Corruption in the EU costs business €120bn a year, study finds; Brussels says states have failed to address conflicts of interest

February 3, 2014 7:11 pm

Corruption in the EU costs business €120bn a year, study finds

By James Fontanella-Khan in Brussels

Corruption has increased since the sovereign debt crisis hit the eurozone and costs the EU economy about €120bn a year in lost tax revenues and foreign investment, according to a European Commission study.

The impact of rising corruption is having a devastating impact on business activity, the study found. A third of companies participating in a public tenders for government contracts have been prevented from doing so due to corruption, according to a Commission survey of European businesses.

The Commission’s report, which found that EU member states have continuously failed to address conflicts of interest between politicians and business, could taint the bloc’s image as a relatively clean place to do business.

Sixty-nine per cent of the 7,842 business surveyed by the EU said paying bribes and exploiting political connections were the easiest ways to obtain certain public services.

Countries under scrutiny in the wake of the eurozonecrisis continue to have corruption problems, the study found, despite reform efforts mandated by Brussels.

Nearly all companies interviewed in Greece, Italy and Spain, for example, complained that corruption was widespread in their country.

Cecilia Malmstrom, the European commissioner for home affairs, said corruption was undermining democratic accountability in all 28 members of the EU.

“Corruption erodes trust in public institutions and in democracy, it undermines our internal market, it hampers foreign investment, it costs taxpayers millions, and in many cases it helps organised crime groups do their dirty work,” she said on Monday.

According to the survey, three quarters of EU citizens believed corruption was widespread, while more than half said that it had increased over the past three years. Companies were also asked whether they had been expected to pay a bribe.

“Trust in Europe’s leaders is falling because relations between business and the public sector take place in the dark, leaving citizens with questions about whose interests are being taken care of,” said Miklos Marschall, deputy managing director of Transparency International.

“To bridge the gap between politics and people, there must be greater transparency in public life and more public officials held to account for their actions,” he added.

Denmark, Finland, Luxembourg and Sweden confirmed their reputation for being clean, with very low experience of bribery and where perceptions of widespread corruption were below the EU average of 74 per cent.

In the UK, experience of bribery was very low, at below 1 per cent, but 64 per cent of respondents thought corruption was widespread in Britain.

Perceptions and actual experience of corruption were highest in Croatia, the Czech Republic, Lithuania, Bulgaria, Romania and Greece.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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