CORRUPTION ASSESSMENT REPORT 2000

Transcription

1 CORRUPTION ASSESSMENT REPORT 2000 Sofia December 2000

2 2 CORRUPTION ASSESSMENT REPORT 2000 Limiting corruption in Bugarian society cas not ony for institutiona and ega measures but aso for estabishing the rue of aw. In this sense, it is of crucia importance to foster a poitica and economic cuture based on trust and respect for pubic institutions, on transparency and openness in the actions of pubic administration, and the wi to achieve stabiity and predictabiity of the economic and socia environment. Coaition 2000 is an initiative of Bugarian non-governmenta organizations which was aunched in the spring of 1997 aimed at imiting corruption in Bugarian society through a partnership between state institutions, nongovernmenta organizations, and individuas, who deveoped and have been impementing an Anti-Corruption Action Pan, Corruption Monitoring System, and an anti-corruption pubic awareness campaign. The Corruption Assessment Report 2000 foows the structure and approach of the Action Pan adopted by the Poicy Forum of Coaition 2000 in November, It presents a genera evauation of the state and dynamic of corruption in Bugarian society and of the efforts to counteract corruption in the year Coaition Lazar Stanev Street 1113 Sofia, Bugaria Te.:(359-2) Fax: (359-2) coaition2000@onine.bg

3 CORRUPTION ASSESSMENT REPORT CONTENTS INTRODUCTION 5 A. CREATING A FAVORABLE INSTITUTIONAL AND LEGAL ENVIRONMENT FOR CURBING CORRUPTION 9 A.1. Pubic Administration Reform and the Roe of the State - Legisative Framework 9 A.2. The Institutions and the Pubic 16 B. REFORM OF THE JUDICIARY 19 B.1. Lega Basis of Judicia Reform 19 B.1.1. Crimina Law and Procedure 19 B.1.2. Civi and Administrative Law and Procedure 21 B.2. Reforming the Organization of the Judiciary. Training of Magistrates 23 C. THE FIGHT AGAINST CORRUPTION IN THE ECONOMY 25 C.1. Corruption and Privatization 25 C.2. Corruption and Business Environment 28 D. THE ROLE OF CIVIL SOCIETY 32 D.1. Non-governmenta Organizations 32 D.2. The Media 33 E. DYNAMICS OF CORRUPT BEHAVIOR AND THE CHANGE IN PUBLIC ATTITUDES TOWARDS CORRUPTION 36 F. INTERNATIONAL COOPERATION AGAINST CORRUPTION 39 F.1. Legisative Dimensions 39 F.2. Institutiona Aspects 41 F.3. Regiona Approach 43

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5 CORRUPTION ASSESSMENT REPORT INTRODUCTION CORRUPTION AND THE PRIORITIES OF SOCIETY (THE MAIN PROBLEMS BULGARIA FACES) * The phenomenon referred to as corruption comprises the sundry forms of abuse of power - economic, poitica and administrative - which a resut in obtaining persona or coective benefits to the detriment of the rights and awfu interests of an individua or of the whoe society. The convoution of this phenomenon is a serious chaenge to any efforts to assess it comprehensivey. The present annua report is the second in a row, which attempts to outine the genera framework and the specific dimensions of corrupt practices in Bugaria seen in their dynamics. As before, our evauation criteria take into account reputabe internationa anayses and domestic indexes about the spread and the frequency of different forms of corrupt behavior. The anaysis of the Corruption Indexes of Coaition 2000 shows that, over the past year, the pubic in this country has sti perceived corruption as an obstace to Bugaria s deveopment that is especiay difficut to overcome. Respondents in various pos have indicated that unempoyment, ow incomes and poverty are the ony factors ranking higher than corruption in terms of socia significance. Moreover, the probem of corruption has been given more weight in comparison with the previous year. The atter fact demonstrates that, in the opinion of the pubic, no sufficienty effective means exist yet to combat corrupt practices so as to suppress them to a toerabe eve. Feb Apri Sep Jan Apri Sep Unempoyment 58,4 64,1 64,6 65,3 71,3 67,8 2. Low Incomes 51,3 49,1 50,2 50,6 48,9 49,0 3. Poverty 31,6 32,9 37,1 41,2 41,9 41,5 4. Corruption 38,5 34,2 38,5 37,5 40,1 37,5 5. Crime 45,4 39,1 32,4 27,9 28,9 25,7 Source: Corruption Monitoring System (CMS) of Coaition For detais regarding the methodoogy of the surveys incuded in CMS pease refer to: * Note: 1) % of those who indicated each factor; 2) Respondents marked up to three answers, which is why the sum tota of percentages exceeds 100. The assessment of corruption as a socia phenomenon requires reguar monitoring of the socia spheres which are highy exposed to corruption risks and of the efforts to combat corruption made by pubic authorities, non-governmenta organizations, the business community and the media. The main priority areas, which predetermine the overa situation with respect to corruption, are considered beow. The pubic sphere as a whoe, and pubic administration in particuar, are the main areas where corruption persists. Thus, they form the object of targeted anti-corruption measures as part of the reforms. The year 2000 has been characterized by continued ack of cear

6 6 CORRUPTION ASSESSMENT REPORT 2000 distinction between pubic and private/party interests. This ack of distinction gives rise to a corruption risk, which threatens the very foundations of democracy and of the market economy. For exampe, a die-hard tradition is that each new government resorts to party criteria to fi the senior administrative posts and the vacant manageria positions in state-owned enterprises. This approach hinders the deveopment of the country s human potentia, frustrates the process of pubic governance and owers the quaity of the pubic services provided. At the same time, it resuts in corruption phenomena such as nepotism, cienteism, and trade in infuence, which negate both the rights guaranteed by the Constitution and competition in a areas of pubic ife. Within the framework of the administrative reform, egisative measures have been undertaken to reguate the organization and functioning of pubic administration. These measures woud certainy make it possibe to achieve transparency and good reguation. Some of the aws passed during the past period are particuary important, viz. the Law on Administration, the Law on Administrative Services to Natura and Lega Persons, the Law on Civi Servants, etc. The new egisative rues on the financia and property standing of senior government officias are aso expected to have a direct anti-corruption effect. They are primariy contained in the Law on Property Discosure by Persons Occupying Senior Positions in the State, an instrument of strong mora infuence that coud acceerate the emergence of a new stye of conduct among the poitica eite. Nevertheess, the new egisation is not devoid of gaps and deficiencies. This is for instance the case with the Law on Access to Pubic Information - as the provisions on the protection of persona data and on officia secrets have been substantiay deayed, the Law coud not materiay improve the access of the pubic to information. The recommendation of Coaition 2000 made ast year - that egisative rues on the funding of poitica parties be enacted - is sti vaid. This woud make it possibe to restrict the corrupt practices in an extremey important area and prevent the iega symbiosis between economic and poitica interests. Another unresoved probem aong the same ines is the reguation of obbying in the context of pariamentary practice. Restricting the use of poitica umbreas woud be crucia for reconfirming the independence and stabiity of the judiciary. In that respect, it is important to ensure the support of the government to the need for judicia reform. In terms of combating corrupt practices, the executive is the branch that shoud put in pace the conditions required to sanction corrupted persons prompty and effectivey, to eiminate any possibiity of corruption within the judiciary and to improve its functioning of and professionaism. The economic sphere as a whoe, and the privatization process in particuar, are of key importance for the combat against corruption. Despite acceerated privatization, which is expected to downsize the potentia for corruption in the economy in the ong run, the nontransparent privatization procedures have again prevaied over the past year. A typica exampe here is the negotiations with potentia buyers. The previous Corruption Assessment Report of Coaition 2000 aready pointed out that such procedures open the door to subjective criteria and corrupt practices. In addition, the state and non-governmenta organizations have faied to

7 CORRUPTION ASSESSMENT REPORT ASSESSMENTS OF THE SPREAD OF CORRUPTION AND THE PRACTICAL EFFECTIVENESS OF CORRUPT PRACTICES * exercise reguar post-privatization contro, which has resuted in obscuring the entire process of ownership transformation in the country. Taken as a whoe, a these negative factors keep serious foreign investors away and impede the entrenchment of cear-cut business rues in the private sector. The very fact that, at the yearend of 2000, the government has decided to appy a new strategic formua to the fina stage of privatization connotes the deficiencies and irreguarities of the mode of divestiture foowed to date. There has been an obvious need to improve corporate governance as a counterbaance to corrupt practices in the private business. The impementation of modern corporate governance standards based on transparency and sef-reguation is a priority in the joint efforts of Coaition 2000 and the Corporate Governance Initiative in Bugaria. The symbiosis between corruption and smugging has a devastating effect with persistent socia impications. According to expert assessments, over the past few years there has been a arge degree of crimina interaction between smuggers and civi servants at virtuay a eves in Bugaria. Iega imports become the source of dirty money and argey fue the gray sector of the economy, which is estimated to be as high as 35 per cent. When assessing the dynamics of corrupt behavior and of the pubic attitude vis-à-vis corruption, we have identified some rather inconsistent trends. On the one hand, the growing pubic intoerance to corruption at the top is tangibe. On the other hand, quite so apparent is the opposite trend, i.e. the pubic resignation at the ack of progress made through the actions or inaction of those in power. A disturbing fact is that, for the first time in the past two years, there is a trend of growing overa toerance to corrupt practices when these are used as an instrument to protect individua interests. This trend goes counter to the heightened intensity and visibiity of the pubic debate on corruption and mirrors the ever more evident discrepancy between the decarations of some poitica authorities and rep-resentatives of the eite and their actua deeds. A cynica way of thinking woud invariaby prevai if the words against corruption become an aternative to the fuy-fedged measures aimed at its erasure. Source: Coaition 2000 * Note: the maximum vaue of the index is 10,0 and indicates the highest possibe eve of corruption. The minimum vaue is 0,0 and indicates the practica absence of corruption. Irrespectivey of this ambivaence, over the past year there is a growing understanding

8 8 CORRUPTION ASSESSMENT REPORT 2000 in society that corrupt practices shoud be opposed by way of specific action, that targeted and systematic efforts need to be undertaken in the pubic sphere in order to arrive at modern standards of transparency and accountabiity. This genera understanding aso mirrors the fact that, in articuating the strategy of the reform during the past year, the authorities have aid a stronger emphasis on combating corruption and have put in pace certain egisative and practica measures endowed with a significant anti-corruption potentia. The roe of the civi society in formuating anti-corruption ethics tends to expand. Simiary, we have witnessed the growing importance of independent media, primariy the press, in voicing the pubic interest to curb corruption in the pubic sphere. Non-governmenta organizations have had specific contribution in this respect in estabishing a pubicprivate partnership to combat this phenomenon. The roe of Coaition 2000 is embematic here, as this is a asting formua enabing the cooperation among representatives of civi society, pubic institutions and the community of experts, and journaists. The efforts of different pubic groups aimed at curbing corruption in the country coud not have been so intense and we focused without the efficient cooperation, on a competey equa fo-oting, with a number of internationa organizations, word financia institutions and foreign government and non-government agencies, which are active in combating corrupt practices. Over the past year, this cooperation has concentrated on estabishing rues of transparency and openness in internationa transactions, and Bu-garia s invovement in this process has gained strength through its accession to some newy adopted ega instruments. Thus, the improved corruption rating of Bugaria in the period , pubished by Transparency Internationa, a we-known internationa NGO, has had visibe repercussions in domestic poitics. In comparison to the previous two years, Bugaria has moved ahead to 52nd from among 90 countries (it ranked 67th in 1998, out of 85 countries, and 63rd in 1999, out of 99 countries). This resut is due primariy to the egisative efforts made to date and coud turn into a stabe trend if the authorities manage to transform the anti-corruption measures into a asting priority of government poicy.

9 CORRUPTION ASSESSMENT REPORT A. CREATING A FAVORABLE INSTITUTIONAL AND LEGAL ENVIRONMENT FOR CURBING CORRUPTION The assessments of the changes, which have or have not taken pace in terms of institutiona and ega improvement, coud be used as a starting point to outine the dynamics of corruption over the past year and highight the future objectives. The emphasis is aid on one of the spheres most vunerabe to corruption, i.e. pubic administration, and on the deveopment of its reguatory framework. In addition, attention wi be drawn to the interweaving of the pubic and the private sectors and the search for mechanisms to distinguish between them and improve the transparency of their diaogue. A.1. Pubic Administration Reform and the Roe of the State - Legisative Framework The fundamenta goa of the administrative reform is to turn transparency and accountabiity into essentia characteristics of a structures of power, especiay the administration. Thus, citizens woud have a arger and better reguated access to pubic services, whie the risks of abuse of power and discretion by the civi servants woud be restricted. After a certain deay, the yearend of 1998 and the whoe 1999 saw a arge-scae process of adopting pieces of egisation designed to govern the organization of pubic administration and its functioning. As a foowup, 2000 had to be the year of competing the egisative framework, putting in pace the required instruments of secondary egisation and successfuy aunching the enforcement of the new rues aimed at curbing corruption. However, numerous difficuties have impeded the enforcement of the aws passed in 1999 (intended to be the ega basis for the pubic administration reform) and of the reguations adopted ater in order to eaborate on and specify the existing fundamentas. The reguatory framework as a whoe coud be quaified as fawed to a certain extent. Hence, it is difficut to ensure its practica enforcement. Other obstaces reate to the inherited inertia of the governmenta structures, the conservative mentaity of civi servants, the fact that the changes introduced acked transparency and the ensuing insufficient pubic support to the entire process of reform. One thing has proven true in every main area of the reform, namey that the initia stage has not provided enough detais to enabe a straightforward concusion on whether the eve of corruption has been affected by the new measures, or not. Thus, in impementation of the Law on Administration (adopted at the yearend of 1998), Rues of Organization and Procedure were drafted and

10 10 CORRUPTION ASSESSMENT REPORT 2000 ater adopted for each of the administrations in the executive branch. These are intended to better the transparency of administrative work and to narrow down the possibiities for corrupt behavior within the state institutions. However, the process of bringing those administrations in ine with the Law (which has to take pace within one year of its effective date) has not been sufficienty open and pubic. This is aso vaid for the numerous state agencies and commissions the administrative structure of which is governed by the same requirements. Working mechanisms to ensure the accountabiity to or information for the pubic concerning the operation of different institutions were not created in due course. A Register on administrative structures and on the acts of the administrative bodies recenty estabished (with the Reguation of the Counci of Ministers No. 89/2000) and accessibe onine via the web site of the government coud have a positive impact in that respect. The maintenance of the Register woud give an overview on which administrative body is responsibe for the impementation of concrete engagements and on the process of re-structuring of the administration. In parae to the genera negative effects, the sow pace of the pubic administration reform and the ack of carity about it bear directy on the efficient impementation of the Law on Administrative Services for Natura and Lega Persons (passed at the yearend of 1999). This Law stipuates a set of Rues of Organization and Procedure of the respective administrations to reguate the procedures for providing and organizing the administrative services and that the probems not covered by those Rues shoud be deat with in interna reguations approved by the competent administ-rative secretary. It is vita to ensure the discosure of any such interna reguations, as this woud enhance both the awareness of citizens of their own rights and the fufiment by civi servants of their duties. The prevention of the existing arbitrariness and abuses of individua interests requires thorough and impid rues on the organization and contro of administrative services. In addition, procedura guarantees wi have to be introduced. For exampe, the Law on Administrative Services for Natura and Lega Persons ays down a genera procedure for the provision of administrative services. At the same time, other aws aso ay down genera administrative procedures to dea with appications and compaints reative to the work of the administration and, which is worse, these same aws refer to different authorities and deadines. As the different aws provide for different deadines and authorities, the individuas are reay frustrated in trying to defend their rights. In order to overcome the inconsistency of the existing reguations, a procedures reative to administrative appications and compaints shoud be channeed in a singe aw on the basis of a genera procedure for issuing and appeaing against individua administrative acts, in ine with the Law on Administrative Procedure and whie taking account of the good soutions embedded in the Law on Administrative Services for Natura and Lega Persons. Such, though imited, codification of administrative proceedings coud provide the indispensabe ega guarantees for the rights and obigations of citizens in their interaction with the administration. It coud aso enhance the transparency and contro of the conduct of administrative authorities and discourage the resort to unreguated

11 CORRUPTION ASSESSMENT REPORT practices in the context of administrative services. The Law on Civi Servants (in effect from August 28th, 1999) is aready being enforced. Some of its impementing reguations have been issued, e.g. Ordinance on the Officia Status of Civi Servants (in force from March 22nd, 2000), Ordinance No. 1 of the Documents Required to Take up Position in the Civi Service (of March 21st, 2000), Ordinance, setting up the uniform cassification of administrative positions. The State Administrative Commission is in the process of being set up (Reguation of the Counci of Ministers No. 152 of Juy 28th, 2000 on the Organization and Activities of the State Administrative Commission, in force from August 1st, 2000). By virtue of the Law on Civi Servants, that Commission is given the task to exercise the overa supervision for compiance with the civi servant status and for the fufiment of the ensuing obigations. It is currenty hard to predict how efficient that supervision woud be, given that the Commission ony may but is not under an obigation to give mandatory instructions to the appointing authorities to rectify the vioations reative to the civi servant status. Currenty, the Rues of Organization and Procedure of the Commission are under preparation. The Law has one drawback in that it has unduy restricted the circe of persons to which it appies. In particuar, excuded from its persona scope remain the members of poitica cabinets, the deputy regiona governors and the deputy mayors. Such an approach is at odds with the European standards, which require that the whoe pubic administration be de-poiticized. In the meantime, an Institute of Pubic Administration and European Integration was set up which is mainy entrusted with improving the professiona skis of civi servants. A Draft Code of Conduct for civi servants incuding rues with anti-corruption effect has been prepared. The measures aimed at promoting the status of civi servants and improving their professiona skis shoud be accompanied by mechanisms preventing the conficts of interest and reinforcing the interna contros. The prohibition for civi servants to make statements on behaf of the administration needs to be made more specific on the basis of a differentiated approach. The point is that compiance with the rue as it is woud resut in isoating the pubic administration and encouraging the ack of transparency which, in turn, woud certainy give food for suspicions and invite media aegations. In this respect, as we, there is a cear need for rues governing the diaogue with the pubic and especiay the communications with the media. The rues on the financia and property standing of persons occupying senior positions in pubic authorities has undergone a substantia egisative deveopment. Their practica impementation woud be of key importance for curbing corrupt practices at the highest eve of poitica power. First, the civi servants have been expicity obiged to decare their property and ater, the Law on Property Discosure by Persons Occupying Senior Positions in the State was adopted (in effect of May 13th, 2000). Such persons are required to decare their property on an annua basis, as of May 31st every year, and this obigation extends to any person occupying a senior officia position. They shoud decare not ony their own income and property acquired during the respective previous year but aso the income of their spouses and

12 12 CORRUPTION ASSESSMENT REPORT 2000 MAIN FACTORS INFLUENCING THE SPREAD OF CORRUPTION * chidren under 18 years of age. The Pubic Register of persons obiged to decare their property under the Law shoud be kept by the President of the Court of Auditors. The Law has aso defined the group of persons entited to have access to the data contained in that register and ays down the procedure for getting such access. Though this particuar Law contains primariy what coud be abeed wishfu provisions, the discosure of compiance or faiure to compy with the rues is expected to entai strong mora effects. These expectations have aready been met in the first months after the Law had come into effect: even the mere discosure of the names of persons who faied to decare their income on time has brought about a pubic response that coud be regarded as a deterrent to corruption. Nevertheess, the need to monitor the enforcement of the Law, and sanction those who have encroached on it, is sti there. Apri Sep Jan Sep Desire for fast enrichment of those 52,9 54,8 57,0 57,8 in power Low saaries 51,5 43,6 47,2 41,6 Poor egisation 38,8 37,8 35,1 40,5 Overap of officia obigations and 25,8 28,3 28,3 32,6 persona interest Lack of strict administrative contro 36,4 33,8 30,8 32,3 Inefficient judiciary 19,6 27,5 24,7 22,2 The mora crisis in the period of transition 19,4 19,4 18,2 17,0 The probems inherited from the 6,8 7,4 7,3 7,8 communist past The specific characteristics of 6,9 4,7 5,9 4,2 Bugarian cuture Source: Coaition 2000 * Notes: 1) % of those citing each factor; 2) respondents marked up to three factors, which is why the sum tota of percentages exceeds 100. The ong-awaited Law on Access to Pubic Information was passed and came into effect on Juy 11th, It is expected to furnish the ega prerequisites for the transparent functioning of the pubic administration. Its adoption, however, has not automaticay put in pace a the technica, organizationa and ega conditions required for that purpose. First of a, the existing registers are incompete, often contain mistakes and have not been kept with the idea of providing genera access to them. There are amost no genera information systems in the spheres most iabe to corruption: rea estate transactions, customs, taxes, etc. Besides, the access to pubic information goes hand in hand with the Law on Persona Data Protection and the Law on Officia Information, but none of these has been passed to date. If concepts such as officia secret are not ceary defined and are not reguated by a aw, the pubic authorities woud not ose their freedom to make subjective assessments. This, in turn, coud impede the access to pubic information or coud reproduce certain corrupt practices and actions.

13 CORRUPTION ASSESSMENT REPORT In addition, it is impossibe to guarantee the protection of the individua against the abuse of persona data by the state or by third parties unti stringent rues on the coection of and access to persona information have been set out in a specia aw. The acquis communautaire aso requires that persona information shoud be coected and processed ony in strict accordance with a aw. In Bugaria, various secondary reguations are in force, which provide for registration, permission and icensing regimes and require that persona data be gathered and processed. Numerous entities operating under private aw - e.g. banks, the Bugarian Teecommunications Company, the Nationa Eectricity Company, the district heating companies, etc. aso coect the persona data they need in the course of their business. The overa resut is that the domestic egisation in force fais to offer protection of those data and information by virtue of a aw. The passing of a aw on persona data protection becomes even more important in view of the growing use of eectronic data exchange and communication in business reations and in the daiy contacts between private persons or between them and the administration. The government has drafted a bi on persona data protection which was pubicy discussed at the end of September, 2000 (the debate was organized by the Lega Directorate of the Counci of Ministers and the Information Centre of the Counci of Europe in Sofia with experts from the Counci of Europe and the Bugarian Government, NGOs and the media). The Code of Tax Procedure was passed which became effective on January 1st, It contains a number of measures aimed at preventing and detecting tax offences and reducing corruption in the tax authorities. An Agency for State Receivabes was set up with powers, which coud be efficienty used to resist corruption. Interna audit units have been set up as we. The measures aready in pace form a sound basis for a better operation of the tax administration. However, they have not yieded the expected anti-corruption resuts despite the wide powers given to the tax contro authorities. Interestingy, the wide scope of powers has even kinded a discussion as to whether they coud be abused and if wider guarantees woud be necessary to prevent such abuses. If the tax egisation is amended as envisaged and the appicabe tax rates are reduced, the tax burden on private operators and individuas woud be eased and the coection rate woud certainy improve. Indirecty, this woud aso imit the number of cases of tax evasion by way of corruption. It is sti necessary to reinforce the roe of the State Financia Contro, incuding that of the Court of Auditors, which is the highest governmenta institution vested with independent supervisory powers in this area. A new Law on State Financia Contro, in force since January 1st, 2001 was adopted. They introduce a modern system of financia contro, based on the preiminary interna contro that is combined with the externa contro, exercised by the Court of Auditors. The institutions in charge of that contro woud carry out audits and interna inspections at the stage before the Court of Auditors has stepped in, in order to screen the expenditure of funds aocated from the budget. It is necessary aso to contro the way in which proceeds from privatization

14 14 CORRUPTION ASSESSMENT REPORT 2000 deas are spent. The rues on both types of iabiity proposed - administrative penaties and financia iabiity - must be improved. In the meantime, in June this year the government presented to the Nationa Assemby a Draft Law on the Court of Auditors but ater withdrew it as neither that draft, nor the Draft Law on State Financia Contro (mentioned above) contained any rues on the economic, financia and accounting expert opinions deivered in court. At present, there are 28 services for expert opinions, which are attached to the district (second-eve) courts but are subordinated to the Ministry of Finance. Their operation is anything but transparent and does not create conditions for the seection of competent experts. The pending proposa is that expert opinions, in cases invoving serious financia crime, shoud be submitted by the Court of Auditors, whie in a other cases the court chamber hearing a particuar case shoud be abe to choose witness experts from a ist of experts authorized by the Court of Auditors. If the reform goes ahead as proposed, it woud surey hit back at the possibiity for corrupt practices. The appication of the Law on Pubic Procurement (in force from Juy 5th, 1999) has invited criticism in the sense that the indispensabe organizationa, reguatory (secondary egisation) and administrative prerequisites do not exist yet in order to enforce the principes enshrined in the Law: openness and transparency, free and fair competition, equa participation opportunities for a candidates. One of the negative reactions has actuay come from representatives of the private business who beieve that the Law, as it is, and its incompetent impementation by the contracting authorities do not encourage the business and prompt abuse and corruption instead. Thus, it has been proposed to modify the aw so as to meet a number of essentia targets: - better transparency of the procedure of awarding pubic contracts and controing their performance; - faster and more efficient appea procedures; - refined reations among the Court of Auditors, the State Financia Contro and the Pubic Procurement Directorate at the Counci of Ministers; - acceerating the setting up of the Pubic Procurement Register; the information obtained from that register must be fit to be used as evidence in court (an Ordinance on Keeping the Pubic Procurement Register was issued); - fixed minimum eve of deposits for participation in tenders; - setting up a body (e.g. a Pubic Procurement Agency) which shoud operate as an out-of-court instance to sette disputes between contracting authorities and contractors; - gradua transition to onine procurement, to take account of the new information and communication technoogies and of the pending proposas for two EC Directives (of May, 2000) on eectronic pubic procurement (the expectations are that the share of on-ine procurements shoud reach 20 per cent by the year 2003). The new foreign exchange egisation - the Law on Foreign Exchange (in effect from January 1st, 2000) and its impementing ordinances - has

15 CORRUPTION ASSESSMENT REPORT consideraby iberaized the foreign exchange transactions and contributed to the free movement of capita and current payments whie conforming to the standards and measures against money aundering. A more systematic, fexibe and differentiated framework has been created which reies mainy on registration combined with minor eements of authorization and a few prohibitions, the atter ony being appicabe in the cases expressy isted in the Law. The foreign exchange contro has aso been organized more consistenty. However, the practice of enforcing the new foreign exchange rues so far has shown that further streamining woud be needed. The procedures to appy for and obtain from BNB the authorizations prescribed, the coection of information from the existing registers, etc., are sti quite compicated and cumbersome. The Law on Measures against Money Laundering is to be amended and suppemented. This is necessary in order to bring the Bugarian aw fuy into ine with the Directive of the Counci of the European Community on prevention of the use of the financia system for money aundering. The amendments shoud enarge the contro mechanism used to check compiance with the Law, extend the powers of the Financia Inteigence Unit, and reguate its reations with the tax and other State authorities. Besides, the data provided to the Financia Inteigence Unit shoud be better protected. As eary as 1999 a Draft Law on Combating Corruption and Financia Crime was prepared and presented to Pariament. The controversia issue in the aw is the status of the proposed new entity - Government Agency for Combating Financia Crime and Corruption (i.e. financia poice) - which shoud be a speciaized body with the Counci of Ministers. The different views on this body, however, shoud not prevent the search for more appropriate soutions in this sphere as we. In September, 2000 the Counci of Ministers adopted Rues on the New Information System, which is to ink the data of the customs, the Ministry of Interior and the judicia system. The system sha be set up with the Nationa Statistica Institute in order to concentrate a the activities in combating crime that are undertaken by the Ministry of Interior, the Ministry of Defense, the investigation services, the courts and the pubic prosecution offices. The project is in its initia phase. The technica prerequisites for its fu impementation do not exist yet, though technica improvement is especiay needed in the courts in order to enabe the registration of a court fies and the processing of information on their cosing. Though an inter-institutiona group has been set up for that purpose, the register is expected to become partiay operationa ony in the spring of At the same time, there are no egisative rues on the officia information or the protection of persona data and, hence, there are no guarantees against the abuse of data. This entais a substantia risk of corruption, especiay when data on serious crimes are at stake. In concusion, the deveopment of the egisative framework for the pubic administration reform and the roe of the state during the past year have reveaed the need for ega prerequisites of a sufficient range that coud efficienty deter corruption. Regardess of the progress on paper, the sectors most exposed to corrupt practices have not been affected tangiby.

16 16 CORRUPTION ASSESSMENT REPORT 2000 A.2. The Institutions and the Pubic SPREAD OF CORRUPTION IN PUBLIC INSTITUTIONS * The defects of the egisative framework of the reform and the ack of sufficient, sustainabe ega prerequisites preventing corruption impact immediatey on the functioning of governmenta institutions and of the civi society, and render the buiding up of an anti-corruptive institutiona environment virtuay impossibe. Apri Sep Jan Apri Sep Customs 8,78 9,10 9,02 9,10 8,90 Privatization Agency 7,46 7,86 7,96 8,28 8,06 Court system 7,62 7,88 7,68 7,68 7,60 Foreign Aid Agency ,78 7,54 Tax Offices 7,10 7,98 7,68 7,56 7,54 Governmenta Departments 6,94 7,40 7,24 7,44 7,50 Government 6,58 7,12 6,94 7,10 7,44 Pariament 6,78 7,16 6,96 7,24 7,42 Poice 7,16 7,54 7,30 7,24 7,14 Committee on Energy 6,40 6,84 7,00 7,10 7,00 Loca authorities 6,90 7,32 7,02 7,04 6,94 B T C ,28 6,60 Municipaity Administration 6,64 7,24 6,82 6,74 6,54 Commission for the Protection of 6,14 6,40 6,18 6,68 6,54 Competition Securities and Stock Exchange 6,24 6,28 6,22 6,50 6,46 Commission Nationa Audit Office 5,74 5,86 5,54 5,84 5,98 Bugarian Nationa Bank 5,34 5,32 5,34 5,16 5,72 State institutions sti manifests a stronger refex of defensiveness and sef-preservation rather than of deveoping mechanisms to protect the citizens and the society against the abuse of power. The democratic decentraization of the state has not taken pace yet. Though the private business prevais as a resut of the privatization process, the traditiona major roe and functions of the state in the sphere of economy have not been repaced by an adequate mechanism or by new functions. The issue of the reationship between pubic administration and the private sector in the economic area has remained unsoved. The newy-estabished Nationa Statistics Institute 4,80 4,54 5,00 4,68 5,02 market reations have Army 4,88 5,06 5,06 5,08 4,98 resuted in a predominanty private sector in the Presidency 4,46 4,50 4,28 4,52 4,52 economy. This necessitates a change in the Source: Coaition 2000 functions of the administration, especiay in the * Note: the maximum vaue of the index is 10,0 and indicates the highest possibe eve of corruption. The minimum vaue is 0,0 and indicates the practica absence of corruption ine ministries deaing in the respective institution. with the economic sector, and requires that a new type of communication be estabished among them. The ack of norms reguating that communication paves the way for corruption and feeds the pubic suspicions that corruption fourishes. The reations in question shoud be based on cear rues. This coud not ony enhance the business deveopment and the buiding up of a modern and efficient administration, but woud aso curtai the opportunities for corruption. No progress has aso been made in terms of transferring some pubic functions onto private entities, despite the repeated requests of the private sector and the pressure it exerts to that effect. A curious exampe

17 CORRUPTION ASSESSMENT REPORT Source: Coaition 2000 here is the proposa of the professiona guids to be endowed, by virtue of a aw, with the power to issue authorizations to practice any trade or activity, except those bearing on nationa security or pubic heath, or reguated by internationa instruments. The transfer of some functions of the state to non-governmenta organizations is an outspoken feature of modern democratic countries. It is aso a must in the deveopment of an anti-corruption mode of reations between the state and civi society in the countries in transition. The envisaged amendments to the Constitution and the set of draft aws reative to oca governments shoud make the municipaities much more independent in genera and in respect of taxation. However, there is no we-defined view, substantiated in pubic, on the specific soutions and objectives to be impemented or pursued and this issue is rather mentioned in the context of the pre-eection campaign. The system of poitica parties is not buit aong principes and modes that woud make it more transparent and independent of the state. Moreover, there have been ostensibe attempts to subject the interests of the state to private poitica interests and priorities. The growing number of party-affiiated persons at the highest ayers of the civi service ceary betrays the ongoing merger between the governing party and the state apparatus. There is no egisative soution yet to the funding of poitica parties. It is urgenty needed to introduce state funding based on objective criteria and accountabiity and whie observing strict rues to ensure the transparency of party finances as a whoe and of the funds used during pre-eection campaigns in particuar, in order to curb corruption reated to poitica parties and cut off the informa bonds between poitica parties and private interests. A Draft Law on Poitica Parties has been presented to the Nationa Assemby. It is the outcome of consutations among the poitica parties and woud prohibit poitica parties from engaging in economic operations. In addition, parties represented in Pariament woud receive an annua subsidy from the state budget. The deveopment of rues on poitica parties is cosey connected with the eection aws, though the discussions on possibe amendments to other pieces of egisation are sti hed at different eves and in an isoated manner. EVALUATION OF THE COMMITMENT OF THE GOVERNMENT TO FIGHT CORRUPTION AMONG CIVIL SERVANTS AND BUSINESSMEN (RELATIVE SHARE OF RESPONDENTS INDICATING THAT THE GOVERNMENT MAKES SERIOUS EFFORTS )

18 18 CORRUPTION ASSESSMENT REPORT 2000 In the year 2000, as a resut of the initiatives of Coaition 2000, not ony the society but senior poiticians have endorsed the idea of setting up a speciaized Ombudsman-type institution to supervise and monitor the work of the pubic administration. Within the framework of Coaition 2000, a concept paper and a Draft Law on the Ombudsman (Pubic Mediator) have been deveoped and widey disseminated and discussed. Adequate pubic support aready exists that such a mechanism is needed as an additiona hurde to corruption and arbitrariness on the part of the administration. Such an institution, in one form or another, exists and functions we not ony in Sweden, its native and, but aso at the European Union eve and in neary a European countries, incuding amost a Southeast European countries. The passing of a specia aw woud make it possibe to buid up a nationwide mechanism - as we as municipa eve institutions - operating on the basis of high ethica standards and reputation in order to counteract abuses by the administration, to resist the burring of the distinction between private and pubic sphere, and to protect the citizens and their rights. The Center for the Study of Democracy and the Center for Socia Practices have aunched experimenta projects for introducing the position of civic observer and pubic mediator in severa municipaities, and the resuts have reconfirmed how usefu it woud be for the society to have such mechanisms at its disposa. After a deay of amost 10 years, in September, 2000 the Law on Non- Profit Lega Entities was passed (to become effective on January 1st, 2001). The aw ists the types of non-profit ega persons: pubic benefit organizations (PBOs) and mutua benefit organizations (MBOs). Upon setting up, PBOs shoud be entered in the Centra Pubic Register with the Ministry of Justice. They sha be controed on an annua basis: a PBO shoud submit to the pubic register, unti May 31st every year, information on its activities and on any changes registered in court, a ist of the members of its governing body, certified annua financia statements or an audit report by a quaified chartered accountant, an annua report, a decaration of the taxes, fees, customs duties and other outstanding pubic debts, and any changes in the Artices of Association or an aternative constituent instrument. The openness and contro of the operation and finances of PBOs woud be important toos in resisting abuse and corruption.

19 CORRUPTION ASSESSMENT REPORT B. REFORM OF THE JUDICIARY The fundamenta objectives of the judicia reform are to create conditions for the quick and efficient sanctioning of corrupt practices and to precude any possibiities for corruption in the judicia system. These objectives directy correspond to the degree of independence and stabiity of the judiciary, and to the eve of professionaism and the pubic confidence in it. These goas determine the priorities of the reform: improving the ega basis of the reform in terms of substantive and procedura aws (egisative reform stricto sensu), education and training of judges, pubic prosecutors and investigators, and reform of the court administration. The need for judicia reform and its priorities are shared by the Judicia Reform Initiative which brings together eight NGOs (one of them being the Center for the Study of Democracy) and representatives of governmenta and internationa institutions, foowing the mode of Coaition The consensus-based document - Program for Judicia Reform - which was drafted and endorsed at a Poicy Forum in May, 2000 identifies the areas of action and ists specific proposas within the framework of the priorities identified. An important deveopment in this fied over the past year has been the growing recognition, at the highest eve of government, that judicia reform is actuay needed. Thus far, the government has been reuctant to agree that the term reform shoud appy to the judiciary. Foowing the deveopments within the judiciary and under pressure by civi society, incuding the professiona associations of magistrates, the executive branch now recognizes the inefficiency of the existing court administration, the difficuties with the administration of justice and the probems with the training and recruitment of magistrates and court staff. As a resut, in October, 2000 a Draft Law to Amend and Suppement the Law on the Judiciary was prepared on the initiative of the Ministry of Justice and a number of NGOs. The proposed amendments to the Law on the Judiciary, which is the organic act of the Bugarian judicia branch, provide that competitions shoud become the main method of recruiting magistrates, offer a new approach to the training of magistrates, introduce a status of magistrates by anaogy with the status enjoyed by civi servants, and suggest measures for the capacity-buiding of the Supreme Judicia Counci and its better co-ordination with the Ministry of Justice. B.1. Lega Basis of Judicia Reform B.1.1. Crimina Law and Procedure Crimina substantive and procedura egisation directy bears on corruption. This egisation has been deveoping, though on a rather piecemea basis, in introducing crimina sanctions corresponding to modern forms of crime, incuding corruption, and to ensure a speedier and more efficient administration of justice.

20 20 CORRUPTION ASSESSMENT REPORT 2000 In the year 2000, the Crimina Code was amended on two occasions. The first set of amendments (in effect from March 21st, 2000) enhanced the crimina measures in areas often marked by corrupt actions. They affected drug trafficking by incriminating two new aggravated offences - enticing or forcing someone to take drugs. The sanctions were increased and the forms of crime were expanded reative to the theft of motor vehices and smugging and on the other hand the imprisonment previousy imposed for ibe and sander was repaced with fine and those crimes wi now be prosecuted on a compaint of the victim. The second set of amendments to the Crimina Code (in effect from June 27th, 2000) increased the sanctions for bribery. Aggravated crimes were introduced, as we as crimina iabiity for the officias. Two competey new offences were incriminated - promising and offering bribes. The act of the officia who has asked for or has accepted bribery is criminaized. A scope, in cases of active bribery of foreign officias and outside the carrying out of an internationa commercia activity has been broaden. Incriminated ware aso an act of promising and offering of a bribery to the foreign officias. The provision on what is known as oyaty check (provocation to bribery) was substantiay improved. With the atest amendments to the Crimina Code, the main forms of corrupt behavior have been covered to a fuer extent. Nevertheess, the resuts of the combat against the heaviest forms of corruption are far from satisfactory. Corruption-reated crimes are difficut to prove, so the crimina-aw measures wi have to be reinforced. These measures shoud not ony punish those guity of corruption but aso prevent the corrupt practices through their deterring and educationa effects and promote an overa pubic intoerance to corruption. In order to improve the egisative rues on bribes (often perceived as a synonym to corruption), the foowing steps shoud be undertaken: 1. The crimina iabiity for bribery shoud be differentiated in view of the perpetrator: the ist of peope who coud be the possibe perpetrators of bribe-reated crimes has been extended by the Crimina Law Convention on Corruption of the Counci of Europe, which is signed but not yet ratified by the Repubic of Bugaria. For instance, aggravated passive bribery offences coud be incuded in the Crimina Code when the wrongdoer works in the judiciary. Aong the same ines, the bribery of municipa servants shoud be incriminated. 2. Trade in infuence shoud be incriminated, of course after the indispensabe egisative rues have been introduced on obbying; 3. The ist of perpetrators of passive bribery shoud be extended; 4. The oyaty check shoud be decriminaized if it is intended to expose corrupt pubic officias. One important issue to be resoved with the possibe future amendments to corruption-reated crimina rues is the immunity from crimina prosecution. Such immunity is currenty enjoyed by Members of Pariament and by magistrates. In the ong run, a new Crimina Code shoud actuay be drafted on the basis of a comprehensive new poicy of crimina prosecution and an approved strategy of combating the modern forms of crime. The amendments to the Code of Crimina Procedure (in effect from January 1st, 2000) had to transform the tria phase into a centra stage of crimina procedure, at the expense of the pre-tria

21 CORRUPTION ASSESSMENT REPORT proceedings which are not pubic by definition and, hence, are deemed to be more beneficia to corrupt practices. The judicia contro has been enhanced of the various measures for non-absconding and, generay, of any measure that interferes with individua rights. Pea bargaining has been introduced which enabes the prosecution and the defense to negotiate the penaty. This is a fexibe instrument that woud speed up the process of crimina prosecution and woud prevent the corrupt practices in the reations between defendants and magistrates. The atest amendments to the Code of Crimina Procedure have been in force for a reativey short period but have evoked fairy contradictory comments among the magistrates. Pubic prosecutors have reservations about the efficiency of the new soutions and have even criticized some of them, viz. the scope of poice proceedings, the fact that the procedura measures undertaken by investigators are not admitted as evidence in court, the reduced powers of the prosecution, and the judicia contro over the right of the prosecutor to discontinue the crimina proceedings or to suspend the execution of the penaty of imprisonment. Opinions are voiced that, instead of acceerating the crimina proceedings, the amendments to the Code of Crimina Procedure sow down the movement of cases and that corruption has now changed house and moved to the court. The judges, on the other hand, insist that judicia contro of a steps undertaken at the pre-tria stage shoud be kept as a crucia characteristic of modern adversaria crimina proceedings and that pubic trias best protect the interests of citizens. Apparenty, a comprehensive anaysis shoud be made to find out why some of the controversia provisions have not worked we enough. An objective survey is aso needed of the case-aw as this is the best instrument to gauge the appropriateness of a given soution. In parae, a ong-term concept shoud be eaborated which shoud serve as a basis for an entirey new Code of Crimina Procedure. A conditions shoud be put in pace to ensure the openness and transparency of crimina proceedings, the rapid and non-expensive prosecution and penaizing of petty offences, and to acceerate the procedure in the event of serious crime, with the concept of serious crime encompassing a forms of corruption. The structure of the future new Code of Crimina Procedure shoud be accuratey weighted so as to cover the use of specia surveiance means, unify the modern terminoogy and change the evidence rues, whie emphasizing on the guarantees against arbitrariness in the process of gathering evidence. B.1.2. Civi and Administrative Law and Procedure The deveopment of civi and administrative egisation, though not aways directy affecting corruption, coud aso deter or contribute to it. The numerous amendments to the existing aws and the many new aws are not aways consistent with each other and yied contradictory resuts in terms of aw enforcement. This coud faciitate corruption, especiay when private interests are interwoven with powers vested in a pubic authority. As far as property aw is concerned, attention shoud be given to the Law on the Cadastre and the Property Registry adopted in the year 2000 (to come