Evaluation of Corruption Condition in the Field of Individual Entrepreneurship of the Republic of Kazakhstan Transparency Kazakhstan Public Fund, Almaty Association of Entrepreneurs and Center for International Individual entrepreneurship with the assistance of the US Agency on International Development (USAID) have conducted in September-October 2002 an expert polling for the purposes of obtaining a maximum objective state estimate of the corruption condition in the field of activity of individual entrepreneurship in the Republic of Kazakhstan. This evaluation was, in its turn, counted on revelation of level and reasons for: - corruption display in the field of individual entrepreneurship itself; - corruption display in relationships of individual entrepreneurship subjects with state authorities; - independent counteraction of entrepreneurs against corruption; - interaction of the state with the commercial sector in the field of struggle against corruption. In the course of conducting this research, 208 respondents were polled, who were representing various spheres of activity, including entrepreneurs, civil servants, among whom employees of tax service, representatives for non-governmental organizations, mass media, scientific-research and information-analytical organizations prevailed. 1. Evaluating the reasons, which most of all contribute to display of corruption in the field of individual entrepreneurship, respondents have given answers, on which the following rating can be built: 1) bureaucratic difficulties and obstacles in the process of solving issues concerning the entrepreneurship activity 14,.8%; 2) increase and large demonstrations of corruption all over the system of public relationships in the Republic 14.4%; 3) aspiration of entrepreneurs to quickly and advantageously solve issues of their activity, if this decision depends on other persons 10.9%; 4) imperfection of legislation regulating entrepreneurship activity 10.4%; 5) absence of realistic assistance to individual business development from the state 9.9%; 6) reluctance of entrepreneurs to appeal to law enforcement bodies on facts of corruption they have faced 8.6%; 7) moral and legal slovenliness of entrepreneurs themselves 8.1%; 8) engagement of individual business subjects by state authorities or separate public servants 7.9%; 9) absence in the field of individual entrepreneurship of internal effective mechanisms for opposition to corruption 5.8%; 10) absence of valuable competition market environment 5.8%; 11) engagement of some individual business subjects by criminal structures 1.9%; 12) strong closeness of the activity of individual entrepreneurship subjects from the community 1.3%. Therefore, corruption display in the field of entrepreneurship activity is most of all influenced by artificial barriers created by officials of several state authorities, which businessmen have to contact in process of their activity, various difficulties and obstacles in the process of solving different issues being the subject of appeal of relevant entrepreneurs. At the same time, such behavior of public servants organically adds the aspiration of businessmen themselves to solve issues of their activity for which
a relevant decision of corresponding authorities is required relatively quickly, and, what is most important, advantageously. In this connection, casual effects of corruption display in relationships between the state and individual business should be acknowledged as mutually determining. Diagram 1. Reasons for Display of Corruption in the Field of Individual Entrepreneurship 1. Какие из перечисленных ниже факторов, по Вашему мнению, наиболее всего способствуют проявлению корруп % Сумма 1 2 3 4 5 6 7 8910111213141516171819202122232425262728293031 1) increas 14,358 114 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2) absenc 5,7935 46 1 1 1 1 1 3) imperf 10,327 82 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4) bureau 14,736 117 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 5) absenc 9,9496 79 1 1 1 1 1 1 1 1 1 1 1 1 1 1 6) engag 7,9345 63 1 1 1 1 1 1 1 1 1 1 1 1 1 1 7) engag 1,8892 15 1 1 1 8) moral 8,0605 64 1 1 1 1 1 1 1 1 9) absenc 5,7935 46 1 1 1 1 1 1 1 1 10) reluct 8,5642 68 1 1 1 1 1 11) aspira 10,831 86 1 1 1 1 1 1 1 1 1 1 1 1 1 1 12) stron 1,2594 10 1 13) other 0,5038 4 1 Total 100 794 2. Which spheres of individual entrepreneurship activity are least/most of all criminzalized and corrupted, in your opinion 1. Production and trade Industrial 16,765 365,6 6,5 1 5 4 1 1 8 8 5 4 10 3 5 4 5 3 2 4 1 1 9 Farm pro 29,431 641,8 0,5 5 4 5 5 1 5 9 4 5 10 3 4 5 4 5 5 2 10 10 Wholesa 16,11 351,3 1 2 1 10 3 1 1 2 1 1 1 2 2 2 1 1 1 4 1 1 Retail tra 19,416 423,4 1 4 3 8 4 2 1 4 2 3 2 4 3 3 3 4 3 1 1 2 1 6 5 10 2. Respondents were also offered to reveal the level of demonstration of corruption and criminalization accompanying it in various fields of individual
entrepreneurship. For this, a numerical system of counting with range from 1 (the highest score) to a maximum score (lowest score) was used, according to the number of types of entrepreneurship activity in various spheres. Under the results of answers obtained for this question, the following rating was made. 1. Industry and trade 2. Finance sphere 3. Leisure and culture 4. Tourism Sphere of activity Scores Industrial production 366 Agricultural production 642 Wholesale trade activity (export and import of 352 industrial and agricultural products) Retail trade (via shops and markets) 424 Real estate transactions 399 Banking activity 477 Audit activity 575 Pawn-shops 472 Accumulation pension funds 410 Securities market 439 Stock market 470 Insurance 504 Currency exchange 515 Food service sphere (cafes, restaurants) 553 Sanatorium and spa service 500 Casinos and game machines 392 Baths and saunas 462 Cultural program (movies, theaters, music halls) 577 Studios of audio- and video-recording (hire) 482 Night clubs and discotheques 390 Sports centers and clubs 476 Show business 379 Exhibition business 441 Tourism on the Republic 400 Trips (tours) abroad 445
5. Transport and transportations 6. Communications 7. Legal services 8. Sphere of information 9. Expert examination, analysis, consultancy 10. Other types of entrepreneurship activity Booking and sale of air tickets 453 Visa formulation 413 Hotel business 401 Sale of vehicles 439 Service centers (repair, washing, etc.) 481 Car parking 612 Refueling stations 456 Road transportation s 443 Railway transportation s 390 Avia transportation s 401 Cellular communication 449 Paging communication 474 Internet services 414 Legal consultations (on various issues) 476 Advocator services 532 Notary services 450 Patent services 383 Registration of commercial organizations 403 Publishing activity (wide range) 543 Publishing of newspapers and magazines 520 Advertising activity 552 TV and radio broadcasting 537 PR-services 516 Consulting 447 Marketing 449 Standardization and certification 448 Consultations on immigration 456 Individual medical service 541 Individual education 486 Guarding activity 520 Construction 450 Customs services 490
Lease of premises 491 Warehouse services 517 Recruitment 566 Fashion ateliers and shops 564 Beauty shops 572 Cleaning centers 610 Repair of household and office equipment 568 Ritual services 588 Therefore, such types of entrepreneurship activity as wholesale export and import trade, accumulation pension funds, show business, tourism on the Republic, railway transportation s, Internet services, patent services, publishing of newspapers and magazines, consulting and construction are acknowledged as the most criminalized and subjected to corruption. Judging on numerous materials in printing and electronic mass media based on real cases from the practice of individuals and legal entities, such evaluation with respect to the majority of the above types of entrepreneurship activity quite corresponds the reality. On the results of respondents to this question by summarizing scores on all types of entrepreneurship activity, relevant spheres of entrepreneurship may also be ranged : 1) leisure and culture 4652 scores; 2) finance sphere 3862 scores; 3) transport and transportation s 3222 scores; 4) expert examination, analysis, consultations 2316 scores; 5) legal services 2244 scores; 6) production and trade 2183 scores; 7) sphere of information 2152 scores; 8) tourism 2112 scores; 9) communications 1337 scores. It is seen from here that the sphere of the largest display of corruption and crime is the sphere of leisure and culture, which includes show business, casino, food service objects, baths and saunas, night clubs, etc. This tendency is less observed in the sphere of communications. 3. In opinion of majority of the respondents, in the sphere of Kazakhstani business, domestic entrepreneurs (81%) face the corruption problems most of all. Foreign businessmen are least of all involved in corruption relationships in Kazakhstan, in which 20% of respondents are convinced. This rating is made no the principle from the highest figure to the lowest, and without the account of Other types of entrepreneurship activity, because types of entrepreneurship activity indicated therein, do not form a single sphere
Comparing the level of confrontation with corruption of various categories of local entrepreneurship, respondents have come to a conclusion that large-scale business subjects are most of all involved in the corruption relationships (244 scores). Most likely, this is stipulated by the main way of solving complicated issues in relationships with state authorities and their public servants. Respondents have referred to the second place small-scale business subjects (274 scores), which represents the most numerous and unprotected category of entrepreneurs. Subjects of average-scale business are close to them on results in this respect (276 scores). 4. In the opinion of respondents, state officials (65%) are inclined to corruption most of all in the sphere of relationships of the state and business, which, to all appearances, is conditioned by their official position being dominating with respect to entrepreneurs and giving possibilities for all possible abuses. Entrepreneurs, in the opinion of respondents, are least of all (354%) drawn towards use of corruption as means of solving various issues with the obligatory participation of the state. Diagram 2. Level of Corruptibility of Participants of the State and Business Relationships This conclusion was obtained by score calculation with ranging from 1 (highest score) to 3 (lowest score) scores
3.2. Determine by priority from 1 (highest score) to 3 (lowest score): 31% 35% 1) subjects of large-scale business; 2) subjects of average-scale business; 3) subjects of small-scale business. 34%
5. By using the scoring system of calculation with the range from 1 (highest score) to 12 (lowest score) scores, under the answers of respondents, the following rating has been made for display of corruption in various spheres of the state and business relationships: 1) public purchases 527 scores; 2) government contractual work 530 scores; 3) transition of the state ownership objects into management 544 scores; 4) privatization of state ownership objects 624 scores; 5) state crediting of individual business subjects 630 scores; 6) antimonopoly policy 607 scores; 7) transfer by the state of the right to rendering certain paid services to individual business subjects 710 scores; 8) tax policy - 726 scores; 9) state support of small-scale and average-scale business subjects 761 scores; 10) issuance of licenses for involving in various types of entrepreneurship activity 813 scores; 11) registration of commercial enterprises and organizations 869 scores; 12) issuance of patents for involving in individual entrepreneurship activity 885 scores. Therefore, the five of the most subjected to corruption spheres of the state and business relationships has covered public purchases, government contractual work, transfer to management and privatization of state ownership objects and state crediting of individual entrepreneurship subjects. As it is seen, the this is the matter of issues of entrepreneurship activity, which completely depend on the state, its relevant bodies and their public officials, and, what is more important, are related to solution of the interests bearing a material nature. 6. As the result of considering the level of effectiveness of opposition to corruption and other infringements in the sphere of business from various state authorities and entrepreneurs themselves under the answers of respondents, following the scoring system of calculation, when ranging the results obtained on scores from 1 (highest score) to 8 (lowest score), the following rating was revealed: 1) national security bodies 424 scores; 2) Office of Public Prosecutor 539 scores; 3) tax service 581 scores; 4) antimonopoly bodies 642 scores; 5) entrepreneurs themselves 665 scores; 6) bodies of interior 687 scores; 7) finance police 711 scores; 8) customs service 721 scores. Therefore, in the opinion of the majority of respondents, national security bodies show the most active in opposition to the corruption and other
infringements. Most likely this evaluation is caused by the fact that, first of all, these bodies and their employees are taken by the public opinion as an example of honesty and incorruptibility due to the special position in the system of state power and management, and, consequently, as the most fundamental fighters against corruption. Secondly, due to specificity of their main activity, national security bodies practically do not interfere at all with the current activity of entrepreneurs, moreover by creating any problems for this activity. It is quite natural that respondents have put customs service and finance police on the last places of the above rating for the subjects of opposition to corruption. To all appearances, this is related to the fact that in practice, these authorities have to face businessmen more often when solving various issues and to solve them by giving to employees of these authorities of bribes, gifts or rendering certain services. And quite often these services especially finance police do not always make a justified and lawful interference with the activity of individual entrepreneurship subjects. 7. As regards possible methods, which entrepreneurs use for the opposition to corruption, respondents believe that businessmen prefer to enter into compromise agreements with persons-corruptors either directly or via mediators (22.7%). On the second place here is appeal to law enforcement bodies (22.1%). Although in this case it is difficult to say uniquely that businessmen completely trust in these bodies. Most likely, appeal of entrepreneurs to these bodies is conditioned by the absence of other, alternative structures, which are capable of defending them from corruption. Further in this rating, there is ignorance by entrepreneurs of corruption offers from other persons, including public servants (15.6%), appeal to a higher management with a complaint for corruption actions of their subordinates (14.1%), open express of their resentment to the persons-corruptors (11,1%), appeal to mass media (10.3%), opposition to corruption via business-associations (3.3%).
Diagram 3. Level of effectiveness of opposition to corruption from various subjects in the sphere of entrepreneurship 6% 9% 1. W hich of the below factors, in your opinion, prom ote m ost of all dem onstration of corruption in the sphere of individual entrepreneurship? Choose and underline no m ore than 5 answ ers 1) increase and large dem onstrations of corruption all over the system of public relationships in the Republic; 11% 1% 1% 14% 6% 10% 2) absence of realistic assistance to individual business developm ent from the state; 3) im perfection of legislation regulating entrepreneurship activity; 4) bureaucratic difficulties and obstacles in the process of solving issues concerning the entrepreneurship activity; 5) absence of realistic support of individual business developm ent from the state; 6) engagem ent of individual business subjects by state authorities or separate public servants; 7) engagem ent of som e individual business subjects by crim inal structures; 8) m oral and legal slovenliness of entrepreneurs them selves; 8% 2% 8% 10% 14% 9) absence in the field of individual entrepreneurship of internal effective m echanism s for opposition to corruption; 10) reluctance of entrepreneurs to appeal to law enforcem ent bodies on facts of corruption they have faced; 11) aspiration of entrepreneurs to quickly and advantageously solve issues of their activity, if this decision depends on other persons; 12) strong closeness of activity of individual entrepreneurship subjects from the public; 13) others 8. From the point of view of the majority of respondents, it is required first of all to activate struggle against corruption in the Republic as a whole, for the effective opposition to the corruption in the sphere of individual entrepreneurship (17.6%). 15.3% of respondents advocate toughening of responsibility of public servants for illegal, including corruption actions with regard to the entrepreneurs. 12.6% of respondents offer to improve legislative base regulating the entrepreneurship activity. Some respondents believe that for successful struggle against corruption in the sphere of business, it is necessary to take certain actions relating to the activity of entrepreneurs themselves. In particular, there are opinions that entrepreneurship subjects should raise transparency level of their activity (12.2%), thus minimizing a possibility of putting pressure in them from every possible corruptors. Two groups of respondents with the equal quantity 11.1% are sure that it is necessary to draft and adopt Business Code, and to strengthen
responsibility of entrepreneurs for committing corruption actions. 10.1% of respondents offer to regularly hold educational measures for entrepreneurs on the issues of corruption and struggle against it. And only 5.8% of respondents consider it effective for the opposition to corruption in the field of entrepreneurship to strengthen powers of law enforcement bodies, who carry out struggle against corruption and economic crimes. Even a less number of respondents (2.5%) are sure in the necessity to increase level of access and constructive interaction of entrepreneurs with public officials. Such big figures show that the majority of respondents is likely not to incline to trust the relative state authorities and their officials, but anyway, to consider them as the most effective subjects for the struggle against corruption in the sphere of business. Conclusions On the above stated results of this research obtained in the course of the questionnaire polling and processing of its data, the following conclusions may be done: 1. It is obvious that a rather big level of corruption demonstration is typical for the sphere of individual entrepreneurship. This is mainly conditioned by the absence of traditions of mutual relations of the state in the person of its relevant authorities and their officials with business, which makes these relations rather complicated and ambiguous. In these conditions, as real practice shows, state officials, from whom solution of various issues of entrepreneurship activity depends, owing to their official position and negative individual qualities are inclined to various types of abuses, including corruption delinquencies. It is mainly stipulated by actual impunity of state officials, who take decisions and carry out control in the sphere of business, and also by the absence of effective public control over their performance. 2. Research has shown that corruption in relationships among state officials and entrepreneurs displays where a material interest of the latter s is solved in favor of entrepreneurs (public purchases, privatization crediting, etc.). 3. At the same time, as it follows from answers of respondents, factors related to the activity of entrepreneurs themselves, depend on demonstration of corruption in the sphere of individual entrepreneurship, such as: a) aspiration of entrepreneurs themselves by giving bribes, gifts or rendering certain services to state officials relatively fast, and, what is most important, advantageously solve various issues of their activity, on which a relevant decision of state authorities and their officials is required; b) large subjection to criminalization of various spheres and types of entrepreneurship activity due to the absence of anticorruption state mechanisms (casino, restaurant business, trade of strong drinks, and others). c) a relatively low level of participation by entrepreneurs in the process of opposition to the corruption in the sphere of own activity; d) preference of entrepreneurs to arrange with corruptors, including by way of complete or partial satisfaction of their interests, rather than to resist their pressure by all possible and legal ways. 4. The polling has revealed a fact that businessmen in the process of opposition to corruption in the sphere of their activity use quite weakly the potential and possibilities of unions (associations) uniting entrepreneurs and calling for protecting their interests. It should be noted that this is difficult to evaluate this fact unambiguously: either not at all businessmen enter the relevant unions (associations),
including owing to competition with their colleagues on business, or they disbelieve in possibilities of these unions (associations), which, in principle, may really be insignificant and not to meet interests and expectations of their members. 5. As a whole, the research has demonstrated a close causal effect and interdependence of corruption demonstration in the sphere of individual entrepreneurship from the nature of actions of state officials and entrepreneurs. Therefore it is non random that the majority of respondents consider the necessity to activate struggle against corruption over the Republic in all spheres of vital activity of Kazakhstani society as the most effective method of opposition against corruption in the field of business.