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28 Feb 2007

Czech-BAE corruption probe worries Prague

As British, Swedish and Czech investigators probe allegations of corruption in a Gripen fighter acquisition, it will be tempting to turn the case into a political vendetta against the opposition.

By Jeremy Druker

As the investigation into allegations of bribery in the Czech acquisition of Gripen fighter jets accelerates, one can only hope that the authorities in Prague do their best to aid their foreign colleagues. But the history of fighting corruption in the Czech Republic does little to support much optimism.

Last week, the Czech media published reports that British and Swedish investigators were looking into serious charges that the British company BAE Systems had bribed high-level Czech officials back in 2001.

At the time, the Socialist-lead government approved the purchase of 24 Gripen jets from BAE Systems and the Swedish Saab company for 60.2 billion crowns (US$2.8 billon dollars at today’s exchange rates). After floods ravished the Czech Republic in 2002, the military opted for a cheaper solution, signing a 10-year lease on 14 Gripens instead. A Swedish television report has alleged that billions of crowns in bribes were handed out over the course of the two deals. So far, three former Czech senators have said they were offered payments.

The recent revelations may be spurring domestic and international interest today, but it is important to remember that many people following the negotiations around the Gripens in the early 1990s found them suspect. Writing in Monday’s edition of Mlada fronta DNES - the leading Czech daily - Bohumil Pecinka blamed intense pressure from lobbyists for a sudden shift in priorities, that placed the purchase of fighter planes much higher on the agenda than in earlier conceptions of military reform.

When it came time to issue a tender, every other applicant except for BAE Systems/Saab withdrew from the lucrative competition, complaining that the government had intentionally crafted a call that would automatically generate a victory for the Gripens. Two finance ministers at the time also criticized the conditions of the potential Gripen deals, saying that the supposed advantages of the offset programs were illusionary.

Pecinka, a long-time commentator for the weekly Reflex, said he wrote back in May 2002 that “no other company in the past 12 years had initiated such pressure on government politicians like BAE systems.” He said that statement remained valid today and pointed to the “atmosphere of corruption” all that nonstop lobbying created. Yet Czech investigators could not find any proof of wrongdoing and shelved the case back in 2003.

Such an intricate web of connections between political and business elites has long plagued the Czech Republic and discouraged normal Czechs. When asked in October 2006 what most bothered them in today’s world, respondents in a Center for Research of Public Opinion poll said financial crime and corruption (29.4 percent), followed distantly by unemployment (20.9 percent) and the political situation (16.4 percent).

Expert surveys carry similarly pessimistic views, such as the Transparency International Corruption Perceptions Index, which measures the perceived level of corruption among politicians and public officials. In the 2006 survey, the Czech Republic tied with Kuwait and Lithuania for 46th place (out of 163 countries), with a rating of 4.8 (10 indicates a country without corruption).

Although a significant improvement over the 2005 rating of 4.3, it was still bad enough to rate the Czech Republic among the countries in the EU with the worst levels of perceived corruption. Transparency International blamed the situation on the failure of the political elite to put in place an effective system for lowering the level of corruption and increasing transparency.

A TIC report released in September 2006, for example, found a catastrophic situation in the area of public contracts. More than half are awarded in violation of the Public Procurement Act with public officials routinely choosing companies without holding tenders. Accusations that the authorities had created tender conditions that explicitly “pre-selected” the Gripens thus fit an established pattern, if true.

Even Czech politicians agree that the fight against corruption has yielded few results. In a poll released last month, 550 parliamentary deputies, senators and city representatives were asked about the level of corruption. Only six percent said it had declined from past levels.

There have been some improvements as of late, however, at least on paper. After years of stonewalling even in the face of widespread criticism, in 2006 parliament finally passed a much more stringer conflict-of-interest bill, which took effect in January. And the ruling Civic Democrats have pushed for the adoption of a new strategy in the fight against corruption based on prevention, transparency and punishment, with approaches that even Transparency International has praised.

Now, with Czech investigators reopening the case based on leads from their foreign colleagues, it is time for the Civic Democrats to prove they are serious. Despite the temptations to turn the case into a political vendetta against the opposition Social Democrats, the government must refrain from any political interference into an investigation that could end up generating the biggest corruption scandal in the country’s short history.

Jeremy Druker is Founder and Executive Director of Transitions Online (TOL), a Prague-based newsmagazine covering Central and Eastern Europe and the former Soviet Union.

The views and opinions expressed herein are those of the author only, not the International Relations and Security Network (ISN).

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