Analysts say a World Bank report on governance is a black mark against Cyprus which needs to tackle corruption if it is to attract institutional investors.
World Bank governance indicators sees Cyprus losing ground on five out of six categories verifying a feeling among Cypriots that there is institutional corrosion.
Cyprus has slipped behind on indicators regarding control on corruption, the rule of law, government effectiveness, regulatory quality and political stability in 2017.
Cyprus exhibited some progress – in the report published every five years – on the voice and accountability indicator, reaching the levels it was at 10 years ago.
The values of the World Bank’s six indicators are identified via a survey, which takes into consideration the answers given by citizens and national institutions dealing with social and economic development of a country.
The final value of each indicator is derived from the synthesis of the responses to surveys of specialist opinion polls or large research institutes. The final values are between -2.5 and 2.5.
That means the higher the value of the indicator, the higher the confidence of the public towards the specific area of governance in their country.
One of the most striking findings of the survey is the public finds that authorities are performing worse than in previous years when it comes to control on corruption. In the fight against corruption, the Cyprus rating fell to 0.78 from 1.25 in 2012 and 1.08 in 2007.
Cypriots gave the government a lower grade regarding its effectiveness as it dropped to 0.92 from 1.39 in 2012 and 1.43 in 2007.
A disquieting find of the World Bank's survey is that the rule of law in Cyprus is showing a significant decline, from 1.12 in 2007 to 1.10 in 2012 and 0.88 in 2017.
Cyprus has also recorded a small drop in the Regulatory Quality indicator.
Vested interests go unchecked
Speaking on behalf of the Fiscal Council, the president of the body Demetris Georgiades told the Financial Mirror it is only natural that citizens would feel that there is institutional corrosion.
When the citizen sees that in simple matters there is no progress with politicians creating and pointing at alleged obstacles, of course, they will show disbelief and discredit institutions and officials.
Georgiades said that problems identified by the indicators are known to all and have been pointed out numerous times by other relevant indicators and reports made by other organisations.
“We do not need these reports to tell us that these issues exist. It is something we experience in our everyday life,” said Georgiades.
Unfortunately, he said, not much is being done to improve the situation, while the indicators will be forgotten after a few days.
“The biggest challenge facing our society is our own refusal to face our problems, to reform, to influence the interests of status quos, to change the balances even though they may be outrageously absurd.”
Georgiades considers the case of pension system reform as an example, an issue, as he said, for which there are no ideological differences and for which almost everyone should agree.
“However, because we do not want to touch some of the interests, that is, the power that employers and trade unionists who are managing the fund, the power enjoyed by the supervisor, the sense of security of the employees who fear change, we are preventing the reform from going ahead,” said Georgiades.
He added: “The result is that savings have been mismanaged for years with losses of hundreds of millions, corruption is booming, and we are currently very close to leaving a generation without sufficient retirement funds.”
This is only one area where a conflict of interests goes unchecked, said Georgiades.
“One can only imagine what is happening with more important issues where there are stronger conflicting interests and more corruption, such as health, education and justice…”.
Side effects
Talking on the effects that such reports have on Cyprus, Chris Savva, a financial analyst managing one of the country’s biggest pension funds, said this development will pose another obstacle in Cyprus’ effort to attract investment.
“We should be concentrating on drawing institutional money from infrastructure and pension funds. In order to be able to do so you need to have a good governance,” said Savva.
The financial analyst said that institutional investors are not only put off by the lack of control on corruption, as indicated by the World Bank, but also by weaknesses in the rule of law.
He argued that investors fear that if they find themselves in a legal dispute, the Cyprus legal system will not only take a few years to deal with the case, there will also be gaps in the law.
“Regrettably, most of our efforts seem to be towards attracting individual and smaller investors, thus not paying attention to bettering our records when it comes to governance,” said Savva.
