Research Article
NEXUS BETWEEN CORRUPTION AND SMUGGLING: COMPARATIVE ANALYSIS AMONG EAST EUROPE COUNTRIES
Rita Remeikiene*, Lithuania Ligita Gaspareniene, Viktoras Chadysas
Corresponding Author: Rita Remeikiene, Mykolas Romeris University, Lithuania
Received: 24 March 2020; Revised: 22 April 2020; Accepted: June 27, 2020
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Corruption reduces tax revenues because it undermines the government's ability to collect taxes and has a negative impact on the overall economic development of the country, foreign direct investment and investment in general. One of the main reasons for the rooting of corruption is the low salaries of officials, so the most common form of corruption is among officials - taking bribes. Scientific literature suggests that cigarette smuggling is due to corruption, but corruption has a greater negative impact on the country's well-being than cigarette smuggling. Citizens attitudes and tolerance in cases of corruption and cigarette smuggling can be one of the major obstacles to combating these phenomena, therefore the main purpose of the article is to understand how Eastern European citizens value the interaction between corruption and cigarette smuggling. In the article is used a representative quantitative method of questionnaire, when interviewing the population of Ukraine and Moldova. The conclusions provide an answer to confirm or refute the fourth hypotheses that were raised.

Keywords: Corruption, Cigarette smuggling, Consumer’s attitude, Moldova, Ukraine.

In order to address a root problem, such as cigarette smuggling, it is not only necessary to look at the causal factors behind it inside and outside the country, but also to consider interactions with other illegal activities such as corruption, organized crime, trafficking or money laundering. The focus of this article and empirical research will be to identify interactions with corruption and cigarette smuggling in Eastern European countries. Scientific literature has shown that corruption and cigarette smuggling are closely interrelated and difficult to coexist. Although this area of research has not been studied extensively, general trends in research (Istiak, 2018; Dandurand, 2013; Yürekli & Sayginsoy, 2010; Merriman et al., (2000)) indicate that higher levels of corruption in the country facilitate cigarette smuggling. at the same time, the income earned from cigarette smuggling continues to support the country's entrenched corruption. A representative quantitative survey was conducted in Ukraine and Moldova, viz. countries that fight tobacco smuggling in 2005 launched the EU Border Assistance Mission to Moldova and Ukraine (EUBAM).

According to the report of “Trading Economics” (2020), based on the estimations of “Transparency International”, in 2019 Ukraine’s Corruption Perception Index (CPI) amounted to 30 points out of 100. Bribes are given to ensure that public services are delivered either in time or at all. Ukrainians stated they give bribes because they think it is customary and expected. On June 8, 2011 Ukrainian President Viktor Yanukovych stated that corruption costs the state budget US $ 2.5 billion in revenues annually and that through corrupt dealings in public procurement 10% to 15% (US $ 7.4 billion) of the state budget “ends up in the pockets of officials”. According to the United States Agency for International Development (USAID), the main causes of corruption in Ukraine are a weak justice system and an over-controlling non-transparent government combined with business-political ties and a weak civil society. For many thousands of Ukrainian people, smuggling across borders is the business of a lifetime, they can’t do anything else, they have been doing this for decades. People risk their lives to avoid meeting with the border guards.

According to the report of “Trading Economics” (2020), based on the estimations of “Transparency International”, in 2019 Moldova’s Corruption Perception Index amounted to 32 points out of 100 (by 2 points higher than Ukraine). The Customs code of RM No. 1149 of 20.07.2000, Article 224 defines smuggling as: “Movement of goods across the customs frontier without or concealed from the customs control in large or especially large amounts, or repeatedly, or by a group of individuals organized to engage in such movement, or by an official using his/her office, or with fraudulent use of customs and other documents, or related with the failure to declare or unreliable declaration of goods in the customs and other documents, as well as such movement of drugs, psychotropic, potent, toxic, poisonous, radioactive, and explosive substances, hazardous wastes, armament, explosive assemblies, fire arms and related cartridges and ammunition, except for smooth-bore hunting arms and related cartridges, cultural values, as well as failure to bring back into the customs territory the cultural values taken earlier abroad, if such return is required, shall be qualified as smuggling and shall be punished in accordance with law”. From this definition, smuggling is a tool that stagnates economic growth, and only the fight against it, in the direct sense of the word, can favour the stability of the state in the economic, political, social and technological sense. Tobacco smuggling, including counterfeit products, is presently assessed as one of the most serious risks to border security at the Moldova-Ukraine border (between December 2015 and November 2016, over 45.7 million cigarettes were seized at the border; 66 million cigarettes were seized in the Bosporus from a ship on route between Famagusta and Skavodsk) (European Union External Action, 2017). Tobacco smuggling takes many forms, starting with small scale packages being hidden in vehicles, and ending with larger scale consignments being clandestinely transported over the “green” border.

               The authors of the article aim to fill the gap and assess how the public is treating the phenomenon of corruption, how much it supports cigarette smuggling and what essential measures it offers to combat illegal activities. The first part of the article analyzes the theoretical aspects of the interaction between corruption and cigarette smuggling, the second part presents the research methodology, the third part presents the results of empirical research.

 

LITERATURE REVIEW

The origin and concept of corruption

The phenomenon of corruption has deep roots. Some sources (Piliponytė, 2006; Žemaitaitienė, 2011; “Brookings”, 2016) indicate that the oldest manifestations of corruption could already be observed in the Arhashastra (“Instructions on Material Prosperity”), an ancient Indian treatise in scripted by Kautila (or Kautilya A Brahmin, also known as Chanakya), a minister to Indian King Chandragupta Maurya, in the fourth century B.C., i.e. two thousand years ago. In the above-mentioned inscription, Kautila expressed his concern about the difficulties to prove the financial dishonesty of public officials. In fact, even trading in favors, popular with judges and other governors described in the Old Testament, can be treated as very early manifestations of corruption that was not only tolerated, but also regulated and formalized (“Brookings”, 2016, p.2). The other source documenting manifestation of corruption is the archive with the records of the thirteenth century B. C. on bribe taking clerks in an institution of the Assyrian Empire corresponding to a contemporary ministry of internal affairs (Vaitiekus, 2002; Palidauskaitė, 2005). Dion (2010) links the early corruption to the culture of Guanxi networks that played a fundamental role in the Chinese Confucian doctrine and helped business companies (especially small ones) to facilitate their deals and stay in business by minimizing the potential risks of severe competition (Yeung and Tung, 1996).

In the European context, the need to combat corruption was already understood in ancient Athens where public inspections were being carried out to prevent bribery. The first attempts to combat corruption in Europe by employing criminal law are linked to the Napoleonic Criminal Code of 1810. In the USA and Great Britain, the laws prohibiting bribery and conflict of interest’s date back to the 19th century.

Vast majority of researchers are of the opinion that the conditions created by modern developing societies along with technological advancement provide the preconditions favorable not only for national or local, but also for global corruption by escalating conflicts of interests and reducing the degree of accountability and personal responsibility. A previous long-standing attitude that corruption is inherent only to poorly developed and/or authoritarian states (e.g. African states) has over the last decade been shaken by the scandals of corruption even in developed democratic states (USA, France, Germany).

Since corruption is a complex, multi-layered phenomenon, covering a number of economic, social, political and cultural aspects, and able to adjust to the changes in the environment (complexity and adaptability of corruption were confirmed by Varraich (2014), Transparency International (2018), Luna-Pla and Nicolas-Carloc (2020), and many other sources), it is difficult to provide its universal definition, thus different literature sources propose a variety of the definitions of corruption, depending on the conceptual or methodological framework through which corruptive activities are analyzed.

Translated from Latin, the word corruption (lot. corruptio) means bribery, damage, payoff, spoilage (Zhdanov, 2002; Trushina, 2008; Keyzerova & Kislyakov, 2017). According to Milovanovic (2002), the Medieval Latin world ‘corruptio’ expresses “a moral decay, wicked behavior, putridity, or rottenness” (p. 2).

Subject to the points of focus on corruption, the definitions of this phenomenon found in different literature sources can be categorized as follows:

1.         Interpretation of corruption as a betrayal of public trust (or so-called public interest definitions).

2.         Interpretation of corruption as a criminal offence (or definitions of corruption derived minding its criminal origin).

3.         Interpretation of corruption as a dimension of low public morale (or definitions of corruption related to the issues of the common public conduct, i.e. morality and immorality).

 

Links between corruption and cigarette smuggling

               If one looks at the impact that corruption has on national and international organizations in preventing cigarette smuggling crimes, the unequivocal answer would be no. Corruption and smuggling are also phenomena such as organized crime, which are often heavily influenced by corrupt officials facilitating smuggling operations. Cigarette smuggling can generate significant revenue, which in turn is used by smugglers to bribe officers and secure their mediation. Organized groups use border control, security and public security systems weakened by corruption.

               The relationship between cigarette smuggling and corruption has not been extensively studied in the scientific literature. Analyzed scientific literature provides these results for the estimated links between cigarette smuggling and corruption. Istiak (2018) found out that between two evils (corruption and smuggling), corruption is the worse. They showed that the cost of welfare is higher than that of smuggling. „The corruption based on paying bribes to obtain an import license is worse than smuggling.  Corruption in the form of paying bribes leads to a biased distribution of income.  Moreover, when corruption is introduced in fiscal sector, this leads to a low collection of revenue and thus hampers the development projects of the government.  So, corruption hampers the overall growth prospects of the economy “(Istiak, 2018, p. 163).

               Dandurand (2013) studied the interaction between corruption and migrant smuggling. Corruption and cigarette smuggling are linked in many ways, depending on the level of development of the country, the country's institutional capacity to prevent corruption, and cultural, political and economic factors. Corruption has a huge impact on the volume of smuggling of migrants, but the extent varies considerably from country to country. The author found that corruption is a significant indicator of the growth of smuggling of immigrants, who, because of poverty, personal insecurity and violence, make immigrants emigrants a source of livelihood. Corruption can occur in any smuggling process i.e. from the point of origin, in transit to the point of delivery, which weakens border protection, immigration control, refugee protection, making smuggling anymore uncontrollable.

               Yürekli & Sayginsoy (2010) found that not only the lower cost of a pack of cigarettes, but also corruption is a contributing factor to cigarette illegal activities. According to the researchers (2010), the weaker the law enforcement, the higher the level of corruption and larger the percentage of smuggled cigarettes that pass undetected” (p. 545). Higher retail cigarette prices and reduced corruption significantly increase government revenue while reducing global cigarette consumption and smuggling. The fact that corruption and a flourishing network of organized crime are more conducive to cigarette smuggling than lower cigarette prices, says Jossens et al. (2009).

               Merriman, et. al. (2000) states that corruption facilitates cigarette smuggling. According to the authors, each one-point increase in a country’s transparency/corruption index is associated with a two-percentage point decrease in experts’ estimates of cigarette smuggling “(p. 365).

               The analysis of the interaction between corruption and cigarette smuggling leads to the conclusion that corruption “feeds” the volume of cigarette smuggling. Reducing cigarette smuggling requires, first and foremost, targeting appropriate measures against corruption. The results of the research presented in the theoretical part reveal that the decreasing corruption, i.e. the improving value of the Corruption Perceptions Index (CPI) contributes to reducing cigarette smuggling. Consequently, with the rise/fall of corruption, cigarette smuggling is growing / decreasing.

 

RESEARCH METHODOLOGY

               The purpose of the empirical study is to determine what links exist between corruption and cigarette smuggling in assessing public opinion in Ukraine and Moldova. Quantitative survey attempts to assess the opinions, attitudes, behaviors, and behavioral factors of the subjects (Kardelis, 2016, p. 236). The questionnaire collects qualitative data. The objectivity of the data does not only depend on the content of the questionnaire, i.e. from the logical and clear presentation of questions, statements, situations, but also to a large extent from the honesty of the subjects, their willingness to openly answer questions and statements. Survey methodology was selected to find out the views of Ukraine and Moldova on the cigarette smuggling and corruption situation. Survey was carried out on June, 2019. 1003 respondents aged 18 + were interviewed in Ukraine and 1026 respondents aged +18 were interviewed in Moldova. Study was carried out as CATI Omnibus survey. CATI in market research stands for Computer Assisted Telephone Interviewing. CATI means that the interviewer conducting the survey over the phone follows a script on the computer while clicking responses and typing open-ended comments from the respondent into the program. Online panel is a group of selected research participants who have agreed to provide information at specified intervals over an extended period of time. The questionnaire asked six questions to find out whether respondents were aware of who smokes smuggled cigarettes in their environment, the hot spots for smuggling cigarettes, their perception of corruption and its most common forms, and the main areas of their activity. Ukraine and Moldova have been selected from non-EU countries on the basis of the following criteria: high levels of corruption and high levels of cigarette smuggling from/ to countries. The following hypotheses were raised during empirical study:

Hypotheses 1: The ‘hot spots’ for smuggling cigarettes are in markets and border areas.

Hypotheses 2: Corruption promotes the resolution of societal problems.

Hypotheses 3: Most often bribes are given by state inspectorates and hospitals.

Hypotheses 4: Higher salaries would reduce the consumption of smuggled cigarettes.

PURPOSE OF THE STUDY

               The study aims to find strong ways and strategies to apply the green economy in Jordan in order to achieve sustainable development and encourage investment and reduce the gap between the rich and poor people for a decent life. This study also aims through comparison and case studies of countries similar to Jordan and some Arab countries in the conditions and social situation to benefit from their experiences in sustainable development, in an effort to clarify the best ways to help achieve sustainable development using clean energy and (green economy).

As can be seen in Moldova, the results of the public survey allowed to confirm hypotheses H1 and H3. In fact, it's very strange that just 4.4 percent of respondents in their environment know people who smoke contraband cigarettes. 9.4 percent of respondents think that Moldova’s border area and official stores is the main points of sale for contraband cigarettes. Respondents who were asked to name statement, which most closely matches their opinion about corruption, most often named that “Corruption is a big social problem” (78.9 percent). 49.6 percent of respondents think that people usually are giving “bribes” in hospital, clinic. Respondents who were asked to name, what should happen so that people would stop smoking contraband cigarettes, most often mentioned that there should be bigger fines/penalties “(15,9 percent). “More information on how smuggled cigarettes pose a much greater risk to health than officially purchased cigarettes” (12,0 percent) (more often they are respondents whose monthly income is 5001- 10 001 lei (25,6 percent)). The smallest proportion of respondents mentioned that there should be “higher pay/salaries” (4,1 percent). 46,3 percent of respondents think that there should be other reasons (forbid production/selling, lower prices, strict law, harsh control, education, etc.) (more often they are respondents who do not smoke (47,7 percent)). 25,6 percent of respondents cannot answer this question.

            Whether there are differences in public attitudes between cigarette smuggling and corruption in Moldova and Ukraine will be answered in Table 2.

In the case of Ukraine, only the H3 hypothesis was confirmed, H1 only partially confirmed, and the remaining hypotheses did not. Only 29.2 percent of respondents in their environment know people who smoke contraband cigarettes. 24.7 percent of respondents think that the bazaar (open market) is the main point of sale for contraband cigarettes. Respondents who were asked to name statement, which most closely matches their opinion about corruption, most often named that Corruption is a big social problem (80.8 percent). 52.9 percent of respondents think that people usually are giving bribes in hospital, clinic. Respondents who were asked to name, what should happen so that people would stop smoking contraband cigarettes, most often mentioned that there should be Lower price/taxes of officially purchased cigarettes (26.5 percent). 
            To sum up, it can be concluded that the attitude of the public in both countries overlaps with regard to the perception of corruption. The vast majority of citizens in both Moldova and Ukraine identify corruption as a major social problem. Bribes (half of those surveyed) are usually given in hospitals and clinics in both countries, so we can assume that the wages of health professionals are low, and health care funding is also lowDistrusting the health social system raises doubts and risks in shaping one's environmental smoking habits. Ukrainians and Moldovans have pointed out that the hot spots for cigarette smuggling are the bazaar and the border (Moldova only). According to survey respondents, raising wages alone will not solve the problem of corruption or cigarette smuggling.

 

CONCLUSIONS

The practical applicability of the study manifests itself through the submission of recommendations to the authorities from public proposals, reducing cigarette smuggling and increasing intolerance to corruption in countries. The limitations of the study are manifested through the response of Moldovan respondents that only 4.4% respondents know people in their environment who smoke smuggled cigarettes. In Ukraine, meanwhile, the percentage was 29.2 percent. In Republic of Moldova the attempts of illicit cigarette trade are most often found out at the country borders, when cigarettes are to be illegally taken out of the country. Moldova is rather a country from which the illegal cigarettes are transported into other countries, where cigarettes can be sold at profitable prices. Public awareness of corruption is a major social problem in both countries, reflecting the growing public awareness in these countries. While awareness is growing, giving bribes in the healthcare sector is a common occurrence among respondents. Society to combat cigarette smuggling proposes increased fines, education of the population on the greater damage caused by smoked smuggled cigarettes, lower cigarette prices / official market taxes, stricter laws, controls. The study confirms the results of previous research that underlines the importance of corruption in regulating cigarette smuggling flows.

 

ACKNOWLEDGEMENT

This paper was supported by Phillip Morris Products S.A. [Grant Agreement PRC-9]. The paper is funded by PMI IMPACT, a global grant initiative from Philip Morris International to support projects against illegal trade and related crimes.

 

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