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News | Sunday, 22 November 2009

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Perceiving corruption: conspiracy, or cock-up?

Does Transparency International’s ranking of Malta in its corruption index reveal the true extent of bribery and corrupt practices on the island? By MATTHEW VELLA

Transparency International’s (TI) corruption perceptions index, an annual corruption ranking of 180 countries, was published this week and gave Malta an average 5.2 score, but dropped it nine places down the corruption index from last year to number 45. Italy was placed at number 63, alongside Saudi Arabia – not nice to be ranked alongside one of the most undemocratic regimes of the world.
How to judge the vector of Malta’s corruption ranking?
In certain cases, political masters have in the past chosen to direct alleged criminal cases to inquiries by retired judges instead of allowing a proper magisterial case to take place. An example of this was the Safi riot of 2005 which quashed a silent protest by detained asylum seekers. Recent bribery scandals revealed a slew of licences being issued against illicit payment by civil servants, such as the maritime licences or VAT fraud case. And even more recent reports on the conduct of certain government ministers, do little to nurture the public’s trust in the political class.
On the other hand, the Maltese government has made some positive leaps in strengthening transparency and governance, with a Freedom of Information Act and soon a legislation to protect whistleblowers. It also recently enacted higher penalties for trading in influence charges.
There is just one problem to what the Corruption Perceptions Index says about Malta: we do not know exactly how it was compiled or who it represents.
Senior researcher at TI Juanita Riaño says Malta’s score was built on four surveys: the Country Risk Service, and Country Forecast 2009 by the Economist Intelligence Unit, which strangely enough are not even available on the Economist website (do they even exist? Only the Country Report is available for Malta); the Global Risk Service 2009 by IHS Global Insight; and the Global Competitiveness Report by the World Economic Forum 2008 and 2009. Riaño says these institutions donate their data free of charge to TI, and do not allow its disclosure.
Since the IHS risk report is only available to subscribers, what remains is the WEF’s competitiveness report which actually does not rate Malta badly. The Malta assessment is led by the Competitive Malta foundation, whose president is Fimbank’s Margrith Lutschg-Emmenegger. Another Fimbank director, John C. Grech of EMCS, is the foundation’s founding president.
The WEF’s Global Competitiveness Report bases its indicators on 15 factors to which respondents choose the five most problematic for doing business. In 2009, the top five most problematic were: inefficient government bureaucracy (23.7% of responses), access to financing (12.2%), inadequate supply of infrastructure and tax rates (jointly 9.9%), and restrictive labour laws (9.7%).
Corruption ranked at number 10 with 3.3% of responses: a fanciful perception, or the observations of the few who had been undercut by corrupt practices?
Additionally, the WEF report gave positive rankings to specific indicators for Malta when it came to the ethical behaviour of companies, the transparency of government legislation, and public trust in politicians.
The IHS Global Insight Report measures “immediate risk events” for a 12-month period on various indicators: fiscal, inflation, banking, pricing, and political risks (coups, institutional failure, terrorism, violence and unrest).

Whose perception?
As the TI blog says, the results of the index are, as every year, “sobering. No region or country in the world is immune to the damages of corruption, as the vast majority of them score below 5.”
Malta’s score of 5.2 put it behind Macao but ahead of EU member states Hungary, Poland, the Czech Republic, Lithuania, Latvia and Italy. Worryingly, it slipped to 45th place from 36 last year and 33 the year before and now ranks 20th in the 30-country region incorporating Europe.
Like the role of the press, the index has the critical role of bringing the world’s attention to the issue of corruption. The TI calls it “branding corruption on the world’s conscience.”
The same might be said of so many issues assiduously reported by MaltaToday but conveniently ignored by other sections of the press: conflicts of interest, political appointments, planning decisions, openness, good governance and accountability… all these issues form part of the gamut that contributes to perceptions of how corrupt citizens feel their country is.
Malta does not feature in the Bribe Payers Index, which TI carried out with senior business executives from companies in 22 economic powerhouses. But the patterns of bribery are familiar enough. Russian companies are the most likely to bribe high-level politicians and low-level public officials. Mexican companies are most likely to use personal and family networks to win public contracts. Indian companies are most likely to bribe low-level public officials to speed things up.
Whichever way you look at it, anyone can see a little piece of Malta in these familiar patterns. To a large extent, the cynics would like to think politicians are easily corruptible. But experience has showed us it is ministerial underlings, and people inside the public sector that are more likely to be corrupt – as the VAT case clearly proves. It was easier for the pen-pushers inside the VAT department to create a modus operandi for the bribe-payers and tax-evaders, than to concoct a grand conspiracy reaching up to the higher circles of government.
The same goes for the health minister’s aide, Thomas Woods, who in 2007 was arrested on charges of corruption in the award of invalidity pensions, by using an elderly woman to receive rewards in the form of meat, fish, rabbits and wine.
Take the Maltese planning process. The MEPA audit officer has revealed countless instances of irregular permits being issued for mega-developments on land that was not scheduled for development, usually against the recommendation of case-officers. The development control commission resigned en masse over the irregularly issued permit for the Lidl supermarket in Safi. There is no doubt that Lawrence Gonzi had to personally take MEPA under his wing as a last-ditch effort to clinch electoral support, because of the sterling work of Joe Falzon in investigating and uncovering so many irregular decisions.
But Malta is a small community, and personal connections go a long way. MEPA’s ‘liaison officer’ was Lawrence Vassallo, seconded there from the private secretariat of the former environment minister, George Pullicino, to serve as an information channel between the authority and the government. Vassallo’s wife was a secretary for the then MEPA chairman Andrew Calleja. And both Calleja and Pullicino had holidayed together. Familiar links like these vitiate the operations of regulatory authorities that are expected to be objective and non-political. In the eyes of citizens, they are links that damage the impartiality of authorities and cement the perception of politicians’ proximity to the decision-making process which directly affect interests of party donors or big business.
Even the Lidl cases – one permit of which was declared irregular, and another currently being investigated – raise the question of whether the government or its authorities is accommodating with large employers like Charles Polidano, the developer behind the supermarkets. When someone like the MEPA audit officer finds himself publicly denigrated over his outspokenness on the way planning permits are issued, it is no wonder that other decision-makers prefer to be subservient towards their political masters and big business.
The anthropologist Paul Sant-Cassia once told me in an interview that the Maltese tend to make a conspiracy out of a cock-up. But again, this bad habit of ours to cry wolf is easily nurtured by the vast networks of power and influence, of politics and business.
Conflicts of interest in Malta have become a natural occurrence thanks to the government’s dictum that they don’t necessarily constitute a breach of ethics. Many friendly entrepreneurs and party-men get handpicked by politicians to take control of government authorities and corporations. Austin Walker, the MEPA chairman, is an old chum of Gonzi’s (no conflict of interest, but Walker is not a civil servant); Joe Fenech Conti, chosen by Austin Gatt to chair the Public Broadcasting Services, and then to sit on the board that determines the location of speed cameras, declared his conflict of interest because his company Datatrak actually processed the data from the speed camera fines; Alex Tranter, the chairman of Enemalta, declared his conflict of interest in the Delimara power station extension, because of his association with an interested party, former Nationalist mayor and mega-developer Nazzareno Vassallo, and rightly sat out of all decision-making on the Delimara tender. In the words of Austin Gatt himself, “any actual, perceived or potential conflict of interest is not a breach of the code of ethics for ministry directors” unless it benefits the interest of another party, other than that of the public entity in question.
And it is not just the government’s apparent nonchalance that fuels such ‘harmless’ conflicts of interest. It is borne out of the way the Maltese do business. Labour MP Charles Mangion was the notary who drew up the paperwork in the €24 million sale of public land at Pender Place, while Alfred Sant had been criticising the sale and conjuring up which “fat cat” would be cashing in on the land (I’d be loathe not to mention that Mangion is perhaps the only minister to have resigned from office after failing to follow correct procedures in recommending that a drug offender be released from prison before his sentence had been fully served – but he later went on record stating he was “too harsh” on himself). Charles Buhagiar, as shadow minister for roads, landed a €80,000 contract for construction management services on the much-criticised roadworks at Mgarr Road in Ghajnsielem: a project that had been turned into an Opposition battlecry because of delays and cost overruns.

Conspiracy or cock-up?
As Transparency International says, corruption is difficult to measure, because it is complex and secretive, making it virtually impossible to quantify. In African countries, the visible cost of corruption is seen in the haunting poverty of so many of its nations.
The price paid in Malta is of another type: environmental degradation perhaps is foremost. It is the same old chestnut that plagued Malta in the 1980s when planning permits were directly regulated by works minister Lorry Sant; even now, the completely irregular permits issued by the DCC continues to confirm reports that the decision-making process cannot be trusted.
But there is also the invisible accumulation of personal wealth that comes from government contracts, whose ultimate victim is always the taxpayer. Such as the case of the direct order issued by none other than the Office of the Prime Minister, under whom the Foundation for Medical Services fell, when it extended €2 million in security and cleaning contracts at Mater Dei to private company G4S – with no public tender issued. It is easy then, for common mortals to come down to the conclusion that it pays to be on the government’s good books. It simply pays.
It is for this reason that finance minister Tonio Fenech and Lawrence Gonzi are facing flak over their disregard of the government ministers’ code of ethics. Fenech’s freebie trip to watch Arsenal play with entrepreneurs Joe Gasan and George Fenech sealed his fate by being perceived to be “too close” to the men who need the government’s benevolence to carry out their multi-million projects. Making matters worse now is the revelation that Gasan and Fenech were presenting their plans for the redevelopment of the Jerma hotel to Gonzi, while the owners of the Jerma – JPM Brothers – were carrying out renovation works inside Tonio Fenech’s residence.
Is it another conspiracy? Surely a cock-up. A massive one. This country is full of them.

 


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