CIAO DATE: 01/2013
December 2012
Norwegian Institute of International Affairs
The paper provides a semi-popular exposition of the formulation of public procurement and privatization mechanisms and how they may be influenced by organized crime units. A number of possibilities are outlined using examples from Bulgaria, Italy and Norway. Public procurement gives rise to a large share of the rents that may end up as private illegitimate income from public governance processes. A major, almost banal reason is that when money is transferred internally in a public organization, it remains only accounting or specific- use money. When it leaves public control, it becomes nonspecific, cash-like. It may be spent on anything. It is when the public sector procures larger items from the private sector that “cash” leaves in large bulks which may give an opportunity for siphoning out larger amounts as generally disposable rents. In an accompanying paper (Andvig and Todorov, 2011) we have seen how public procurement rents may either be shared between procurers and suppliers through corruption or be shared among suppliers through cartel-making.
Resource link: Public procurement and organized crime – illustrated with examples from Bulgaria, Italy and Norway [PDF] - 1.3M