Counting the cost of corruption

   Winning valuable contracts from bribes is not unique to Poland. In many emerging markets it's the key way to developing a business, but it's also the wrong way. According to the World Bank, a bribe is similar to paying an additional tax on your business – in Poland that's calculated to be about 2% of every company's annual turnover. For young businesses that have yet to mature, this is a costly price for trying to generate a profit. It also doesn't bode well for long-term success.

   As an indication that corruption must be taken more seriously, Prime Minister Jerzy Buzek addressed an audience on the subject in Warsaw last week. No doubt he's aware that much of the criticism about corrupt practices are directed at the very top of his government's administration.

   High-level corruption is the most ominous form of corruption in Poland today – and it's growing. Corruption at this level generally involves close links between political groups and between the public and private sector. The World Bank lists a number of areas where the problem is rampant, such as promoting or blocking new laws, malpractice in public procurement, manipulation of privatization efforts and interfering in the award of concessions, licenses and tax exemptions.

   Obstacles at such a high level inevitably cause a great deal of resentment among ordinary people and business leaders alike. The problem with this type of corruption, though, is that it tends to breed even more corruption along the food chain in a never-ending cycle.

   And it gets worse. The World Bank goes on to say that there is little faith in the judiciary and a lack of credibility in the courts, which are overwhelmed by cumbersome procedures and subject to long delays, sometimes running into years. It also says private sector businesspeople have effectively given up trying to take legal action against corrupt procurement and other contracts. There's also a lack of faith in accounting procedures and in public administration. In fact, corruption in many public services is actually worse than 10 years ago.

   A knock-on effect of this type of corruption is that fewer local and foreign investors will want to get involved. Bribes mean poorer services, loss of faith with the public and a stifling of private initiatives in business.

   So what is to be done? The government has introduced measures during the past 10 years, but they have been largely ineffectual. There has to be fundamental reform to restore confidence. This reform has to cover the procedures from the highest to the lowest levels – from Parliament and the judiciary down to public servants issuing licenses to prospective market stallholders.

   If corruption in Poland is to be tackled successfully, all levels of society have to get involved. Identifying the problem publicly will be a start. This would give people more confidence to speak out and provide important information on the nature and costs of corruption to society. Until then, the cancer will continue to eat away at the good work that has been achieved these past 10 years.