The InterDependent

The specter of corruption hovers over the fight against poverty in nearly every country, not just those receiving aid but in those sending it. Embezzlement, fraud, graft and theft are found at the highest level and down to the lowest, with petty bribes often the norm. All acts add up to monumental amounts of money, as much as $1 trillion a year, squandered from donor countries to developing countries, leaving the poor still lacking and questions about the validity of aid hanging in the air. It’s a dynamic with plenty of blame going around.

“Corruption is a constant drag on many countries,” said Richard A. Boucher, a deputy secretary-general of the Organization for Economic Cooperation and Development, a research group based in Paris that concentrates on matters of wealthy countries. Boucher, a former American diplomat and State Department spokesman, spoke at an anticorruption event last week during the United Nations Millennium Development Goals summit meeting. The event, held Sept. 21 at UN headquarters, was presented by Transparency International and the UN Development Program.

Transparency International

Panelists at the anticorruption event at the UN said that theft, bribery and fraud occur at all levels in rich and poor countries alike.

Four panelists participated, with Huguette Labelle, the chairwoman of the board of Transparency International and a Canadian, presiding.

Corruption happens in places where “there’s lots of money,” Boucher said. Big government programs, the defense industry and extractive industries – they’re all hard to track, especially when there is unregulated power. “Sometimes it’s too easy,” he added, to pilfer money in aid programs where holes exists in complicated systems, like multiple forms to fill out or rules to follow, layers of compliance that can be exploited by the wily.

It doesn’t help, Boucher said, that there is “too much ingenuity out there.”

What can be done? Government procurement processes need to be more transparent, a focus that Boucher said that his organization had made a top priority. Brazil, for example, put government procurement information on Web sites, making transactions clear and upfront. More information exchange among countries, like tax authorities, is also valuable, as is more enforcement of laws and regulations.

The Paris organization’s antibribery convention, Boucher said, has been particularly successful.

Indeed, the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions is the only international instrument, the agency says, that focuses on foreign bribery, which is a specific form of corruption. Companies engage in such bribery when they offer, promise or give a bribe to gain advantages in, say, winning a construction contract, an oil or a gas concession or an operating license.

The 38 countries that have signed the convention (the 33 organization members plus Argentina, Brazil, Bulgaria, Estonia and South Africa) must prosecute individuals who are involved with bribes to public officials and penalize them with fines or even prison time. Companies must also be sanctioned. (More information is available at www.oecd.org/daf/nocorruption/convention.)

Boucher said that as a result of the sanctions, one company faces combined fines of 1.24 billion euros for foreign bribery, or about $1.67 billion. He added in a follow-up e-mail message that through the antibribery convention, 148 individuals and 77 entities have been sanctioned under criminal proceedings since the convention went into force in 1999. At least 40 of the individuals were sentenced to prison for foreign bribery and about 280 investigations are continuing.

Corruption leaves its marks in every stratum of society. As Selim Jahan, the director of poverty practice at the UN Development Program, said as a panelist, “Poverty and corruption are multidimensional.”

Transparency International

"Poverty and corruption are multidimensional," said Selim Jahan of Transparency International.

“The link of poverty to corruption tends to focus on economic aspects,” Jahan continued. “But corruption also erodes the society – it weakens the institutions in a country.”

Corruption, he said, acts as a bottleneck. It is a tremendous drain on resources, for example, with huge amounts of money being lost, diverted or used inefficiently. The bottlenecks create havoc in providing services, with the rich ending up being the only ones who can afford the services because of the high costs involved. The quality of services can suffer as well.

The figure that is tossed out the most in reference to corruption loss worldwide -- $1 trillion – was confirmed by Tom Cardamone, another panelist and the managing director of Global Financial Integrity, a Washington group that specializes in curtailing the flow of illegal money.

Cardamone, an American, put the onus on developing countries to do more in monitoring the aid flow within their borders.
Primary illicit flows, in order of pervasiveness, are trade mispricing (like claiming inaccurate values on goods for customs), criminal activities and tax evasion. Africa suffers from major illicit flows -- $30 billion to $50 billion a year – increases of 18 percent a year.

The money ends up mainly in places like offshore jurisdictions (Cayman Islands, Channel Islands, Switzerland and such), the major financial centers of the US, Britain, Asia and Europe, banks of developed countries and even in other developing countries.

A global task force focusing on international integrity and international development can help solve the problem, Cardamone said. More transparency in trade, better recording and registering of multinational corporations (who owns shell companies, trust accounts and the like) and money-laundering tracking are essential tools for fighting corruption at national and international levels.

Unfettered media and strong civil-society role have a positive effect, too, Cardamone said.

The role of civil society was emphasized by the final speaker, Sipho Moyo, who is from Zimbabwe, has a Ph.D. in economics and is working in Johannesburg as the Africa director of One, the antipoverty group whose board includes the philanthropist and singer Bono.

Moyo cited Sierra Leone as an example of civil society’s growing influence in battling corruption. In Sierra Leone, she said, grass-roots groups have been blowing the whistle on corrupt leaders and provoking the government to follow up with “serious investigations,” she wrote in an e-mail message later on the subject.

She wrote: “Thanks to a new legislation that was passed in April of this year (replacing an archaic more or less wishy washy one) two senior ministers have since been prosecuted and sentenced to jail for abuse of office.”

In the heated debate on how aid can be both effective and foster vice, Moyo, who is not related to Dambisa Moyo, the author of “Dead Aid,” said that if African countries strengthened the development of their own resources in their mineral-rich lands and then scaled up, they could rely less on assistance from the West.

It boils down to who is in charge and what direction the officials decide to take and sticking to that plan.

“Leadership should be accountable in countries and outside countries,” said Geraldine Fraser-Moleketi, who made the opening remarks at the event and is the director of the Democratic Governance Group, Bureau for Development Policy at the UN Development Program. “Demand accountability.”