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Hungary’s anticorruption performance is deteriorating – concludes the 2015 global survey of Transparency International

Hungary slipped down three places in the most comprehensive corruption ranking in the world, the Corruption Perceptions Index (CPI) prepared by Transparency International. The Hungarian branch of Transparency International presented the findings related to Hungary in Budapest today. The findings show that Hungary’s performance within the European Union and also the narrower Central-Eastern European region declined.

Rankings have not changed at the top – the biggest economies of the world do not perform as well

More than two thirds of the 168 countries assessed last year received less than 50 points on a scale of 0 (perceived as highly corrupt) to 100 (perceived as very clean) assessing the corruption situation in these countries. This means that anti-corruption performance is weak in most countries. Out of the G-20 countries, which represent the major economies in the world, ten – among them EU-member Italy – belong to the group of countries with a performance below 50 points. One of the biggest losers of the 2015 Corruption Perceptions Index – the 21st published by TI – is G-20 member Brazil, which slipped down 7 places to 76 compared to last year’s rankings. Another G-20 member, Turkey continued its fall starting in 2014 – when its ranking dropped 11 places –, and slipped down 2 places in the most recent rankings.

Denmark finished at the top in 2015 with 91 points this year, which is one point short of the winning score in 2014. The second and third podium positions are also taken by Scandinavian countries: Finland achieved 90 points, and Sweden 89. The fourth Scandinavian country ended up at the top of the field as well: Norway came in sixth following New Zealand and the Netherlands. Scandinavian countries finish every year in the top positions of the Corruption Perceptions Index, but some Western European countries and New Zealand repeatedly place among countries barely infested with corruption. Their outstanding record of great anti-corruption performance may be traced back to the fact that in these states, public power is serving the citizens, the public sector operates transparently and accountably, and governments publish what they use public funds for. It is also no coincidence that the countries at the bottom of the rankings are from the same group each year. As in 2014, the bottom positions of the 2015 CPI rankings are taken up by South Sudan, Afghanistan, Sudan, North-Korea and Somalia, with the two last ones both receiving 8 points each. For lack of a responsible state leadership, we cannot speak of accountability or a state serving the public good in these countries.

Corruption may only be eliminated with the help of citizens

“The 2015 Corruption Perceptions Index clearly shows that corruption remains a blight around the world”, stresses José Ugaz, the Chair of the anti-corruption movement Transparency International. Ugaz has extensive experience in the fight against corruption: as an Ad-Hoc Attorney, he was involved in the investigation into the abuses committed by the highest government circles in Peru, also including former president Alberto Fujimori. As the Chair of Transparency International says, “Corruption can be beaten if we work together. To stamp out the abuse of power, bribery and shed light on secret deals, citizens must together tell their governments they have had enough.”

Hungary dropped 3 positions and lost 3 points

In 2015, Hungary received 51 points in the CPI survey, which is three points below the results of the country a year before. Similarly to its score, Hungary now also has a ranking three places below that of the year before, and is at place 50 out of the 168 countries surveyed (Hungary came in 47th in 2014 out of 175 countries). The decline is particularly striking within the region, as Hungary was only less corrupt than Romania and Bulgaria in the Central-Eastern European region last year, which means that since 2014, the Czech Republic overtook Hungary, and Slovakia and Croatia caught up with the country. The absolute winner in the region in 2015 is the Czech Republic, which improved its 2014 score by 5 points to 56, and landed in the 37th position rising 16 positions. Hungary’s performance deteriorated not only in regional, but also in EU comparison: out of the 28 member states, Hungary tied for the 22nd to 24th spot. Hungary is increasingly exposed to corruption: In 2013, Hungary came in 20th, and in 2012, 19th out of the then 27 EU member states.

2015: a year for the opaque distribution of public funds

The accessibility of data relating to the use of public funds and the independence of the judiciary proved successful in the fight against corruption, for which the success stories from Western European and above all Scandinavian countries are evidence. In these countries, citizens are aware of what their government spend their taxes on, and if they are in doubt, they can be sure that they can rely on public institutions and a judiciary independent of the government.

In contrast, Hungary’s government does everything to make sure things are not like that in the country. Those who could check its powers before, can now only do that at great difficulty or not at all, as the government spent the last years taking over public institutions to shore up its own powers. The only exception to that are the courts of law. Hiding information is increasingly easy, as the government restricted the accessibility of information of public interest, which makes it considerably harder for citizens to gain information about public spending.

“A centralised form of corruption has been developed and systematically pursued in Hungary”, said Mr. József Péter Martin, the executive director of Transparency International in Hungary (TI). The government may use its power without any consequence to grant illicit advantages to cronies. According to the head of the anti-corruption organisation, “turning public funds into private wealth using legal instruments is an important element of corruption in Hungary”.

Only the oligarchs enjoying the sympathy of those in power change, their source of enrichment does not, so that crony capitalism is being built just like before to a considerable extent from the tax-payers’ money and to their detriment in Hungary. In the years 2013 and 2014, the company Közgép, linked to Mr. Lajos Simicska, who were apparently unable not to win any public procurement procedure, had revenues of more than HUF 170 billion, and generated a profit of HUF 17 billion. In 2015, the companies of Mr. István Garancsi (Market) and Mr. Lászól Szíjj (Duna Aszfalt) were the most successful, although the growth of the companies of Mr. Lőrinc Mészáros was also legendary. The companies linked to Mr. István Garancsi won public procurement contracts worth HUF 46.5 billion in 2015, while Duna Aszfalt, an interest of Mr. László Szíjj and its consortium partners became HUF 62 billion richer out of public funds. The enterprises of Mr. Lőrinc Mészáros also received public contracts worth altogether almost HUF 40 billion.

The executive branch of government also tends to make not only friendly companies, but also sports clubs dear to politicians richer out of public funds: companies donated to sports to the tune of over HUF 200 billion in the past four years. As corporate donations to spectator team sports are tax exempt, in practice, the state treasury lost a significant amount of money in tax revenues within four years. In addition, this money was channelled to the sports teams partly in secret, as due to a legislative amendment from 2015, it is unknown which companies are sponsoring clubs instead of paying taxes. As a result of this amendment, it is impossible to uncover, whether there is any correlation between the success of certain companies in public procurements and the several billions of corporate donations paid to the favourite football teams of the prime minister and some other members of his cabinet.

Competitiveness is in free-fall

The deterioration of the corruption risks in Hungary is accompanied by a steep decline of the country’s competitiveness. According to the recently published competitiveness survey of the World Economic Forum, Hungary places 63 out of 140, whereas 10 years ago, it was the 38th, and fifteen years ago the 28th most competitive economy in the world. The businessmen asked rated the transparency of government decision making in Hungarian to be particularly poor, and ranked it 119 out of 140 just like the illicit use of public funds. “The reason for the deterioration of Hungary’s competitiveness is primarily that the country’s institutional system is not transparent, and also biased”, adds Mr. József Péter Martin. A vicious circle has started in Hungary: the institutions now serve the interests of the government, which leads to a high exposure to corruption. This reduces competitiveness, dampens investment activities, which may result in an unfavourable growth structure. This is a hotbed of crony capitalism based on rent-seeking: the companies not rarely have an interest in gaining the sympathy and friendship of the government, and not in efficient market performance. This further increases corruption.

About the Corruption Perceptions Index

The Corruption Perceptions Index (CPI) is prepared by the centre (Secretariat) of Transparency International (TI) in Berlin based on 12 surveys and analyses performed by 11 organisations. They measure corruption in the public sector by surveying the opinion of experts and businessmen on the corruption infestation of the public institutional system, the economy and society. Corresponding data was available on 168 countries in 2015, and Hungary was assessed based on 9 different sub-factors. TI defines the scores of the sub-factors on a scale from 0 to 100, where 0 marks highly corrupt countries and 100 those least infested. The secretariat of TI in Berlin calculates the index by weighting the average of the scores.

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