Kickback
fightback

 
Peter Eigen
describes how corruption deepens poverty and damages the environment, and shows how the fight against it is intensifying

The Millennium Development Goal of halving the number of people living in extreme poverty by 2015 is attainable only if the world’s governments seriously tackle corruption.

Nepotism, patronage and corruption do not just block development and deepen poverty. They also hold back the development of a private sector in developing countries, and deprive a new generation of the education and health care they need to be able to participate in economic development.

Corruption diverts public funds to promising opportunities for rent-seeking, such as large infrastructure projects, which benefit certain well-connected individuals. It also deepens a country’s indebtedness for generations to come: estimates put the cost of corrupt projects in developing countries at more than one third of the debt burden of the developing world. Wasteful projects generate recurring costs, and are often poorly implemented because tenders are allocated to bidders who pay kickbacks instead of those offering quality and value for money.

It is a particular problem in the area of public contracting. The Organisation for Economic Co-operation and Development (OECD) puts government expenditure on procurement at $3.5 trillion worldwide. A conservative estimate puts the amount lost due to bribery in government procurement at $400 billion worldwide.

Corruption erodes freedoms and causes significant economic losses. The World Bank’s World Development Report 2005 gives central prominence to the message that corruption is one of the most important determinants in the investment climate for everyone.

It also exacerbates destruction of the natural environment. The 2001 Environmental Sustainability Index (ESI), launched at the World Economic Forum in Davos, found that, of its 67 variables, corruption was the most negatively correlated to countries’ level of environmental sustainability. Marc A. Levy, the ESI’s director of research, concluded: ‘Corruption deserves a stronger role on the environmental sustainability agenda’.

There are two main reasons for corruption’s devastating impact on the environment: environmental safeguards are often overcome with its help; and large, environmentally damaging selection and overdesign of projects tends to offer better opportunities for kickbacks. Hence the developing world is dotted with environmentally harmful power dams, roads, pipelines and ports, mainly driven by corruption. They often have a devastating impact on traditional communities.

It is not only the politicians and public officials who create the problem: bankers, lawyers, accountants and engineers working on public contracts are also responsible.

Good governance, however, is now firmly on the agenda of governments, the private sector and intergovernmental organizations worldwide. This is not just the view from and in development aid ministries in the West, but also at the World Bank and increasingly among governments in the developing world.

It is a priority for an increasing number of new governments around the world, even though enormous challenges persist. As this year’s Nobel Peace Prize winner, Wangari Maathai, says, it is now clearer than ever that the challenge facing much of Africa is to move from an age of conflict, hunger and corruption to one of good governance and economic development.

Road map to reform
Last October the Government of Kenya, together with Transparency International, organized a meeting in Nairobi on New Anti-corruption Governments: The Challenge of Delivery – seeking to offer solutions for an effective road map to reform in a country where corruption is rampant.

Industrialized countries and multinational corporations bear a major responsibility. Until the OECD Anti-Bribery Convention came into force in 1999, the political and commercial elites of the developed world condoned active bribery by their exporters abroad. In some countries, indeed, bribes were tax deductible.

The United Nations Convention against Corruption, signed in Merida, Mexico, in December 2003, provides new scope for effecting mutual legal assistance between countries – making it easier, in particular, to facilitate the return of assets stolen by corrupt leaders. This complements the African Union Convention on Preventing and Combating Corruption, adopted in July 2003, which also provides for greater cooperation on the return of stolen assets.
Corruption erodes freedoms and causes significant economic losses
John Githongo, Permanent Secretary for Governance and Ethics in the office of Kenyan President Mwai Kibaki, says that in searching for assets appropriated by corrupt elites, Kenya’s new government has already traced roughly $1 billion believed to have been stolen from the country.

But changing the rules of the game is no easy matter. Reform-minded governments must not only confront entrenched corrupt political and commercial networks. Having raised expectations, they must also provide some quick wins before the citizenry loses patience.

From Georgia to Kenya to Indonesia, new governments elected on an anti-corruption platform should be supported with expertise to strengthen governance. Much depends on political leaders’ vision, as well as on their skills in designing the right sequence of reforms and on their ability to build coalitions behind the reforms. Good judgement is needed to strike a balance between short-term and long-term goals, and to prosecute corrupt actors and call guilty politicians to account without generating a political witch-hunt. Leadership skills are needed for introducing tough reforms without losing popular – or indeed international – support.

New governments must also deal decisively with the past as transparently as possible. Indecision in bringing firm sanctions to bear or in implementing forceful restitution mechanisms, for example, can quickly lead to deepening popular disillusionment and a gradual erosion of the authority of leadership.

Propitious climate
Increased global awareness of the impact of corruption has created a propitious climate for leaders in many parts of the world to fight it. Major international institutions, such as the World Bank, are now active partners in controlling corruption. International business and civil society organizations have united around a global consensus, reflected in the adoption in June this year of an anti-corruption principle by the more than 1,500 corporations worldwide who are signatories to Kofi Annan’s UN Global Compact.

There is no single recipe, but any solution requires political vision and sustained political will to engage all partners


Peter Eigen is Chairman of Transparency International.

PHOTOGRAPH: Kathy Lipicus/UNEP/Topham


This issue:
Contents | Editorial K. Toepfer | Strengthening the rule of law | Partners in law | Justice can be shortsighted | Force of law | A matter of judgement | A law of energy | People | Rule of man, or rule of law? | At a glance: The rule of law | Sebastião Salgado | Sustainable development comes from Saturn! | One planet, different worlds | Nature’s wisdom | Kickback fightback | Conflict and cooperation | Holistic landmark | Empowering the poor | Legal climate | Small is effective | Building the framework


Complementary issues:
Globalization, poverty, trade and the environment 2003
World Summit on Sustainable Development 2002