FINAL REPORT The Integra Foundation - "Coping with Corruption ToolKit" Promoting Islands of Integrity: Measuring and encouraging the ability of Slovak SME's to resist corruption and do ethical business Bratislava, August 3 1, 2000 Award number: 193-A-00-99-00104-00 (previous award number: 193-0020-G-00-9104-00) Prepared by: Monika Benfoddova Allan Bussard The Integra Foundation MiSikova 28/B 81 1 06 Bratislava SLOVAKIA phone: +421 (07) 52444246-7 fax: +42 1 (07) 52494 184 e-mail: [email protected] web: www.integra.sk Project Activities from October 1,1999 to May 31,2000 1. Key parameters determination Based on consultation with specialist In discussion with the local branch of Transparency International (TI) In discussion with David Murray of Transparency International UK. In discussion with representatives of the Association of MicroFinance Institutions of Slovakia. (AMIS) and on the basis of specialized studies related to the theme of corruption we determinated 24 key parameters which were tracked in the course of the project. These were anticipated to revolve around the common issues of bribery, kickbacks, extortion, nepotism, influence peddling, collusion, etc. 2. Client Survey creation On the basis of the parameters determined above we compiled a questionaire. The survey contains 43 questions which can be divided into the following parts: personal attitude to corruption practices 0 practice / reality that entrepreneurs meet potential solutions to these problems This survey was created in order to determine the primary environmental issues - legislative, judicial, economic, social - that impact ethical business behavior in Slovakia and find out some possible methods which Slovak SME's can use to avoid corruption practices. Before finalization of this survey we met with representative of the Agency FOCUS Mr. DianiSka and with Mrs. Emilia Sicakova from TI. The purpose was to gain their professional advice related to the creation and use of the client survey. 3. Test Group creation: In order to have our test group big enough to receive objective results we contacted various SME and Microfinance agencies in Slovakia, and gained their co-operation in doing the client survey and creation of the test groups. List of contacted agencies is in Appendix 1.. Also we had presented the project at the meeting of the Board of the Association of Microfinance Institutions of Slovakia (AMIS). Not all of the addressed institutions were willing to cooperate or responded our challenge. Regarding our database, for purpose of this project we made selection of Integra past, current and potential clients who participated in the annual Integra regional training conference held in Piestany November 12-14, 1999 Here is the list of slected clients, members of test group: Client Company size Business activity Location (workers) Colegium Ltd. 6 Architects studio Bratislava ~aldirLtd. 4 Graphic design Bratislava studio ArtForum Ltd. Book Bratislava retail/wholesale I FBE Ltd. Management I Bratislava 1 consulting- I I Komrska Plumbing Plumbing Bratislava Runa Souvenir ~roduction Bratislava Folk Dkcor Handcrafts retail Bratislava Nay Ltd. Electronic goods Bratislava retail Tespol Ltd. Tyre service Michalovce Control systems Michalovce design Agroslutby Ltd. Garden Centre Michalovce FotoProfi Ltd. Photographers Liptovsk$ MikulaT; studio Sal6n Katka Wedding studio Levice Sajben Farms Ltd. Rabbit growers Levice K&UCdairv Dairy farm Humenni: Pila Rez Sawmill Martin Fanna Pamiru Rabbit growers Nitra MikroFond 20 women in Various Bratislava microenterprises Our test group met following criteria: Willingness to cooperate Industry - a balanced representation from retail, service and manufacturing sectors will be sought Location - representation from all regions of Slovakia is essential Size - for the purposes of this project, SME is defined as having less than 25 workers. The client survey was confidential. Total amount of surveys sent/delivered among entrepreneurs was 120. In the term demand we received and evaluated 56 answers. Mentioned respondents was clients of following microlending institutions: RPIC Zvolen (12), VOKA (1 I), Nadhcia Integra (1 I), PICPoprad (9), RPIC Povaiska Bystrica (8). Regarding geographic area, although in spite we tried to cover equally all areas of Slovakia respondents were mostly from banskobystricky region 35,7 % and we had no answers from trnavslj and ko8ick$ region. As for the legal form of the business companies which participated in the survey three of the addressed companies was joint-stock companies, 22 was limited liability companies and 30 of them were soleproprietorships. Regarding industry, in survey participated 23,7% representatives of manufacturing sector, 32,4% representatives of service sector, 43,7% representatives of retail. Regarding size of the firms most 82,1% had less than 30 workers the rest 14,3% had more. In effort to secure proper results we focussed mostly on competent responsible people owners of the firms, managers or deputies. 4. Test Group survey conducted Data was evaluated using statistical methods of SPSS software for Windows. But the results are not statisticly significant considering whole Slovakia especially owing to the size of the test group. It's more correct to speak of a sampling, rather than a survey. Even in that research participated mostly entrepreneurs which are clients of microlending institutions. It means that test group was group of developing businesses which are in the phase of dynamic growth struggleing for survive in a difficult environment. In spite of this, the authors of this material believe that also opinions of that strictly defined test group have significant value and it can tell us much about attitude of entrepreneurs to problem of corruption in Slovakia. For optimum tabulation of the results of the client survey we have consulted Dr. LukSik from Slovak Academy of Sciences. He recommended us to use Excel1 as a more convenient software tool than the originally planed Access. The main corruption problems faced by the businesses in the survey were (in priority): 1. vehicle registration process 2. firm registration process 3. carrying out place for busines 4. carrying out building permit 5. loan application process 6. contact with tax officials 7. speeding up of legal process 8. effort to win the public tender which was offered by state institution obtain subsidy or grant from state 9. effort to win the public tender which was offered by private organization 10, state trade inspection 11. obtaining of export and import licences 12. effort to win a state order One of the main task of the research was to identify if entrepreneurs in Slovakia know any usefbll anticorruption strategy. These are some answers to the following question: "What can be, in your opinion an anticorruption strategy?" 20,8 % replied "I do not know" the rest of the test group responded: 18,8 % transparent legislation l2,5 % punishment of trespasser 10,4 % act according to your own conscience 14,6 % respect the law 6,3 % control 4,2 % education 4,2 % breaking of byrocracy 6,3 % medialization 2,l % develop a real and healthy competitive environment and market 5. Global practice awareness Part of the project was to conduct research within the international network of Transparency International to determine whether programs to assist SMEs face corruption exist elsewhere in the world. This research was conducted by Mr. David Murray, a leading Business Ethics consultant from Britain and member of the UK Advisory Board of Transparency nternational. The research revealed no substantial anti-corruption programs that had microenterprise or SMEs as a focus. Anti-corruption programs tend to focus instead on the public sector or large- scale enterprise. The results of Mr. Murray's survey are presented in Appendix 2.. 6. Case studies collection Assembly of evidence of measures taken by small businesses to counter corruption in their business environment and of experiences they have. Six case studies were written, based on the most common corruption-related problems faced by Slovak SME's. These are included in the Appendix 3.. 7. Draft toolkit design An initial toolkit was produced. The toolkit serves as a training material and is designed to initiate a discussion on the corruption issue, and to determine what strategies are being used to avoid corruption. First page contains introduction and suggestions how to use this material. Then there are six case studies each on different corruption situation, based on reality and collected while working with our clients. At the end of each story there are questions which should provoke a discussion regarding solution of described problem. On the basis of the results gained from discussions we prepared manual ,,Coping with Corruption Toolkit". 8. Toolkit test The experience of entrepreneurs, results of the survey and testing initial toolkit material became a main theme of the Integra Foundation annual conference held in May 19-21, 2000 in Moravany nad Vahom. Altogether 21 small business owners, diverse as to business size and type, from all regions of Slovakia and from abroad took part in the two halfday workshops. An important part of this initial toolkit material were case studies which presented a dilemma regarding various corruption practices. Main aim of this workshops was to stimulate a valuable discussion leading toward conclusions containing some strategies and tools how to solve discribed situations. Case study method allowed adequate anonymity to stimulate a free