Corruption up as Latvia slips in transparency ratings (News Feature)

By Mike Collier Nov 17, 2009, 15:04 GMT

Riga - Latvia is struggling to cope with two epidemics at once. While a growing number of swine flu cases is an immediate cause of concern, the Baltic state is battling a more deep-rooted problem - corruption - a non-profit organization reported Tuesday.

According to the annual report by anti-corruption watchdog Transparency International (TI), Latvia shares 56th place among 180 countries for its levels of corruption, along with Malaysia, Namibia, Samoa and fellow-EU member state Slovakia. Last year it ranked 52nd.

'This result indicates a serious corruption problem in the country,' said Laura Mikelsone, director of Delna, the Latvian chapter of Berlin-based TI, at a news conference. She added that the current economic problems 'are to a large extent rooted in corruption.'

Latvia's is not the worst rating in the European Union. Greece, Bulgaria, Italy and Romania all managed lower ratings.

But the fact that Latvia's rating dropped to a level it last had in 2002 suggests that efforts to clean up bureaucracy and business have been sent into reverse by the sharpest economic recession in the EU.

Zaneta Jaunzeme-Grende of the Latvian Chamber of Commerce told the German Press Agency dpa the economic crisis was exacerbating the problems faced by her members, noting there had been a doubling in the level of 'kickbacks' expected to win major contracts.

Other common forms of corruption cited by TI include misuse of EU funds, and tax evasion, whereby employees get paid a minimum wage officially and the remainder in envelopes of undeclared cash.

Juta Strike, a representative of the Latvia's anti-corruption agency, KNAB, also spoke at the news conference. KNAB is trying to persuade government ministers to sign up to a new code of ethics that would require them to declare information about their and their families' economic interests.

But the case that has shocked the entire nation concerns allegations that contractors and senior management of the main Riga Children's Hospital embezzled hundreds of thousands of euros intended for renovation of the dilapidated hospital buildings.

Raids by KNAB earlier this month uncovered 700,000 lats (1 million euros) in various currencies at addresses owned by five people.

The charity Liele, which has raised thousands of euros for the hospital from voluntary donations, summed up the mood of stunned outrage in its response to news of the raids.

'We are astonished that at the same time mothers are forced to buy their own thermometers to measure the temperature of their babies, a search of hospital managers uncovers 700,000 lats in cash,' said a statement issued by the charity.

All this is taking place against the background of a murky power struggle at the heart of Latvian politics. Aivars Lisenko, one of the senior hospital executives arrested in connection with the children's hospital scandal, had donated large sums to one of Latvia's leading political parties.

A trio of high-profile 'oligarchs' exerting huge influence in business and politics have declared that they would like to be Latvia's next prime minister and have a realistic hope of achieving that goal thanks to their control of parties.

Efforts to reform public administration have been launched but are meeting stiff resistance. This is in evidence in the bitter conflict between Finance Minister Einars Repse and Dzintars Jakans, the suspended head of the State Revenue Service, whom Repse accuses of deliberately frustrating his efforts to overhaul Latvia's inefficient tax collection regime.