Corruption And Transparency - Part I
By Sam Vaknin, Wed Dec 7th
I. The Facts Just days before a much-awaited donor conference, theinfluential International Crisis Group (ICG) recommended toplace all funds pledged to Macedonia under the oversight of a"corruption advisor" appointed by the European Commission. Thedonors ignored this and other recommendations. To appease thecritics, the affable Attorney General of Macedonia charged aformer Minister of Defense with abuse of duty for allegedlyhaving channeled millions of DM to his relatives during therecent civil war. Macedonia has belatedly passed an anti-moneylaundering law recently - but failed, yet again, to adopt strictanti-corruption legislation. In Albania, the Chairman of the Albanian Socialist Party, FatosNano, was accused by Albanian media of laundering $1 billionthrough the Albanian government. Pavel Borodin, the former chiefof Kremlin Property, decided not appeal his money launderingconviction in a Swiss court. The Slovak daily "Sme" described inscathing detail the newly acquired wealth and lavish lifestylesof formerly impoverished HZDS politicians. Some of them nowreside in refurbished castles. Others have swimming poolsreplete with wine bars.
Pavlo Lazarenko, a former Ukrainian prime minister, is detainedin San Francisco on money laundering charges. His defense teamaccuses the US authorities of "selective prosecution". They are quoted by Radio Free Europe as saying: "The impetus for this prosecution comes from allegations made bythe Kuchma regime, which itself is corrupt and dedicated tousing undemocratic and repressive methods to stifle politicalopposition ... (other Ukrainian officials) including Kuchmahimself and his closest associates, have committed conductsimilar to that with which Lazarenko is charged but have notbeen prosecuted by the U.S. government". The UNDP estimated, in 1997, that, even in rich, industrialized,countries, 15% of all firms had to pay bribes. The figure risesto 40% in Asia and 60% in Russia. Corruption is rife and all pervasive, though many allegationsare nothing but political mud-slinging. Luckily, in countrieslike Macedonia, it is confined to its rapacious elites: itspoliticians, managers, university professors, medical doctors,judges, journalists, and top bureaucrats. The police and customsare hopelessly compromised. Yet, one rarely comes across graftand venality in daily life. There are no false detentions (as inRussia), spurious traffic tickets (as in Latin America), orwidespread stealthy payments for public goods and services (asin Africa). It is widely accepted that corruption retards growth bydeterring foreign investment and encouraging brain drain. Itleads to the misallocation of economic resources and distortscompetition. It depletes the affected country's endowments -both natural and acquired. It demolishes the tenuous trustbetween citizen and state. It casts civil and governmentinstitutions in doubt, tarnishes the entire political class,and, thus, endangers the democratic system and the rule of law,property rights included. This is why both governments and business show a growingcommitment to tackling it. According to TransparencyInternational's "Global Corruption Report 2001", corruption hasbeen successfully contained in private banking and the diamondtrade, for instance. Hence also the involvement of the World Bank and the IMF infighting corruption. Both institutions are increasinglyconcerned with poverty reduction through economic growth anddevelopment. The World Bank estimates that corruption reducesthe growth rate of an affected country by 0.5 to 1 percentannually. Graft amounts to an increase in the marginal tax rateand has pernicious effects on inward investment as well. The World Bank has appointed last year a Director ofInstitutional Integrity - a new department that combines theAnti-Corruption and Fraud Investigations Unit and the Office ofBusiness Ethics and Integrity. The Bank helps countries to fightcorruption by providing them with technical assistance,educational programs, and lending. Anti-corruption projects are an integral part of every CountryAssistance Strategy (CAS). The Bank also supports internationalefforts to reduce corruption by sponsoring conferences and theexchange of information. It collaborates closely withTransparency International, for instance. At the request of member-governments (such as Bosnia-Herzegovinaand Romania) it has prepared detailed country corruption surveyscovering both the public and the
private sectors. Together withthe EBRD, it publishes a corruption survey of 3000 firms in 22transition countries (BEEPS - Business Environment andEnterprise Performance Survey). It has even set up amultilingual hotline for whistleblowers. The IMF made corruption an integral part of its countryevaluation process. It suspended arrangements with endemicallycorrupt recipients of IMF financing. Since 1997, it hasintroduced policies regarding misreporting, abuse of IMF funds,monitoring the use of debt relief for poverty reduction, datadissemination, legal and judicial reform, fiscal and monetarytransparency, and even internal governance (e.g., financialdisclosure by staff members). Yet, no one seems to agree on a universal definition ofcorruption. What amounts to venality in one culture (Sweden) isconsidered no more than hospitality, or an expression ofgratitude, in another (France, or Italy). Corruption isdiscussed freely and forgivingly in one place - but concealedshamefully in another. Corruption, like other crimes, isprobably seriously under-reported and under-penalized. Moreover, bribing officials is often the unstated policy ofmultinationals, foreign investors, and expatriates. Many of thembelieve that it is inevitable if one is to expedite matters orsecure a beneficial outcome. Rich world governments turn a blindeye, even where laws against such practices are extant andstrict. In his address to the Inter-American Development Bank on March14, President Bush promised to "reward nations that root outcorruption" within the framework of the Millennium ChallengeAccount initiative. The USA has pioneered global anti-corruptioncampaigns and is a signatory to the 1996 IAS Inter-AmericanConvention against Corruption, the Council of Europe's CriminalLaw Convention on Corruption, and the OECD's 1997 anti-briberyconvention. The USA has had a comprehensive "Foreign CorruptPractices Act" since 1977. The Act applies to all American firms, to all firms - includingforeign ones - traded in an American stock exchange, and tobribery on American territory by foreign and American firmsalike. It outlaws the payment of bribes to foreign officials,political parties, party officials, and political candidates inforeign countries. A similar law has now been adopted by Britain. Yet, "The Economist" reports that the American SEC has broughtonly three cases against listed companies until 1997. The USDepartment of Justice brought another 30 cases. Britain haspersecuted successfully only one of its officials for overseasbribery since 1889. In the Netherlands bribery is taxdeductible. Transparency International now publishes a name andshame Bribery Payers Index to complement its 91-country strongCorruption Perceptions Index. Many rich world corporations and wealthy individuals make use ofoff-shore havens or "special purpose entities" to launder money,make illicit payments, avoid or evade taxes, and conceal assetsor liabilities. According to Swiss authorities, more than $40billion are held by Russians in its banking system alone. Thefigure may be 5 to 10 times higher in the tax havens of theUnited Kingdom. In a survey it conducted last month of 82 companies in which itinvests, "Friends, Ivory, and Sime" found that only a quarterhad clear anti-corruption management and accountability systemsin place. Tellingly only 35 countries signed the 1997 OECD "Convention onCombating Bribery of Foreign Public Officials in InternationalBusiness Transactions" - including four non-OECD members: Chile,Argentina, Bulgaria, and Brazil. The convention has been inforce since February 1999 and is only one of many OECDanti-corruption drives, among which are SIGMA (Support forImprovement in Governance and Management in Central and EasternEuropean countries), ACN (Anti-Corruption Network for TransitionEconomies in Europe), and FATF (the Financial Action Task Forceon Money Laundering). Moreover, The moral authority of those who preach againstcorruption in poor countries - the officials of the IMF, theWorld Bank, the EU, the OECD - is strained by their ostentatiouslifestyle, conspicuous consumption, and "pragmatic" morality.
About the author:Sam Vaknin is the author of Malignant Self Love - NarcissismRevisited and After the Rain - How the West Lost the East. He isa columnist for Central Europe Review, PopMatters, and eBookWeb, a United Press International (UPI) Senior BusinessCorrespondent, and the editor of mental health and Central EastEurope categories in The Open Directory Bellaonline, andSuite101 . Visit Sam's Web site at http://samvak.tripod.com |
