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Recently we’ve been revising our knowledge of corruption. We’ve rethought our perceptions and redefined our understanding of it.
We’ve done this because, whilst only being one word, it is a word that has a great influence on framing people’s attitudes towards global poverty, the reasons it occurs and, most importantly, what response we should make.
The reality is too often ‘corruption’ is used as a one word excuse to disengage. This is because it is an umbrella term which describes many forms of illegal activity that operate at different levels. In other words, it’s easy to blame ‘corruption’ as the problem – without understanding what the problem is.
So how should we understand and categorise corruption? And more importantly why does it matter?
Breaking down corruption
A useful place to start is from the United Nations’ report, ‘A User’s Guide to Measuring Corruption’. The report distinguishes between two forms of corruption: petty corruption and grand corruption. According to them petty corruption is defined as ‘street level’, everyday corruption. It occurs at the lower end of political interaction between citizens and public officials. Critically, petty corruption occurs where an individual comes into direct contact with officials of the state. For example this may include bribes paid in return for preferential treatment or services.
The other form of corruption, which is has a far greater reach, is called grand corruption.
So what is ‘grand’ corruption? And how ‘grand’ is it?
To begin with, Tearfund provide a useful definition in their report, ‘Corruption and Its Discontents – Assessing the impact of people living in poverty’.
According to them:
‘Grand corruption is that which takes place at the highest levels of political authority and decision making. It occurs at the formulation of public policies and may involve the appropriation or embezzlement of government funds, or the tailoring of public laws, codes and regulations for the benefit of particular ‘favoured’ groups in return for bribes, or simply to preserve political support and power.’
That’s a long definition. But it details how grand corruption operates.
And here is where it becomes interesting. As Tearfund continue:
‘Such forms of corruption pose a significant threat at the national level, for they have direct implications for a country’s economic and political stability, as well as affecting the overall level and distribution of public resources.’
As Tearfund argue, it’s the effect of grand corruption that has such great significance. What they mean when they describe as ‘affecting the overall level and distribution of public resources’ is, in a word, governance.
In short, gaining a fuller picture of corruption, its scale and its disastrous effect on development is critical because corruption fundamentally undermines governance.
So what is governance and what relationship does it have with corruption?
Governance is defined by the United Nations as the ‘exercise of political, economic and administrative authority to manage a nation’s affair.’ Taken a step further, good governance occurs where ‘public resources and problems are managed efficiently and in response to the critical needs of society.’
Rather than providing for the efficient and responsible management of a nation’s resources, corruption ensures that those in power too often act in their own interests choosing to enrich themselves at the expense of their population.
Not exactly good governance is it? Sounds like Teodorin Obiang.
So how big is grand corruption in dollar terms?
For example, according to Global Financial Integrity, they estimate that approximately US $50 billion in corrupt money is deposited each year into western bank accounts and tax havens. This is a staggering amount of money.
Yet, it’s five times less than the estimated US $250 billion in laundered funds that makes its way into US banks each year.
The significance of such large scale misappropriated funds and the leaders and officials who are engaged in this process can seem overwhelming. Yet they point to a far more serious problem.
The figures point out the connected reality that facilitates and encourages the existence of grand corruption. And it is in understanding the connections that is so empowering because we begin to see where we can make a difference.
The issues they point towards are the broader structural problems. It’s up to us to ask the questions regarding what involvement our systems, companies and rules have in facilitating poor governance and encouraging not only a culture but the reality of grand corruption. It’s only fair to ask then, where does the problem and, more importantly, responsibility lie?
Is ‘pointing the finger’ fair?
Ultimately, corruption, on a grand scale, is no longer about what happens over ‘there’, a problem that we have no ‘say’ in. Instead, the reality is, there is much we can do over ‘here’ to improve the situation. As the UN recognised, effective governance relies on ‘public participation, accountability and transparency.
This raises the following questions – what can and what are we doing to improve public participation, accountability and transparency in countries undermined by corruption?
The answers. Plenty. And, we’ve already started.
Right now, we at the Global Poverty Project along with our friends from the Publish What You Pay coalition are campaigning on greater transparency standards for the natural resource industry. For many countries, the revenue from natural resources provides the best opportunity to lift themselves out of poverty. To put this in perspective: in 2008 exports of oil and minerals from Africa, were worth approximately $393.9 billion. This figure is nearly 9 times the value of international aid to the continent which amounted to $44 billion.
We believe that releasing the information about the payments that oil, gas and mining companies make to resource rich, developing countries, has the ability to empower citizens to hold their governments to account. By publishing what they pay companies can help ordinary citizens, from the countries who grant them their licenses to operate in the first place, demand a fairer outcome for themselves. It can change the culture and sadly the reality of grand corruption.
Our campaign on this issue reflects our understanding that what we are not only capable of but that we can make a difference. It’s up to us to demand transparency from companies that are based in the UK but work and generate their profits by working in developing countries.
So join us. Join our movement for Justice. |
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Corruption.
What do you think of when you read that word? How do you define it?
The reality is corruption is a difficult concept to grasp. Most of us instinctively ‘know’ it when we see it and can point out specific examples of corruption where they occur. However, to define corruption in a form that moves beyond an instinctive response towards a more considered understanding is a far more difficult process. Fundamentally, it comes down to agreeing upon a workable definition.
But this isn’t easy. In fact, there is no worldwide consensus on how exactly corruption should be defined. This is despite the United Nations passing a Convention Against Corruption.
It is critical however, to have a better grasp of corruption and its effect on exacerbating poverty in order to start tackling the problem.
To begin with a straightforward definition as offered by Transparency International defines corruption as the ‘misuse of public office for private gain’. Whilst this definition is useful, I find that it is limiting in its scope. By focusing on public office, it is based on a clear distinction between the public and private sector. Yet this denies the reality of corruption as it occurs.
Take Equatorial Guinea for example. As we blogged earlier, Teodorin Obiang, the son of the Dictator is able to afford a lavish lifestyle, all the while earning an ‘official’ salary of $5000 month. How does he do this?
In his own words from Human Rights Watch’s report:
Cabinet Ministers and public servants in Equatorial Guinea are by law allowed to owe [sic] companies that, in consortium with a foreign company, can bid for government contracts and should the company be successful, then what percentage of the total cost of the contract the company gets, will depend on the terms negotiated between the parties.
But in any event, it means that a cabinet minister ends up with a sizeable part of the contract price in his bank account.
It’s clear that on this definition Teodorin is corrupt. But beyond his corruption the picture becomes more complex.
We need to be mindful, when reading his words, to ask ourselves what role our laws, systems and companies play in fostering and enabling a corrupt regime.
To be precise, when looking at his statement I couldn’t help but think - what does ‘in consortium’ mean? How does a foreign company ‘bid’ for government contracts? And, what does it mean when terms are ‘negotiated’ between parties?
In short – we need to have a more robust definition that situates the scourge of corruption in its appropriate context. On this theme, Tearfund, in their report, ‘Corruption and its Discontents’, define it as ‘the abuse of entrusted power for private gain at the expense of others or of the society as a whole’.
Such a definition is inevitably broader. And it’s better.
By shifting the focus from those in ‘public office’ to those in ‘entrusted power’ their definition raises questions of the actions of not only Teodorin Obiang but also the involvement of foreign companies.
Furthermore, as they argue in their report, such a definition ‘recognises the wide range of actors involved. It allows us to see that corruption and governance are inextricably linked as they have to do with the use and abuse of power.’
Thus we can conclude, from their definition that the companies who ‘bid’ for and ‘negotiate’ contracts with Teodorin themselves occupy a position of entrusted power. Such a conclusion raises the issue, and I would argue, the reality, of our complicity.
This view reflects the statement by our friends CAFOD, Christian Aid, Global Witness, One World Action, Tearfund, The Corner House and, Transparency International. On International Anti-Corruption Day, they argued together.
When multinational companies bribe foreign public officials, it undermines the rule of law and the principle of fair competition and entrenches bad governance in developing countries, hindering their efforts to alleviate poverty and often contributing to instability and human rights abuses. Corruption, including bribery, impedes the delivery of vital public services, denying millions of people access to water, health and education across the developing world.
And this has been the reality of the experience of Equatorial Guinea. Whilst the government is no doubt corrupt – questions must be asked of the oil companies involved. And it is up to us to begin asking these questions.
As the US Senate concluded in their investigation:
Oil companies operating in Equatorial Guinea may have contributed to corrupt practices in that country by making substantial payments to, or entering into business ventures with, individual E.G. officials, their family members, or entities they control, with minimal public disclosure of their actions.
And here’s our opportunity.
With a broader, more realistic understanding of corruption is it possible to see the potential for our involvement and influence. Recognising the abuse of entrusted power provides the opportunity for us to use our voice. In this case, we have a role to pay to bring ‘minimal public disclosure’ to a higher, more transparent standard.
And it’s already begun.
Last year, the United States acted. They passed a law requiring companies in the natural resource industry to publish what they pay to foreign governments. The information released is aimed at preventing the blatant corruption occurring in Equatorial Guinea and elsewhere.
This year the UK and Europe are looking at legislating greater resource transparency standards as in the United States. And for this to happen, and to happen quicker, we need to raise our voice.
That’s what we’ve done, are doing and will continue to do. And you can join us too.
If you're in the UK, join our campaign asking anti-corruption chamption Ken Clarke to actually develop and release an anti-corruption strategy. |
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Corruption.
Having just read that word I’m sure you’ve got a whole lot of perceptions and opinions that inform your instinctive reaction to reading it. That’s my guess because when I see, read or hear the word I know it immediately sparks that process in me.
The reality is the word corruption is too often an invitation to withdraw, to not listen or to change the conversation. And that’s not just my opinion at times, instead it’s one shared by the majority of people in the West.
According to the latest available study of public opinion on aid effectiveness in the UK, the majority of the public believe that corruption in poor countries makes it pointless donating money to reduce poverty. A staggering 56 per cent of the population believe it is the main cause of poverty ahead of the lack of education, 23 per cent, and over-population, 18 per cent.
Worryingly this perception has only grown in the last few years. In fact, the same study notes that in September 2008, 18 months prior, the proportion of the population considering corruption to be the main cause was 44 per cent.
So why is this concerning?
As we blogged recently, the public plays a critical role in shaping government policy. Through their attitudes and opinions the public provide the space for the government to act with the support of the people. That’s why the government ring-fenced the aid budget prior the severe budget cuts. It’s because it knows that poverty and the injustice of the situation matters to the public.
Unfortunately, rising negative opinions towards the disastrous impact of corruption, whilst understandable, are misguided for they fail to see the broader issues of systemic injustice. Instead, they lead to a blame game with its easy black-white view of the world where those at ‘fault’ are to blame.
As the figures quoted above reflect, corruption is mistakenly seen as a problem ‘over there’. The survey questions are a reflection of the mind-set of the ‘other’ person having the problem. In this process, we continue to ask – why can’t ‘they’ get their house in order? Why can’t ‘they’ clean up their act?
I don’t mean to suggest that these are questions we should not be asking. However, I believe that if we’re going to ask these questions, we need to ask them of ourselves, our government and our systems.
This might seem like a radical position to take but it’s one that is gaining traction. Just last month leading economist Jeffrey Sachs wrote an article titled ‘The Global Economy’s Corporate Crime Wave’.
We at The Global Poverty Project do not express an opinion on his article. However, we mirror his concerns. Sachs begins his article by stating:
The world is drowning in corporate fraud, and the problems are probably greatest in rich countries – those with supposedly “good governance.” Poor-country governments probably accept more bribes and commit more offenses, but it is rich countries that host the global companies that carry out the largest offenses. Money talks, and it is corrupting politics and markets all over the world. These are legitimate questions but they fail to see the broader systemic injustice that exists.’
Sachs' words, and the questions he raises are worth reflecting on. These are questions that need to be asked.
Fundamentally, what role do we, the ‘good governance’ countries play in fostering both a culture and the reality of corruption? This question is worth attention. As I wrote recently, the dictator’s son of Equatorial Guinea, Teodorin Obiang recently enquired into purchasing a yacht worth $380 million. This is despite his offical salary of $4000 per month. His lavish lifestyle, at the expense of the people of Equatorial Guinea is facilitated by the complicity of banks such as Riggs where his family, at one stage, was the largest customer.
It’s for this reason that we at The Global Poverty Project are campaigning, along with over 600 civil society organisations around the world for the governments of the ‘good governance’ world to require oil, gas and mining companies to publish what they pay to foreign governments.
Already, the US has passed laws. Now, it is the turn of the UK, Europe and Australia.
These disclosure requirements have the potential to release information that can unlock the enormous wealth being generated by the natural resource industry, benefitting the citizens of the resource rich countries in which they operate. Remember, they are, after all, the owners of the natural resources in the first place.
Such an action recognises that corruption is far more complex than a problem over ‘there’. Instead of seeing corruption as an excuse to disengage, feeling helpless in the face of the problem, we see it as an invitation to get involved to change the systems that allow it to continue.
That’s why it’s worth heeding Jeffrey Sachs' words.
"So the next time you hear about a corruption scandal in Africa or other poor region, ask where it started and who is doing the corrupting. Neither the US nor any other “advanced” country should be pointing the finger at poor countries."
If you want to get involved to do your bit, join us. The reality is, there’s a lot we can do. And we’re just getting started.
If you're in the UK, join our campaign asking anti-corruption chamption Ken Clarke to actually develop and release an anti-corruption strategy. |
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On June 15 2010, Ken Clarke was appointed as the UK’s international anti-corruption champion.
Personally appointed by the Prime Minister, Ken Clarke promised to work closely with colleagues, authorities and agencies to develop a strategy to combat international corruption.
According to him: 'The champion role sends out a clear message that the UK coalition government will not tolerate bribery or corruption.'
As well as sending out that clear message, Ken Clarke also promised that he would work ‘closely with colleagues across departments, devolved administrations, law enforcement, prosecution authorities and regulatory agencies to ensure a coherent and joined-up approach to combat international corruption.
To date we’re yet to see a ‘joined-up approach to combat international corruption’.
In short, a plan.
We’re calling on Ken Clarke to develop a plan
This is disappointing. Corruption is real and its effects are disastrous. As the Bond Governance Group argue in their anti-corruption paper,
‘Corruption has devastating effects on developing economies and their citizens’ quality of life. Its cost in Africa alone has been estimated at US$148 billion a year, representing 25% of the continent’s GDP. Corruption undermines economic growth rates and cripples public services, as money which should be destined for re-investment and public expenditure finds its way into private bank accounts, often abroad.’
Too often many consider the existence of corruption as a reason to do nothing. The reality is, there’s much we can do in the UK to combat corruption.
The paper identified a number of areas and opportunities that the UK has to fight corruption. For example, the first three that the paper raises include:
- Illegitimate payments: bribery of foreign public officials
- Lack of transparency in legitimate revenue payments by companies
- Illicit and harmful financial flows out of developing countries
These three issues demonstrate that there is much the UK can do to fight corruption. They are issues that deserve a ‘joined-up approach’ to address.
And they are the issues that we are campaigning on.
First, on July 1 the Bribery Act will come into force. This is a much needed update to Britain’s anti-bribery laws. However – the Act itself has been undermined by the guidance notes that the government released. By opening up huge loopholes the government has weakened the ability of the Act to address the very thing it is supposed to.
We’re calling on Ken Clarke to properly implement the Bribery Act
Second, transparency in the natural resource industry is critical to fighting poverty. Too often the wealth generated by the natural resources doesn’t go towards improving the lives of the very owners of the resources – the citizens themselves.
It was encouraging then to hear George Osborne agree that there needs to be greater transparency in the natural resource industries.
"As we enter a new decade when the resources of Africa are going to be heavily developed, I strongly believe it's in everyone's interests that mining companies and others operate to the highest standards. That's the way to ensure some of the world's poorest benefit from the wealth that lies in the ground beneath them. That's why I've raised the issue of new international rules at the G20 in Paris - the first time that's happened. And that's why Vince Cable and I will be arguing for an European agreement that matches the new standards just set in the US.”
Third, illicit financial flows rob countries of the funds they need to develop. Global Financial Integrity have calculated that between 1970 and 2008 Africa had lost $854 billion in illicit financial flows. That was the conservative estimate. The most generous estimate put the figure at $1.8 trillion.
Critically, they argue that our financial systems promote, perpetuate and exacerbate this problem. As their report points out
This massive flow of illicit money out of Africa is facilitated by a global shadow financial system comprising tax havens, secrecy jurisdictions, disguised corporations, anonymous trust accounts, fake foundations, trade mispricing and money laundering techniques.
Whilst they can appear overwhelming, the common thread running through these examples are the opportunities they provide for us to get involved, take action and demand a better outcome for the world’s poor.
Ultimately, overcoming extreme poverty will not occur by throwing loose change at the problem. Rather, it is the systems and structures that keep people poor that need to be changed.
And that’s where you and I step in.
That’s why we’re campaigning for Ken Clarke to announce the government’s strategy to combat corruption.
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The Australian government are about to announce the findings of their review into foreign aid. The UK has just released theirs. Both have focused on aid transparency - making sure that the public, officials and poor country government and citizens can know where the money has come from and where it's going. In this blog, we look at what's happening in the world of aid transparency.
Recently a new standard was agreed to for the publication of aid to developing countries. This may not sound too interesting, or effective but it has lasting implications for the aid sector. Working just like resource transparency legislation that the British government announced that it would be supporting, a uniform aid standard makes it far easier to trace where money is being spent, because with an increased level of accountability citizens are empowered with a vital source of information with which to hold their governments to account.
Currently, there is no mandatory standard outlining what to publish, how to publish it and what form that takes.
Such an outcome has been the result of the International Aid Transparency Initiative (IATI). Launched on September 4, 2008, IATI is a coalition of donor governments, governments of developing countries and NGOs whose aim is to make information about aid spending ‘easier to access, use and understand.’ Currently there are 18 donors who are IATI signatories including the World Bank, United Nations Development Programme and countries such as Sweden to Australia. In addition 19 developing countries have endorsed IATI from across the world Honduras to Ghana and Papua New Guinea.
So what do the standards require?
The new standards establish universal definitions setting out how much money is being provided, when it was, or is, due to be paid out and how funds are expected to be used. They are part of the broader movement for aid transparency that aims to benefit recipient governments, donors and aid agencies and southern citizens and their representatives.
With the IATI, participating donors will publish their aid information in one place and one format. For recipient governments this greater aid transparency means that they are able to know how much aid is invested, from whom and where it being spent. Having the information available in one place is essential for their budget planning for two reasons; first, a lack of funds means that a government cannot implement it’s plans and second, a lack of predictability means that government’s are unable to effectively plan in the first place.
This problem has real world implications. For example, in 2007 the Sierra Leone government received $US 26 million less than it had budgeted – money that had already been budgeted for spending on poverty reduction.
For donors such as governments, aid agencies and private foundations, aid transparency ensures that their efforts will be most effective reducing the likelihood of overlap. An example of this occurred in 2000 when the United Nations Development Programme undertook a review of the aid spent on the Palestinian territories – most aid projects were focused on urban areas while rural and refugee camps –in the direst need of aid – were neglected. And it’s for cases like these that the IATI is focused.
For citizens in recipient countries greater levels of aid information benefit civil society as they provide another vital source of information enabling them to hold their governments to account. With another avenue that can potentially be abused for corruption no longer available civil society organisations can track and challenge the discrepancies between aid received and aid spent.
Lastly, aid transparency challenges existing misconceptions that currently exist in donor countries. As we blogged last week, many in America think that up to one-fifth of their budget is sent overseas as aid. And it’s a similar story in the UK. Here, people estimated that government spending on overseas aid was 18.55% when the actual figure is only 1.3%.
It’s these misunderstandings that drive people’s cynicism towards aid - because they don’t know how much is spent, or where the money goes, they are overestimating the amount and underestimating the effectiveness of aid.
That’s why the Global Poverty Project supports the IATI. As another mechanism for increasing transparency and accountability it empowers citizens of aid recipient countries to hold their governments to account. And, in the process, it dispels common myths surrounding aid and the real progress being made. |
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