Snap Shot Czech Republic: A tale of working Eastern European democracy
Petr Nečas was elected as the prime minister of the Czech Republic in 2010. Having a reputation of “Mr. Clean,” he set the anti-corruption agenda as the main goal of his government. However, as a reformist leader within a party with strong ties to local godfathers, it’s not clear that his squeaky clean reputation holds up. In summer 2013, he was forced to resign due to a major corruption scandal, even though he still hasn’t been proven guilty. His case brought public attention to special interest groups behind the scenes who arguably use the government to control state-owned enterprises and public procurement.
Despite these allegations of corruption and recent debate of the issue, no hard evidence indicating policy capture in the Czech Republic has been published so far. With a new study from the Centre for Applied Economics, we aim to change that — we provide results showing serious conflicts of interest in the financing of all major Czech parties. How did we do that?
Our team gathered an extensive data set on Czech political party financing, cross-referenced donor lists with public procurement, European funds, and several other “red flags.” We originally did not aim to discover policy capture — we merely hoped to find some cases of possible conflict of interest, as the public money recipients would be “giving back” to political parties. The results, however, went beyond our expectations:
- 29.6 percent of all Czech public procurement winners (roughly 1,200 companies) directly donate money to political parties. Statistically, these donations help firms face lower average competition and get a larger volume of contracts.
- For 14 percent of all donations, the identity of the true donor is questionable, as these are shell companies, offshore companies or economically inactive subjects. Even non-existent companies and unborn children were listed among donors. (See table below.)
- Furthermore, there is an extreme culmination of donations just below the 50,000 CZK ($2,023 USD) limit, where the donor needs not be properly identified. (See table below)
Why has no one noticed?
We were first to gather such evidence, simply because the data on political donations were available only in paper form in the Czech parliamentary library. Occasionally, journalists revealed some cases of conflict of interest while studying these. We, however, took the effort to manually process all donation lists into own database, where we could combine them with other data that our NGO gathers (public procurement, offshore companies, etc.).
The previous lack of such evidence could also be a consequence of poor control mechanisms: The annual reports are only reviewed by auditors who are chosen by parties themselves and by the parliamentary committee, which performs only formal checks. Even the obvious flaws went through the control mechanisms undetected, such as donations from municipality-owned enterprises or non-existent firms and people.
Put it online?
We are far from claiming that all identified cases are truly problematic. Further investigation of individual cases is needed. It is, unfortunately, not in the capacity of a small NGO to examine all the data. According to our initial analysis, about 2,000 donations came from public procurement winners alone, possibly causing a conflict of interest for politicians deciding on public procurement outcomes. Thus we created PolitickeFinance.cz — a site that serves as a database of donations, enabling users to filter donations using various red flags related to the donors.
While doing so, we faced a ban from Czech Office for Personal Data Protection, which claimed that our activity violates the protection of personal rights and therefore is illegal. After consulting several lawyers, we decided to publish the data anyway — so far without consequences. We believe that public interest in transparency of political party financing should outweigh the need for personal protection and that will be our argument in a potential trial.
Our findings in much greater detail confirm the criticism made by GRECO — that transparency of Czech political party financing is unsatisfactory, and that independent control mechanisms need to be put in place. This year, a new law on political party financing should be passed; it has, however, been already postponed several times. We hope that our analysis will contribute to a fact-based discussion on real issues of party financing. Solving such issues might improve political stability of our country, and help us not to repeat case of Nečas.
We further hope that our study might serve as a good practice case for foreign NGOs aiming for similar goals. The linkage between party donations and procurement (or other public money) is possibly severe in many other young democracies.
Jiří Skuhrovec is an economist and programmer. He serves as the head of the Centre for Applied Economics, a Czech data-driven NGO at Charles University.
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