Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

6 Chapter 1: The Economic and Institutional Context
that have a serious corruption problem. 10 In 2005, SaM’s position, with a corruption perception
index of 2.8 in 2005, remained similar to that in 2004, but improved significantly from 2003,
when it scored 2.3 and ranked 106th. The index measures the degree to which corruption is
perceived to exist among a country's public officials and politicians.
1.21 The EBRD-World Bank Business Environment and Enterprise Performance Survey
(BEEPS) shows that corruption is a problem for doing business throughout Central and
Eastern Europe. The BEEPS has been carried out in three rounds in 1999, 2002, and 2005 and
covers virtually all of the countries of Central and Eastern Europe and the former Soviet Union,
as well as Turkey. It measures some key indicators of corruption and unofficial payments, such
as bribe tax, bribe frequency, percent of firms saying corruption is a problem for doing business,
and state capture. The Survey offers simple averages over all firms of these measures of
corruption for a single country as well as regional aggregates, computed using firm-level data.
The aggregates show that Southeast Europe as a region generally performs poorly when
compared to EU8 11 or Europe and Central Asia in general: in 2005, bribe frequency, corruption
as a problem doing business, and state capture were all higher in SEE (Figure 1.1).
Survey-based Governance Indicators for Serbia and Montenegro
1.22 Serbia and Montenegro compares unfavorably to the average regional performance
in most indicators of corruption (Figure 1.1). SaM’s bribe tax compares favorably to the SEE
regional average of about 0.9 percent in 2005, but unfavorably to the EU8 average of about 0.66
percent in 2005. With respect to the percent of firms saying corruption is a problem, SaM
compared unfavorably to the regional SEE average (24 percent) and the EU8 average(10
percent). The percentage of firms indicating corruption as a problem is larger in SaM than the
SEE regional average (48 percent) and the EU8 average (30 percent).
1.23 According to the BEEPS, administrative corruption seems to have increased in
Serbia and Montenegro in recent years. The percent of firms indicating corruption as a
problem for doing business increased from about 30 percent in 2002 to about 50 percent in 2005.
Bribe tax as a share of annual sales remained low at about 0.6 percent (and down from 1.5
percent in 2002), but bribe frequency increased. Of the surveyed firms, the percent saying
unofficial payments are frequent rose from about 15 percent in 2002 to about 32 percent in 2005.
According to the survey, unofficial payments are mainly connected with government contracts,
courts decisions, customs and taxes collection, and business licenses and permits.
influential positions to take advantage of government activities at the expense of the rest of the population; by
interfering with the government’s ability to impose necessary regulatory controls and inspections, and enforcement
of contracts and property rights; and by acting as a tax to discourage foreign investment.
10 A score of 5.0 is the number Transparency International considers the borderline distinguishing countries that do
and do not have a serious corruption problem. In 2005, Iceland was the world's least corrupt country (with a score of
9.7) while Bangladesh and Chad were the most corrupt (with a score of 1.7). The State Union of Serbia and
Montenegro ranked 97 th out of 159 countries surveyed.
11 EU 8 countries are the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, the Slovak Republic, and
Slovenia.