Government is ‘losing grip’ on corruption
Analysts fear that Cyprus is paying the price for a poor record in governance
A World Bank report on governance indicators sees Cyprus losing ground on five out of six categories verifying a feeling among Cypriots that there is institutional corrosion.
Cyprus has slipped behind on indicators regarding control on corruption, the rule of law, government effectiveness, regulatory quality and political stability in 2017.
Cyprus exhibited some progress – in the report published every five years - on the voice and accountability indicator, reaching the levels it was at ten years ago.
The values of the World Bank’s six indicators are identified via a survey, which takes into consideration the answers given by citizens and national institutions dealing with social and economic development of a country.
The final value of each indicator is derived from the synthesis of the responses to surveys of specialist opinion polls or large research institutes. The final values are between -2.5 and 2.5. That means the higher the value of the indicator, the higher the confidence of the public towards the specific area of governance in their country.
One of the most striking findings of the survey is the public finds that authorities are performing worse than in previous years when it comes to control on corruption. In the fight against corruption, the Cyprus rating fell to 0.78 from 1.25 in 2012 and 1.08 in 2007.
Cypriots gave the government a lower grade regarding its effectiveness as it dropped to 0.92 from 1.39 in 2012 and 1.43 in 2007.
A disquieting find of the World Bank’s survey is that the rule of law in Cyprus is showing a significant decline, from 1.12 in 2007 to 1.10 in 2012 and 0.88 in 2017.
Cyprus has also recorded a small drop in the Regulatory Quality indicator.
Former Governor of the Central Bank Panicos Demetriades told news website Stockwatch the ratings are worrying as “these indicators are decisive not only for sustainable development but also for the general prosperity of a country”.
He said it was no coincidence that countries like Finland, Denmark and Norway, which occupy the top ranks in the World Happiness Index, have the best institution quality, according to the World Bank.
“In the case of Cyprus, it is particularly worrying that the country is receding in indicators such as control on corruption and rule of law, which are considered to be the most important for economic growth in the long run,” said Demetriades.
“At the same time, Cyprus has one of the biggest declines in the Happiness index, ranking it in position 130 from 141 countries in the table,” he added.
Demetriades said it is no surprise that the decline in the governance indicators of the World Bank is in line with a number of other negative developments that began with the erosion of the Central Bank’s independence in 2013.
“Since then we have seen efforts by the Anastasiades administration to control other independent institutions, as well as the media,” said the former banker.
He added: “We had the collapse of the Co-op bank and the government’s insistence on introducing the naturalization program that creates a cocktail of economic and political risks (for example, the boom in high rise constructions for foreign millionaires, which is not sustainable development but, possibly, signs of a bubble) while ignoring prudent warnings from the Fiscal Council and other economists.” refusal to face our problems, to reform, to influence the interests of status quos, to change the balances even though they may be outrageously absurd.”
Georgiades considers the case of pension system reform as an example, an issue, as he said, for which there are no ideological differences and for which almost everyone should agree.
“However, because we do not want to touch some of the interests, that is, the power that employers and trade unionists who are managing the fund, the power enjoyed by the supervisor, the sense of security of the employees who fear change, we are preventing the reform from going ahead,” said Georgiades.
He added: “The result is that savings have been mismanaged for years with losses of hundreds of millions, corruption is booming, and we are currently very close to leaving a generation without sufficient retirement funds.”
This is only one area where a conflict of interests goes unchecked, said Georgiades.
“One can only imagine what is happening with more important issues where there are stronger conflicting interests and more corruption, such as health, education and justice…”.
Talking on the effects that such reports have on Cyprus, Chris Savva, a financial analyst managing one of the country’s biggest pension funds, said this development will pose another obstacle in Cyprus’ effort to attract investment.
“We should be concentrating on drawing institutional money from infrastructure and pension funds. In order to be able to do so you need to have a good governance,” said Savva.
The financial analyst said that institutional investors are not only put off by the lack of control on corruption, as indicated by the World Bank, but also by weaknesses in the rule of law.
He argued that investors fear that if they find themselves in a legal dispute, the Cyprus legal system will not only take a few years to deal with the case, there will also be gaps in the law.
“Regrettably, most of our efforts seem to be towards attracting individual and smaller investors, thus not paying attention to bettering our records when it comes to governance,” said Savva.