The reports of the Czech Counter-Intelligence Service (the Czech abbreviation is BIS) repeatedly hint at economic and corruption risks connected with the administration of state property. Public contracts have been repeatedly pointed out as the problematic area. For example the BIS annual report for 2010 states: “there have been failures of some of the
59 Estimate of ineffectively spent resources in public contracts in 2004. Prague: Transparency International – Czech Republic, 2007, available athttp://www.transparency.cz/doc/vz_odhad_neefektivity.pdf.
60
Pavel. J.and others. Odhad ekonomických ztrát ve zdravotnictví.Prague: Transparency International – Czech Republic, 2007, available athttp://www.transparency.cz/doc/tzdrav_studie02052007.pdf.
state representatives, who participated in transferring property out of state institutions. BIS identified non-standard and non-transparent behaviour of both competitors and the contracting authorities in tenders for state contracts. Frequent occurrences were the interconnection of the contracting authority and the public contract applicant, effort to award the public contract without a selection procedure, adjustment of tender documentation conditions in favour of a previously selected candidate, overestimation of the contract, influencing of the evaluation commission’s members or issuing contracts for unnecessary services. Economic interests of the state in case of various types of selection procedures were endangered also by mutual agreements of applicants about the price and the winner of the contract”.61
The environment of companies owned or partially owned by the state or municipality is considered exceptionally vulnerable to corruption. “A long-term phenomenon, which negatively influences these companies, is the relatively weak position of the owner, which makes it easier for the management to conduct inefficient activities. The management in some companies deliberately restricted the controlling and monitoring role of the state. They used e.g. inaccurate or incomplete information for the supervisory board, personal relationships between the management and representatives of auditory and regulatory bodies. The inconsistent role of the state as the owner is then the decisive factor providing a relatively large space for possible damages to state-controlled companies in favour of private subjects via manipulated public tenders, bypassing the Act on Public Contracts, overestimation of the acquisition value, disadvantageous sale of property or purchase of unnecessary marketing, advisory or legal services. Other risks were represented by unfavourably set contracts on providing services or property to other private subjects for their own business activities”.62
This critical view of the functioning of state and municipal companies with an insufficient ownership policy is confirmed by the analysis conducted by the Ecological Legal Service (EPS).63 This analysis states that 13 largest companies owned by the state or municipality had a total revenue of 299 billion CZK in 2010 (for comparison: non-mandatory expenses if the state budget were ca. 317 billion CZK in 2010). The total profit of these companies was ca. 40 billion CZK in 2011 (from that 34 bn. ČEZ). However, these companies received in the same year ca. 35 billion CZK in subsidies, so their profit was de facto only 5 billion CZK. The EPS study further states that the Act on Public Contracts is too benevolent towards sector contracting authorities and enables the state companies to issue the majority of public contracts freely and does not require them to publish almost no information about them. The total costs of external services and goods supplies of 15 largest contracts amounted to 350 billion CZK in the last four years – according to the Act on Public Contracts the companies only issued 169 billion CZK. Only token information can be found bout the unregistered billions. The major problem regarding transparency is the possibility to trade with companies with unclear ownership. As for the amount the risk is even bigger than in the case of state administration. While e.g. the largest anonymous supplier for the state administration was the EDH Holding, which in the last four years received 3.2 billion CZK, the Appian Company with anonymous ownership received at least 17 billion CZK from ČEZ and Czech Railways companies in recent years. Also according to the mentioned study, there is no state (neither municipal) ownership policy in the Czech Republic.
61
BIS Annual Report 2010, p. 3, available at: http://www.bis.cz/n/2011-09-07-vyrocni-zprava-2010.html#1. 62 Same source
63 EPS – Do the state and municipal companies need stricter rules? Available at: http://aa.ecn.cz/img_upload/a6fff2d4939ff74268dd80e1c2102b42/SOE_Informacni_podkladTISK_2.pdf , more information at: http://www.eps.cz/resime/tema/tunelovani-statnich-firem.
Out of 23 recommendations from the OECD regarding the administration of the state-owned companies64 the Czech Republic fulfills only 5 and only partially.
Conclusion:
The state and municipal companies represent in terms of the amount of abused public resources via corruption methods one of the riskiest sectors of the society. With just a few exceptions (new rules for appointments to the management of state companies, improving the competences of the Supreme Auditing Body) they were not paid sufficient attention within the existing Anti-Corruption Policy, the public control is limited and the influence of behind-the-scenes actors is significant.