The 1.5 billion USD feeding corruption

The 1.5 billion USD feeding corruption
This article has been written for Albanian Free Press newspaper and www.afp.al

By Eduard Zaloshnja

Corruption is fed in two ways.

First of all, through taxes and customs. Businesses pay bribes in order not to pay what they should really pay. This way, the pockets of corrupt officials and corrupt business people are filled, while the state’s treasury (where public money are kept) is not filled as it should do. Then, the public is told that it is impossible to increase pensions and salaries significantly.

Secondly, once that inadequate amount of money goes into the state treasury and spent inappropriately, a part of them fills the pockets of corrupt officials and corrupt business people, through tenders, concessions and private services for the state.

But, how much money is collected by Albanian corruption through these two sources?

In order to make an approximate estimation of the first source, we need to make a comparison between Albania’s fiscal performance and Montenegro’s fiscal performance. (With the northern neighbor we share many similar things–geography, history, culture, economy, fiscal system and politics–as a result, we must also have a similar fiscal performance). Meanwhile, as far as the second source is concerned, we need to look into a study conducted by the World Bank on developing countries, where Albania is part of.

For the 2018 budget, Albanian authorities are projecting revenues amounting to 4.5 billion USD or 27.5% of the Gross Domestic Product (GDP). Meanwhile, Montenegro’s budget projects amounting to 34% of GDP. If our fiscal performance was the same as Montenegro’s fiscal performance, 1 billion USD more than projected would go into the state treasury.

Now, let us see what will happen with the 4.5 billion USD which will enter the state treasury (which in fact should amount to 5.5 billion USD).

According to a study of the World Bank, on average, 11% of the state budget money of developing countries (where Albania is included), goes in the pockets of corrupt officials and corrupt business people. So, in a 100 million USD tender, on average, 11 million go to officials who organize the tender, the middleman and the businessman who wins the tender.

If Albania stands in the average evaluated by the World Bank (we could be higher or lower), then 500 million USD (out of the budget’s 4.5 billion USD) will end up in the pockets of officials, middlemen and businessmen who win the tenders and government contracts.

Then, after analyzing the two sources above, next year, corruption will absorb around 1 and a half billion USD in Albania.

For comparison, with the half of the money going for corruption next year, authorities can fund all the works needed to prevent floods which happen every year (According to a study of the World Bank, 720 million USD are needed to repair/strengthen dams, embankments, water collectors, drainage canals and to plant trees in water collecting areas around rivers).

With the money going toward corruption next year, authorities in the country can pay for the construction of all the roads projected to be built until 2020.

The amount that the 2018 budget is allocating for the increase of pensions (pensioners will receive on average an increase of 3 USD a month) is 18 million USD

The amount that the 2018 budget is allocating for compensation of former political dissidents and their descendants is 18 million USD.

Comparisons can continue for other needs that the country has too.

The analysis above only refers to 2018, but it would, more or less, produce the same results even if it would refer to the year 2008. That year, the Albanian state budget’s revenues amounted to 26.9% of GDP, while revenues in Montenegro amounted to 34.5% of GDP. Meanwhile, abuses with tenders, concessions and government contracts was, in 2008, similar to developing countries, which were subject of the World Bank’s abovementioned study.

Note: The views expressed in this article are the author's own and do not necessarily reflect Albanian Free Press’ editorial policy

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