Department Seminar, Online Event
Title: COVID-19 emergency governance in Romania: New corruption equilibrium or a passing phenomenon?
Authors: Aly Abdou (Government Transparency Institute), Mihály Fazekas (Central European University), Bence Tóth (University College London)
Abstract: The COVID-19 pandemic has put extreme strain on the governance structures around healthcare supplies, delivery and management. To secure adequate supplies of critical inputs, national governments in Europe and the European Commission have relaxed the usual controls of corruption in public purchases for critical medical products. While flexible procurement was paramount in the beginning of the pandemic, the corresponding elevated corruption risks needed to be carefully managed if public money is to be used for saving lives instead of filling the pockets of corrupt elites. The difficulty of such a balancing act has been thoroughly exposed by numerous high-profile procurement corruption scandals linked to the pandemic from the UK through Germany to Romania. While the short term increases of corruption risks are expected, it is unclear to date if they represent a short-term deviation from the prevailing corruption equilibria or they result in a new norm of high corruption public spending.
Against this background, this research analyses the short to mid-term impacts of the COVID-19 state of emergency in Romania on corruption risks in public procurement. In Romania, like in other EU countries, the COVID-19 emergency was met with relaxed rules starting from March 2020 lowering corruption controls in selected sectors. We track 11 risk indicators from the literature on corruption risks in public procurement, such as a single bid submitted on an otherwise competitive market or the supplier registered in a tax haven, to capture the degree of restricted competition. We analyse more than 1.5 million government contracts in Romania throughout 2017-2021. We match contracts that are similar based on several characteristics before and after the COVID-19 emergency within the healthcare sector, and other sectors that are not expected to be affected by the health emergency, and estimate the risk increases attributable to the lax rules.
We find that the COVID-19 emergency increased corruption risks by around 80% both for COVID-19-related products and the broader healthcare sector. These increased risks are predominantly driven by relaxing rules such as transparency requirements designed to control corruption. We also document increases in corruption risks of non-COVID-19-related products, and non-healthcare sectors which suggest corruption risk spillovers. Furthermore, the risk levels do not converge back to pre-pandemic levels even several months after the emergency rules were introduced. Together, these results demonstrate the crucial importance of supranational (EU) as well as national institutional controls of corruption that balance out the adverse effects of emergency rules.