RESULTS OF SOCIOLOGICAL SURVEYS ON CORRUPTION

 

Transparency International “Corruption Perceptions Index”[108]

 

Corruption Perceptions Index is one of the best-known and the most widely recognized survey that aims to rank countries by assessing the countries` abilities to control corruption as a phenomenon by measuring the level of corruption in the public sector and politics.

Based on the results of the 2015 edition of the Transparency International Survey on Corruption Perceptions Index[109] (hereinafter referred to as CPI), Lithuania scored 61 points out of total points of 100 and was ranked at the 32nd position on the list of 168 countries.

A country‘s corruption perception is ranked by attributing a specific score on a one hundred points` scale from 0 (perceived to be highly corrupt) to 100 (perceived to be very clean).

Lithuania was ranked at the 16th position among the European Union countries, whereas Lithuania was ranked  18th among the European Union and Western European countries. Starting from 2012 Lithuania‘s CPI is consistently growing and within the period of 4 years it improved by 7 points.

It should be noted that CPI indicates the countries‘ perceived levels of corruption among civil servants in the public sector and politicians, their non-transparent relations with the private sector, in other words, the index indicates not the actual corruption level in the countries, but the opinion of national experts and foreign experts as well as business representatives of those specific countries, which is based on their perception of the corruption level within the country, therefore it is vital to adequately inform the public (including the private sector)  on corruption cases and its actual prevalence level in order not to shape an impression that  corruption is  more widely spread than it is  indeed, and thus not to diminish undeservedly the country’s prestige on the international business market.

 

TRACE Matrix (Business Bribery Risk Index)[110]

 

In November 2014 the U.S. international business association TRACE International in cooperation with the U.S. analytical centre RAND Corporation announced the release of a new edition of the TRACE Matrix[111], a global business bribery risk index. Lithuania was assigned a very high position the 18th out of 197 by surpassing not only Estonia (22nd position) and Latvia (25th position), but also the United Kingdom, Denmark and other Western European countries that generally by far surpass Lithuania (in other surveys).

 

Based on the TRACE Matrix Index countries are measured according to the four main domain criteria:

  1. Businessmen interactions with the country‘s government (the number of interactions, potential bribery expectations, the extent of the regulatory burden);
  2. Anti-bribery laws and their enforcement in practice;
  3. Transparency of the public sector and implemented procedures;
  4. Capacity for the public oversight of the enumerated processes, for instance, by attracting the media.

 

Eurobarometer Sociological Survey “Businesses` Attitudes towards Corruption”[112]

 

This Survey and many other surveys reveal the trend that business representatives who during the Survey  declared  an increased turnover of their companies over the past years were  less inclined to complain about the bureaucracy, corruption, administrative burden and other factors aggravating business conditions than those  business representatives whose companies’ turnover decreased. . This supposes that business,  quite often blaming the existing legal regulation and alleged corruption,  tries to justify its failures in such a way.

The above-mentioned Eurobarometer Survey also revealed that the  number of businessmen who considered that corruption adversely affected their opportunities to win a public procurement tender decreased by 8% in Lithuania.

Based on the opinion of the respondent businessmen, corruption is not the main problem in business development and ranks  the last among  9 factors  having the negative impact on business and is followed by: 1) high tax rates; 2) fast-changing regulatory and policy environment; 3) weak financing and availability of credits; 4) lack of measures for debt recovery; 5) complexity of administrative procedures; 6) nepotism and protectionism; 7) restrictive labour relations regulation; 8) insufficient infrastructure.

Less than one third (28%) of the Lithuanian businessmen indicated corruption as one of the problems  having a negative impact on doing business. Nonetheless, in their opinion, this phenomenon is rather widely spread and even 82% of the respondents sustained such opinion which was by 7% less than in 2013.

Besides, in spite of the fact that the Lithuanian businessmen think that nepotism[113] and cronyism[114] play the important role in the public sector, they also acknowledge that this problem is even more widely spread in the private sector.

 

Control Risk Survey “Business` Attitudes towards Corruption in 2015–2016”[115]

 

Even 41% of the respondent international business representatives interviewed by the Control Risk reported that the risk of corruption was the primary reason they pulled out of a transaction  which they had already invested in and which they spent time on  (the major part of companies that acted in such a way were from the Western countries) and it  evidences  that corruption may be considered as one of the greatest obstacles impeding foreign investment.

Based on the Survey results and as compared to the Survey results of 2006, Western countries pursuing stringent anti-corruption policy tend to suffer lower damage due to unfair competition. In the Survey of 2006 44% of respondents indicated having suffered damage due to unfair competition, while  only 24% in 2015.

The respondents expressed a very positive attitude towards international legislation designed for fighting  corruption: 81% of respondents believe such legislation  improve the business environment; 64% of them indicated that it deters corrupted competitors; and 55% indicated that it creates more favourable conditions  for ethically minded companies to enter  the high-risk markets.

 

The companies participating in the survey indicated that they implement the following anti-corruption measures:

  1. 87% of the companies have a formal policy that clearly prohibits bribes;
  2.  64% of them implement anti-corruption training programmes for employees;
  3. 58% have anonymous  whistle-blowing lines;
  4. 58% use standard clauses providing for bribery prohibition in contracts with sub-contractors ;
  5. 43% perform the procedures for prior legal and financial checks on business partners;
  6. 43% carry  out corruption-specific audits or review procedures;
  7.  43% have the right to audit third parties;
  8. 39% have procedures in place for corruption risk assessment when entering new countries;
  9. 30% have developed training programmes for the senior management and board members;
  10. 21% use transaction risk monitoring software/applications;
  11. 119% use third-party verification software.

 

It is noteworthy that the Control Risk Survey performers pointed out that:

  • Compliance (anti-corruption) programmes often do not reach their original goals therefore, a significant gap remains between the perceivable efficiency of the programmes and the real situation. This occurs due to the inconsistency, incompleteness or improper implementation of the programmes, finally, the decisions are often taken in the companies without a proper assessment of the risks that are  faced in practice specifically by their employees.
  • Reduction of corruption should be the duty of each employee; however, this purpose  requires a leader who might be an example for everybody. Such leader should perceive the risks encountered by  the employees in their daily activities and support them by real actions and advice without limiting himself/herself to notifications of threatening sanctions only. In absence of such leader and his/her consistent performance, there is a probability of employees’ distrust in the implemented compliance (anti-corruption) programme, non-compliance with its provisions and, finally, violations.

 

The True Cost of Compliance 2011[116]

 

The U.S. Ponemon Institute in cooperation with Tripwire, Inc. conducted a benchmark study of 46 multinational organisations in 2011 to determine the effectiveness  and the cost-efficiency of the compliance (anti-corruption) measures applied by business organisations.

This benchmark study is the first study of such type, where the use of empirical data was aimed to estimate the true cost of compliance with the requirements of appropriate regulations for  business organisations, including their duty to implement anti-corruption measures, and the cost of non-compliance with these regulations.

Based on the data of the Study results the cost of preventive measure implementation is 3.5 times less ($ 3.5 million) than the cost of non-compliance related to resolution of problems caused by legal violations ($ 9.4 million).

 

The Lithuanian Map of Corruption 2014[117]

 

At the initiative of the STT, in 2014 company Vilmorus conducted a survey “The Lithuanian Map of Corruption 2014“ during which  three target groups were surveyed: the residents of Lithuania, managers of business companies and civil servants.

The Survey results showed a growing negative attitude of the business sector towards corruption, for instance, the number of company managers who think that in order to make things go in the right direction they have “to pay extras” (in 2011 the number of such persons comprised 66%, and in 2014 it was 53%). The number of those presuming that bribes save time in dealing with administrative procedures also decreased (a decrease from 50% to 27%).

The Survey also revealed potentially positive future trends, i.e.  all groups of respondents: 22% of  residents, 34% of businessmen and 41% of civil servants indicated that, in their opinion, the corruption level will slightly or majorly decrease during the coming 3 years, and this is the best result since 2005. The growing number of the residents and company managers who would not give a  bribe as this conflicts with  their beliefs also add to the positive attitude towards corruption.

The decreasing trend in the number of company managers that had the corruption experience is observed, only 6% of respondents indicated that they gave the bribe within the 12-month period  and 14% - within the period of 5 months (this indicator is gradually  decreasing since 2001).

An important aspect is that  that business much better evaluates the anti-corruption environment than the residents and civil servants, and that the  results of business survey are far more positive than those of  residents.

On the other hand, an enormous gap still exists between the real and alleged corruption  in Lithuania, for instance, 88% of  residents considered that the Customs is highly corrupted or partially corrupted, but only 33 respondents dealt with the customs formalities within the period of five years, out of which  35% paid bribes. A similar situation is observed in relation to courts: 80% of residents indicated considering that courts are highly corrupted or partially corrupted, however, only 95 respondents (i. e. 9.5% of total number of the surveyed respondents) encountered  criminal and civil case investigations, and only one fifth of respondents  possibly paid bribes. Therefore it leads to the conclusion that the major part of the residents learn about the possible corruption in certain institutions only from their environment  or guess about the existence of corruption  in these institutions.

 

Investors` Confidence Index for Lithuania (ICIL) Survey[118]

 

The Investors` Confidence Index for Lithuania (ICIL) survey is carried out by the Lithuanian Association Investors` Forum on a quarterly basis. The ICIL reveals attitudes and expectations that the largest foreign capital businesses operating in Lithuania have for the country’s business and investment climate. The purpose of the Index is to evaluate the country’s business environment and the attractiveness of the Lithuanian economy to foreign investors based on the experiences and observations of market players already operating in Lithuania.

One of the emerging ICIL trends shows the growing concern of investors over the business transparency situation in the country. Based on the data of the 1st quarter of 2016 four fifths of the respondents (79%) indicated business transparency as the area requiring immediate changes. If compared with the data of the 4th quarter of 2015 this number increased by ten percent. The diagram revealing the trend in the area requiring changes, i.e. business transparency, is provided hereinafter below:

 

 

 

/The translation of the above Chart, where LT - in Lithuanian and EN - in English, accordingly./

  • LT: 2014 II ketv. – EN: Q2 2014;
  • LT: 2014 III ketv. – EN: Q3 2014;
  • LT: 2014 IV ketv. – EN: Q4 2014;
  • LT: 2015 I ketv. – EN: Q1  2015;
  • LT: 2015 IV ketv. – EN: Q4 2015;
  • LT: 2016 I ketv. – EN: Q1  2016.

        

Economic Freedom Score [119]

 

The economic Freedom score is compiled by the U.S.A. Economic Survey Centre “Heritage Foundation” in cooperation with the Wall Street Journal. This Survey ranks countries according to such criteria as business freedom, labour relation regulation, governmental spending, fiscal freedom, etc. Freedom from corruption is one of the constituent parts of the Survey.

According to the global ranking in 2016 Lithuania was ranked to be in the 13th position  out of 178 countries and, as compared to the previous years, it went up by two positions, thus leading to the overall score increase by 0.5 point up to 75.2%. Such Lithuania‘s ranking is the best since 1996. On the other hand, the Survey results reveal that the labour relations regulation and freedom from corruption in Lithuania were assigned the lowest points.

 

Doing Business 2016 Survey[120]

 

Doing Business 2016 Survey might be indirectly related to corruption. The Survey analyses the following aspects: opportunities for starting business, availability of credit, connection to the power grid, investor protection, trading with other countries, end of the business, insolvency / bankruptcy. Such areas as legal framework, changes in procedures, reforms conducted in the country, etc. are surveyed in  each area. It is considered that the simpler the procedures and the fewer of these need to be undertaken in each of the above- mentioned areas, the more favourable business environment is created, thus leading to lower corruption level.

In 2015 Lithuania is ranked to be in the 20th position out of 189 counties. Acceleration of the VAT payer registration procedure, protection of minor shareholders partially added to the country’s higher ranking position, as well as two reforms in relation to the connection to the power grid were also taken into consideration – a shorter term for the provision of the connection service for connection of non-domestic consumer electrical equipment to the power grid and a reduced number of procedures for connection to the power grid. However, the long-lasting dealing with insolvency procedures, insufficient credit availability  for business had the most detrimental effect on the overall ranking. In fact, with regard to opportunities for starting a business, Lithuania ranked 8th, while  with regard to ownership registration it ranked 2nd.

Therefore it must be considered that the preconditions for the spread of corruption appear in those areas, where  the regulation of procedures is complicated, and document management requires from business much  time- and human resource-consumption related costs. Striving for better ranking and more favourable business environment, the facilitation of procedures and simplification of legal regulation in problematic areas is necessary.

 

Business Anti-Corruption Portal[121]

 

A lot of useful information on the anti-corruption environment in Lithuania and other countries of the world (corruption spread level within the judicial system, police, civil service, land planning, tax administration, customs, public procurement, environmental protection, etc.) are available in the Global Business Anti-Corruption Portal (BACP).

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[108] A more detailed information on the Survey results is available  on the website: https://www.transparency.org/cpi2015 
[109] CPI is one of the best worldwide known corruption perception surveys performed on an annual basis. This index is a crucial source of information for the international political institutions, business and financial structures considering investment opportunities or development of new business projects in some countries.
[110] The goal of the association established in 2001 is to aid companies and first of all major international corporations to follow anti-bribery standards (the U.S. Foreign Corrupt Practices Act as of 1977 and the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions) and to force their commercial intermediaries to follow these Standards.
[111] A more detailed information on the index is available on the website: http://www.traceinternational.org/trace-matrix/ 
[112] The  Survey results are available on the website:

http://ec.europa.eu/COMMFrontOffice/PublicOpinion/index.cfm/Survey/getSurveyDetail/instruments/FLASH/surveyKy/2084 
[113] Nepotism means favouritism shown to the relatives or close friends by those with power or influence.
[114] Cronyism means the practice of appointing friends to the high-level posts regardless  their suitability.
[115] The Survey results are available on the website: https://www.controlrisks.com/webcasts/studio/2015-GENERAL/corruption-report/corruption-survey-2015.pdf 
[116] The Study results are available on the website:

http://www.tripwire.com/tripwire/assets/File/ponemon/True_Cost_of_Compliance_Report.pdf 
[117] The Survey results are available on the website:

http://www.transparency.lt/wp-content/uploads/2015/10/korupcijoszemelapis20141.pdf 
[118] The Survey results are available on the website: http://www.investorsforum.lt/lt/publikacijos
[119] The Survey results are available on the website: http://www.heritage.org/index/country/lithuania 
[120] The Survey results are available on the website: http://www.doingbusiness.org/rankings 
[121] Website: http://www.business-anti-corruption.org/