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Deciding what is corruption is more art than science: many people may find it difficult to define it exactly, but they know it when they see it.
Graft, fraud, nepotism, and bribery have been around for an eternity. In individual cases they can even appear to be beneficial. Far from suggesting smooth operation, however, widespread corruption is a symptom of malfunction that can hinder foreign investment and restrict development.
HEAVY BURDEN
The poor too
often pay the price of corruption
“Rampant corruption demonstrates that the system is broken—resources are not going where they should go,” says Michael Stevens, ADB Principal Audit Specialist, Office of the Auditor General.
It is estimated that one third of public investment in many Asia and Pacific countries is squandered on corruption. Keeping in mind the difficulty of measurement, ADB officials suggest it can cost as much as one sixth of a country’s potential gross domestic product.
In a new study, the World Bank Institute estimates more than $1 trillion is paid in bribes each year. Daniel Kaufmann, the Institute’s director for governance, says the figure estimates bribes paid worldwide in both rich and developing countries. It does not include embezzlement of public funds or theft of public assets.
The issue goes to the heart of the Millennium Development Goals. Because corruption robs funds from programs to improve health, education, and other basic services, the poor too often pay the price. The World Bank Institute estimates that child mortality can fall as much as 75% when countries tackle corruption and improve their rule of law.
“While one may think of examples in which some firms/people are made better off by paying a bribe... the overall effect of corruption on economic development is negative. This is just as true in Asia as elsewhere,” writes Shang-Jen Wei, the Harvard-based economist in a study of corruption published in 1998.
Reducing corruption to less damaging levels is difficult and can take a long time. It requires leadership, the setting up of independent watchdogs, establishment of policies and laws that are adhered to, and public sector reform.
“You will need many generations to deal with the problem. Things are bad, and some are saying ‘getting worse’,” says Jak Jabes, Director of ADB’s Governance and Regional Cooperation Division. Just how long it takes, he says, will depend on setting up an “environment for change.”
More than $1 trillion is paid in bribes each year
- World Bank Institute estimate
The ADB-Organisation for Economic Co-operation and Development (OECD) Anticorruption Initiative, started in 1999 in response to the turmoil set off by the Asian financial crisis, is helping set a tone for change. Under this initiative, 21 countries have signed the Anticorruption Action Plan, including Bangladesh, India, Indonesia, and Philippines. The four are ranked among the region’s most corrupt nations by numerous surveys, including by Transparency International.
The ADB-OECD initiative aims to help build institutions and implement anticorruption strategies without interfering in internal corruption cases. It promotes an integrated approach to policymaking while respecting country differences, encourages partnerships between governments and civil society, and promotes international aid coordination.
Corruption in parts of Asia is rampant. Measuring corruption, however, is difficult due to the surrounding secrecy.
Serious study suggests, nonetheless, that it can be assessed, if not fully quantified. To make it easier researchers use surveys that gauge expert opinion, sometimes that of businesspeople. It is their perception that matters, because they will decide where to invest their money in the region.
Transparency International, an international nongovernment organization that brings civil society, business, and governments together to combat corruption, provides respected assessments of corruption around the world. Through its International Secretariat and more than 85 national chapters, Transparency International works to raise awareness of the damaging effects of corruption, advocates policy reform, works toward the implementation of multilateral conventions, and monitors compliance by governments, corporations, and banks.
Its last perceptions index ranked Singapore the fifth least corrupt country in its list of 133. Hong Kong, China, was 14th, and Malaysia 37th. Bangladesh was last, tailing Nigeria.
“Rampant corruption demonstrates that the system is broken—resources are not going where they should go“
- Michael Stevens, ADB Principal Audit Specialist
Most Asian countries were in the bottom half of the index.
The need for measurement, however, can be taken too far. “It does not matter what specific percent or level someone has measured. The more important issue is whether there relatively is a little or a lot,” says Mr. Stevens.
In Malaysia, corruption foes are increasingly hopeful the new Prime Minister, Abdullah Ahmad Badawi, will keep his pledge to crack down on corruption. His government, a signatory to the ADB-OECD plan, has charged a minister and a prominent businessman with graft. It has also brandished a list of 18 other high-ranking officials who could face similar charges.
“Political will is absolutely essential. If you have strong leadership, then people will follow,” says Mr. Stevens.
More and more Asian governments are acknowledging that fighting graft and bribery is fundamental to the fight against poverty. Hong Kong, China, and Singapore—once among the most corrupt—turned around rapidly once the political will emerged to do so. By using measures such as raising civil service salaries to levels that would discourage corruption—and with strong anticorruption bodies such as Hong Kong, China’s Independent Commission Against Corruption—corruption cleaned up. Singapore’s corruption watchdog is the Corrupt Practices Investigation Bureau.
Abuse of power for personal benefit will likely always exist. Recent high-profile cases of corruption in Canada and the United States show it is not just developing countries that suffer from the problem, nor is it culturally specific.
“We won’t fool ourselves into thinking we will get rid of it completely. It is everywhere,” says Mr. Stevens.
The question becomes one of how to work in a system where it is widespread, and how to reduce it.
“People ask: why are you working with notoriously corrupt countries? By engaging with a country and providing a loan or technical assistance we have the opportunity for policy dialogue and to bring the issue of corruption to the forefront of our discussion and maintain dialogue on the issue,” says Mr. Jabes.
ADB is helping countries set up corruption watchdogs, such as in Bangladesh and Indonesia. In Nepal, ADB assisted in setting up the National Vigilance Center. Through a $600,000 technical assistance loan, the center is supporting the development of technical auditing capacity within the Government and the private sector, which will provide improved quality control of civil works in infrastructure projects.
ADB is supporting reforms to strengthen the Philippines’ nonbank financial sector through a $150 million loan program approved in September 2003. It will address graft and corruption in the financial markets, improve transparency, and strengthen investor protection.
Corruption distorts development by directing funds away from their intended purpose. Studies have shown that domestic investment, foreign investment, and economic growth are lower in more corrupt countries. While it may appear to “grease the wheels” for some, corruption only indicates the system has derailed. Acknowledging and fighting it are central to economic growth.
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