods
Figure 4. Structure of exports by sections of SITC, rev. 4 in 2011
Food and live animals
Beverages and tobacco
Crude materials, inedible (except fuel)
Mineral fuel, lubricants and related materials
Animals and vegetable oils, fats and waxes
Chemicals and related products n.e.c.
Manufactured goods classi!ed chie"y by material
Machinery and transport equipment
Miscellaneous manufactured articles
Commodities and transactions n.e.c.
Mill ion Levs
SerbiaRussian Fed.
SpainFrance
BelgiumGreece
ItalyTurkey
RomaniaGermany
Млн. левове
0 1000 2000 3000 4000 5000
ГерманияРумъния
ТурцияИталияГърцияБелгия
ФранцияИспания
РусияСърбия
Храни и живи животни
Безалкохолни и алкохолни напитки и тютюн
Необработени (сурови) материали, негодни за консумация (изкл. горивата)
Минерални горива, масла и подобни продукти
Мазнини, масла и восъци от животински и растителен произход
Химични вещества и продукти
Артикули, класифицирани главно според вида на материала
Машини, оборудване и превозни средства
Разнообразни готови продукти, н.д.
Стоки и сделки, н.д.
14.1 %0.2 % 9.6 %
2.0 %
10.0 %
0.7 %
13.7 %
7.9 %
24.9 %
16.9 %