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

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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.
Chapter 1: The Economic and Institutional Context 7 Figure 1.1. Unofficial Payments and Corruption in SaM and in the Region Bribe Tax (bribes as a share of annual sales) Bribe Frequency (percent of firms saying unofficial payments are frequent) 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 SAM EU8 SEE ECA 2002 2005 40% 30% 20% 10 % 0% SAM EU8 SEE ECA 2002 2005 Corruption as a Problem Doing Business (percent of firms indicating corruption as a problem doing business) State Capture (State Capture Index: 0=no impact, 4=decisive impact) 60% 50% 40% 0.60 0.50 0.40 30% 20% 2002 2005 0.30 0.20 2002 2005 10 % 0.10 0% SAM EU8 SEE ECA 0.00 SAM EU8 SEE ECA Source: BEEPS 2005. Survey-based Governance Indicators for Montenegro 1.24 Montenegro-specific data on governance and corruption are scant. The number of Montenegrin firms included in BEEPS is low. In 2002, a total of 250 SaM firms were interviewed by the Survey. Of this, only 20 firms were in Montenegro. Similarly, only 18 firms out of the total 300 firms surveyed in 2005 were Montenegrin firms. Given the small number of Montenegrin firms covered in the Survey, one needs to be cautious about drawing firm conclusions from the survey about trends in administrative corruption. 1.25 Although the number of Montenegrin firms included in the BEEPS is small, the survey shows that the trends in Montenegro have been broadly consistent with that of SaM (Figure 1.2). Bribe frequency not only increased between 2002 and 2005 but, at about 42 percent in 2005, was significantly higher than the average for SaM (32 percent). ) Similarly, the percent of firms indicating corruption as a problem for doing business and state capture, although smaller than in SaM as a whole, both increased between 2002 and 2005 in Montenegro. According to the Survey, bribes are frequent in government contracts, fire and building inspections, customs and imports, and public services, in particular telephone and electricity services.
Page 1 and 2: Report No. 36533 Republic of Monten
Page 3 and 4: CONTENTS ACKNOWLEDGMENTS ..........
Page 5 and 6: TABLES Table 1.1. Montenegro’s Gr
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Page 10 and 11: ii Executive Summary and procuremen
Page 12 and 13: iv Executive Summary 2006-2010 is p
Page 14 and 15: vi Executive Summary bill in the ke
Page 16 and 17: viii Executive Summary 23. Going fo
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4. PUBLIC FINANCIAL MANAGEMENT AND
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96 Annex 1 Indicator 2001 2002 2003
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98 Annex 3 ANNEX 3. COSTS OF ALTERN
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Republic of Montenegro: Public Expenditure and ... - Vlada Crne Gore

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