| I. The FactsJust days before a much-awaited donor | | | | Corruption Perceptions Index.Many rich world |
| conference, the influential International Crisis Group | | | | corporations and wealthy individuals make use of |
| (ICG) recommended to place all funds pledged to | | | | off-shore havens or "special purpose entities" to |
| Macedonia under the oversight of a "corruption | | | | launder money, make illicit payments, avoid or evade |
| advisor" appointed by the European Commission. The | | | | taxes, and conceal assets or liabilities. According to |
| donors ignored this and other recommendations. To | | | | Swiss authorities, more than $40 billion are held by |
| appease the critics, the affable Attorney General of | | | | Russians in its banking system alone. The figure may |
| Macedonia charged a former Minister of Defense with | | | | be 5 to 10 times higher in the tax havens of the |
| abuse of duty for allegedly having channeled millions | | | | United Kingdom.In a survey it conducted last month |
| of DM to his relatives during the recent civil war. | | | | of 82 companies in which it invests, "Friends, Ivory, |
| Macedonia has belatedly passed an anti-money | | | | and Sime" found that only a quarter had clear |
| laundering law recently - but failed, yet again, to | | | | anti-corruption management and accountability |
| adopt strict anti-corruption legislation.In Albania, the | | | | systems in place.Tellingly only 35 countries signed the |
| Chairman of the Albanian Socialist Party, Fatos Nano, | | | | 1997 OECD "Convention on Combating Bribery of |
| was accused by Albanian media of laundering $1 billion | | | | Foreign Public Officials in International Business |
| through the Albanian government. Pavel Borodin, the | | | | Transactions" - including four non-OECD members: |
| former chief of Kremlin Property, decided not appeal | | | | Chile, Argentina, Bulgaria, and Brazil. The convention |
| his money laundering conviction in a Swiss court. The | | | | has been in force since February 1999 and is only one |
| Slovak daily "Sme" described in scathing detail the | | | | of many OECD anti-corruption drives, among which |
| newly acquired wealth and lavish lifestyles of | | | | are SIGMA (Support for Improvement in Governance |
| formerly impoverished HZDS politicians. Some of | | | | and Management in Central and Eastern European |
| them now reside in refurbished castles. Others have | | | | countries), ACN (Anti-Corruption Network for |
| swimming pools replete with wine bars.Pavlo | | | | Transition Economies in Europe), and FATF (the |
| Lazarenko, a former Ukrainian prime minister, is | | | | Financial Action Task Force on Money |
| detained in San Francisco on money laundering | | | | Laundering).Moreover, The moral authority of those |
| charges. His defense team accuses the US authorities | | | | who preach against corruption in poor countries - the |
| of "selective prosecution".They are quoted by Radio | | | | officials of the IMF, the World Bank, the EU, the |
| Free Europe as saying:"The impetus for this | | | | OECD - is strained by their ostentatious lifestyle, |
| prosecution comes from allegations made by the | | | | conspicuous consumption, and "pragmatic" morality.II. |
| Kuchma regime, which itself is corrupt and dedicated | | | | What to Do? What is Being Done?Two years ago, I |
| to using undemocratic and repressive methods to | | | | proposed a taxonomy of corruption, venality, and |
| stifle political opposition ... (other Ukrainian officials) | | | | graft. I suggested this cumulative definition:The |
| including Kuchma himself and his closest associates, | | | | withholding of a service, information, or goods that, |
| have committed conduct similar to that with which | | | | by law, and by right, should have been provided or |
| Lazarenko is charged but have not been prosecuted | | | | divulged.The provision of a service, information, or |
| by the U.S. government".The UNDP estimated, in | | | | goods that, by law, and by right, should not have |
| 1997, that, even in rich, industrialized, countries, 15% | | | | been provided or divulged.That the withholding or the |
| of all firms had to pay bribes. The figure rises to | | | | provision of said service, information, or goods are in |
| 40% in Asia and 60% in Russia.Corruption is rife and | | | | the power of the withholder or the provider to |
| all pervasive, though many allegations are nothing but | | | | withhold or to provide AND That the withholding or |
| political mud-slinging. Luckily, in countries like | | | | the provision of said service, information, or goods |
| Macedonia, it is confined to its rapacious elites: its | | | | constitute an integral and substantial part of the |
| politicians, managers, university professors, medical | | | | authority or the function of the withholder or the |
| doctors, judges, journalists, and top bureaucrats. The | | | | provider.That the service, information, or goods that |
| police and customs are hopelessly compromised. Yet, | | | | are provided or divulged are provided or divulged |
| one rarely comes across graft and venality in daily | | | | against a benefit or the promise of a benefit from |
| life. There are no false detentions (as in Russia), | | | | the recipient and as a result of the receipt of this |
| spurious traffic tickets (as in Latin America), or | | | | specific benefit or the promise to receive such |
| widespread stealthy payments for public goods and | | | | benefit.That the service, information, or goods that |
| services (as in Africa).It is widely accepted that | | | | are withheld are withheld because no benefit was |
| corruption retards growth by deterring foreign | | | | provided or promised by the recipient.There is also |
| investment and encouraging brain drain. It leads to | | | | what the World Bank calls "State Capture" defined |
| the misallocation of economic resources and distorts | | | | thus:"The actions of individuals, groups, or firms, both |
| competition. It depletes the affected country's | | | | in the public and private sectors, to influence the |
| endowments - both natural and acquired. It | | | | formation of laws, regulations, decrees, and other |
| demolishes the tenuous trust between citizen and | | | | government policies to their own advantage as a |
| state. It casts civil and government institutions in | | | | result of the illicit and non-transparent provision of |
| doubt, tarnishes the entire political class, and, thus, | | | | private benefits to public officials."We can classify |
| endangers the democratic system and the rule of | | | | corrupt and venal behaviours according to their |
| law, property rights included.This is why both | | | | outcomes:Income Supplement - Corrupt actions |
| governments and business show a growing | | | | whose sole outcome is the supplementing of the |
| commitment to tackling it. According to Transparency | | | | income of the provider without affecting the "real |
| International's "Global Corruption Report 2001", | | | | world" in any manner.Acceleration or Facilitation Fees - |
| corruption has been successfully contained in private | | | | Corrupt practices whose sole outcome is to |
| banking and the diamond trade, for instance.Hence | | | | accelerate or facilitate decision making, the provision |
| also the involvement of the World Bank and the IMF | | | | of goods and services or the divulging of |
| in fighting corruption. Both institutions are increasingly | | | | information.Decision Altering Fees - Bribes and |
| concerned with poverty reduction through economic | | | | promises of bribes which alter decisions or affect |
| growth and development. The World Bank estimates | | | | them, or which affect the formation of policies, laws, |
| that corruption reduces the growth rate of an | | | | regulations, or decrees beneficial to the bribing entity |
| affected country by 0.5 to 1 percent annually. Graft | | | | or person.Information Altering Fees - Backhanders |
| amounts to an increase in the marginal tax rate and | | | | and bribes that subvert the flow of true and |
| has pernicious effects on inward investment as | | | | complete information within a society or an economic |
| well.The World Bank has appointed last year a | | | | unit (for instance, by selling professional diplomas, |
| Director of Institutional Integrity - a new department | | | | certificates, or permits).Reallocation Fees - Benefits |
| that combines the Anti-Corruption and Fraud | | | | paid (mainly to politicians and political decision makers) |
| Investigations Unit and the Office of Business Ethics | | | | in order to affect the allocation of economic |
| and Integrity. The Bank helps countries to fight | | | | resources and material wealth or the rights thereto. |
| corruption by providing them with technical | | | | Concessions, licenses, permits, assets privatized, |
| assistance, educational programs, and | | | | tenders awarded are all subject to reallocation |
| lending.Anti-corruption projects are an integral part of | | | | fees.To eradicate corruption, one must tackle both |
| every Country Assistance Strategy (CAS). The Bank | | | | giver and taker.History shows that all effective |
| also supports international efforts to reduce | | | | programs shared these common elements:The |
| corruption by sponsoring conferences and the | | | | persecution of corrupt, high-profile, public figures, |
| exchange of information. It collaborates closely with | | | | multinationals, and institutions (domestic and foreign). |
| Transparency International, for instance.At the | | | | This demonstrates that no one is above the law and |
| request of member-governments (such as | | | | that crime does not pay.The conditioning of |
| Bosnia-Herzegovina and Romania) it has prepared | | | | international aid, credits, and investments on a |
| detailed country corruption surveys covering both the | | | | monitored reduction in corruption levels. The |
| public and the private sectors. Together with the | | | | structural roots of corruption should be tackled rather |
| EBRD, it publishes a corruption survey of 3000 firms | | | | than merely its symptoms.The institution of |
| in 22 transition countries (BEEPS - Business | | | | incentives to avoid corruption, such as a higher pay, |
| Environment and Enterprise Performance Survey). It | | | | the fostering of civic pride, "good behaviour" |
| has even set up a multilingual hotline for | | | | bonuses, alternative income and pension plans, and so |
| whistleblowers.The IMF made corruption an integral | | | | on.In many new countries (in Asia, Africa, and |
| part of its country evaluation process. It suspended | | | | Eastern Europe) the very concepts of "private" |
| arrangements with endemically corrupt recipients of | | | | versus "public" property are fuzzy and impermissible |
| IMF financing. Since 1997, it has introduced policies | | | | behaviours are not clearly demarcated. Massive |
| regarding misreporting, abuse of IMF funds, | | | | investments in education of the public and of state |
| monitoring the use of debt relief for poverty | | | | officials are required.Liberalization and deregulation of |
| reduction, data dissemination, legal and judicial reform, | | | | the economy. Abolition of red tape, licensing, |
| fiscal and monetary transparency, and even internal | | | | protectionism, capital controls, monopolies, |
| governance (e.g., financial disclosure by staff | | | | discretionary, non-public, procurement. Greater access |
| members).Yet, no one seems to agree on a universal | | | | to information and a public debate intended to foster |
| definition of corruption. What amounts to venality in | | | | a "stakeholder society".Strengthening of institutions: |
| one culture (Sweden) is considered no more than | | | | the police, the customs, the courts, the government, |
| hospitality, or an expression of gratitude, in another | | | | its agencies, the tax authorities - under time limited |
| (France, or Italy). Corruption is discussed freely and | | | | foreign management and supervision.Awareness to |
| forgivingly in one place - but concealed shamefully in | | | | corruption and graft is growing - though it mostly |
| another. Corruption, like other crimes, is probably | | | | results in lip service. The Global Coalition for Africa |
| seriously under-reported and | | | | adopted anti-corruption guidelines in 1999. The |
| under-penalized.Moreover, bribing officials is often the | | | | otherwise opaque Asia Pacific Economic Cooperation |
| unstated policy of multinationals, foreign investors, | | | | (APEC) forum is now championing transparency and |
| and expatriates. Many of them believe that it is | | | | good governance. The UN is promoting its pet |
| inevitable if one is to expedite matters or secure a | | | | convention against corruption.The G-8 asked its Lyon |
| beneficial outcome. Rich world governments turn a | | | | Group of senior experts on transnational crime to |
| blind eye, even where laws against such practices are | | | | recommend ways to fight corruption related to large |
| extant and strict.In his address to the Inter-American | | | | money flows and money laundering. The USA and |
| Development Bank on March 14, President Bush | | | | the Netherlands hosted global forums on corruption - |
| promised to "reward nations that root out corruption" | | | | as will South Korea next year. The OSCE is rumored |
| within the framework of the Millennium Challenge | | | | to respond with its own initiative, in collaboration with |
| Account initiative. The USA has pioneered global | | | | the US Congressional Helsinki Commission.The |
| anti-corruption campaigns and is a signatory to the | | | | south-eastern Europe Stability Pact sports its own |
| 1996 IAS Inter-American Convention against | | | | Stability Pact Anti-corruption Initiative (SPAI). It held |
| Corruption, the Council of Europe's Criminal Law | | | | its first conference in September 2001 in Croatia. |
| Convention on Corruption, and the OECD's 1997 | | | | More than 1200 delegates participated in the 10th |
| anti-bribery convention. The USA has had a | | | | International Anti-Corruption Conference in Prague |
| comprehensive "Foreign Corrupt Practices Act" since | | | | last year. The conference was attended by the |
| 1977.The Act applies to all American firms, to all firms | | | | Czech prime minister, the Mexican president, and the |
| - including foreign ones - traded in an American stock | | | | head of the Interpol.The most potent remedy |
| exchange, and to bribery on American territory by | | | | against corruption is sunshine - free, accessible, and |
| foreign and American firms alike. It outlaws the | | | | available information disseminated and probed by an |
| payment of bribes to foreign officials, political parties, | | | | active opposition, uncompromised press, and |
| party officials, and political candidates in foreign | | | | assertive civic organizations and NGO's. In the |
| countries. A similar law has now been adopted by | | | | absence of these, the fight against official avarice |
| Britain.Yet, "The Economist" reports that the | | | | and criminality is doomed to failure. With them, it |
| American SEC has brought only three cases against | | | | stands a chance.Corruption can never be entirely |
| listed companies until 1997. The US Department of | | | | eliminated - but it can be restrained and its effects |
| Justice brought another 30 cases. Britain has | | | | confined. The cooperation of good people with |
| persecuted successfully only one of its officials for | | | | trustworthy institutions is indispensable. Corruption |
| overseas bribery since 1889. In the Netherlands | | | | can be defeated only from the inside, though with |
| bribery is tax deductible. Transparency International | | | | plenty of outside help. It is a process of |
| now publishes a name and shame Bribery Payers | | | | self-redemption and self-transformation. It is the real |
| Index to complement its 91-country strong | | | | transition. |