Incomplete Transparency Builds Frustration

The graph on the wall tells the story of it all.
Picture it now, see just how
The lies and deceit gained a little more power!

I received this paper slip in the mail, earlier this week, but only now had the time to pay appropriate attention to its contents. I'm quite happy that my electricity supplier took the effort to print and distribute these slips. However, it makes me think of the larger picture, especially about the role of monopolies, discretionary power and opacity--the three elements conducive to corruption.


I'm quite satisfied with Enel's willingness to disclose information about their primary sources of energy, although I'd prefer that they increase the proportion of renewables (now standing at only 4.43%, which represents 27.86% of the entire national capacity, relying solely on hydro), at the cost of coal (45.85%), gas (31.53%), and especially tar/peat (1.25%). Equally interesting, but not very surprising, I see 0.00% imports. Amazingly, they're taking responsibility for, and disclosing, the level of their impact on polluting Romania (31.67% over the national average in CO2 emissions, but only 16.31% of the national average in waste radioactivity). But is this enough for them to gain my trust?

And here are the causes of my frustration: I have no idea what's the acceptable level of CO2 emissions and/or waste radioactivity--is the national average lower, higher or equal to that acceptable level? Hence, I have no idea whether my electricity supplier is fully transparent and accountable. And, if they're not, I'm frustrated with the impossibility of switching the plug to a different supplier :-( Equally frustrating, I can't find what are they doing, if anything, to build new capacities for renewable sources and/or to reduce their impact on pollution at national level. My suggestion to Enel-Romania: Publish the graphs off this slip onto your website, and add information that would help me appreciate your services! Otherwise, you're no different from the Government :-(

Actually, how could they be different? We simply replaced the monopoly of a public agency with that of a private operator. In an ideal world, privatizing a public service, such as electricity supply in this case, should allow customers access to improved ... something! Indeed, transparency is an improvement, even when incomplete, but it's not enough! Privatization intended to stimulate competition among private suppliers, while the absence of alternative distribution grids actually beats the purpose :-( Therefore, all such parastatals (private agents that perform public services) should meet the transparency and accountability standards required of all public institutions. When a monopoly operates with opaque procedures, the door is open to discretionary power, and then misusing that power for private gain becomes so easy, that corruption is already in the house :-(

But the damage's been done, already, before privatization, and lies with the regulatory framework. Generally speaking, the private operator finds it easier to comply with the national rules on the ground, than with the governance standards from their headquarters. Thus, as long as the Government has no strategy on either fighting corruption or restructuring the state apparatus, why should parastatals go out of their way to inform end-users completely about their operations? I guess this is the ultimate source of my frustration: While integrity, transparency, accountability are absent from the public sector, the private sector has no incentive to push standards upwards--rather, they're all rent-seekers engaged in a race to the bottom :-(

Restructuring the State Apparatus--Playing by Ear?

A wandering cymbalist came back from London, where he used to earn his living by playing on the streets:
-- So, leaving everything else aside, d'you get to learn some English, as well?
-- Yessir, I did! Especially useful when you need to talk about money, you know :-)
-- And how's 10 in English?
-- They say "ten," but you can ask a harder question :-)
-- Alrighty, then, how's 1,000?
-- That's easy, too: ten-ten-ten-ten-ten-ten... ;-)

The Cabinet decided, during negotiations for the second installment of the IMF loan, to force all public employees into 10 days of unpaid leave, by the end of the year; then, to cut off 10,000 budgeted but unoccupied positions, while scratching off more than 100 central government agencies. We're also waiting for a big infrastructure project to build 10,000 km of secondary roads, while the Cabinet's Program also promised 1,000 km of highways. [Later edit: The total savings effected by these measures amount to €150 mil./year, while the IMF loan stands at €20 bn. principal! The Cabinet fine-tuned its statement, later today.] I understand the need for round figures, easy to communicate, to convey, to convince--the have a nice ring to the ear :-) But every time I hear such figures, I'm thinking of the "successful" cymbalist playing everything by ear till the day he had to quit wandering and go home--"no harm done," right?!?

You'll be surprised to learn that I welcome the adoption (I have my doubts as to the constitutionality of implementation!) of a measure that allows public employees to take unpaid leave amounting to 10 days every year! No, I haven't seen the reasoning behind this decision, the full cost-benefit analysis and/or the regulatory impact assessment--neither from the Cabinet, nor from the initial proponents--but I give you my opinion: Every now and again, people realize they are not in the mood or don't have the motivation to go to the office. When that happens, they "call in sick." Some jurisdictions in this very wide world allow for employees to take a limited number of "sick-days" per year, no questions asked. In Romania, if you do call in sick, you need to bring a certificate from a general practitioner MD, stating that you were, indeed, sick. You can only imagine the volume of small bribes being transacted for these certificates every year! Therefore, being able to call in, now and then, for one of those unpaid days is a good solution for fighting petty corruption--although it's clear to me that our ministers never considered such impact for their measure.

Just as well, you'll be surprised to learn that I also welcome cutting off 10,000 positions from the state apparatus--as long as they're not being filled, the budgeted money would've returned to the treasury, anyways. I haven't seen analyses supporting this measure, either, but since those institutions actually function without these 10,000 employees, I agree that cutting off the allocation (both positions and funds) may have a positive impact over the coming years. Institutions will be forced to adapt/adjust to the new conditions, rearrange their internal processes/procedures, and even become more cost-effective, hopefully. But I remember having this conversation with former and current decision-makers, back in 2007, when the ministries of economy and finance merged for a brief period of time: I was suggesting that the merger could've been used as an opportunity to mainstream the activities of the ministry, and dispose of a sizable proportion (about 30%) from the 35,000 civil servants they employ. Not just sack them--a measure that would've definitely antagonized trade unions--but simply move them into other institutions that manage EU financial instruments.

Early 2006, I worked on a project that analyzed the training needs of the Romanian public sector, with respect to improving the absorption capacity of European funds at a minimal 50%. At that time, we assessed that 10,000 public employees could've been trained within 6 months to a couple of years, with a "return on investment" (compared to absorption capacity) negatively correlated from a fabulous 150,000% to a "mere" 6,000%, respectively. In contrast, we just got news that absorption capacity may have increased from 3.22% to a "spectacular" 5.41% over the past 6 months :-( Just assume that Romania would've managed somehow, by end 2007, to have trained 10,000 of the 35,000 employees from the ministry of economy and finance only, and then to have placed them in key positions amidst the 70+ management authorities and intermediary bodies that plan, coordinate, implement, monitor and evaluate the spending of those €30+ billion. I can't even fathom the potential impact! But I'm sure that more public institutions would've been mainstreamed by now, less people would've remained within the public sector, and SME-buzzing-bees would've created more jobs and poured more tax-money into the state budget.

Indeed, we need a slimmer state apparatus, with lower costs and improved performance. Training is just one lever that can be employed in order to improve the situation; employing all available levers in concertation may yield extremely positive results, achieving sustainable development and higher living standards. But mainstreaming institutions and restructuring administration require consensus, rather than conflict. Decisions should be calm rather than hasty, reasoned rather than discretionary, well-planned rather than pressured. Bref, not playing by ear! Unfortunately, we still don't have enough information about norming the cost of labor, about budgeting the performance of institutions, or about multi-annual projects, objectives and priorities. Therefore, either we take the governing cymbalists back to school, or we simply wait until they're forced to go home--wishing for "no harm done," after all?!? I don't think so! If I must listen to cymbalists, let them, at least, be professionals:

Greasing the Wheels vs. Crisis in Indicators

I'm not an economist, so I solemnly declare that some of the economic and/or financial indicators, currently debated in the media, totally escape me. But I wonder... What's the meaning of this incredible evolution, over the past 8 months, from an economic growth of +8 to -8% year-on-year, coupled with an economic deficit of, once again, 8%? To my mind, several explanations may be in order, but I haven't heard any of our analysts, commentators, even politicians, talking about these things--at all! Does corruption play any role in this severe crisis?!?

1. Can it be the case that our system of macro-economic indicators is terribly screwed up? If that were true, I'd be ready to admit that last year's economic growth of 8% (as well as previous growth rates varying from 4-5% during 2001-04, to 6-7% after 2005) were false, while the new indicators being used in 2009 picture a more accurate reflection of economic realities. Hence, we should use this opportunity to recalibrate our indicators, and possibly revisit the entire statistical package that's currently in use. Consequently, we should be able to further improve our capacity of monitoring, evaluating and planning reforms--measures, results and impacts of government decisions.

2. What if the indicators are just fine, but we're incapable of making proper interpretations? [Or, just as it used to happen before 1989, reports are being fudged to please the ultimate decision-makers, whose egos "must" be propped by meager subordinates that create a personality cult whereof they draw individual benefits?] If that were true, past analyses regarding Romania's economic development may have been, once again, false. But in this case, we should recalibrate/replace the people that proved either incompetent or malevolent. From this perspective, we should design an improved system for the cross-verification of statistical data, with harsh and immediate sanctions for false reporting--regardless of whether "mistakes" are honest or not.

3. Finally, I must also consider the possibility that both indicators are properly designed, and reports or analyses are utterly true. In this case, I assume the only explanation for the discrepancy from +8 to -8% resides in the Romanian economy being completely non-competitive? Thus, the cause of the economic contraction might not be so much related to the global crisis, but rather to the impact of Romania's entering the European Union--and I can easily understand that growth in 2007-08 was the inertial effect of the accession process, whereas contraction in 2009 is the inertial effect of lacking a competitive advantage within the EU. As a result, then, we should take the opportunity and finally enact the sound, structural, economic reforms that are so long overdue.

3'. Of course, not being an specialist, I can only speculate--and here's an alternative scenario for #3, based on the effects of systemic corruption: Say I had 100 monetary units stashed from bribes and other undue benefits, and I negotiate with you a laundering scheme, as we are both businessmen: We "discover" that you owe me 100, but you can't pay, "because of the crisis." Then, I "take over" your business, and you get 50 in cash, from my black stash, while I just laundered the entire 100. A few months later, we open a new business together (most probably based on the one I just "took over"), and you repay some 20-30 of the original 50--ultimately, you make some money, totally "legit," and really out of nothing, while I launder at least 70% of my illegal stash, taking advantage of the global crisis.

With so many businesses flipping over, of course the general stats would reflect a severe contraction of the Romanian economy in 2009. Moreover, since these people want to keep a low profile for their "investments," they'd only operate with small enterprises, so these transactions wouldn't be reflected on the stock exchange, but rather in the trade registry. I wonder if one could check on the total volume of investments this year, as well as the total changes of ownership for small businesses--if I'm right in my "corrupt scenario," I guess we should see a sizable injection of funds into a feeble economy. Would that make sense to you?!? I mean, would it be logical to see small and inconspicuous investors flocking around a collapsing economy with the strong conviction it'll turn profitable in less than a year?!?

This is the way I can make sense of these macro-economic indicators that otherwise escape me. I really have no preference for any of the scenarios above--either one of them is equally insulting, from a governance perspective :-( But if I'm right in my alternative speculation, I can only trust that early warning mechanisms are in place, and money laundering may be exposed. Otherwise, given the old saying that corruption may be good at a certain stage of economic development ("greasing the wheels"), I'm only left with the hope that past decades of systemic corruption would finally have a positive result, in a strong and competitive economy, consolidated after 2010 with large sums of money amassed illegally until 2008... Hopefully, it'll stay clean!

Later edit: Another explanation appeared, and I think it makes sense; just as this latest alternative. The question, then, remains: Which one of these alternative explanations is true?

Passing the Buck--Pressure, Power, Procedure

Pressure--pushing down on me,
Pressing down on you--no man ask for!
Under pressure--that burns a building down,
Splits a family in two,
Puts people on streets...

So, I've been on vacation for 2 weeks, and I just managed to catch up with the news: The same bickering between the 2 parties of the governing coalition, the same incapacity to make decisions, the same worsening of economic prognoses... Actually, no news! Except that some commentators only now realize that Romania outsourced its governing to the IMF. So, what's the new angle I propose to my readers, today? I think there's too much pressure on the Executive, and that's why PM Boc and his crew are making so many mistakes, adopting extremely fragile decisions and ruling by successive flaws :-(

For the past 15 years or so, our Executive spearheaded the drive for reforms, signing agreements with various international and/or inter-governmental fora--the Council of Europe, the International Monetary Fund, the World Bank, NATO, the European Union... Parliament always remained in the background, ratifying various normative acts under the whip of the most prominent political leaders of the day--whether President or Prime Minister. Eventually, Parliament slid down the path of learned helplessness, never being able to exercise its oversight (or scrutiny) function, while the Cabinet amassed more and more decision-making power. Of course, the legislative tool of Cabinet Ordinances (explicitly delegated from Parliament, under the Constitution), placed in the hands of powerful politicians (such as, primarily, former PM Năstase), created the expectation that Cabinet must take the lead, and act promptly on every single problem, regardless how obscure or mundane.

Thus, PM Boc is now in position to prove himself, to meet the expectations... Hence, he feels compelled to solve everything by passing yet another Emergency Ordinance, as soon as possible, in spite of transparency procedures or regulatory impact assessments. On top of this, Parliament is split 3-ways, which means one can never plan a legislative agenda--simply because no one can control the legislative process :-( Only one solution may exist for circumventing this problem--where Parliament is too weak and incapable of scrutinizing the Executive, and Cabinet can no longer abuse Ordinances--and that's to assume responsibility, possibly by 2 September. By this procedure, Cabinet submits a Bill that can only be passed or failed by Parliament, in a plenary session, without debate. If the Bill fails, so does the Cabinet--as a result, either a new governing coalition is formed, or snap elections are called.

Now you see how the pressure is building around Mr. Boc and his Cabinet. To be frank with you, I empathize with PM Boc--but that doesn't mean I sympathize, and I most definitely don't condone this type of conduct! I suggest that the best solution is to open up the decision-making process, in order to secure public support for reforms, and then improve the management of the legislative procedures in Parliament. In other words, if PM Boc wants to escape the pressure, he should simply pass the buck and place pressure on Parliament :-) And start reforms over there, in order to increase and ensure the sturdiness of adopted measures, finally rule by law, instead of flaw--by reducing the time of legislative procedures and by enlarging/deepening the dialog with the stake-holders and end-users of every single decision.

Anticorruption Mayors on Top of Executives

They say the next big thing is here,
that the revolution's near,
but to me it seems quite clear
that it's all just a little bit of history repeating

I'm on vacation, in a little village on the Bulgarian seaside, getting tanned and practicing an extraordinary language that I picked up in college. But just 3 days ago, the National Assembly confirmed Bulgaria's new Cabinet, after the national elections earlier this month. Unsurprisingly, in his inaugural speech, coming after the European Commission's report, former Sofia Mayor and current Prime-Minister Boiko Borissov pledged to step up the fight against corruption and organized crime. Will the former Mayor and his team succeed?

Early 2005, a reporter from Radio Nederland Wereldomroep asked me a very insightful question: If your former Mayor promised, but did not deliver, to get rid of Bucharest's stray dogs, why expect anything of the same person's promise to get rid of Romania's corruption, once he's become President? I think nobody can answer such a question, and the developments of the past few months shed a new light on that particular question. Once again, I remember that anti-corruption is a quest for good governance, as shown in UNCAC's statement of purpose, art. 1: "To promote integrity, accountability and proper management of public affairs and public property."

I am not fully aware of what Mayor Borissov had promised to citizens of Sofia, nor whether he delivered or not. But I'm sure a similar question may be asked about this new pledge, especially as we can look at past examples. The most obvious (though not flattering) comparison would be with current PM Emil Boc, former Mayor of Cluj, but remember Victor Ciorbea, former Mayor of Bucharest: what did he promise in 1994, when elected Mayor?, did he fix the city's problems? I guess not :-( Yet, he became Prime-Minister in 1996, pledging structural reforms, including anticorruption... Many decisions made during that time yielded good results in restructuring the economy and integrating Romania with both NATO and EU, but many others resulted in increasing perception of corruption (1997-2002), especially at high levels of decision-making. Nonetheless, we pay tribute to former PM Ciorbea for initiating Romania's first systematic study on corruption, as well as ground-breaking anticorruption law (both completed after he was sacked).

Drawing on the mixed experience of past Romanian Mayors making their way to the top of the Executive, I'd say Mr. Borissov and Ms. Popova don't stand a chance in improving the situation in Bulgaria, or showing results in a reasonable time. Unless, of course, they shift their approach, and no longer look at the fight against corruption/organized crime as an end, in and of itself! Just as their Romanian counterparts (regardless of past experience with local administration), they should lay the ground for good governance, rather than focusing on anticorruption. Simply put, corruption affects every walk of life, being more the effect, rather than the cause, of bad government.

However, politicians (especially of a newly born party, such as GERB) are usually interested in getting visible results in the short term (to secure re-election for themselves), at the cost of viable results in the medium to long term (to achieve rule-of-law, durable development and, ultimately, quality of life for the citizens). Therefore, unless they put in place a system of participatory and transparent policy-making, with sound evaluation systems and good enough safeguards for responsible public management, with clear accountability mechanisms, I'm afraid they won't succeed--either in Bulgaria or Romania :-( But they do have an opportunity to do the right thing!