Systemic Corruption Hinders Progress Towards Sustainable Development Goals

The United Nation’s Sustainable Development Goals (SDGs) set out an ambitious global development agenda until the year 2030. They consist of 17 goals, and goal 16 specifically targets measures for transparency and accountability, and the fight against corruption. These goals intend to significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime; substantially reduce corruption and bribery in all their forms; develop effective, accountable and transparent institutions at all levels and ensure public access to information and protect fundamental freedoms, in accordance with national legislation and international agreements.

Transparency International Hungary (TI) made an in-depth assessment of the aforementioned goals, and revealed serious deficiencies and challenges. The main reason is why some of the development goals are not or not sufficiently met in Hungary has been the fact that corruption has become institutionalized and systemic in the country.

This scheme of corruption is very closely linked to the centralized nature of the political and economic regime. Fidesz, the incumbent governing party won landslide victories three times (in 2010, 2014 and 2018), and got a supermajority in the Parliament. Thereafter, it severely restricted societal controls. In 2010, the new government extended its power to a level that is unusual in liberal democracies, and constructed a de facto ‘upper house’ by appointing own loyalists to public institutions that are nominally independent (from the executive power). Fidesz changed the electoral law transforming it towards a more majoritarian (and less proportional) system and applied some gerrymandering. The three consecutive Fidesz governments post 2010 have eliminated political and professional autonomy of most of the state institutions and transformed them into the instruments of the central government’s power undermining the system of checks and balances.

The capture of the state by influential groups – oligarchs and/or political players – has become the rule rather than the exemption across Central and Eastern Europe (CEE). Particularism, extractive institutions and favouritism seem to be overcoming universalism, inclusiveness and public integrity. In Hungary, an informal network including politicians, oligarchs and grey eminencies re-politicize the state in pursuit of political monopoly. This political mode of monopolizing the state positions and resources is clearly distinct from the oligarchical state capture and can be seen as “reverse” state capture. Corruption has become centralized – and, in some cases, has been legalized.

Democratic checks and balances characterizing liberal democracies have been almost entirely eliminated, apart from the law courts. The judges have preserved their autonomy and their decisions have been still independent from the central government endeavours. But that’s also not a remedy for tackling corruption charges. The Achilles heel of the judiciary is the prosecution service, which prevents cases from being heard by law courts by making only very few indictments in those affairs in which pro-government players are involved.

A peculiarity of the Hungarian situation is that a strong tension between regulation and practice has developed since the incumbent government captured the state in a steady process after 2010. On one hand, a large number of anti-corruption regulations have been in compliance with EU norms. On the other hand, execution and practice is particularistic and biased favouring loyalists and cronies. One of the most obvious examples for that is how the public procurement system works in paper (the regulation is in compliance with EU norms), and in practice (the implementation benefits the loyalists).

The split of the Hungarian society is more profound than any time in the recent thirty years. An obsession with centralization, populistic rhetoric, and the government’s measures have divided the country’s citizens on one hand into loyalists, cronies and clients, and, on the other hand, those whom the government portrays as foes, e.g. the representatives of the independent NGOs. Under the new law regulation for the CSOs that was adopted in 2017 those CSOs which get more than EUR 23 000 foreign funding per year have to declare themselves as “foreign funded organizations”. Another bill, the so-called ‘Stop Soros’, was approved on 20 June 2018 targeting and criminalising the work of those organisations which assist to refugees under the pretext of countering “illegal migration”. But despite these measures, and the populistic rhetoric and smear campaigns against civil society, still there has been a certain gap between words and actions. The campaigns usually lack administrative sanctions, or if they exist in paper, they are not implemented.

Based on these general remarks, TI Hungary makes the following recommendations:

– As the main corruption risk is the capture of state institutions by government interests, we urge the government to re-establish the democratic checks and balances and the professional autonomy of state institutions, and enhance their capacity to effectively and efficiently carry out their mandate.

– Concerning public procurements – as the main vehicle for funneling public money to political actors – an effective and independent controlling mechanism should be established. And an adequate legal remedy system would be of utmost importance in order to enforce the present legal framework.

– The government ought to strengthen the legal framework that governs the accessibility of public interest information by, inter alia, 1) revising legal provisions that enable secrecy; 2) promoting proactive disclosure practices; and 3) expecting corporations to reveal information concerning their beneficial owners.

– The government ought to introduce more stringent legal provisions to enhance transparency and accountability of political finance, and ought to set higher standards of the implementation of such provisions in order to incentivise an intransigent enforcement of the legal norms concerned.

– The government should reinstate and reaffirm public trust in the political elite also by reforming the current system of interest, income and asset disclosures by expecting a higher level of transparency and by exercising more rigorous control.

– The government ought to publicly acknowledge the significance of whistleblowing by not just condoning these people who expose wrongdoing and thereby take a risk, but also by introducing a system to offer them reliable protection and sufficient financial support. In addition, the government should also adopt necessary regulations to guarantee that reports made by whistleblowers are thoroughly examined.

– We urge the government to incentivize companies that participate in public procurement to adopt integrity measures. Companies should introduce coherent rules and systems in order to extensively tackle corruption risks and maintain regulatory compliance. Companies should make their operation and organizational structure available to public, thus become accountable to stakeholders.

– The government should create a new, comprehensive legislative framework on transparent lobbying through a legitimate and inclusive process that meets the long-term support of all stakeholders concerned. We encourage market players and their respective professional organisations to apply lobbying self-regulation tools and promote responsible lobbying practices in general.

– The independence of the media authority has to be re-established in order to foster a wider supply of outlets and broadcasters and to halt the tendency of the distortion of the media market towards government players. The regulation should promote free competition in the media sector, e.g. facilitating that the state advertisements should not be directed exclusively to the pro-government outlets.

 

The full report can be downloaded at the bottom of this page.

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