The Annual Forecast and Analysis report – Romania 2016

CapWhat lessons can we draw from the tumultuous year 2015? In the Annual Forecast and Analysis report – Romania 2016, SAR draws a series of conclusions regarding the apparent progress that Romania registered regarding control of corruption and economic growth.

The three chapters analyze the current situation and Romania’s progress over the past few years with regard to:
– Economic growth (and the forecasts for the next few years)
– Public integrity (or the state’s capacity to control corruption)
– Public procurement, focusing on state and agency capture by private firms through particularist ties

The full report can be read here.

The executive summary (in English) can be read here.

I.    Romania has concluded its third successive year of fast economic growth and, if 2016 confirms this trend, it will be the first time that growth won’t come as a surprise. Several analysts interviewed by SAR point towards a 4% GDP growth this year. Challenges are high, with elections on the way and global economic turmoil looming. The outcome of the next few years will also depend on whether the government decides to go on with the tax cuts and minimum wages hikes, a policy that worked so far, or to have a more conservative approach. Either way, although technically fit for the Euro, enthusiasm is so low that the question is again not when Romania may join, but rather if it ever will.

II.    Romania achieved significant milestones in fighting corruption as well as regarding public integrity, but is still vulnerable to several common misunderstandings: that punitive measures are enough to reduce corruption; that over-regulation of campaign financing will eliminate political corruption; that public institution could ever become efficient without transparency or open data.

Romania is still far from the European average in terms of public integrity and is still one of the most corrupt EU countries. Improvement can not be achieved solely by punishment or over-regulation, as proven by the lack of correlation so far. The best improvement of indices came as a result of administrative, not judicial change. Therefore, the focus should change from fighting to preventing abuse: more transparency in public spending or campaign financing, more public services that are available online and bringing in more user for such services.

III.    The improvement in public infrastructure has been a top objective in public policy for the last 25 years. Unfortunately, although much was spent between 2007 and 2013, output didn’t match expenditure, the main reason being favoritism. This analysis will try to measure the extent to which contracts are granted either competitively or discretionary.

Data collected between 2007 and 2013 shows that 37% of contracts were granted either to single-bidders or politically connected companies. Single-bidder auctions were more common in state funded projects then in those sponsored by the EU. One in seven contracts was granted to companies who made private donations to political entities. However, there is a slight downward trend in favoritism in the latter years.