Governance and accountability: rhetoric and reality

The Polyviou Report on Mari-Vassilikos
The report by Polis Polyviou on the Mari-Vassilikos disaster of 11 July 2011 included 13 substantive recommendations to prevent a similar occurrence, ten of which relate to structural, relationship and procedural issues within and between a variety of government ministries, public services and functions. Of the other three, recommendation 5 is that the government should review and strengthen its whole crisis management response system for major incidents, whether coming under the EU Major Hazards (‘Seveso’) Directive or not. Recommendation 7 demanded the establishment of an Independent Commission Against Corruption, presumably styled on the ICAC in Hong Kong. Recommendation 12 demanded both manpower cuts to the public services and a radical change to their culture: means ‘should be created to consolidate the conditions that will encourage initiative, willingness, the awareness and responsibility of servicing the public interest, beyond any other personal or partisan or extraneous element or factor’.
The report was highly critical of the Christofias government [ ]. However, without public statements about the recommendations and their implementation, by the time the new government [ ] came into office in March 2013, many people inferred that the whole report had been quietly buried. That perception remains as the new government has not indicated any intent to implement recommendations 5 and 7, for example. The one possible exception is recommendation 12, which Mr Anastassiades has personally backed with much public rhetoric, no doubt because he had no alternative with the bailout conditions demanding something similar (but see below).
So, to what extent have the Polyviou recommendations been implemented? What is the reality vs. the rhetoric? When I asked recently an audience of some 60 senior representatives to the Cyprus Safety Platform, largely from government departments, public services and state-owned companies, if they could confirm the extent of implementation, not a single person was able to enlighten us. Indeed, some suggested that it was probably nil and many agreed that, if there had been any implementation of substance, the government (former or current) would have been the first to seek political and public approval benefits by ensuring maximum publicity.
This apparent neglect of the Polyviou report, especially the substance relating to major hazards per se, does not inspire confidence that there are no other such disasters ‘waiting to happen’ in Cyprus. Will the individual and collective operations for the new LNG terminal, the Vittol plant and the rebuilt power station at Mari be fully compliant with the prevention and mitigation requirements of the Seveso II Directive, for example? Who is ensuring that with each of them the ‘domino’ risks meet the ALARP (As Low As Reasonably Practical) criteria? Are there sufficient expert resources in the relevant regulatory enforcement functions to evaluate compliance?

The Banks
Much has been written about the demise of the Laiki/Cyprus Popular Bank and Bank of Cyprus. Evidence from bank officials submitted thus far to the government’s committee of inquiry into the crisis of the two main banks suggests serious embedded malfeasance at the banks on a range of issues on a long-term basis: corrupt relationships, undue political influence, cronyism, abuse of office, improper massive loans to directors, lack of due diligence and generally poor governance and risk management.
Then there is the whole issue of the consequences of the EU bailout. Quite apart from the huge losses suffered by investors and account holders beyond the €100k protection limit and the destruction of public confidence in the banks as a whole, for weeks and now months the world has been privileged to witness the on-going soap opera of BoC taking on thousands of defunct but costly Laiki employees at the behest of overbearing banking trade unions. The Troika memorandum required Laiki’s own financial assets and debts to be transferred to BoC, not the Laiki staff and the debts of their provident fund! Bank staff are thus still being encouraged to believe that somehow they are not ordinary mortals subject to the inevitable consequences of, in many cases, their own long-term selfishness. Overall, many bank employees apparently see themselves as superior beings who are entitled to a job for life, endless benefits at the expense of account holders, investors, shareholders and the taxpayer and having no accountability for anything. Their contribution to the banks’ failures must, on the contrary, surely be rewarded! Redundancy at statutory compensation rates is for lesser mortals in other sectors.
The ‘reward for failure’ culture in the banks is not confined to Cyprus. Such has been the national scandal of ‘bonus and pension rewards for failure’ in the UK finance sector, for example, that the UK government has been forced to address it firmly in the face of public pressure. Inappropriate bonus levels and exit payments for bank employees, even in those banks that had already suffered huge failures, will be curbed and capped. In addition, the Commission on Banking Standards has now recommended that senior bankers should face criminal charges with jail sentences and loss of bonuses if they are involved recklessly in a future banking collapse. In future, bonuses will also be deferred for up to ten years so as to encourage greater personal responsibility.
Is there any likelihood that senior bankers in Cyprus will ever face similar curbs and criminal sanctions? Perhaps the new ‘post-haircut’ involuntary shareholders of BoC will lead a shareholder revolt at the AGM and threaten to oust the new board unless they act more robustly against absurd demands from the unions and get on with the urgent task of boosting the bank’s share values.

The Public Sector
‘The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed, lest Rome will become bankrupt. People must again learn to work instead of living on public assistance.’ (Cicero, 55 BC).
This ancient reference to the arrogance of officialdom was mirrored in what the Polyviou Report had to say in Chapter 11 about the public sector where ‘most positions are held by persons not on value but on partisan criteria and usually characterised by neglect and inadequacy with no proper accountability or penalty’. President Anastassiades has made several public statements stressing his determination not only to cut the over-bloated public sector headcount (as demanded by the Troika) but also to embed a new culture of honesty, integrity and transparency throughout the public sector. Fine words indeed but when will we start to see substantive evidence of their actual implementation? And how does he square, on the one hand, his earlier righteous rhetoric with his increasingly populist speeches telling the public sector their jobs are safe? Cyprus Airways, that horrible parody of good governance, is still there untouched and withering on the vine. CYTA and EAC continue over-bloated and untouched, with the most expensive public services in the EU. Time, surely, for the President to stop pandering to the public sector while treating the rest of the population as second class citizens. Cue also for the new Cyprus Governance Charter initiative which is currently being promoted.