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Six Strategies to Fight Corruption

Augusto Lopez-Claros's picture
Also available in: العربية

Having looked at some of the ways in which corruption damages the social and institutional fabric of a country, we now turn to reform options open to governments to reduce corruption and mitigate its effects. Rose-Ackerman (1998) recommends a two-pronged strategy aimed at increasing the benefits of being honest and the costs of being corrupt, a sensible combination of reward and punishment as the driving force of reforms. This is a vast subject. We discuss below six complementary approaches.

1. Paying civil servants well

Whether civil servants are appropriately compensated or grossly underpaid will clearly affect motivation and incentives. If public sector wages are too low, employees may find themselves under pressure to supplement their incomes in “unofficial” ways. Van Rijckeghem and Weder (2001) did some empirical work showing that in a sample of less developed countries, there is an inverse relationship between the level of public sector wages and the incidence of corruption.

2. Creating transparency and openness in government spending

Subsidies, tax exemptions, public procurement of goods and services, soft credits, extra-budgetary funds under the control of politicians—all are elements of the various ways in which governments manage public resources. Governments collect taxes, tap the capital markets to raise money, receive foreign aid and develop mechanisms to allocate these resources to satisfy a multiplicity of needs. Some countries do this in ways that are relatively transparent and make efforts to ensure that resources will be used in the public interest. The more open and transparent the process, the less opportunity it will provide for malfeasance and abuse. Collier (2007) provides persuasive evidence on the negative impact of ineffective systems of budget control. Countries where citizens are able to scrutinize government activities and debate the merits of various public policies also makes a difference. In this respect, press freedoms and levels of literacy will, likewise, shape in important ways the context for reforms. Whether the country has an active civil society, with a culture of participation could be an important ingredient supporting various strategies aimed at reducing corruption.
 
New Zealand, which is consistently one of the top performers in Transparency International’s Corruption Perceptions Index, is a pioneer in creating transparent budget processes, having approved in 1994 the Fiscal Responsibility Act, providing a legal framework for transparent management of public resources.

3. Cutting red tape

The high correlation between the incidence of corruption and the extent of bureaucratic red tape as captured, for instance, by the Doing Business indicators suggests the desirability of eliminating as many needless regulations while safeguarding the essential regulatory functions of the state. The sorts of regulations that are on the books of many countries—to open up a new business, to register property, to engage in international trade, and a plethora of other certifications and licenses—are sometimes not only extremely burdensome but governments have often not paused to examine whether the purpose for which they were introduced is at all relevant to the needs of the present. Rose-Ackerman (1998) suggests that “the most obvious approach is simply to eliminate laws and programs that breed corruption.”

4. Replacing regressive and distorting subsidies with targeted cash transfers

Subsidies are another example of how government policy can distort incentives and create opportunities for corruption. According to an IMF study (2013), consumer subsidies for energy products amount to some $1.9 trillion per year, equivalent to about 2.5 percent of global GDP or 8 percent of government revenues. These subsidies are very regressively distributed, with over 60 percent of total benefits accruing to the richest 20 percent of households, in the case of gasoline. Removing them could result in a significant reduction in CO2 emissions and generate other positive spillover effects. Subsidies often lead to smuggling, to shortages, and to the emergence of black markets. Putting aside the issue of the opportunity costs (how many schools could be built with the cost of one year’s energy subsidy?), and the environmental implications associated with artificially low prices, subsidies can often put the government at the center of corruption-generating schemes. Much better to replace expensive, regressive subsidies with targeted cash transfers.

5. Establishing international conventions

Because in a globalized economy corruption increasingly has a cross-border dimension, the international legal framework for corruption control is a key element among the options open to governments. This framework has improved significantly over the past decade. In addition to the OECD’s Anti-Bribery Convention, in 2005 the UN Convention Against Corruption (UNCAC) entered into force, and by late 2013 had been ratified by the vast majority of its 140 signatories. The UNCAC is a promising instrument because it creates a global framework involving developed and developing nations and covers a broad range of subjects, including domestic and foreign corruption, extortion, preventive measures, anti-money laundering provisions, conflict of interest laws, means to recover illicit funds deposited by officials in offshore banks, among others. Since the UN has no enforcement powers, the effectiveness of the Convention as a tool to deter corruption will very much depend on the establishment of adequate national monitoring mechanisms to assess government compliance.

Others (Heinemann and Heimann (2006)) have argued that a more workable approach in the fight against corruption may consist of more robust implementation of the anticorruption laws in the 40 states that have signed the OECD’s AntiBribery Convention. Governments will need to be more pro-active in cracking down on OECD companies that continue to bribe foreign officials. In their efforts to protect the commercial interests of national companies, governments have at times been tempted to shield companies from the need to comply with anticorruption laws, in a misguided attempt not to undermine their position vis-à-vis competitors in other countries. Trade promotion should not be seen to trump corruption control. Governments continue to be afflicted by double standards, criminalizing bribery at home but often looking the other way when bribery involves foreign officials in non-OECD countries.

6. Deploying smart technology

Just as government-induced distortions provide many opportunities for corruption, it is also the case that frequent, direct contact between government officials and citizens can open the way for illicit transactions. One way to address this problem is to use readily available technologies to encourage more of an arms-length relationship between officials and civil society; in this respect the Internet has been proved to be an effective tool to reduce corruption (Andersen et al., 2011). In some countries the use of online platforms to facilitate the government’s interactions with civil society and the business community has been particularly successful in the areas of tax collection, public procurement, and red tape. Perhaps one of the most fertile sources of corruption in the world is associated with the purchasing activities of the state. Purchases of goods and services by the state can be sizable, in most countries somewhere between 5-10 percent of GDP. Because the awarding of contracts can involve a measure of bureaucratic discretion, and because most countries have long histories of graft, kickbacks, and collusion in public procurement, more and more countries have opted for procedures that guarantee adequate levels of openness, competition, a level playing field for suppliers, fairly clear bidding procedures, and so on.

Chile is one country that has used the latest technologies to create one of the world’s most transparent public procurement systems in the world. ChileCompra was launched in 2003, and is a public electronic system for purchasing and hiring, based on an Internet platform. It has earned a worldwide reputation for excellence, transparency and efficiency. It serves companies, public organizations as well as individual citizens, and is by far the largest business-to-business site in the country, involving 850 purchasing organizations. In 2012 users completed 2.1 million purchases issuing invoices totaling US$9.1 billion. It has also been a catalyst for the use of the Internet throughout the country.

In many of the measures discussed above aimed at combating corruption, the underlying philosophy is one of eliminating the opportunity for corruption by changing incentives, by closing off loopholes and eliminating misconceived rules that encourage corrupt behavior. But an approach that focuses solely on changing the rules and the incentives, accompanied by appropriately harsh punishment for violation of the rules, is likely to be far more effective if it is also supported by efforts to buttress the moral and ethical foundation of human behavior. We will turn our attention to this in a future blog.
 

Comments

Submitted by Anonymous on

I think in addition to the aforementioned discouraging money politics especially in my country Nigeria could be a good track in the right direction.

Submitted by Anonymous on

I agree. It is very important for governments to ensure that "campaign contributions" are not used as a mechanism to gain access to politicians and to policymaking. To safeguard democracy and democratic institutions, governments have to ensure that money does not pervert the political process. Hence the importance of transparency and accountability.

Submitted by Kamlesh Kumar on

In India, most importantly, there is urgent need of judicial reforms and justice delivery system. A time bound disposal of the cases and disputes of all categories is the most important requirement. People die contesting cases, they are forced to offer bribes and spend their valuable time in pursuing the cases, causing great losses to economy.
No amount of increase of salaries of public servant will encourage them to not indulging in corruption. They will do it if they can. Implementation of a citizen charter with accountability and time bound actions will limit corruption to some extent. Of course, use of IT will be of great help.
Limiting powers of the Government in terms of bribing voters through ill conceived social schemes such as MNREGA and unnecessary subsidies will also be of help in preventing mass bribing and improving Government fiscal conditions.
Reducing and rationalizing taxes, introduction of GST are other important measures to lower incidences of corruption.

Submitted by Khwezi on

I think in addition to this, a country needs to develop a sense of moral character in citizens, starting with the family, and all other institutions in society. An upright moral character will even deter the hungry from stealing

Submitted by Anonymous on

Yes, you are totally right. Corruption, no doubt, has a moral dimension. We need to think hard about how to buttress the ethical and moral foundations of human behaviour. I will have more to say on this topic a bit later on. Augusto

Submitted by kashif yousaf badar on

The Pakistani Youth perception to overcome the great curse of corruption and empowering the accountability process are.

1. Reduce the discretionary powers of the government officials and political leaders for the usage of public funds.
2. Equal social justice system for all the public according to rule of Islam.
3. Rule of law will be on the top priority in the country.
4. Introduction of Toll Free hot line for Whistle Blowers on the national level, the youth should stand united against the corruption in the society , government and in the country
5. Judicial Reforms i.e. appointment of more judges and creation of new courts on emergency basis in the country to speed up the judicial process and creation of monitoring and inspection department in the judiciary to monitor and eliminate the ever increasing corruption.
6. The role of public accounts committee (PAC) ,anti corruption unit and Nab should be more strengthen and try for less involvement of Govt officials and other political pressures.
7. The Land record system must be immediately computerized in whole of the country to reduce the chances of corruption and changing in the record of land.
8. At least one consumer court and price control committee should be established at the Tehsil level to deal with the issues relating to consumer crimes, over pricing etc.
9. Islamic system based on democracy will be implemented.
10. Poverty and unemployment should be minimized and equal status should be given to every citizen of the country apart from its gender, race, religion, wealth or status.

Submitted by Anonymous on

There is much in what you say that makes eminent sense. I am particularly encouraged that these proposals are coming from a youth organization. If your generation begins to take an active interest in finding solutions to the problems that afflict your country, we have a higher chance of leaving a better world to our children. I wish you well. Good intentions (such as you clearly have) and a sound knowledge of the causes of corruption and possible remedies will surely make a difference. Augusto

Submitted by saadat on

The objectives are genuine to restrict corruption if a system is designed to achieve the targets. Otherwise written words have no value, it needs practical action. Govt. must work on the objectives to achieve and make public comfortable.

Submitted by Ahsan Iqbal on

Good suggestions pl join our efforts to fight corruption through governance reforms. Pakistan Governance Forum 2014 on 22 Dec, 2014 in Islamabad visit www.pc.gov.pk

Submitted by Anna on

This article gives a very good overview of how to combat corruption. As mentioned in the article "the moral and ethical foundation of human behavior" is important also. Therefore in every country (even in industrialized countries), children at school should be informed about the negative influence of corruption on the country. We have to start from bottom up and combine it with bottom down influence, which means our governments have to show how to govern without corruption.

Submitted by Anonymous on

You are right. Training our children in sound morals and a sense of civic duty and service to humanity is at the root of addressing a whole range of social ills, many of which go beyond corruption. Enhancing the participation of women in public life and in decision making in all spheres of human activity will also make a difference. Corruption is not an inevitable evil. It is something that will, in due course, yield to education and the inculcation of moral values, such as those that can be found at the foundation of most major Faiths. Augusto

Submitted by ajituewun on

In Nigeria, I believe capping campaign funds and spending will go a long way to reduce electoral fraud, which bring corrupt officials into power. More so, a reduction of the financial benefits associated with political offices would also help to increase the number of people who actually enter into politics and governance for genuine reasons. Another way will be to include stiff punishment for corrupt officials of all classes in the laws of the land.

Submitted by Anonymous on

You are correct in your observations. Public policies on corruption have to combine rewards for honesty and punishment for bad bahaviours. Enhancing the participation of women in public life will also make a difference. A number of studies have shown that, in general, women are less subject to the temptations of bribery and have a higher sense of public duty. Creating a less corrupt world will surely involve greater involvement by women in decision making at all levels. Augusto

Submitted by Joel on

Giving anti-corruption institutions powers to protect whistle-blowers could also go a long way to combating corruption in government ranks. This coupled with freedom of press can impact positively on anti-corruption prospects.

Submitted by Anonymous on

I agree with you on both counts. A free press is an important ingredient since it shines a light on corrupt practices. Bribers always act in the dark. Augusto

Submitted by TUBI O. T. Esq. on

A strong & actionable Political Will with strong independent Institutions to reduce or stamp out corruption supperceeds the aforementioned options.

Nigeria is still regarded as one of the most corrupt countries in the world despite having the six suggested solutions in one form or the other in place!

Submitted by Anonymous on

I respectfully disagree. Nigeria has serious shortcomings in everyone of the six areas identified. Hence the presence of corruption. Having said this, you are right, strong independent institutions are important, as is the presence of political will on the part of honest, credible politicians, dedicated to the public good. Augusto

Submitted by Bolaji Olaniran on

The world also need to reduce the gap between the rich and the poor, the haves and haves not, this has been the main reason why people try to steal public fund thinking they can secure the future of their unborn generations by burying foreign currencies in the ground. i also thing access to economic opportunities, loans, education and equality before the law.

Submitted by Kunmi on

Africa needs these tools and West African countries will benefit from these strategies.

Submitted by ngubia m on

Six strategies to fight corruption
Thanks a lot for this insightful piece on combating the malignant social and economic malfunction called corruption
Broadly, there are three policy proposals on curbing corruption: lawyers approach, the businessman’s approach and the economists approach. These consist respectively in producing tougher new laws, tougher enforcement of existing laws and increasing the level of competition in the economy, both among firms and bureaucrats.
Singapore and Hong Kong are some of the least corrupt countries on the world are successful applications of lawyers approach – they have draconian laws on corruption; they also pay their bureaucrats exceptionally well but the level of political competition on this e countries is extremely low; this has allowed exception level of pay in the bureaucracy without too much political completion.

I will borrow example from one country in East Africa-Kenya; this is my country of birth.
The Kenya Civil service is among the highly paid; this was strategic to attract and retain and high performing from the private sector’s ; it started with an elite Dream Team crafted by the former president in late 90s to turn around the Kenyan economy; vision 2030 secretariat and et al.
Yes, the work by Rijckeghem and Weder (2001) that there is an inverse relationship between the level of public sector wages and the incidence of corruption may be partially correct; it ignores the rent seeking nature of the economic man and the politics of the country which are central to award of civil service jobs.; what about the level of civil liberties?
The Kenyan MP is paid over $10,000per month excluding various unwarranted allowances like sitting allowance (being paid to be in parliament), yet they still misuse constituency development funds, solicit bribes to support either private or public members bill , refuse to pay for child support?
Thus the questions is how much of the clean record if any in Kenya/LDC can be attributed to the policy of high wages?

The red tape of bureaucracy is not a choice of large institutions but product of the desire to systemize processes which should/must outlive the officeholders/owners; and that’s why it’s easy for a small outlet in downtown street to complete an order for emergency backup generator that for GE( Kenya) to fix a rundown backup generator
Government are the highest rent seeking entity in the economy; they extract income through these bureaucracies; they also create employment otherwise every government unit/ department should be run as a business unit able to finance its operations.
I agree these needless regulations need to be removed but are the leaders ready to pay the political price? And as such instead of dismantling these bureaucracies they create more efficient ‘political outfits ie centers of excellence like Huduma Centre in Kenya; constitutionalize various commission and authorities , merge moribund parastatals rather that privatize them et al
Thus there’s a a correlation between the nature Governance of a country and level of red tape.

Corruption is a social evil with immediate economic effects but long-term damage on moral fabric of the humanity; it eats into the family values where ones worth is measured by the size of the wallet.
It emanates from the Id- the instinctive nature of the being, the self, the selfish, the animal desire to fulfill immediate aggressions which matures into fully grow untamed ego.
It’s also fueled by the capitalism which advocates completion, privatization and wealth accumulation.

To address corruptions we need a bottom up approach

1. Disband Anti-corruption agency- this agency serves the master.
2. Set up a Whistle blowing agency whose sole mandate is educate the citizenry on corruption
3. Make corruption a subject/ topic in basic education.
4. Personalize corruption; carry out national wide HIV like campaign and sensationalize and sensitive citizens on evils/benefits of corruption.
5. Set an alternative form of Social justice dedicated to corruption like the Rwanda’s Gecaca system.

Submitted by Mchenry on

Every citizen knowing their rights should also help curb corruption. This eliminates the government from oppressing and intimidating the have nots and hence giving everyone a fair chance/ opportunity to better themselves. We vote our leaders into power so they may lead us, not harass us. Having said that voting based not on tribe, ethnicity, religion but instead Integrity, honesty,commitment, and good character.

Submitted by Anonymous on

A very appriatable work being done by D W. B. Reduction in corruption mostly depend upon D wills of Govs. If D country Heads R corrupt , then D Govt. Functionry have free hands in looting D Public money.

Submitted by MBA NGUEMA on

On pourrait ajouter d'autres aspects dans les pays d'Afrique où la corruption est actuellement généralisée: c'est le cas du Gabon. S'il est important que soit combiné les axes suivants: La prévention, l'éducation, les conditions, les incitations et les sanctions. Mais cela n'est possible que si toutes les parties prenantes se mobilisent pour lutter contre la corruption. Or, que constate-t-on? Que l'exécutif semble trainer les pas. Au Gabon,après avoir élaborer une stratégie de lutte sous l'appui du programme des nations unies en 2012, cette derière n'est pas toujours mise en oeuvre. Qu'attend-t-on?

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