Once a concession agreement or any large-scale public procurement contract is signed, who can ensure that the terms are met? How to turn commitments into development on the ground? This is the puzzle that a mix of around 70 government, business and civil society leaders from West Africa began to solve this past week.
Recently, many in the community concerned about international corruption have begun to discuss the need to hold individuals responsible criminally for their actions. While people have long discussed the failure to hold high-profile bribe recipients responsible, now the discussion has mutated to the bribe payer side. Lower-level targets are certainly more easily prosecuted than the rich and powerful. After all, corruption, like most crimes, is committed by people, not by companies, machines or cultures. Some countries, most notable the U.S., have brought an increasing number of cases against individuals directly involved in paying or authorizing bribes.
We have received a few comments to the blog we posted last week and we want to take this opportunity to thank our contributors. The examples provided and issues raised highlight both the on-going efforts that are happening at the country level and the need to learn from these efforts. The on-going discussion also raises some additional questions:
It is a fact that many of the countries which suffer the most from corruption are the countries which have the fewest resources to combat the problem. Poor countries may be faced with a dilemma of using resources to prosecute the corruption which degrades the quality and quantity of public goods that reach their citizens, or using resources to provide those basic goods, such as food aid and roads.
At the same time, larger bribes are not infrequently paid by outsiders, such as foreign corporations. Casual observation shows that funds must be coming from outside some of the poorest countries. In short, the bribe money is flowing from the developed world into the developing world.
Conventional wisdom holds that bribery is the preferred means of influencing government policy in less developed countries, while lobbying is more common in developed countries. Perhaps due to this perceived compartmentalization of lobbying and bribery, very little is known about the relationship between lobbying and bribery, the extent and effectiveness of lobbying vs. bribery in less developed countries, and how this relationship changes as countries move up the development ladder.
Joining Forces Towards Development Effectiveness Through a Global Alliance to Combat Corruption
The World Bank has established regional networks of anticorruption enforcement personnel. The network has been given a name suggesting vigor and ruthlessness: International Corruption Hunters Alliance. On December 6 - 8 in Washington, the members of the alliance will gather to reflect on their work. Joining them will be authorities from member countries that have prosecuted bribe payers, as well as representatives from the private sector, civil society and international organizations. It is hoped that by the end of the meeting a truly global enforcement alliance will have been born.
To prepare for the meeting, a series of virtual conversations has been launched. The series addresses four key themes. We invite you to join the conversation via the links below. More updates will follow.
The OECD Antibribery Convention requires parties to make promising, offering, or giving a bribe to an official of another government a crime. Although 38 countries have ratified the convention, Transparency International reports that as of the end of 2009 only seven are actively enforcing this provision. Another nine are making some effort to enforce it and have taken few if any steps to enforce the convention.
In early 2009, the U.S.-based multinational Halliburton paid $579 million to the U.S. government to settle charges it had bribed Nigerian officials to win a contract. In late 2008 the German telecommunications giant Siemens paid $1.6 billion in fines, penalties and disgorgement of profits to the German and American governments for bribing officials.
I believe that timeliness is key in the sharing of information. If criminal information about suspects is not shared with those who need to know in a timely manner, this can result in crimes being committed that could have been prevented or once-in-a-lifetime investigative opportunities being lost.
In the field of fraud and corruption and in our context, the failure to share information in a timely manner can result in funds continuing to leak that could have been put to use to the benefit of society and overburdened countries and taxpayers picking up the bill for products and services that they have not received, are incomplete or are hugely overpriced.
The question I want to raise is whether and how we can share information at a sufficiently early stage.
Buying and selling a product or service involves a number of costs, including time spent searching for the best prices, negotiating for good discounts, researching product quality and writing contracts where applicable. Broadly, these are called the transaction costs of economic exchange, and part of the reason firms exist is to keep transaction costs at a minimum.
My last blog post addressed progress made in the extractive industries, in terms of fighting corruption, and in particular the new U.S. law (the Dodd-Frank Act) that will impact some of the largest gas, oil and mining companies in the world when it goes into effect in 2011. I also mentioned a few initiatives that have played an important role in advocating for this law and for a global norm on transparency. Another important player in this field is the Extractive Industries Transparency Initiative (EITI), as rightly pointed out by a reader and colleague. Launched in 2002, EITI advocates for transparency in the extractive industries through the publishing of financial information and promoting a culture of transparency that involves dialogue, empowering civil society, and building trust among stakeholders. A fundamental principle of the EITI is the development of multi-stakeholder initiatives to oversee the implementation and monitoring process, which is supported through a multi-donor trust fund, managed by the World Bank.
Transparency International’s (TI) 2010 Corruption Perceptions Index provides a rather bleak picture of the current state of corruption around the world. With more than half of the 178 indexed countries scoring below five on a 10 point scale (with 10 being “very clean”), corruption remains a major impediment to development. Thus, TI is now advocating for stricter implementation and monitoring of the United Nations Convention Against Corruption (UNCAC), a global legal framework that came into force in 2005 to help curb corruption. The Convention’s 140 signatories’ will be under review for the next three years for their efforts in fighting corruption. TI further recommends that focus should be given to areas such as, “strengthening institutions; strengthening the rule of law; making decision-making transparent; educating youths and setting up better whistle-blower protection schemes.” As a matter of fact, anti-corruption measures will be discussed at the G-20 summit taking place in Seoul next week. However, Christiaan Poortman, TI’s Director of Global Programmes, is skeptical as to whether it will produce any major changes at the governance level.
The second day of the workshop on 'Implementing Effective Country Level Governance Programs', Cape Town, South Africa was marked by a sectoral turn. The substantive reflections and lesson-sharing of the day focused on the implementation of governance and anti-corruption programs at country level in sectors like health, education, transport, energy, and extractive industries. Now, these sectors are very different, but what is fascinating is that with regard to good governance the issues and challenges are amazingly similar. Let me explain.
Designing policies that promote innovation and growth is key to development. In many countries there is also considerable corruption, with government officials seeking bribes and many firms underreporting their revenues to the state to evade taxes. Might there be a set of reforms that allow policymakers to kill two birds with one stone, both reducing corruption and boosting innovation? New research suggests financial sector reform may be able to play this role.
In a recent paper with co-authors Meghana Ayyagari and Vojislav Maksimovic, we look at corruption—defined as both bribery of government officials and tax evasion—and how this is associated with firm innovation and financial development. Using firm-level data for over 25,000 firms in 57 countries, we investigate whether firms are victims, who pay more in bribes than they gain by underreporting revenues to tax authorities, or perpetrators, who gain more by avoiding taxes than they lose in paying bribes.
Of particular interest is the effect of corruption and tax evasion on innovative firms. Specifically, we explore the following questions:
There is growing Bank – CSO policy dialogue occurring via blogs which is generating unexpected thoughtful and frank exchange of views. The most recent case was a few weeks back when Justin Lin, the World Bank’s Chief Economist, was invited to be a guest blogger on the “From Poverty to Power” blog page maintained by Oxfam/GB’s Head of Research, Duncan Green. The exchange was on Justin’s recent paper "Growth Identification and Facilitation" on the role governments play in promoting economic growth. Many CSOs, such as Oxfam, feel that the Bank is undergoing a paradigm shift by now providing developing countries with more ‘policy space’ to design their own economic plans, including industrial policies to support nascent industries.