Sorin Ioniţă
Bucharest

Corruption as a symptom of opacity and poor policy making
– and a few measures to address these problems

Research project funded by the IPF program of OSI, Budapest - B9158

Timetable

Issues and advocacy plan

A. Problem definition

The basic idea of this project is that corruption and the mishandling of public funds in transition countries are to a large extent just symptoms of two deeper institutional shortcomings:

·        The opacity of the public institutions, of policies and their effects. Most of the time the main problem is not that relevant pieces of information are not disclosed to the public, but that they are not produced within the public agencies in the first place, although they should be among the most important management instruments to improve performance in the state sector.

·        The flawed policy process, probably the most crucial (and ignored) source of poor governance, is characterized by little public consultations, hasty decisions and poor implementation capacity. If at all, the public debates and identification of crucial trade-offs occur after policies are (or are supposed to be) implemented, not before, which creates uncertainty, confusion and ultimately mistrust in public institutions. The immediate symptom of this model of governing by default is the large gap between written plans and strategies, on the one hand, and social realities on the other. This flawed decision-making pattern verifies the worst expectations of citizens, as it is very permeable to rent-seeking and typically leads to selective enforcement of rules.

Briefly put, corruption – broadly defined so as to include rent-seeking, state capture, deliberate misallocation of public funds and the exchange of favors that can take even non-monetary forms – is only a by-product of a flawed policy making process. This being so, there is currently little incentive for citizens to participate in making decisions, as long as policies are muddled, inconsistent and ultimately non-binding. Important public actions in society occur mostly by default, by formal laws and regulations being enforced selectively, after different groups struggle for the best possible arrangement (the best menu of rules applicable in their case).

The policy-by-default model of governing is damaging for the society in general because: it is unpredictable; it is opaque, making hard to evaluate costs and benefits; it discourages broad involvement, and so forgoes fresh private resources and ideas; it is ultimately ineffective, creating huge deadweight costs. Due to this ah-hoc nature of governance, crucial public choices either pass unnoticed or are obscured on purpose (to avoid divisions, public criticism, etc). When this happens, the hard decisions are postponed, and therefore taken implicitly by the bureaucracy in the process of implementation. This is why many times the secondary acts (administrative norms) that follow a law are more important than the law itself – actually, they make law.

There is nothing new or peculiar to transition countries in having erratic and opaque policies, an unclear agenda at the top, little public consultation, poor coordination, and a weak civil service overstepping its mandate when making crucial decisions by default in the implementation process. In a book on policies in developing countries, Marilee Grindle argues that one of their obvious characteristics is that the focus of participation and conflict occurs primarily at the implementation or the output stage[1]. This contrasts with the experience of the US or Western Europe where the focus rests instead on the input or policy-making stage. She identifies two reasons for this difference. First of all, in developing countries there are few organizational structures able of aggregating the demands and representing the interests of broad categories of citizens. When such structures do exist, they tend to be controlled by elite groups. Second, national leaders with influence over the allocation of policy goods tend to discourage citizen participation in the policy process as illegitimate, or at least inefficient. Trapped between weak representation and discouraged participation, citizens/groups are forced to engage with the policy process by presenting individual demands. Therefore "factions, patron-client linkages, ethnic ties and personal coalitions"[2] are the most common mechanisms to access public goods and services.

Mutatis mutandis, the analysis is instructive when translated into the post-communist space. Communism has left behind a tradition of policy making which does not encourage broad and open consultations, considering and costing-out alternative courses of action, or balancing trade-offs. Instead, the agenda is set in a close circle of technocrats and approved by the key political players (who may or may not coincide with the official political hierarchy). However, the formal policy set from the top is merely a basis for perpetual negotiations – vertical and horizontal[3] – in the public administration and the political system occurring during the implementation stage. Substantial deviations from the original goals are tolerated depending on the informal power of each actor involved. Formal policies do exist, as well as other official norms and regulations, but they tend to be more or less fictional, many times the public institutions being the first to ignore them.

When this system becomes well-entrenched policies are (i) numerous and volatile (ii) and designed without regard to the feasibility of implementation, since they are not meant to be consistently implemented anyway, but to be used instrumentally as weapons in power struggles among groups. Interests are balanced not during the process of reaching a decision, but in the implementation process, and the most valuable asset in this process is control over the enforcement mechanisms. Horizontal accountability bodies – nominally independent institutions such as the administrative judicial system, public auditors – are therefore weak and politicized. This situation comes close to what has been described in the development literature as weak governance, and it is arguably an entrenched reality in many transition countries, particularly in South-Eastern Europe.

 
B. Project objectives

While this brief description points at the vastity and profoundness of the problem, step by step remedies are possible, however. First we need to document and measure it more precisely, beyond the sweeping description sketched here. Convincing descriptions and illustrations, if properly done, can help by increasing the visibility of some parts of the broader policy-making process which are otherwise considered too technical and intricate by most citizens and opinion leaders (such as budgetary allocations). Second, precise and realistic institutional remedies must de devised aimed at fixing some of the flaws identified.

As a policy area broadly defined, this project will focus on the intergovernmental financial transfers (money circulating between the national and various tiers of local governments in a country) and other special funds and allocations performed by central agencies which presuppose substantial spending and/or investment affecting local communities. Since all transition countries are aggressively decentralizing government functions and resources, the share of these funds in the total budget is rapidly increasing – for example in Romania it amounts to about 40% of the public spending. It comprises many services and infrastructure with high impact on the quality of life of the citizen, such as social protection, roads, housing policy, rehabilitation of utility providers, subsidies for all of the above, major local investments. Apart from the regular intergovernmental transfers, there are usually at least four or five important central ministries or agencies in every country which have power to influence budgetary allocations through their routine operations. What is more, this sizable part of the public budget is a notoriously eclectic, fragmented and impenetrable one, where allocation and spending are almost discretionary (or, when criteria exist, they tend to be loosely enforced) and monitorization very feeble. As a result the pattern resulting is erratic, inconsistent with stated policies, and full of irregularities.

In this project we will carry out activities on three dimensions:

1.       Devise a system of quantitative indicators to measure the extent to which the policy-by-default model corresponds to reality in the area discussed above, and what are its effects. Since the budget is the typical embodiment of the main policy choices, whether implicit or explicit, the set of indicators will be built mostly based on it.

·        Budget volatility, i.e. the tolerance to deviations in execution on the main chapters

·        In cases where policies imply territorial allocations, the fraction of appropriations and spending done without explicit criteria

·        When  criteria of allocation and spending do exist, a measure of deviation from them will be built in order to evaluate the accuracy of enforcing

2.       A number of three or four case studies will be developed on important sections of the policy area defined above, where policies-by-default seems to be the best explanatory model. Particular attention will be devoted to the role played by institutional design, incentives of stakeholders and the resulting political choices which may explain the patterns described at point 1 above. The aim here is to develop good governance lessons from this analysis and summarize them in the form of an agenda for change in the sectors studies through the cases. The vision underpinning this analysis is that of improving governance through better measurement and transparentization. In this sense transparency is not only something that happens (or not) at the interface with the citizen, but indeed a principle built into the own internal procedures of the public sector.

3.       In the most pro-active part of the project, a brief Citizens' Budget Guide will be edited and disseminated, with a focus on the most "sensitive" areas of the budget described above. The target group of this Guide, edited for the first time in Romania, is represented by all interested citizens and non-expert opinion leaders. And the main goal is to cut through the maze of laws, strategies, government plans and financial data available, which the vast majority of people find hard to comprehend (or even to get access to), in order to offer an illustrated overview of the main public choices and their effects in Romania in the last years. Being so, it will be conceived and written not as a technical description of current procedures, but as a base for citizens' participation in rational decision-making – i.e. a tool of civic education, outlining the crucial options and trade-offs that must be made at the central and local level, and illustrating the effects of past decisions.

 
C. Deliverables and dissemination

·        Policy paper including the evaluation, case studies and policy recommendations produced (points 1 and 2). It will be edited in both electronic form and hardcopy, in both Romanian and English, and disseminated to the Romanian media and broader public, and discussed in two public workshops.

·        Two public workshops organized by the Romanian Academic Society (SAR, Bucharest-based think tank) with people from the relevant central and local public institutions, to debate the findings and recommendations included in the policy paper. 

·        The Citizens' Budget Guide, in Romanian, in both electronic form and hardcopy. This will also be disseminated through opinion leaders and the media, be made available freely on SAR's webpage, and pushed into the public attention by a series of presentations and press conferences. If successful, the possibility will be explored to contract a printed edition with one of the Romanian academic publishing houses.

D. Regional relevance

·        The work on the indicators defined at point 1 may have piloting value: the set of indicators can form the basis for a subsequent cross-country benchmarking study in the region – a quantitative approach to the comparative assessment of the quality of governance which goes beyond the typical opinion survey indicators. Objective measurements of weak governance are both a good diagnostic tool and a trigger for public action in the fight against misgovernance and corruption.

·        The analysis and reform proposals at point 2 may also have a regional dimension, as the problems identified and lessons learned, though developed on the example of Romania, may be generally applicable. In particular, the explanatory model of policy-by-default, with its structural flaws and possible remedies, may be considered in the broader context of the strategies to combat corruption devised by many governments in the region.

·        A Regional Citizens' Budget Guide, following up on the few such existing initiatives and incorporating the most relevant country-specific conclusions and trends, may also be an idea worth exploring.

E. Connections with other OSI / CEU programs

·       Discuss with the organizers to include a presentation / module / section in the 2006 course Strategic Corruption Control and Organizational Integrity (also held in 2005), organized by SUN. Preliminary discussions as our IPF projects advances will be held with the CPS / Public Integrity Education Network staff who are also involved in organizing the SUN course.

·       A workshop may be held by our IPF group on Corruption and Policymaking in Transition together with the students and staff of the Public Policy MA program at CEU who have similar interests, under the umbrella of the department. If announced well in advance and held in early December / or late January, the workshop may be an opportunity for the CEU MA students to present their term papers that may fit this topic.

·       To the extent that it addresses practical issues of public administration reform or public budgeting, the activity of this workgroup may be of interests for the Local Government and Public Service Initiative program of OSI as well.