In a previous blog we discussed the factors that have pushed issues of corruption to the centre of policy debates about sound economic management. A related question deals with the sources of corruption: where does it come from, what are the factors that have nourished it and turned it into such a powerful impediment to sustainable economic development? Economists seem to agree that an important source of corruption stems from the distributional attributes of the state. For better or for worse, the role of the state in the economy has expanded in a major way over the past century. In 1913 the 13 largest economies in the world, accounting for the bulk of global economic output, had an average expenditure ratio in relation to GDP of around 12%. This ratio had risen to 43% by 1990, with many countries’ ratios well in excess of 50%. This rise was associated with the proliferation of benefits under state control and also in the various ways in which the state imposes costs on society. While a larger state need not necessarily be associated with higher levels of corruption—the Nordic countries illustrate this—it is the case that the larger the number of interactions between officials and private citizens, the larger the number of opportunities in which the latter may wish to illegally pay for benefits to which they are not entitled, or avoid responsibilities or costs for which they bear an obligation.
|Two members of the Black and White club join an arm-wrestling competition with the slogan 'Arm-wrestling to blow away corruption' at a youth event in Hanoi in November 2012 to promote fair education environment.|
I often hear that corruption is everywhere and nothing can be done about it. I used to believe it. I still hear people saying the work on anticorruption is a waste of time. I disregard these cynical statements now. Who made me change my attitude? The youth.
I started being inspired several years ago when a group of young women from the Vietnamese NGO Live and Learn (L&L) developed the idea of ‘a sustainable and transparent society in the hands of youth’. As clear as the idea tells, these young women wanted to engage more with youth, educate them about sustainable and transparent development and how young people can become catalysts for change and for a less corruption-prone country. The idea was among winning initiatives of the Vietnam Innovation Day (VID) 2009 More Transparency and Accountability, Less Corruption, which was co-organized by the World Bank and the Government Inspectorate.
As part of the project idea, L&L would help connect and create a network of student and youth groups (Green Generation network, volunteer clubs, youth organizations, Be Change Agents, etc.) in Hanoi. These groups would be more informed of development issues such as sustainable development, corruption, and their responsibilities, and eventually would act together to build a corruption-free society. The journey was not without difficulties. During the first six months of the project, L&L was not able to get into many universities to talk with students about transparency nor integrity, let alone corruption. Even if universities were open to the idea, not many students showed interest. Some events attracted only 8 young people.
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What’s a cash-tight government to do when it wants to modernize a hospital, build a railway, or expand the power grid to reach underserved areas? It might explore outside, private sources of financing—that’s where public-private partnerships (PPPs) come in. The acronym has a promising ring to it, yet going back to the 1970s, its impact has been mixed. At their best, PPPs can provide rapid injections of cash from private financiers, delivery of quality services, and overall cost-effectiveness the public sector can’t achieve on its own.
But at their worst, PPPs can also drive up costs, under-deliver services, harm the public interest, and introduce new opportunities for fraud, collusion, and corruption. Our experience at the World Bank Integrity Vice Presidency is that because PPPs most often are geared toward providing essential public services in infrastructure, health and education, the integrity risks inherent in these sectors also transfer to PPPs.
On April 17, the Integrity Vice Presidency convened a public discussion on corruption in PPPs (pdf) bringing together finance, energy, and fairness-monitoring perspectives. Looking at the landscape, in the last eight years, 134 developing countries have implemented PPPs in infrastructure, and in the last decade the World Bank has approved some $23 billion lending and risk guarantee operations in support of PPPs.
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A version of this blog was published on Thanh Nien Newspaper on February 1, 2013
At the World Bank Spring Meetings last week, there was a very interesting discussion, moderated by Femi Oke, on the topic of “Investment, Infrastructure, and Integrity,” On the panel were a few worthies from the private sector, Karan Bhatia, of General Electric, Peter Solmssen of Siemens AG, and Julio Rojas of Standard Chartered Bank, along with Rashad Kaldany and Janmitra Devan of the World Bank. They were joined by the Minister of Finance of Indonesia, Agus Martowardojo, and the Secretary of Finance of the Philippines, Cesar Purisima.
The issue is a prickly one: How to promote clean business in large infrastructure projects? It is unavoidable for the World Bank, the private sector and governments to be involved in infrastructure, so it is essential that the reputation of the infrastructure sector be tied to integrity. At the same time, the response to corruption has to be pragmatic. The challenge is to figure out the balance and respond appropriately and make “risk-based” decisions, versus “rules-based” decisions. The panelists alluded to the role of knowledge and the open dissemination of knowledge on private-sector business dealings and in government contracting and procurement to spur accountability and governance in this arena. There was agreement that the World Bank’s open agenda would be helpful in pushing this forward.
The panel was asked to share their individual “principles” to achieve integrity.
These are some of the views and reports relevant to our readers that caught our attention this week.
"The political uprisings that have swept the Arab world over the past year represent the most significant challenge to authoritarian rule since the collapse of Soviet communism, according to Freedom in the World 2012, the latest edition of Freedom House’s annual global survey of political rights and civil liberties. Yet even as the Arab Spring triggered unprecedented progress in some countries, it also provoked a harsh and sometimes murderous reaction, with many leaders scrambling to suppress real or potential threats to their rule. The repercussions of this backlash have been felt across the Middle East, as well as in China, Eurasia, and Africa.
A total of 26 countries registered net declines in 2011, and only 12 showed overall improvement, marking the sixth consecutive year in which countries with declines outnumbered those with improvements. While the Middle East and North Africa experienced the most significant gains—concentrated largely in Tunisia, Egypt, and Libya—it also suffered the most declines, with a list of worsening countries that includes Bahrain, Iran, Lebanon, Saudi Arabia, Syria, the United Arab Emirates, and Yemen. Syria and Saudi Arabia, two countries at the forefront of the violent reaction to the Arab Spring, fell from already low positions to the survey’s worst-possible ratings." READ MORE
This post originally appeared on Voices & Views: Middle East & North Africa
Although many events from the Middle East and North Africa region have enjoyed large press coverage and headlines, one has remained, to date, a rather well-kept secret: the inclusion of governance and a dedicated provision on Public Procurement in the new Moroccan Constitution, adopted by referendum on July 1, 2011. In doing so, Morocco has joined the very small list of countries (i.e., South Africa and the Philippines) to grant a constitutional status to this rather technical field, the impact of which will be progressively felt in the world (even outside the small world of procurement lawyers), as it affects how government money is converted into goods and works like roads, schools, vaccines, etc.