Corruption: An Industry Strives

In One Respect, Third World Poverty Is No Mystery

NEW YORK, NOV. 2, 2002 ( Governments have produced a flurry of international agreements in recent years designed to fight against corrupt practices. Recent reports, however, indicate that there is still a long road ahead in the effort to stamp out bribery and misuse of funds.

In the latest Corruptions Perceptions Index (CPI) released Aug. 28 by the non-governmental organization Transparency International, 70 of the 102 countries surveyed scored less than 5 out of a clean score of 10.

Launched in 1995, the CPI is a poll of polls, reflecting the perceptions of businesspeople and country analysts, both resident and non-resident. This year’s CPI draws on 15 surveys from nine independent institutions. The CPI includes only those countries that feature in at least three surveys.

“Political elites and their cronies continue to take kickbacks at every opportunity,” stated Transparency International Chairman Peter Eigen in the press release accompanying the report. “Hand in glove with corrupt business people, they are trapping whole nations in poverty and hampering sustainable development.”

Corruption is not only a problem in Third World countries, but is also present in the nations whose firms invest in developing countries, explained Eigen.

The 2002 survey shows that corruption is perceived to be rampant in Indonesia, Kenya, Angola, Madagascar, Paraguay, Nigeria and Bangladesh: all countries with a score of less than 2. At the other end of the scale are the countries with a score of higher than 9 — with very low levels of perceived corruption: Finland, Denmark, New Zealand, Iceland, Singapore and Sweden.

Also highlighted in the presentation of the report is the situation of the countries formed from the old Soviet Union. “The CPI 2002 indicates that Russia has a long way to go and remains seriously corrupt, together with Uzbekistan, Georgia, Ukraine, Kazakhstan, Moldova and Azerbaijan, all of which score less than 3 out of 10,” explained Eigen.

Billions missing

Examples of rampant corruption and bribery are common. Corrupt African leaders have stolen at least $140 billion from their people in the decades since independence, said Nigerian President Olusegun Obasanjo, according to a June 14 report in the Independent newspaper of Britain.

Obasanjo also accused European countries of sitting on much of the stolen money, stashed in their nations’ banks. Europe did little to try to bring back the money to Africa and improve living conditions, he contended.

Nigeria’s leader defended a deal he made with the family of his late predecessor, Sani Abacha. They agreed to hand over $2 billion looted from the country, so long as they could keep $100 million of the funds. Obasanjo said he was forced into the deal because European banks insisted on proof the money was stolen.

And in Angola a report by the International Monetary Fund found that nearly $1 billion disappeared from government finances last year, BBC reported Oct. 18. The sum is about three times the value of the humanitarian aid received by Angola so far this year. More than $4 billion is unaccounted for over the past five years, the report said.

The IMF report does not mention where the missing money has gone to, but its overview of the political and economic situation in the country speaks of “extensive corruption” as one of the challenges faced by the government, BBC said.

“Every person could be fed, every baby could be vaccinated, every bridge could be rebuilt and every [land] mine could be lifted if the government of Angola properly used the millions it steals each year,” said a foreign-aid worker in a July 30 article in the London Telegraph.

The article reported that a footnote in British Petroleum’s 1999 annual figures stated it had spent 75 million pounds ($116 million) on a “signature fee” to win an offshore production contract in Angola. The payment, however, never appeared in any government accounts.

Asia too is suffering from a lack of clean business practices. A July 1 Newsweek report on the subject noted an estimate made by the Asian Development Bank, which calculated corruption now amounts to as much as 17% of gross national product in poor countries.

In India, for example, an estimated 20% of the 545 members of the lower house of Parliament have criminal backgrounds, ranging from graft to murder, the Financial Times reported Aug. 8. State assemblies, particularly in the most populous states of Uttar Pradesh and Bihar, have even more criminals.

“India’s politics has become disturbingly criminalized,” said H.D. Shourie, founder of Common Cause, an anti-corruption group that specializes in public-interest lawsuits. “And this has encouraged the spread of corruption elsewhere in society — the judiciary, the civil service, the police.”

In Uttar Pradesh, recent estimates say that less than a third of development money from New Delhi gets anywhere near its intended beneficiaries, the Financial Times reported Oct. 12.

Bribery is common in large construction projects. State governments are partial to building large dams because such projects involve expensive contracts with private companies. However, they rarely bother to follow up with the necessary (and non-lucrative) repair and maintenance work. India is thus littered with leaking dams. Phantom employees are also common. A recent probe found that only 18,000 of New Delhi’s 42,000 municipal employees show up at work.

“Basket cases”

So as not to waste money on corrupt governments, the head of the U.S. Agency for International Development announced changes in how official aid will be distributed, the International Herald Tribune reported Oct. 25.

Andrew Natsios told the Development Cooperation directorate at the Organization for Economic Cooperation and Development in Paris that the countries he described as “basket cases” would get help through a new department called the Democracy, Conflict and Humanitarian Bureau. He said this assistance would be distributed through non-governmental organizations, charities and religious groups rather than through “corrupt, predatory and tyrannical” governments.

At the intergovernmental level, the OECD is reviewing the implementation of the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions. A progress report was presented at the OECD Ministerial Council meeting last May 15-16. The convention took effect Feb. 15, 1999. All 30 OECD countries signed the convention as well as five non-members: Argentina, Brazil, Bulgaria, Chile and Slovenia.

Also part of the OECD is the Financial Action Task Force on Money Laundering. Its role is “to generate the necessary political will to bring about national legislative and regulatory reforms to combat money laundering,” the OECD said. The task force monitors progress in implementing anti-money laundering measures and promotes their adoption worldwide.

There is also much activity at a regional level. For example, the Organization of American States has formed an Inter-American Anti-Corruption Network. And since 1999 the Council of Europe has a mechanism called the “Group of States Against Corruption,” designed to monitor the observance of the anti-corruption norms adopted by the council.

The International Monetary Fund and the World Bank are also active in this area. According to an IMF fact sheet, “The IMF and Good Governance,” dated Aug. 31, an increasing number of country reports by the organization contain references to the situation regarding corruption. And the World Bank is increasing audits of how its loans are managed, along with giving advice to governments on how to develop and implement anti-corruption programs. Their success may help decide whether developing countries ever rise above poverty.

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