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COVID-19 AND HOW TO PREVENT CORRUPTION RISKS IN LATVIA

An earlier version of this blog originally appeared on the Transparency International Latvia (Delna) website in Latvian on April 2, 2020.

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At the end of March 2020, a state of emergency has been declared in Latvia to deal with the outbreak of the Covid-19 pandemic. During an emergency situation, the Saeima, the Cabinet of Ministers and members of the Crisis Management Council and other officials make quick decisions on the allocation of large sums of funds, to ensure the operative implementation of the adopted measures. While this is necessary, it can also increase the risk that the temporarily extended powers are used by dishonest public officials for their own private interests through corruption, bribery and fraud.

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With this blog, TI Latvia urges the government to act with greater transparency to improve the procurement of lifesaving equipment, promote open and transparent contracts, prevent price gouging of drugs and medical supplies, and share information about important shortages in a timely way.

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OVERBURDENING OF HEALTHCARE SYSTEM AND BRIBERY RISKS

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Corruption in the healthcare sector is not uncommon. Even in ordinary times, corruption in the health sector causes losses of over US$500 billion every year.  With the health systems on the brink of collapse, this cost might increase significantly.

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So far, over 164 countries are struggling to keep up with the pandemic. More than 2.500.000 people across the world have contracted the virus and more than 180.000 have died. In Latvia, as of May 6, a total of 900 people were infected, with a sharp rise in numbers between March and April. An extreme volume of patients seeking medical care threatens to overwhelm already fragile national health systems.

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As hospitals struggle to cope with Covid-19 and face increasing shortages in staff, beds, ventilators and other equipment, bribery risks are a major concern. Medical providers are facing difficult decisions about which patients to treat based on who needs care most, and patients willing to pay a bribe could leave those most vulnerable and unable to pay at the bottom of the waiting list. The risk is particularly high in Latvia, where, according to the 2017 Eurobarometer, informal payments or gifts to healthcare workers are twice as much as much as the EU average (8% vs. 4%).

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Furthermore, in a situation of shortage of medical supplies, there is also a high risk of price gouging, as suppliers may extort governments by demanding higher prices. There have already been some attempts by unscrupulous traders to profit from public panic by inflating prices for ordinary consumers. Though in Latvia there were no such cases yet, it is important that the government takes measures to mitigate this risk.

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Transparency International Latvia wants to encourage citizens to report such cases, either by using the government’s whistleblowing mechanism or TI Latvia’s “Whistleblower centre”, which offers a confidential channel and advice on the actions to be taken.

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  • The government should adopt a “zero-tolerance” policy for bribes paid in the healthcare sectors to obtain undue advantages in the treatment of patients

 

  • Citizens should promptly report any suspicion of irregularities to the whistle-blowing channel set up by the government and/or to TI Latvia’s whistle-blower centre.

 

RISKS IN THE PROCUREMENT OF DRUGS AND MEDICAL EQUIPMENT AND ALLOCATION OF EMERGENCY ALLOWANCES

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Procurement of medicines and supplies is one of the most vulnerable areas to corruption in health systems. While according to  the UN Office on Drugs and Crime (UNODC), approximately 10 – 25 per cent of all money spent on procurement globally is lost to corruption, in the EU, 28 per cent of health corruption cases are related specifically to procurement of medical equipment.

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On April 1st, the European Commission issued the Guidance on using the public procurement framework in the emergency situation related to the COVID-19 crisis (2020/C 108 I/01). The Guidance explains which options and flexibilities are available under the EU public procurement framework for the purchase of the supplies, services and works needed to address the crisis.

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Firstly, in cases of urgency they can avail themselves of possibilities to substantially reduce the deadlines to accelerate open or restricted procedures. Secondly, if those flexibilities are not sufficient and authorities face a situation of “extreme urgency”, a negotiated procedure without publication can be envisaged, which allows for a faster awarding of contracts to provide for COVID-19 pandemic related needs. While this is necessary, it also increases the risk of favouritism in the allocation of public resources away from the public eye.

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In Latvia, the government will allocate more than 2 billion euros (20% of the State Budget) to mitigate the negative economic impacts of the Covid-19. This also includes €8 million in crisis allowances granted to healthcare workers. It is important to ensure that these funds are not used for unjustified personal gains, and that taxpayers have a clear understanding of how public money is used and controlled. This could be done by centralizing procurement and making emergency procedures public and open.

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USING OPEN DATA TO MONITOR PROCUREMENT RELATED TO COVID-19

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As procurement for the Covid-19 crisis involves multiple agencies within the government buying things such as medical equipment, medicines, infrastructure for hospitals or security services, finding all the contracts related to the crisis can be tricky. To make the information easy for people to understand, it can be helpful if government agencies provide data on emergency procedures in open format and available from a single location. Open procurement data can be used not only to monitor and prevent corruption risks, but also analyze and share information to predict and manage critical supply chains.

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Ministers and other public institutions, including KNAB and IUB have called for the need to ensure transparency and principles of good governance in public procurement. At the end of April the government published data on emergency contracts related to the Covid-19 crisis in the dedicated website www.covid19.gov.lv, the website is still being improved. However, at present, it is difficult to identify contract information in the Procurement Monitoring Bureau’s database about Covid-19 purchases to which the law was applied.

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There are already examples around the world of this good practice being implemented. In Ukraine, the government has put in place a business intelligence tool that has a specific module to show all the COVID-19 related emergency procurement, and includes information such as the name of items, the price per item, terms, supplier, etc. (see picture below). Another good practice comes from Lithuania, where the Procurement Office has published all the concluded contracts in a single location.

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Picture: screenshot from Ukraine’s Prozorro tool.

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The Open Contracting Partnership has provided guidance on how to monitor Covid-19 procurements, what data fields are useful and what to do if open data is not available. As a first step, the government should collect and tag all contracting processes and budget lines with “COVID-19” to ensure high-quality, open and complete data, disclose technical comments from suppliers, and publishing all contract awards under the emergency framework.

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Well-structured open data allow to explore which agencies are buying, what items are being procured, when, and how much is being spent, giving an idea on how the government is managing the emergency and if there are enough supplies. Furthermore, it can be used to explore the networks of suppliers can be interesting to see not only who the biggest providers are and if they have connections, but also to identify possible risks in the supply chain and patterns of potential overpricing.

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OTHER ESSENTIAL DATA

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A potential centralized platform with information on Coronavirus-related procurement procedures should not only include data on tenders, awards and contracts, but also on government’s aid fund paid to the private sector and allowances granted to healthcare workers.

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The State Revenue Service has promptly published the list of self-employed people and companies whose employees have been paid downtime benefits and list of companies that have received support with taxes. However, this good practice should also be implemented for all the other forms of state aid to the private and non-governmental sectors, including companies exempted from rents, etc., in order to guarantee the greatest possible transparency and accountability.

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To improve the scope and quality of the information, state authorities should make sure that:

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  • along with the names and registration numbers of legal entities, the total downtime allowances paid to employees is published on the SRS website as well as on the government website covid19.gov.lv.

 

  • the amount of additional compensation paid to the employees of the health care system together with the name and surname should be published on the website covid19.gov.lv.

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CONCLUSION

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The challenge the Covid-19 is a test for the democratic resilience of a country. Such a crisis, and the corruption risks it brings with it, can only be tackled with a concerted effort from governments and citizens to ensure that public resources are not wasted, both in the short-term horizon of the response to the emergency and in the mid-long-term perspective of economic recovery. In this context, Latvia has a chance to play its part in the global efforts and provide inspiring examples of good governance to other countries in Europe and beyond.

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The article is written with the Society Integration Fund financial support from the Latvian state budget.  “Sabiedrība par atklātību – Delna” is responsible for the content of the article.

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