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CORRUPTION AND DEVELOPMENT IN AFRICA
Maputo, Mozambique, November 1-2, 1997
GCA/PF/N.2/11/1997
 

Background
Executive Summary
Introduction
Part I: Outline of the Problem
Part II: Combating Corruption
Conclusion and Annex

Background

The problem of corruption was raised by a number of participants during the GCA Plenary in Maastricht, November 1995, which was attended by several African Heads of State as well as by cabinet members from African countries, their development cooperation partners from northern countries and international organizations, and representatives of civil society from both Africa and the north. There was unanimous agreement that corruption, though a problem throughout the world, presented a significant threat to the development of African countries and that urgent action was thus required to address it. While recognizing the need for the governments and populations of African countries to be in the forefront of the fight against corruption, both African participants and their northern partners also emphasized that international action was required. African leaders in particular stressed the role of northern countries and multinational companies in worsening corruption in their countries. The meeting expressed concern that in several OECD countries the bribery of foreign officials by companies remains legal, and that it is even tax-deductible in some. It urged that steps be taken to change this situation.

As a result of the discussions in Maastricht, in 1996 the GCA Co-Chairpersons decided that the problem of corruption should be addressed within the GCA. Accordingly, it was assigned as the main topic for consideration at the 1997 Policy Forum in Maputo, Mozambique. This decision met with considerable support from the constituents of the GCA, and coincided with the increased worldwide attention now being paid to the problem of corruption.

The GCA Co-Chairpersons recognize that combating corruption will require action on several fronts. However, they consider that taking action to reduce bribery in international procurement would be a useful starting point. Not only could this lead to a dramatic reduction in corruption related to international contracts, but it could also stimulate effective action against domestic corrupt practices.

Therefore, the Co-Chairpersons have launched an initiative targeting international procurement in donor-financed projects and contracts in several African countries. Under the initiative, the heads of state of the countries will emphasize to their procurement officials that receipt of bribes in connection with international procurement contracts is prohibited. They will also require that the Chief Executive Officers of international corporations bidding on contracts certify that their employees and agents have been effectively forbidden to offer or pay bribes. Finally, they will request the World Bank and other international financing agencies to include "no-bribery" clauses in contracts which they finance. The initiative also involves the implementation of a variety of supportive measures, including the revision of national procurement codes and legislation, development of monitoring procedures, strengthening of regulatory provisions, and increasing sanctions for those found engaging in corrupt practices.

To date, the initiative has the strong support of the Presidents of Benin, Malawi, Mali, Tanzania, and Uganda, as well as the Prime Minister of Ethiopia, and is in the initial stages of implementation in these countries. In addition, Mr. James Wolfensohn, the President of the World Bank, has responded positively to requests to include no-bribery clauses in contracts which the World Bank finances. Transparency International is also involved in strengthening national supportive efforts in these countries.

Executive Summary

Corruption exists throughout the world, in developed and developing countries alike. In recent years there has been a significant increase in the attention paid to corruption, in part due to a series of high-level corruption cases in industrialized countries, in part due to an increasing awareness of the costs of corruption throughout the world, and in part due to the political and economic changes which many countries are undergoing. Corruption in Africa is a development issue. African countries cannot bear the costs of corruption, which impedes development and minimizes the ability of governments to reduce poverty. For these reasons, effectively addressing corruption in African countries has become a development imperative.

Corrupt practices span a wide spectrum, ranging from petty corruption whereby bribes are required before normal bureaucratic procedures are accomplished, to large scale corruption whereby considerable sums of money are paid in return for preferential treatment or access. Corruption occurs in the political, economic and administrative spheres. Corruption is worse in countries where institutions, such as the legislature and the judiciary are weak, where rule of law and adherence to formal rules are not rigorously observed, where political patronage is standard practice, where the independence and professionalism of the public sector has been eroded, and where civil society lacks the means to bring public pressure to bear.

Many countries in Africa are currently in the process of transition from single party politics and command economies to political pluralism and market economics. In the previous systems, extensive governmental involvement in the economy and regulation of public life created the basis for corrupt practices, although only those associated with the regime could benefit. While the true extent of corrupt practices was not fully understood, the negative effects of corruption were certainly among the factors inducing the collapse of the old order in most instances. Once established, democratic political systems and open economies provide the best opportunities for controlling corruption. In periods of transition, however, when one set of rules and norms has broken down, but another has not yet been institutionalized, opportunities for corruption can flourish, while the openness enjoyed as a result of political liberalization makes corruption more evident.

Once corruption becomes entrenched, its negative effects multiply. It induces cynicism, because people begin to regard it as the norm. It undermines social values because people find it easier and more lucrative to engage in corruption than to seek legitimate employment. It erodes governmental legitimacy because it hampers the effective delivery of public goods and services. It limits economic growth because it reduces the amount of public resources, discourages private investment and saving, and impedes the efficient use of government revenue and development assistance funds.

Strategies to limit corruption have to be realistic and achievable, and tailored to the needs of particular countries. Too-ambitious endeavors which cannot deliver results can be counter-productive. Like other reforms, policies intended to address corruption have to be consistently implemented over the long term. Corruption is essentially a governance issue. Increased governmental accountability and transparency, enhanced public participation in decision making, strengthened public sector and civil society institutions, and greater adherence to the rule of law will not only improve governance but will help counter corruption. Free and open competition is ultimately the greatest weapon against corrupt practices -- whether political, economic or bureaucratic.

At the national level, specialized agencies and anti-corruption bodies can be extremely effective, but only provided that they have sufficient independence, authority and resources to function efficiently. Government actions alone will not be effective. A broad coalition against corruption, encompassing governments and the public, is necessary. In this, organizations of civil society, the press and the business sector all have a crucial role to play. Public opinion has to be supportive of anti-corruption efforts, and public opinion is the major force in creating an environment in which corruption is not accepted or condoned. Public education as to the detrimental effects of corruption is important in creating public awareness and an active public response in support of anti-corruption measures. For this, free and professional press and media, and accessible channels of information, are crucial.

While the ultimate responsibility for combating corruption lies with countries themselves, there is a role for both regional cooperation and international support. Many corrupt practices are localized or are confined within the boundaries of individual countries. Many more, however, are not. International business transactions have long been recognized as fertile ground for corruption. Much of the money gained as a result of corrupt practices is kept in safe havens outside of Africa. Some parties to corrupt activities may be based in neighboring countries, and those accused of corruption often simply move to other countries to avoid prosecution. Regional cooperation and development of regionally-agreed legal mechanisms to address these problems would be useful, while international efforts to stop large-scale corruption in business transactions are essential.

There is also need for the international development community to become seriously engaged in efforts to counter corruption, given the role which development assistance plays in the economies of many African countries. Too often in the past, development assistance has been part of the problem. Now, bilateral donors, as well as the international financial institutions, recognize that sound management and effective use of development assistance funds are of fundamental importance. They are thus increasing their efforts to improve accountability and enhance transparency in assistance programs, as well as to include anti-corruption provisions in procurement procedures.

Corruption is now recognized as a global phenomenon, which has to be addressed coherently and consistently. The need for concerted action in Africa is evident. African countries have to become more integrated into the global economy and attract greater levels of foreign and domestic investment if they are to achieve the growth rates necessary to reduce poverty and improve the well-being of their populations. The estimated $2.6 billion in foreign direct investment which went to Africa in 1996 is much more than in previous years. However, this still only represents about 3 percent of the total foreign direct investment which flowed to developing countries. Similarly, domestic savings and investment rates of 15-17 percent remain well below the average for developing countries. To the extent that corruption contributes to these low levels of investment and savings, it impedes Africa's progress. It therefore has to be confronted as a matter of urgency.

Although there are no easy solutions to the problem of corruption, it can be addressed, and it would appear that the time is now right for a concerted international effort to do so. Corruption at the local, national and international level has to be made a high-risk, low-gain endeavor. It has to be made more difficult to engage in, and to be met with social disapproval, moral censure and rigorous legal prosecution. Both those who corrupt and those who are corrupted have to be punished.

The policy implications for both African governments and their donor partners are clear. African countries have to continue with political and economic reforms which promote free and open competition, transparency and accountability. At the same time, they must implement strategies specifically targeted at corruption, and build coalitions with civil society to create an environment in which corruption is not tolerated. The international community, for its part, must make transnational bribery in international business transactions a criminal activity, reduce the possibilities for corrupt practices in development assistance programs, and support the anti-corruption efforts of African countries. These actions, taken together, will make it possible to limit -- although not to eradicate -- corruption, and to reduce the corrosive effects it has on nations and societies.

Introduction

Corruption can be defined as the abuse of official position for private gain. It exists everywhere in the world, as the recent extensive press coverage detailing corrupt practices in many western countries as well as those of the former Soviet Union testify. However, in those countries in which democratic governance is well established, institutions such as the judiciary, the legislature and the press provide a check on corrupt behavior and also make it more difficult and risky to engage in. Similarly, the development of a merit-based and professional civil service has reduced opportunities for public sector corruption in many countries. Corrupt behavior becomes the exception rather than the norm if the likelihood of being caught is high, if the punishment once caught is severe, and if it is generally condemned by society. Conversely, corruption tends to be the norm if the chances of being caught and severely punished are low, and if it is a generally accepted -- or at least tolerated -- mode of behavior.

Increasingly, attention is being focused on corruption, in African countries and elsewhere, as the damaging effects of corrupt practices become more widely understood, and as people become less willing to tolerate corrupt behavior on the part of their leaders. The highly-publicized incidences of corruption in many developed as well as developing countries are indicative of this. Corruption in Africa is a development and social issue. Most African countries are no more corrupt than countries in other regions, but in many ways the problem is worse in Africa because the majority of African countries are poor and can thus least afford the consequences of corruption. Moreover, unchecked corruption will undermine the very real gains which a number of African countries are now experiencing as a result of economic and political reforms. Indeed, where unchecked control of political power allows unrepresentative groups to monopolize national resources for the benefit of a chosen few, then corruption becomes an impediment to change, and therefore a serious constraint on economic growth and poverty reduction. Furthermore, national private sector actors may be reluctant to invest if they know that certain corrupt political leaders will necessarily become their silent partners.

Although corruption is a problem in many countries in Africa and elsewhere, it is neither inevitable nor insurmountable. However, there are no quick and easy solutions. Addressing corruption in any country requires political will, commitment on the part of governments and citizens alike, and consistent effort. While the responsibility for addressing corruption lies primarily with African countries themselves, the support and active engagement of the international community is also required. In many instances, industrialized countries have either condoned or encouraged corruption in African countries. Bribes have been paid to secure contracts, mismanagement and misuse of development assistance funds have been tolerated, and corrupt regimes have been supported out of political expediency. It is only relatively recently that African governments and their development partners have begun to focus on the need for transparency in government transactions, or to prevent official development assistance funds being used to replace those domestic resources diverted into corrupt channels.

The intent of the paper is to provide general background information. It first describes the problem of corruption from a political economy perspective, and reviews some of the costs and consequences of domestic and international corruption. It then focuses on what can be done to address corruption, and discusses measures which have to be implemented at a national level before considering some of the supportive initiatives currently being put in place internationally. The paper suggests that corruption in African countries has to be seen as a governance issue, and proposes that over the long-term it is improvements in governance which will provide the necessary checks and balances to limit the opportunities for corrupt practices and to facilitate their detection when they occur.

Part I: Outline of the Problem

I. Overview

How corruption manifests itself and its effect on the functioning of society varies from country to country, and is conditioned in part by the social, economic and political realities of each country. At one end of the spectrum there are countries which are relatively corruption-free, while at the other end there are countries in which corruption is endemic and threatens to undermine the fabric of society as well as political and economic systems. At the very extreme are cases of government kleptocracies, which over time lead to state collapse. Most countries lie somewhere in the middle of the spectrum, with corrupt practices concentrated in a few areas and generally not condoned. African countries fall into each category.

Corruption occurs when there is both the opportunity and the inclination, and when the potential rewards are considered to be worth the risk of discovery and punishment. Corruption often, but not always, involves payment of a bribe, and can also involve theft and fraud. In addition, there are a wide range of practices which may technically not be illegal, such as selective exemptions from import duties, the non-competitive allocation of import/export licenses, or the appointment to positions on the basis of connection rather than merit, which are nevertheless corrupt because political friends of the governing regime are favored, and also because the government loses revenue. Although no governance system is immune to rent seeking and corrupt practices, corruption tends to flourish where governments are highly involved in the economy, where bureaucratic management systems are relatively ineffective even though government officials perform a wide range of administrative functions, where there is little political or economic competition, and where the institutions of state and society are weak.

At the margins, some practices which are regarded as corrupt in one country may not be considered so in another, but for the most part there is agreement as to what constitutes corruption. Furthermore, while corruption has to be determined within the socio-cultural context of each country, there is usually an understood line between socially-accepted practices of gift-giving, networking, reciprocity and granting of favors, and corruption. A significant issue, however, is that as corruption becomes more widespread and entrenched, the line between socially-accepted behavior and corrupt practices becomes blurred and also less rigorously held. As a result, practices which once would have been regarded as inappropriate if not downright corrupt become acceptable, and even expected, and the vigor with which corruption is addressed declines. In this regard, the example set at the top levels of the political power structure is extremely important.

Corruption in some African countries has become endemic. As such, it is found in almost all aspects of life. Endemic corruption implies a breakdown of the rule of law, and in most instances a loss of state legitimacy. It perverts the normal use of connections, networks and reciprocity, and leads to increased personalization of power. As a result, people come to rely on connections and favors instead of formal political, social and economic rules, and illegitimate use of state resources becomes acceptable. In many instances, wealth and social status are valued, even if they are a result of blatant corrupt practices. In such instances, political corruption and bureaucratic corruption reinforce each other and create coalitions of vested interests which work to maintain the status quo.

Where corrupt practices have become entrenched, large scale corruption by which senior government officials amass huge fortunes co-exists with petty corruption by which officials at almost every level request payment to perform tasks or provide services which they should be doing as part of their job. Ordinary people come to see corruption, and the inefficiencies and distortions it creates, as an inevitable facet of life. Over time, the public sector becomes dysfunctional, the legal system ineffectual, and the institution of government loses legitimacy. Such degraded situations cause growing percentages of economic and administrative activity to become "informal", thereby further widening the gap between the government and the people.

Some areas of government function are more prone to corruption than others, everywhere in the world. Review of countries in Africa and elsewhere suggests that public procurement is a particularly problematic area, especially given the range of actions it encompasses and the significant sums of money involved. Government provision of energy, transport and communications infrastructure, as well as governmental involvement in the management and issuing of licenses or concessions for exploitation of resources such as minerals, oil and gas, tend to be especially susceptible to rent seeking and corrupt practices. A number of high-profile cases have also pointed to corruption in the procurement of military hardware and arms. In these areas, corruption is usually on a large scale, and has an international, as well as a domestic, dimension. Other areas of government function which are particularly vulnerable to large scale as well as petty corruption are taxation, customs, and the issuance of permits and licenses.

Recently, concerns have been expressed about the process of globalization, given the speed with which financial transactions occur, and the increased facility with which funds can be moved from place to place. It is argued that this can facilitate large scale or "grand" corruption, by making it more difficult to detect. Moreover, in some instances funds obtained as a result of corrupt business transactions seem to have become part of networks of money laundering and organized crime which cross national boundaries. However, the same technologies which permit funds to be moved quickly to a variety of locations may also facilitate detection of illegal practices. Furthermore, as corruption threatens increasingly interdependent businesses and countries, they are more likely to seek coordinated and concerted ways of addressing it.

II. Forms of Corruption

A. Political and Bureaucratic Corruption

Political corruption is quite commonplace in many countries, including those of Africa. Indeed, high profile cases of corruption in most countries usually involve political corruption of one sort or another, as recent events in countries such as the United States, France, the United Kingdom and Italy indicate. As with other forms of corrupt behavior, political corruption forms a spectrum, ranging from outright buying of political support to granting favors and preferential access to political allies. What is considered to be political corruption varies considerably from country to country, and some practices are not regarded as corrupt at all by many people because they are not explicitly illegal.

Political corruption is essentially linked to the access to and control of power, and the way in which such power is exercised. While political corruption is an issue everywhere, it tends to be less of a problem when political competition is institutionalized, as corrupt individuals can be voted out of office, or can lose support within their political parties because they are seen as a liability. Open political systems, parliamentary debate of policies, and public access to information can help to provide a check on political corruption in that they reveal corrupt practices. To a certain extent, the incidents of political corruption which frequently come to light in developed countries indicate that institutions and systems are working, in that corrupt practices are being exposed.

The most prevalent types of political corruption center on campaign finance, the award of government contracts on the basis of political support or affiliation, donations to political campaigns in the expectation of later benefits in the form of appointments or access, use of political position to leverage kick-backs or illicit payments, and appointments to high office on the basis of patronage. In spite of considerable efforts to limit outright fraud, in many African countries elections remain an area in which both explicit and more subtle forms of political corruption can thrive, and parliamentary office and privilege can easily be abused. In some countries, blurring of the line between public and private assets and resources is a particular problem. Political corruption is doubly damaging because it involves people in leadership positions, and because it reinforces other forms of corruption. Over time, widespread corruption at the political level also erodes confidence in the institution of government.

Bureaucratic corruption can be on a large scale as, for example, when state-owned enterprises are privatized, land redistributed, public works projects implemented or major government contracts awarded. It can also be on a small scale, whereby ordinary transactions cannot be accomplished without payment of a bribe. Bureaucratic corruption can consist of bribes -- to obtain contracts, information or assets, to gain access to benefits, to avoid paying taxes, duties or levies, to obtain permits or licenses, to influence legal or administrative outcomes, and to speed up or slow down government processes, among other things. It can also involve theft, as when government revenues and resources are simply stolen, salaries and fees are charged for work not performed, and legitimate taxes and levies are collected but not passed on. Petty corruption can be ad hoc and disorganized, whereby payments are requested by individual officials working independently, or hierarchically organized so that shared payments provide an incentive to engage in corrupt practices as well as protection for those doing so. As with other forms of corruption, it tends to become self-sustaining.

In part, rent-seeking on the part of public officials in many African countries is a consequence of extremely low salaries, while compressed wage scales and limited opportunities for advancement compound the problem. However, bureaucratic corruption involves a more complex set of factors, and there is little basis for assuming that corruption would cease if public sector salaries were increased without other measures also being put in place. Moreover, while low salaries may partly explain the existence of petty corruption and theft at lower levels, it cannot be an excuse for higher-level and large scale bureaucratic corruption. Unless high-level bureaucratic corruption is addressed, it will be difficult to reduce corruption at lower levels.

The most widespread form of bureaucratic corruption is probably appointment or promotion on the basis of connections, as opposed to merit. This creates inefficiencies and undermines the professionalism of the public service. Perhaps most damaging, bureaucratic corruption over time becomes self-reinforcing, and corrupt practices become institutionalized. Part of the problem of widespread, entrenched corruption is that, while many people suffer from it indirectly, a large number actually benefit from it directly. In extreme instances, people may choose to enter government or military service in spite of low official salaries in order to exploit opportunities for rent seeking or to gain preferential access to goods and services.

Political and bureaucratic corruption which exist independently of one another are cause for concern. However, they are most damaging when they co-exist and reinforce each other, as they tend to in countries which lack strong countervailing institutional and civil society forces, where the political, bureaucratic and private sector elites are closely interconnected, and where control over resources and politics are intertwined. In such instances, both the benefits of engaging in corrupt practices, and the costs of not doing so, become extraordinarily high. In Nigeria, for example, the enormous wealth afforded by oil revenues, the size of the public sector and amount of revenue controlled by it, the existence of extremely lucrative government contracts, and the institutionalization of patron-client relationships, create a climate which is highly conducive to corruption, and extraordinarily resistant to change.

B. International Dimensions of Corruption

The international dimension of corruption in African countries encompasses corruption in international business transactions and also misuse of official development assistance funds. In some instances the two are linked, given the role of development assistance in the economies of a number of African countries. Corruption in international transactions can also involve political pressure for procurement of equipment or award of contracts. Increased concern as to the efficient use of aid resources, greater attention to international business practices, and a number of scandals involving political figures in industrialized countries have converged to highlight the problem of large scale corruption in major projects in developing countries, including those in Africa.

While it is not only international companies which are involved in corrupt practices, efforts to address corruption will be undermined unless they are part of the process. Corrupt practices in international business transactions range from outright theft and fraud to bribes to obtain contracts or information, additional payments, under-invoicing, excessive commissions, and payments to agents or middle-men. They can also involve "padding" of contracts, provision of sub-standard goods or equipment, and billing for services not rendered. There are those who say that corruption is instigated by companies who offer bribes and kickbacks. There are others who say that government officials demand payment and companies have to pay if they want to work in the country. Whatever the sequence of events, it is clear that corruption in international transactions, particularly in public works contracts and procurement, is a major source of grand corruption wherever it occurs.

Many companies -- national and international -- say that they do not want to engage in corruption, because it adds to the cost of doing business and often does not yield the desired result. However, they say that they are caught in a "prisoner's dilemma" of paying bribes because all of their competitors do so. The fact that domestic payment of bribes is illegal and subject to quite severe punishment acts as a deterrent to such practices in many industrialized countries. However, in a number of these same countries, laws which prohibit domestic payment of bribes by companies do not apply to the payment of bribes off-shore. In some countries, such payments are still tax-deductible. In recent years the linkages between corruption and international banking practices and standards has also come under scrutiny. In some quarters there are calls for greater disclosure on the part of banks, as well as for the extension of international conventions originally developed to address money laundering as a result of drug smuggling to be applied also to funds obtained by apparently corrupt means.

Corruption involving official development assistance funds is somewhat different, in that the donor is not an active party, although individual officials may become involved in corrupt practices. More often, this type of corruption involves mismanagement or misuse of funds, which go undetected because of inadequate checks and balances and limited adherence to measures intended to promote accountability and transparency. As a consequence, it can mean that development projects are poorly implemented, that funds or commodities never reach the intended beneficiaries, and that services are not provided. In some instances, development aid has continued to be provided even when it was clear that funds were being diverted or mismanaged, and in extreme cases international assistance has permitted corrupt regimes to stay in power long after their legitimacy has been exhausted.

Corruption in the use of development assistance funds has not only undermined the utility of such funds, but has also served to erode support for aid, both in the countries providing and, to a lesser extent those receiving, assistance. Furthermore, it has reduced the international credibility of official development assistance. In some instances it has encouraged domestic corruption, by almost legitimizing corrupt practices and conferring a degree of "honorability" on them, and has thus made domestic corruption more difficult to address. To a certain extent, the way in which aid-funded contracts have been let and technical assistance has been provided has contributed to a cycle of corruption. The disparities between the salaries and benefits of expatriate consultants and those of national government officials have in some cases facilitated rent-seeking behavior, while in others the extensive provision of aid-funded vehicles and equipment has led to collusion between project staff and local suppliers.

Another dimension of international corruption involves the linkages between corrupt practices, organized crime, drug trafficking and money laundering. To date, most African countries have been relatively uninvolved in this particular syndrome of corruption, but they are susceptible and there are concerns that it is beginning to take hold. Trafficking in drugs, minerals, endangered species and arms are increasingly problematic in some African countries, and are worsened by porous borders and inadequate policing systems. Such activities can only be effectively dealt with in an international context, and most African governments lack the resources to adequately combat them.

C. Corruption and Transition

In recent years, attention has been focused on the processes of political and economic transition and their possible side-effects of worsening corruption. Political and economic reform do not in and of themselves create the conditions in which corrupt practices can flourish. On the contrary, over the long-term, political and economic reform create a situation in which corruption becomes more difficult by facilitating greater competition, placing limits on governmental authority, and encouraging popular participation in decision-making. There is, however, a difference between institutionalized and clearly understood mechanisms for economic competition and political contestation, and situations of political and economic instability. In the latter, the opportunities for corruption are much greater, and also more likely to be exploited.

Evidence from some countries suggests that in the short-term corruption can increase due to the uncertainty which political and economic transition creates. To a significant extent, those who are threatened by reform can try to maximize their gains while they are in a position to do so. Moreover, as old methods of control break down, but new ones are not institutionalized, the opportunities for rent seeking and corruption can increase. It is also true that in some countries those who could not previously benefit from rent-seeking have taken advantage of new-found opportunities to do so. Additionally, corruption can become more apparent with reform in that the political opening up of societies, and the resulting greater freedom afforded to the press and civil society organizations, brings hitherto hidden corrupt practices to light.

There is also ample evidence to suggest that, in the absence of accountable, transparent administrative systems and adherence to rule of law, some processes, such as divestiture and privatization, can be exploited by corrupt individuals. Furthermore, even without explicitly corrupt intentions, such processes can be manipulated so that select groups benefit or have preferential access. The experience of transition economies in this regard is particularly enlightening, and underlines the importance of addressing broader governance issues early on in the process of both political and economic reform. In countries such as Russia and Ukraine, there are concerns that the widespread and excessive corruption that is now apparent, and which in some instances is linked to organized crime, will undermine support for the process of political and economic reform. In these countries the need to deal with high-level large scale corruption has become a political imperative.

III. Costs and Consequences of Corruption

Corruption in African countries is a cause for concern because it diverts already limited funds, undermines economic progress and impedes policy changes required for development. Though difficult to quantify, the costs and consequences of corruption are many and varied. The effects of corruption are felt in the political and social, as well as the economic, spheres. Although the direct costs of corruption may be high in terms of lost revenue or funds diverted from their intended use, the indirect costs in terms of the economic distortions, inefficiencies and waste resulting from corrupt practices are more problematic over the long-term and also more difficult to address.

The consequences of corruption encompass "white elephant" projects -- often unfinished or without funds for maintenance, shortages of some commodities and stockpiling of others, sub-standard work, inflated costs, and cost overruns. Corruption increases the costs of doing business, wastes resources, and can radically reduce revenues accruing to the state. It also results in poor service delivery, "moonlighting" or multiple concurrent sources of employment, and refusal to perform normal functions without additional payment. Moreover, corruption and corrupt leaders both deepen poverty and make it difficult for ordinary people to get ahead as the result of their own efforts. There is increasing evidence that the social and economic costs of corruption disproportionately affect the poor, who not only suffer from the lack of services and efficient government, but who are also powerless to resist the demands of corrupt officials.

Power, influence and willingness to engage in corrupt behavior all converge in large-scale corruption. Although it does not involve as many people as petty corruption because only those in senior positions can engage in it, this type of corruption is extremely damaging because of the sums of money entailed and because of the example it sets. While petty corruption can appear to be insignificant in comparison, the cumulative effect can be considerable in financial terms. It is this form of corruption which most ordinary people in African countries experience, and it creates an environment of uncertainty and unpredictability. Widespread petty corruption, in which almost every interaction with a government official requires a bribe, also creates a situation in which corrupt practices come to be regarded as the norm.

It is obviously difficult to quantify the costs of corruption. However, isolated examples give an indication of the range and the dimensions of the problem. In Nigeria, a steel mill budgeted at $1.4 billion ended up costing $4 billion, although there is no evidence that the original estimate was low and little cause to believe that the cost overrun was due solely to inefficiencies. In Tanzania, investigation of road construction contracts revealed cost increases of between 101 and 353 percent, which could not be accounted for. In Gambia in the early 1990s it was estimated that customs and tax revenues amounting to 8-9 percent of GDP were foregone, largely as a result of corruption. In Uganda 42,000 "ghost workers" contributed to the civil service wage bill, while in Guinea 11,000 were discovered in a single civil service census. The Government of Cameroon itself acknowledged that fraud and corruption involving state institutions cost some 1,500 billion CFA francs between 1981 and 1986.

The cost is not just monetary. Between 1970 and 1985 Uganda's wildlife was decimated, in part as a result of collusion between corrupt officials, military personnel, poachers and international dealers. A similar situation occurred in the Democratic Republic of the Congo (Zaire), and Nigeria recently admitted that corruption has encouraged trade in endangered species. The environmental impact of corruption also has to be taken into account. Granting of concessions for logging, or sale of land for tourism, when accompanied by kickbacks and favors is unlikely to take environmental concerns into account. Corrupt practices can also endanger health and public well-being. In Cameroon, adulteration of official supplies of drugs and vaccines came to light. The real drugs were sold on the black market, while the adulterated supplies passed into the official health care system. In Tanzania, a major corruption scandal surrounded the sale of food declared unfit for human consumption. Numerous incidences of sale of outdated food and medicines and violation of safety standards linked to corruption have also been uncovered in various countries.

Insufficient empirical research has been done on corruption to date to accurately determine the correlation between corruption and economic growth, or the effect of corruption on investment. However, preliminary evidence and a body of theoretical analytical work suggest that corruption exacts a considerable cost on both. Statistical analysis indicates that corruption is negatively linked to investment and economic growth. Studies using corruption indices, other measures of bureaucratic efficiency, and investment and economic growth data, have indicated that a one standard deviation improvement in the corruption index is associated with a four percentage point increase in investment and over a half percentage point increase in the annual growth rate of per capita GDP.

Other studies show that there is a correlation between the extent of regulatory discretion afforded to officials and corruption. They also indicate that bureaucratic red tape is not reduced by bribes, and that it may actually increase where corruption is widespread. Additionally, analysis suggests that corruption may distort the composition of government expenditure in favor of large capital projects which provide an opportunity for collecting rents and away from expenditure on education and other social sectors. The evidence from studies also indicates that a high level of corruption reduces government revenue, and thus the resources available for public investment, that it reduces expenditure for operation and maintenance, and that it is associated with poor quality of infrastructure.

The pattern and extent of corruption possibly also has some impact on economic growth. If corruption is relatively contained, growth may not be unduly affected, at least in the short-term, although there is a case to be made that in these cases growth would be higher and more evenly distributed without corruption. Also, to the extent that the profits from corrupt practices are re-invested into the economy, the negative effects of corruption may be somewhat mitigated. In such instances, foreign and domestic investors may be willing to invest because the degree of corruption, and the expected outcome, are relatively predictable. Where corruption in systemic, however, the resulting inefficiencies and distortions are likely to have a negative effect on economic growth and certainly on economic development. In such instances, the unpredictable environment created by widespread corruption can act as a deterrent to private sector activity and investment, whether domestic or foreign. In such instances also, funds obtained as a result of corrupt practices are frequently not re-invested in in-country productive enterprises, but are kept offshore. Thus for many African countries, wealth resulting from corruption also forms part of flight capital.

It is generally accepted that large natural resource endowments raise the risk of corruption, because of the amount of revenue which can be generated, and because the governmental regulations covering their extraction and sale can constitute a lucrative source of rents. While poor policies or conflict have obviously had an impact, the fact that resource-rich countries such as Nigeria, the Democratic Republic of Congo (Zaire), and Angola have earned considerable revenue from exploitation of their resources but have not managed to translate this into broad-based economic growth suggests that corruption may also be a significant factor. In these countries, the standard of living of ordinary citizens has actually declined over the years, and investment, though relatively higher than in many African countries is highly concentrated in mining and the oil industry.

Part II: Combating Corruption

I. Challenges of Addressing Corruption

Corruption involves choices. It does not just happen. Fraud and corruption require that people both choose to engage in corrupt practices and have the opportunity to do so. Strategies to address corruption therefore have to address the element of choice as well as that of opportunity. They have to make corruption a high-risk and low-gain, as opposed to a low-risk and high-gain, endeavor. Such strategies have to be country-specific, and what works in one country may not necessarily work in another. The challenge facing those countries which remain relatively corruption-free at present is to prevent an increase in corrupt practices. Those which already have quite high levels of corruption have to break the cycle and build anti-corruption coalitions before corruption becomes systemic. Those in which corruption is widespread and entrenched have to re-establish governmental legitimacy and re-build institutions as well as hitting hard at corrupt practices.


Combating corruption is neither straightforward nor easy, but it is not impossible. A good number of countries have moved from being generally quite corrupt to a situation in which corruption exists but is not widespread and pervasive. It is true that many of the industrialized countries did this over time, as political and economic competition became institutionalized, and as adherence to the rule of law became more widespread. However others, such as Singapore and Hong Kong, have made significant progress in a relatively short time, by affording anti-corruption efforts a high priority. While it is true that many African countries have not yet begun to deal seriously with corruption, a number of others have made considerable efforts, at the governmental and at the non-governmental level. There is also growing awareness in most African countries of the need to forcefully address corruption.

This has been matched by the attention afforded to the problems of corruption by most industrialized countries in recent years. In part this attention is a result of highly publicized incidences of both political and economic fraud and corruption in these countries themselves, and in part it is due to increasing globalization. It is also partly a consequence of the impact of corruption on transition economies, particularly those of the former Soviet Union, and of heightened awareness of the effects of corruption in developing countries. More than ever, addressing corruption is a global issue, as the costs and consequences of corruption are felt beyond national borders. Countries everywhere, including those in Africa, have to constantly develop new strategies to meet the changing challenges which corruption presents.

II. Combating Corruption at the National Level

Ultimately, measures to address corruption have to be put in place in and by individual countries themselves, although the support of the international community, including the international business community, is essential. Experience has shown that preventing and combating corruption requires a consistent, coherent, broad-based approach and a long-term perspective. It has also shown that leadership, political will and public support are essential to the success of any anti-corruption effort, and that the causes and not just the consequences of corruption have to be addressed. Transparency International has defined what it terms "national integrity systems" which comprise a number of "pillars of integrity", all of which are required if corruption is to be effectively combated. These national integrity systems encompass public sector anti-corruption strategies, watchdog bodies, public awareness and participation, accountable judicial process, the media, and the involvement of the private sector and international business.

A. Leadership and Political Will


Without leadership and political will anti-corruption strategies will fail. Political leadership is required to both set an example and to demonstrate that no-one is above the law. Although high level political support for anti-corruption efforts is not sufficient in and of itself, a high profile focus on specific actions can be extremely useful in sending a strong signal that corruption will not be tolerated. This was demonstrated in Singapore, when the fact that the Prime Minister strongly and publicly supported the anti-corruption campaign did much to give it credibility. In several African countries in recent years also political leaders have taken a strong stance against corruption. In Uganda, for example, the leadership of President Museveni has been an important element in anti-corruption efforts, while in Tanzania, the fact that President Mkapa required that senior officials disclose their assets and sign a code of ethics, and did so himself soon after taking office, set an example that he intended to live up to his electoral campaign promises to target corruption.

Emphasis on corruption in African countries is not new. Indeed, most countries have long had legislation to prevent corrupt practices, and stringent penalties for those found engaging in them, including blacklisting, seizing of assets, mandatory dismissal from public office, and legal action. However, in most cases these have been ineffectual because they have not been invoked or because important figures have been exempted. This has served, not only to undermine anti-corruption efforts, but also to erode public support for them. Political will is therefore essential to ensure that anti-corruption legislation and administrative measures are enforced. Political will is also vital to abolish long-standing bureaucratic procedures, such as monopolistic granting of export and import licenses, which are perpetuated because they are lucrative vehicles for corruption, even though they may have little positive value in economic or regulatory terms. Surveys indicate that the example set by leadership, along with stiff penalties for corruption, are considered to be among the most effective measures for addressing corruption at the national level.

B. Public Sector Measures

As with other reforms, governments implementing anti-corruption measures have to demonstrate seriousness and achieve results to build public confidence. This implies that they will have to pursue longer-term governance improvements and institution-building goals, as well as focus on specific actions which can have an impact in the short-term. Stop-start efforts, a piecemeal approach, over-emphasis on legal measures and sporadic anti-corruption campaigns will not yield lasting results, and in fact may erode support, while concentrating on one area and ignoring others could simply shift the locus of corruption rather than prevent it.

While specific targeted anti-corruption measures can be useful, they should be embedded in mutually supportive broader policy reforms. In general, reducing government involvement in the economy, streamlining government functions, and limiting the discretionary decision-making authority of officials will reduce opportunities for corruption, while economic reforms can eliminate the government monopolies and economic distortions which facilitate it. Several countries have found that tax reform, revision of investment codes, elimination of price controls, de-regulation, and reduction in the number of licenses and permits required have had a significant effect. Several others, including Benin, Tanzania, and Malawi, have either revised or are revising public procurement codes as they have identified this as a major area of corruption. Some reforms, such as privatization, have to be handled with extreme care, as they are vulnerable to manipulation.

Measures which improve governmental accountability and transparency, such as implementing rigorous budgeting, expenditure and financial reporting mechanisms, requiring all expenditures, including those for military and security, to be on-budget, enforcing audit provisions, and increasing public access to information, have also been found to reduce corruption. Some countries, such as Mali and Uganda have focused on decentralization to improve service delivery as well as to increase government accountability, but care has to be taken that there is sufficient capacity and accountability at the local level otherwise rent-seeking can actually increase.

There is also an important role for administrative reform in checking corruption and encouraging adherence to formal rules. In some instances rent seeking is possible because financial and other administrative control systems have broken down. Thus implementation of results-oriented management systems and increasing inspection and oversight can be very helpful. Countries such as Singapore also found the use of spot checks, changing the functions performed by officials, and regular audits to be effective deterrents. In Mauritius and Uganda reducing the discretionary authority of officials and minimizing their contact with the public in areas such as customs and tax collection through streamlining and standardizing procedures and computerizing records has increased efficiency and reduced opportunities for rent-seeking.

C. Supportive Institutional Structures

Several countries have managed to create an environment in which corruption is the exception rather than the norm, where it is relatively difficult to engage in, and where the chances of detection are quite high. They did so in part by developing institutions such as the civil service, parliament and the judiciary, which in turn created interlocking systems of oversight and self-regulation. All of these institutions have to be free of corruption themselves and active players in the fight against corruption. However, in countries where corruption has become endemic, they themselves are frequently either corrupt or ineffectual, and reforming them is a lengthy and a costly process. Nonetheless it is being done by many African countries, often with the assistance of their development partners.

While purely legal measures to reduce corruption are unlikely to be totally effective, they are an essential part of any anti-corruption strategy. Rule of law is important to guarantee protection of human rights, ensure governmental predictability, create a climate conducive to private sector activity and domestic and foreign investment, and to enforce adherence to formal rules of behavior. To be effective, the rule of law has to be applied impartially, court rulings have to be protected from political interference, and judicial independence has to be assured. A functioning and professional legal system and access to justice are also necessary. This requires, among other things, qualified, well-paid judges with security of tenure. Experience in industrialized countries also indicates that civil law is often more useful in combating corruption than criminal law.

Parliaments create the legislative framework for addressing corruption, as well as promoting governmental accountability and acting as a check on the executive. Mechanisms such as specific parliamentary oversight committees, especially in the area of public accounts, open parliamentary debates, parliamentary-mandated commissions of inquiry, and publication of parliamentary records can all help increase transparency and prevent corruption. However, as well-publicized incidents in developed countries frequently indicate, lawmakers themselves are not above corruption, and most parliaments have internal checks and balances to prevent abuse of office. South Africa has taken considerable steps in this regard, and members of parliament recently agreed to adopt a voluntary code of conduct which, among other things, requires broad disclosure of assets.

Bureaucratic corruption has been identified as a problem in almost all African countries, and creating a meritocratic civil service is a basic requirement for limiting corrupt practices and rebuilding public confidence in the government bureaucracy. However, the fact that a large number of African countries have implemented civil service reform programs for some time without any significant decrease in corruption indicates that this is not an easy task. It also highlights the necessity of implementing civil service, policy, and administrative reforms together so that they are mutually reinforcing. Streamlining of governmental procedures has to be accompanied by effective implementation of administrative checks and balances, accounting and reporting procedures, and adequate supervisory practices to make corruption more difficult to engage in and easier to detect. Making corruption harder to engage in is, however, only part of the equation. Equally important, a culture of honesty and professionalism needs to be created, and thus incentives as well as sanctions have to be employed. Remuneration is obviously a factor, and civil service salaries in many countries will undoubtedly have to be increased, but opportunities for training and career advancement on the basis of merit are also important, and mechanisms to instill a sense of professional pride have to be developed.

Autonomous agencies and watchdog bodies are significant components of any anti-corruption strategy. These include specialized anti-corruption agencies, offices of the inspector general, auditor general and ombudsman, independent human rights and electoral commissions, and special committees of inquiry. Some of these offices now exist in almost all African countries, although their ability to function, and the resources at their disposal, varies. To be truly effective, such bodies have to be independent and protected from political manipulation, and should report to parliament. They also need to have sufficient financial and professional resources, and be afforded adequate powers to enforce ethical codes and standards. They need to enjoy the confidence of the public and their decisions have to be respected by the political elite. They obviously themselves have to maintain high standards of conduct, and be able to guarantee confidentiality and protection to those reporting cases of corruption.

The November 1996 "Report of the Commission on the Causes of Corruption in Tanzania" clearly indicated that the existence of independent agencies alone is insufficient to combat corruption. The report found widespread corruption at all levels in virtually every government ministry, the military and the judiciary, even though Tanzania had a number of specific anti-corruption and oversight agencies. When combined with other measures, however, watchdog bodies can be extremely useful, not only in bringing cases of corruption to light, but also in promoting governmental accountability and building public confidence. Although there has obviously been political interference in some cases, in many African countries independent electoral commissions have greatly improved the openness of the electoral process and the smooth running of elections. Botswana's Directorate for Corruption and Economic Crime has been very effective in investigating and prosecuting cases of corruption, while in Uganda the offices of the Inspector General and Auditor General have been instrumental in both uncovering corruption and putting preventive measures in place. Several countries, including Benin, Malawi, and Tanzania, have established specific anti-corruption offices as focal points for work on corruption.

D. The Role of Civil Society

Civil society has to be involved in the fight against corruption. Indeed, without the active involvement of civil society, including the private sector and the population at large, it will not be possible to combat corruption. Corruption cannot be seen in isolation. Its effects permeate societies, and in turn societal attitudes can either encourage or discourage corruption. It is not clearly understood why relatively corruption-free societies become corrupt, but a number of explanatory factors can be posited, one of which is a change in social attitudes toward corruption. Review of how, historically, some countries moved from being quite corrupt to having relatively low levels of corruption also suggests that social attitudes are an important variable. Such attitudes are not confined explicitly to corruption, but also to how the state and government are viewed, how power and influence are understood and rewarded, and how networks and social and family connections are used.

Changing attitudes is a slow process, but the creation of a normative environment in which corruption is not condoned is essential. Until success gained as a result of corrupt practices meets with public disapproval, it will be hard to counter corruption, and until the public at large is convinced that corrupt practices do not pay, they will continue. Countries which have relatively low levels of corruption also tend to have low public tolerance for corrupt practices and high public support for anti-corruption measures. Public opinion and the actions of civil society organizations can, and frequently are, the trigger for addressing corrupt practices in either politics or the functioning of government.

Professional associations, civil society watchdog bodies, community organizations, consumers associations and religious leaders can build coalitions against corruption and demand greater governmental accountability. They can also play a crucial role in informing the public as to the extent and consequences of corruption. The challenge facing them is to galvanize public opinion and persuade the majority of citizens to actively combat corruption. In many instances in African countries they are doing so, and in several countries national workshops have been held to focus on the problem of corruption and to build public support for anti-corruption efforts. It is of course essential that non-governmental organizations themselves set ethical standards, operate in a transparent and responsible fashion, and not abuse privileges.

It is in the interests of the private sector to address corruption, as over the long-term private sector actors would benefit from increased competition, a "level playing field", greater legal protection of contracts and property rights, less bureaucratic red tape, enhanced predictability, and increased efficiency in dealing with the public sector. The costs of doing business would also be reduced as firms would no longer have to pay bribes. Private sector support of government anti-corruption efforts is essential to their success, as the balance will be tilted away from corrupt practices once sufficient members of the private sector are willing to take the risk of not bribing, and of not relying on political connections. The private sector has thus to be an active partner in anti-corruption efforts and stop paying bribes. While there are those who benefit from corruption and non-competitive access and who therefore resist reform, throughout Africa many businesspersons and business associations are supporting anti-corruption efforts and also refusing to be party to corrupt activities.

The media has a very important role to play in educating people, exposing corruption and building support for efforts to combat it. Corruption thrives on secrecy, which is countered by a free press. The threat of negative publicity and the fact that political corruption is frequently exposed in the press serve as strong deterrents to fraud and corruption in many industrialized countries. An independent and free press also fulfills an important public information function and can help counteract public perceptions that corruption is inevitable and that important people are immune from investigation or censure. It is, however, important that proper ethical standards and responsible investigative journalism are practiced by the media, and that it practices impartiality. "Witchhunts" and unsubstantiated accusations can serve to undermine anti-corruption efforts.

III. Regional and International Anti-Corruption Measures

The recognition of the international dimension of corruption in African countries has been a relatively recent development, and moves to combat it will reinforce national efforts. Until recently, industrialized countries were reluctant to admit that the business practices of either their national companies or international corporations had a role in worsening corruption in developing countries, or that this was anything for governments to become involved in. They were equally unwilling to recognize that corruption in many countries undermined the effectiveness of development assistance, or that development assistance could in some instances facilitate the continuance of corrupt practices. This has now changed substantially, and a number of initiatives are underway to make corruption in international business transactions more difficult and to help African countries combat corruption.

There is also scope for regional cooperation, as much of the corruption in African countries is not confined within national borders. In many instances, money gained as a result of corrupt practices is kept outside of the country. Frequently, companies offering bribes are based elsewhere, and persons suspected of corruption simply move to neighboring countries. Moreover, porous borders have facilitated illicit trade, as well as smuggling of drugs and small arms, between countries. Attempts to investigate and bring those involved in corruption to trial have frequently been hampered by lack of formal agreements between countries. The development of political agreements and regional legal mechanisms could therefore be helpful in this regard.

A. Corruption in International Transactions

Organizations such as Transparency International (TI) have done much to highlight the problem of corruption in international business transactions, and focus attention on the fact that international companies not only provide bribes to developing country officials, but also that such bribery is legal in many northern countries, and tax deductible in some. TI encourages countries and companies to adopt and implement "integrity pacts" by which all companies bidding on a project agree to refrain from bribery in order to create what it calls "islands of integrity" within international procurement. This is intended to encourage companies to desist from paying bribes by providing an assurance that all others bidding on the same project will also do so, thus allowing free and open competition.

The International Chamber of Commerce (ICC) is also concerned to promote greater transparency in international trade and has developed Rules of Conduct, intended to be applied voluntarily by private enterprises. These Rules prohibit extortion and bribery for any purpose, including judicial proceedings, tax matters, political contributions, legislative proceedings, and regulatory cases as well as in obtaining and retaining business. They are intended to be observed by non-profit, as well as for-profit, organizations. The Rules not only cover bribery and kickbacks, but also payment to agents and political contributions.

Building on these concepts, a number of African countries, in collaboration with the GCA, the World Bank, Transparency International, and bilateral donors have recently decided to target public procurement involving international contractors, because they believe that by so doing they can have an impact on a major source of large scale, high-level corruption. The idea, which includes using explicit no-bribery language in bid and contract documents, also involves revision of national procurement legislation, strengthening of regulatory provisions to limit opportunities for corruption, and increasing sanctions for those found engaging in corrupt practices. It involves collaboration between African governments, financing agencies and international companies. Financing agencies would be expected to require compliance with anti-bribery provisions, and to implement sanctions against defaulters, while companies bidding on contracts would explicitly undertake not to bribe and to take punitive measures against any personnel found engaging in bribery or corruption.

In May 1997 the twenty nine member nations of the Organization for Economic Cooperation and Development (OECD) committed to take measures to criminalize the bribery of foreign public officials in international business transactions, and to enact legislation to this effect by the end of 1998. They further agreed to conclude negotiations on an international convention to criminalize such bribery by the end of 1997. OECD is also urging those countries which have not yet ended tax deductibility of bribes to foreign officials to do so, and recommends increased international cooperation to combat corruption, both at the country level and through enhanced cooperation with international organizations and the private sector. In addition, the agreement reached in May 1997 includes a recommendation that member countries require anti-corruption provisions in bilateral aid-funded procurement and that they promote implementation of anti-corruption provisions in international development institutions.

The OECD recommendations were endorsed by the June 1997 Summit of the Eight (G7 plus Russia) which committed member countries to undertake similar steps regarding criminalization and tax deductibility of bribery, and to eliminate corruption in aid-funded procurement. The Summit also encouraged the IMF and the World Bank, as well as the regional development banks, to strengthen their efforts to help countries fight corruption and also to raise public sector procurement standards. Like the OECD, the Summit called for greater international cooperation to combat money laundering and financial crime.

In December 1996 the United Nations General Assembly also adopted a Declaration Against Corruption and Bribery in International Commercial transactions, while the European Union and the Council of Europe have also developed comprehensive anti-corruption policies and are working on anti-corruption conventions. All of these strongly support criminalization of foreign bribery and eliminating the tax deductibility of bribes. The Organization of American States in March 1996 adopted an Inter-American Convention Against Corruption, which, among other things, facilitates transnational investigation, seizure of assets and extradition in cases of corruption. Such a convention provides a model for other regions, as criminal investigations of corruption are frequently hampered by lack of formal agreements between countries.

The linkages between corruption, capital flight and international banking have long been recognized, though hard to prove because international banking regulations made information difficult to obtain. However in 1997 the Swiss government took action in a number of cases of money-laundering and indicated that it would not permit banking practices to shield illicitly obtained funds. At the request of the concerned countries, it agreed that $2.2 million deposited on behalf of former President Mousse Traoré would be repatriated to Mali, and launched an investigation into claims that funds stolen by former President Mobutu of Zaire were held in Swiss bank accounts. Although these actions are welcome, further coordinated action involving the whole international banking system will be required if placing illegally obtained funds in secret accounts is to be stopped.

B. International Development Finance and Corruption

In recent years almost all of the development financing institutions, whether the international financial institutions, multilateral development organizations or bilateral development assistance agencies, have become increasingly concerned to help countries address corruption as well as to limit the opportunities for rent seeking and corrupt practices in their own development assistance programs.

For a number of years, the World Bank, UNDP, the African Development Bank, the EC and the bilateral assistance programs of DAC member countries have been supporting the efforts of African countries to improve governance, as well as to implement economic reform programs. Such assistance, which covers legal sector reform, institutional development, training and technical assistance for parliamentarians, and civil service reform, in addition to support for macroeconomic policies, has done much to help governments put in place the conditions which limit opportunities for corruption. Other assistance has helped to strengthen civil society organizations and provide training for journalists. More recently assistance has been provided for specific activities such as revision of public procurement and investment codes which have a direct impact on corruption. Some donors are also supporting anti-corruption agencies and other specialized bodies, as well as the development of comprehensive anti-corruption strategies.

Although such efforts indirectly address corruption, until recently Africa's development partners did not specifically focus on the problem of corruption in their policy dialogue with African governments or in their overall assistance programs, although it has been raised in the context of specific projects or activities. However, in 1994, some donors froze aid to Tanzania, and in 1997 the World Bank and the IMF suspended assistance to Kenya because of corruption. Moreover, as a result of increasing concern over the role of development assistance in facilitating corrupt practices and the negative effect of corruption on the impact of aid, donors have now explicitly indicated that attention will be paid to corruption, as well as to governance in general, in their decisions regarding provision of assistance.

The World Bank and most bilateral donors have also focused on their own regulations and requirements, and have revised their procurement guidelines to more effectively address bribery and corruption in aid-financed procurement. Most donors have also realized that corruption in internationally-financed programs does not necessarily involve fraud or embezzlement of funds, but can also center on inflated costs, unnecessary fees, provision of excessively large amounts of equipment, and non-competitive procurement arrangements. As a result, they have in many instances revised program preparation and management procedures, strengthened financial reporting and audit requirements, and increased internal management oversight to both make corrupt practices more difficult and to facilitate early detection.

While these measures are undoubtedly useful, a coherent donor approach to the issue of corruption could also be beneficial. Increased policy harmonization and standardization of procedures and reporting requirements could help to highlight problems and limit opportunities for corruption. Donors have to ensure that they maintain adequate internal controls to ensure effective program management and accountability, and thus limit opportunities for rent-seeking. Moreover, given that considerable amounts of bilateral development assistance are channeled through international or national non-governmental organizations, there is need for provisions intended to detect and counter corrupt practices to be applied to such assistance also.

Conclusion

The 8th International Anti-Corruption Conference (IACC) held in Lima, Peru, in September 1997, indicated the extent to which world attention is focused on the problem of corruption and the urgent need to combat it. The Lima Conference stressed the imperative of moving beyond an understanding of the problem and a recognition that it has to be addressed, to the rigorous implementation of anti-corruption measures at the national and the international level.

On the positive side, it would appear that concerted efforts to address corruption are underway, in Africa and elsewhere. Many of the reforms which African countries are implementing will, over the longer term, create the conditions which make corruption both more difficult and more risky to engage in. At the same time, there are signs in many countries that the broad coalitions which are essential to fight corruption are being built. Furthermore, the international community is taking a far more proactive stance than ever before, to assist the efforts which African countries are themselves making and also to curb corruption in international business. However, this should not lead to complacency. As experience has shown, combating corruption requires a long-term strategy, and constant attention and action on the part of governments, organizations, and the public.

The current efforts of African countries should be continued. They should also be expanded. Corruption has to become a high-risk, low-gain endeavor. Leadership and political will are of paramount importance in transmitting the message that corruption will not be tolerated at any level, and mechanisms have to be put in place to make sure that it does not pay. Importantly, the populations of African countries must be firmly on the side of minimizing corruption. If they are to be reduced, corrupt activities have to be met with strong public disapproval as well as official sanction. African countries also need the concerted support of their development partners to develop the institutions which over the long-term help to combat corrupt practices.

Cooperation between countries at the regional and at the international level is also required if corruption is to be effectively addressed. In an increasingly globalized environment, corruption knows no borders. While the current international efforts to combat corruption in international business transactions are an important step forward, their success will depend on the rigor with which they are implemented. Anti-corruption conventions and other legally-binding arrangements at the regional level have an important role to play in limiting corruption. Similarly, reforms in the international banking system are required to ensure that funds gained as a result of corrupt practices do not find safe havens. Combating corruption has thus to become an international priority if real and sustainable progress is to be made.

Annex I: Examples of Anti-Corruption Efforts

Many examples of anti-corruption efforts exist. This Annex provides very brief overviews of a few of them for illustrative purposes. Given space constraints, the overviews do not fully do justice to the efforts they describe. Furthermore, many more, including those of non-governmental organizations in a number of African countries, are not mentioned.

The Annex provides information on the efforts undertaken by the governments of two African countries, Botswana and Uganda. Botswana has comparatively low levels of corruption, while in Uganda in the mid-1980s corruption had become widespread and systemic. It then discusses elements of the anti-corruption campaigns undertaken by Hong Kong and Singapore, two countries which have met with considerable success in combating corruption in a relatively short period of time.

A. African Country Examples

Botswana has been relatively corruption free since independence, has enjoyed political and economic stability, and has a highly professional civil service. Nonetheless, it found itself in the 1980s facing a series of corruption scandals caused in part by rapid economic growth and the expansion of the public service which accompanied it. The government's response was to implement an approach based on investigation and prosecution, public education, and prevention, and it sought outside expertise to do so. From the beginning, the campaign had the highest level political support from President Masire, and in 1994 the Government enacted the Corruption and Economic Crime Act. This act not only created new offenses of corruption, but also specific mechanisms to deal with them.

The Directorate of Corruption and Economic Crime, based on the Hong Kong model, was established as an independent entity with special powers of investigation, seizure, search and arrest. It was accompanied by a series of public information campaigns which have resulted in a high public awareness of the role and responsibilities of the Directorate. To date it has been highly effective in dealing with cases of corruption, most of which have been brought before the courts and resulted in prosecution. Public opinion in Botswana seems to be steadfastly against corruption, and the public has responded to calls to report apparent cases of corruption to the Directorate's Report Centre. Thus, from its inception in 1994 through April 1997 the Directorate has received 3081 reports of corruption.

A significant problem which the Directorate has come across in its work is the difficulty of bringing cases of corruption to prosecution when they involve another country. In many instances, it has discovered that bribes have been made outside of Botswana, funds have been deposited or invested in other countries, and that persons implicated in corrupt deals have left Botswana. While it has had considerable assistance from some countries, its experience highlights the need for international cooperation in addressing corruption, and the utility of mechanisms such as the OAS Convention.

The situation facing Uganda in the mid-1980s when it began to address corruption was much worse. Corruption was widespread and had permeated all levels of government. It had been worsened by years of armed conflict, economic collapse and a virtual breakdown of law and order. From the beginning, the leadership of President Museveni has been an important facet of the anti-corruption campaign in Uganda. However, In spite of the considerable efforts made by the government, corruption is generally still regarded as a significant problem in Uganda. This both highlights the difficulty of addressing corruption once it has become systemic, and the need for consistent action over the long-term in order to win public support and active involvement in combating it.

The anti-corruption program, which began in the mid-1980s has been strengthened by provisions included in the 1995 Constitution. The establishment of the Office of the Inspector General, which has a broad mandate and specific powers to address corruption and which is required to submit periodic reports to parliament, was a key element of the program. It also strengthened the role of the Director of Public Prosecutions as well as that of the Auditor General, and re-activated the public service inspectorate and the public accounts committee of parliament. A National Committee, under the leadership of the Inspector General of the Government has been appointed to oversee implementation of the government's anti-corruption program, and a Public Complaints Commissioner's office is being established. In addition, the anti-corruption program includes a public information and communication strategy to involve civil society and the business sector, and a wide-ranging leadership code of conduct.

Importantly, Uganda has embedded its anti-corruption program in its broader economic and governance reform efforts, so that it supported, and was supported by, other policy reforms. The economic reform program has eliminated government monopolies and economic distortions which encouraged corruption; export procedures have been simplified and a new investment code implemented; parastatals have been privatized and price controls removed; and a wide range of government functions have been depersonalized, so that opportunities for rent seeking have been reduced. The government is also implementing a program of decentralization of administrative functions and service delivery in an attempt to ensure greater public accountability, and is strengthening the inspectorates in agencies such as customs and the revenue authority. Legal and judicial reforms to help improve ethical standards and ensure that existing anti-corruption legislation is enforced in the courts are underway. Furthermore, significant civil service reform involving reduction of size, increased wages, implementation of administrative reforms and results-oriented management, computerization of financial management systems and strengthened audit systems, and promotion of a code of conduct for public service employees, is being implemented.

B. Other Country Experiences

In recent years, both Hong Kong and Singapore have attracted considerable attention because of the rapid decline in corruption as a result of specific measures they undertook. They both followed a similar route of establishing anti-corruption bodies with broad legal powers. However, their efforts also involved considerable public education campaigns and high level, visible, political support. Although they have been spectacularly successful in reducing corruption in a comparatively short time, the approach adopted by Hong Kong and Singapore is not necessarily replicable everywhere. Both countries enjoyed high levels of economic growth during the period in which they instigated their anti-corruption strategies, and they have both been able to substantially improve the socio-economic well-being of their populations as a result. Moreover, although Hong Kong has achieved considerable success to date, it realizes that it has to maintain vigilance and keep abreast of new forms of corruption, facilitated by changing international circumstances. It also realizes that a regional strategy, involving China and neighboring countries, is essential in an increasingly globalized environment.

Hong Kong established its Independent Commission Against Corruption (ICAC) in 1974 against a background of widespread corruption, and has achieved considerable success in reducing incidences of corruption in the public service and in changing the attitudes of the general population and the business community toward corruption. It is now generally accepted that corruption would undercut the considerable gains which Hong Kong has made, and there is little public tolerance of corrupt practices. Moreover, many companies operating in Hong Kong have adopted voluntary corporate codes of conduct to curb corruption.

Among the factors which have facilitated Hong Kong's success are the high level of political support its anti-corruption efforts have enjoyed, and the rigorous independence of the ICAC. The ICAC has wide powers of investigation, and is itself subject to strict controls to ensure high levels of integrity. A long-term strategy based on prevention, investigation and education, and sufficient resources devoted to anti-corruption efforts, have also been important contributing factors. A comprehensive legislative framework to combat corruption, and an efficient legal system are in place. Public support has been built through public education campaigns and the work of the Community Relations Department, which actively engages the public in the fight against corruption. Importantly, the ICAC provides total confidentiality to those reporting cases of corruption.

When Singapore attained independence in 1959, corruption was widespread and entrenched, even though a Corrupt Practices Investigation Bureau (CPIB) was in existence. Public officials were comparatively poorly paid, the legal basis for combating corruption was weak, and levels of education among the general population were relatively low. In order to address corruption, the political leadership not only set an example but also established "zero tolerance" for corruption. A long-term strategy was developed, encompassing comprehensive anti-corruption legislation, considerably strengthened powers of the CPIB, and stringent punitive measures including prohibiting award of public contracts for a period of five years to contractors found guilty of bribery. Punishment for public officials found guilty of corruption is severe, and is extended regardless of position. Moreover, both the person giving and the person receiving the bribe are liable to the same punishment.

In addition, the salaries of public sector officials have been substantially increased and all government departments are engaged in the fight against corruption. They are required to implement rigorous guidelines governing the actions of all public officials, including mandatory declaration of assets, prohibition of the use of information for personal benefit, restrictions on the financial liabilities of public officials, and strict measures governing conflict of interest and receipt of gifts Government departments are also expected to implement administrative measures to make engaging in corrupt practices more difficult and to facilitate early detection when they occur. The rigorous implementation of anti-corruption measures and an extensive public education campaign, as well as improvements in the education levels of the general population, have built strong public support for anti-corruption measures and very low public tolerance for corrupt practices.

ANNEX II: Selected References

This paper drew on published and unpublished material, news reports, and discussions of corruption in conferences, seminars and meetings. It also drew on previous work by the GCA and other organizations on governance.

While specific references are not cited in the text, this Annex provides information on recent documents and publications which either address the general issue of corruption or focus on specific issues, and which are relatively easily obtainable. For the most part, references are to publications from 1996 and 1997, although very important work was obviously done before this.

National Integrity Systems: The TI Source Book; edited by Jeremy Pope. Transparency International, 1997.

Corruption, Democracy and Human Rights; papers from conferences in West Africa, Eastern and Central Africa, and Southern Africa (separate volumes). Africa Leadership Forum, Accra, 1995 and 1966.

Corruption and the Global Economy; edited by Kimberley Ann Elliot. The Institute for International Economics, Washington DC 1997.

"What Can Be Done About Entrenched Corruption?"; Michael Johnson; paper prepared for the 1997 World Bank Conference on Development Economics.

"Corruption and Development"; Susan Rose Ackerman; paper prepared for the 1997 World Bank Conference on Development Economics.

"The Role of a National Integrity System in Fighting Corruption"; Petter Langseth, Rick Stapenhurst and Jeremy Pope. EDI Working Papers Series. The World Bank, 1997.

"Fighting Corruption: A Model for Building National Integrity"; edited by Rick Stapenhurst and Sahr Kpundeh. EDI Seminar Series. The World Bank, 1997 (forthcoming).

"Corruption and Good Governance"; Discussion Paper 3, Management Development and Governance Division. UNDP, 1997.

"Corruption: The Issues"; Andrew Gouedie and David Stasavage. Technical Paper No. 122, OECD Development Centre, 1997.

"Economic Corruption -- Some Facts"; Daniel Kaufmann, Foreign Policy, Summer 1997.

"Why Worry About Corruption?"; Paulo Mauro, Economic Issues Series, International Monetary Fund, 1997.

"The Effects of Corruption in Growth, Investment and Government Expenditure", Paulo Mauro, IMF Working Paper Series. International Monetary Fund 1996.

"How Taxing is Corruption on International Investors"; Shang-Jin Wei. Harvard University Kennedy School of Government, 1997

"High Level Rent Seeking and Corruption in African Regimes: Theory and Cases"; Jacqueline Coolidge and Susan Rose-Ackerman. Policy Research Working Paper 1780; The World Bank, 1997.

"National Integrity System Country Studies"; Petter Langseth and Rick Stapenhurst. EDI Working Papers Series. The World Bank, 1997.

"Corruption, Public Investment and Growth"; Vito Tanzi and Hamid Davoodi; paper prepared for the 53rd Congress of the Institute of Public Finance, Japan; 1997.

"Presidential Commission of Inquiry Against Corruption", Vols. 1 and 2. Government of the United Republic of Tanzania.

Revised Recommendations on Combating Bribery in International Business Transactions, OECD May 1997.

"Helping Countries Combat Corruption: The Role of the World Bank". The World Bank, 1997.

"Inter-American Convention Against Corruption". The Organization of American States, 1996.


 

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