Corruption risks in Eurasia: Spotlight on Azerbaijan and Moldova

In November 2013, Ukraine’s former president Yanukovych suddenly suspended preparations for the Ukraine-EU Association Agreement, leading to massive demonstrations in Kiev’s Maidan Square and, ultimately, his ouster. Now, eight months later, under new leadership with strong commitments to implement reforms and combat corruption, Ukraine has signed the agreement.

Georgia and Moldova have also signed the agreements which lower trade barriers and pave the way for future integration into the EU market. In turn, governments must implement a range of comprehensive reforms – from strengthening the rule of law to ensuring protection of human rights and fighting corruption.

And yet, systemic corruption remains a major problem across the EU’s eastern neighbours. Transparency International’s Corruption Perceptions Index 2013 shows that these countries suffer from high levels of corruption, with Georgia ranking the highest, scoring 49 on a scale from 0 (highly corrupt) to 100 (least corrupt), while Armenia scored 36, Moldova 35, Azerbaijan 28 and Ukraine 25.

To combat systemic corruption, a holistic and comprehensive approach is needed. Over the past year, Transparency International has been conducting assessments in the region, examining corruption risks in 13 institutions and key players of the governance structures in Armenia, Azerbaijan, Georgia, Moldova and Ukraine.

Today, Transparency International Azerbaijan and Transparency International Moldova launch their assessments in Brussels. The reports show that corruption risks undermine prospects for closer political and economic relations with the EU, but also point to promising developments and provide tailor-made recommendations for reform.

AZERBAIJAN: OIL RICH BUT LACKING INDEPENDENT OVERSIGHT

In Azerbaijan, the economy is heavily dependent on oil revenues, and like many other resource rich countries, it suffers from “the resource curse” and corruption.

Transparency International Azerbaijan’s assessment highlights serious corruption risks across society. Most alarming is a general weakness of institutions and actors with watchdog functions – civil society, the media and political parties. The parliamentary watchdogs, the Ombudsman and Chamber of Accounts, both show an insufficient level of independence and do not make adequate use of their oversight powers as granted by law.

MORE THAN 1/3 OF AZERBAIJANIS THINK BUSINESSES ARE CORRUPT/EXTREMELY CORRUPT

This is according to our Global Corruption Barometer 2013. The findings from Transparency International Azerbaijan’s assessment show that regulation of the private sector is needed.

While Azerbaijan does have an anti-corruption legal framework in place, regulation of corruption in the private sector is missing and some crucial laws – including those on whistleblower protection, conflicts of interest and corporate governance – have yet to be adopted.

There are, however, some promising developments in the fight against corruption. In recent years, the government has undertaken solid reforms to eliminate petty corruption through the introduction of electronic services and establishment of one-stop public service centres, and it has improved the private sector environment through simplification of business registration.

To address these corruption risks in Azerbaijan and to ensure an effective system of checks and balances, reforms needed include:

The legislature should:

- Implement a regulatory framework which ensures criminal responsibility for failure to act on the findings of the parliamentary watchdogs, the Ombudsman and the Chamber of Accounts.

- Ensure participation of civil society representatives at the parliamentary committee meetings, with the aim of discussing new draft laws.

- Adopt laws on whistleblower protection, conflicts of interest, corporate governance and anti-corruption norms for the private sector.

The executive should:

- Establish national- and local-level public monitoring councils where civil society plays an active role.

MOLDOVA: MORE ANTI-CORRUPTION REFORM EFFORTS NEEDED

Transparency International Moldova’s assessment shows that all 13 governance institutions assessed have a high vulnerability to corruption and are lacking in transparency and integrity. Some institutions shown to be most vulnerable to corruption are political parties, the Ombudsman and the private sector.

In particular, corruption in the private sector is poorly regulated by the state, and the “shadow economy” – in which some private sector actors conduct business – poses significant corruption risks. Additionally, the ethical standards of small enterprises are low, and big enterprises usually do not implement corporate management norms.

80% OF MOLDOVANS THINK THE JUDICIARY IS CORRUPT/EXTREMELY CORRUPT.

This is according to our Global Corruption Barometer 2013. The findings from Transparency International Moldova's assessment show that judiciary reform efforts do not go far enough.

In recent years, however, Moldova has demonstrated some progress in preventing and combating corruption. The establishment of the National Integrity Commission has led to civil servants being sanctioned for violating laws on conflicts of interest and asset declaration. And a critical sector, the judiciary, has seen the initiation of reform efforts aimed at enhancing independence and integrity of judges as well as holding them accountable for corruption-related charges. The adoption of an important law on the disciplinary accountability of judges had continued to be postponed, however.

Also, many of the Group of States against Corruption (GRECO) recommendations on transparency of funding of political parties and electoral campaigns have been discussed with civil society, and are on their way to becoming adopted by parliament.

To address these corruption risks in Moldova, reforms needed include:

The government should:

- Increase the transparency of its decision-making processes, particularly regarding administration of state enterprises and commercial companies (mostly in terms of privatisation and leasing out properties).

The private sector should:

- Implement higher standards of transparency, ethics and integrity in business, including actively monitoring compliance with anti-corruption policies.

The judiciary, in particular the Supreme Council of the Magistracy and the Supreme Council of Prosecutors, should:

- Take action against cases of improper behaviour of judges and prosecutors, applying appropriate sanctions.

Political parties should:

- Make funding of political parties and electoral campaigns transparent, as well as establish internal democratic principles and integrity standards for members.

This publication has been produced with the assistance of the European Union. The contents of this publication are the sole responsibility of Transparency International and can in no way be taken to reflect the views of the European Union.

This project is funded by the European Union.