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  • Corruption in the Central Asian Countries

    01.08.2016 | Comments | 499 Daniyar Nurbayev

    Today corruption is widely accepted as a threat for social-economic development in all countries. There are various reasons for this belief. Firstly, instance, corruption decreases public revenues due to low efficiency in taxes and other public revenues collection and willingness of households to go underground. With low public revenues, the governments are unable to be effective, and to invest in social areas (such as property rights, law enforcement, control of corruption, health, education etc.), which further deteriorate the current situation, and in productivity-enhancing areas, which deteriorate economic development. Secondly, corruption creates obstacles for entrepreneurship and innovation. In a highly corrupted environment, it is difficult to open and maintain their businesses for the entrepreneurs. High corruption creates bureaucratic obstacles and imposes an additional financial cost for entrepreneurs. Thirdly, as it was noted above corruption decreases social investments, therefore it violates the protection of property right protection and law enforcement. Thus, under a low level of protection of property rights and law enforcement, an organized crime can start to flourish.

    Despite the importance of low corruption, there is myriad of countries, which have a high level of corruption. The former Soviet Union countries and most of the African, Asian and Latin American countries suffer from high corruption. Thus, there is a huge literature, which attempts to investigate corruption in these countries, and explain why these countries have high level of corruption. Mauro (1996), Gyimah-Brempong (2001), Johnson et al. (2011), Dobson and Andres (2012) have studied on seminal works, which investigate the relationship between corruption and socio-economic development.

    Due to the importance of corruption, in this study we analyze corruption in the Central Asian countries, namely in Kazakhstan, Kyrgyzstan, and Uzbekistan. These countries are the former Soviet Union countries (FSU), and as it is common for all transition countries, they suffer from high corruption. These countries suffered from corruption from the early beginning of their independence. According to Kaufman and Siegelbaum (1996), the FSU, after gaining their independence, started to implement national privatization policies, where the governments sold the national property to their citizens. However, the national privatization policy falls apart and most of the sold properties went to elites, not to ordinary citizens due to corruption schemes. 

    We investigated corruption in these countries by using different corruption indices. It is important to note that measuring corruption level in an accurate way is almost impossible. The indices used in this work are measured by population’s and expert’s survey.  

    The first index we employed in this research is Control of Corruption Index in the World Bank's Worldwide Governance Indicators. This index covers all three countries from 1996 to 2014[1]. This index is calculated by aggregating different corruption indexes, different surveys of households and firms and data from commercial business information providers. We can see that the higher the index, the lower corruption.

    Figure 1: Control of Corruption

    Source: World Bank's Worldwide Governance Indicators

    In Figure 1, we can see World Bank’s Control of Corruption index for three Central Asian countries. Figure 1 shows that Kazakhstan and Uzbekistan had almost similar level of corruption, while Kyrgyzstan had significantly higher level in 1996. However, since the beginning of 2000’s corruption in Kyrgyzstan started to grow and reached the level of Kazakhstan and Uzbekistan. Interestingly, Kazakhstan managed to decrease the level of corruption, while Kyrgyzstan and Uzbekistan failed to achieve. Despite the fact that Kazakhstan decreased its corruption level, it is still at 155th out of 215 countries, while Kyrgyzstan and Uzbekistan ranked at 185 and 186 respectively.

    The next index is the Heritage Foundation’s Freedom from corruption index. The index also provides data for all these countries between 1998 and 2014. Here, again the higher the value of the index, the lower the corruption.

    Figure 2: Freedom from corruption

    Source: The Heritage Foundation

    The data from this index look similar to the World Bank’s control of corruption index. Similarly, in the end of 1990s Kyrgyzstan had a lower level of corruption, while Uzbekistan and Kazakhstan were significantly higher. Since then Kazakhstan improved its corruption level, while Uzbekistan and Kyrgyzstan failed. According to the index, Kazakhstan ranked 129th out of 186, while Kyrgyzstan and Uzbekistan ranked 166 and 179 respectively.

    With these two indexes, we observed that these three countries have high level of corruption. However, Kazakhstan dealt best with corruption for the last 15 years, while two other countries, especially Kyrgyzstan, increased corruption level in the period. It is important to note that the correlation between these two indexes is 91%, which shows consistency among indexes.

    In this research, we show the corruption level in three Central Asian countries. In further researches, it is important to investigate the determinants of such high corruption level in the Central Asian countries, to be able to provide concrete policy implications. In addition, it is also important to investigate the relationship between corruption level and socio-economic development in these countries. Because in this region, corruption level may not have significant effect on economic development, due to its cultural specialty.


    References.

    World Bank's Worldwide Governance Indicators  http://databank.worldbank.org/data/reports.aspx?source=worldwide-governance-indicators#

    Heritage foundation’s Freedom from corruption index http://www.heritage.org/index/explore?view=by-region-country-year

    Paolo Mauro (1995), Corruption and Growth, The Quarterly Journal of Economics, Vol. 110, No. 3

    Noel D. Johnson, Courtney L. LaFountain and Steven Yamarik (2011), Corruption is bad for growth (even in the United States), Public Choice, Vol. 147, No. ¾

    Kwabena Gyimah-Brempong (2001), Corruption, economic growth, and income inequality in Africa,  Economics of Governance, 3, 183–209


    [1] Between 1996-2002 they World bank published bi-annual data


    Note: The views expressed in this blog are the author's own and do not necessarily reflect the Institute's editorial policy.

    Tags: Central Asia, Corruption, Economy

Author

  • Junior Research Fellow

    Daniyar Nurbayev

    Daniyar Nurbayev is a research fellow at the Eurasian Research Institute. Daniyar completed his bachelor’s degree in Finance in the Kazakh-British Technical University in 2013. In addition, he holds Masters degree in Finance from the Kazakh-British Technical University (2015).