By definition, it is almost impossibleto estimate the scale and theultimate cost of corruption forsociety internationally or in anyindividual country. Among citizensworldwide, popular perception andopinion places both grand and pettycorruption high on their list ofnational concerns – this is as true ofthe ‘developed world’ as it is of the‘developing world’. In monetaryterms, the World Bank conservativelyestimates that bribes alone equalapproximately 3% of global GDP,equivalent to around US$1 trillionper year – more than enough to deliver theMillennium Development Goals agenda in full. This figure excludes embezzlement of governmentfunds and, as a result, it is likely that a moreaccurate figure is some 5% of global GDP. It isestimated that the figure for developing countriescould be as high as 25%.

The consequences for human development are asobvious as they are scandalous, especially in thosecountries where even the most basic needs of amajority of people are not being realised.

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Corruption and DevelopmentColm Regan

According to many commentators, corruptionhas an impact at a variety of levels through:

• reducing the level of both domesticand foreign investment – due toincreased costs, uncertainty as tooutcomes and lack of faith in thequality and impact of political andeconomic decision making

• reducing social cohesion and co-operation as individuals and groupsseek advantage over others

‘Recent scandals in Brazil, France, Italy, Japan, Mexico, the US and othercountries indicate that corruption is a worldwide phenomenon. But in Africa,the poorest continent, its effects have been especially harmful. In some Africancountries corruption has been so pervasive that even the most basic publicservices have been crippled and virtually no financing is left over for publicinvestment. Corrupt officials and their external partners have siphoned awaybillions of dollars from the continent into secret foreign bank accounts,probably accounting for a significant share of the continent’s stock of flightcapital, which the UN Economic Commission for Africa has reported to be anestimated $148 billion.’

- Journalist and Researcher Ernest Harsch

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Least Corrupt 2005

Iceland

Finland

New Zealand

Denmark

Singapore

Sweden

Switzerland

Norway

Australia

Austria

• increasing inequality and the transfer ofresources from the poor to the rich – thisdisproportionately benefits the rich and hurtsthe poor

• the inappropriate allocation of governmentfinances for personal, regional or group benefitrather than that of all citizens

• increasing the risks and the effects of disastersas a result of faulty planning and constructionand inadequately resourced services etc. (see,for example, the Global Corruption report ofTransparency International for 2005 whichexamines corruption in construction).

The UN Anti-Corruption Toolkit adds anotherdimension:

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‘Corruption tends to concentrate wealth, notonly increasing the gap between rich and poorbut providing the wealthy with illicit means toprotect their positions and interests. That, inturn, can contribute to social conditions thatfoster other forms of crime, social and politicalinstability and even terrorism.’

Recent years have witnessed a significantfocus on the issue of corruption – itsexistence and estimated scale has led tocalls from many observers and critics for anend to aid programmes, especially thosefocused on corrupt governments. Scandalsin various programmes and structuresincluding those in the UN itself, have addedadditional fuel to the debate. Thecorruption debate has also been used topillory whole nations and regions despitethe fact that ordinary citizens, especially indeveloping countries, are as innocent ofcorruption as taxpayers in aid-providingcountries.

However, recent developments in relation tocorruption have also included theemergence and strengthening of civilsociety organisations internationallydedicated to challenging corruption and topromoting transparency and accountability– the best known of these organisationsinclude Transparency International, thePublish What You Pay Campaign and theExtractive Industries Transparency Initiative,but there are also hundreds of smaller local

Most Corrupt 2005

Bangladesh

Chad

Haiti

Myanmar

Turkmenistan

Cote d’Ivoire

Equatorial Guinea

Nigeria

Angola

Democratic Republic of the Congo

- Source: Transparency International CorruptionPerceptions Index 2005

NGOs working on the same agenda. There has alsobeen significant growth in national and internationalanticorruption activities, and much more opendiscussion in international forums about corruption.Important initiatives include the OECD Anti-BriberyConvention, the UN Convention Against Corruptionand the African Union Convention on Corruptionand Corruption Related Offences.

The World’s Ten Most Corrupt Leaders

Name President

1. Mohamed Suharto Indonesia (1967–1998) - 15–35 billion

2. Ferdinand Marcos Philippines (1972–1986) - 5–10 billion

3. Mobutu Sese Seko Zaire (1965–1997) - 5 billion

4. Sani Abacha Nigeria (1993–1998) - 2–5 billion

5. Slobodan Milosevic Serbia/Yugoslavia (1989–2000) - 1 billion

6. Jean-Claude Duvalier Haiti (1971–1986) - 300–800 million

7. Alberto Fujimori Peru (1990–2000) - 600 million

8. Pavlo Lazarenko Ukraine (1996–1997) - 114–200 million

9. Arnoldo Alemán Nicaragua (1997–2002) - 100 million

10. Joseph Estrada Philippines (1998–2001) - 78–80 million

Defined as former political leaders who have been accused of embezzling the most funds from their countries over the past two decades.

All sums are estimates of alleged embezzlement and appear in U.S. dollars.

- Source: Transparency International Global Corruption Report 2004

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Defining corruption

Defined broadly, corruption is the misuse ofpositions of power and/or privilege for personal gainor benefit – it can include fraud, bribery, misuse ofresources, demanding favours (including sexualfavours) in return for services or for the avoidance offines etc. Most commentators note the differencebetween petty and grand corruption.

Petty corruption usually involves the exchange ofsmall amounts of money, the granting of minorfavours in return for preferential treatment oremployment or for the avoidance of fines etc. Grandcorruption is corruption that characterises thehighest levels of government, private business orcivil society and can lead to a broad erosion ofconfidence in government, accountability, the ruleand impartiality of law and economic stability.

Commentators note also that the most criticaldifference between grand corruption and pettycorruption is that the former involves the distortionor corruption of the central functions ofGovernment and society, while the latter developsand exists within the context of establishedgovernance and social frameworks.

Corruption Perceptions Index

Transparency International began publishing anannual Index of Perception of Corruption (CPI) in1995 ranking the world’s countries according to ‘thedegree to which corruption is perceived to existamong public officials and politicians’ by businesspeople and country analysts. In the index, corruptionis defined as ‘the abuse of public office for privategain’.

In the 2005 report, some 16 different polls andsurveys were used from 10 different independentinstitutions including, for example, ColumbiaUniversity, the Economist Intelligence Unit, FreedomHouse, the UN Economic Commission for Africa etc.In recent years, Transparency International hassought to develop other corruption measurementtools to complement the CPI. The Bribe Payers Indexassesses the supply side of corruption and rankscorruption by source country and industry sector.The Global Corruption Barometer is a public opinionsurvey that assesses the general public’s perceptionand experience of corruption in more than 60countries around the world.

Country/Rank 2001 2003 2005(Number of (91) (133) (159)countries surveyed)

Iceland 4 2 1

Finland 1 1 2

New Zealand 3 3 2

Denmark 2 3 4

Singapore 4 5 5

Australia 11 8 9

United Kingdom 13 11 11

United States 16 18 17

Ireland 18 18 19

Chile 18 20 21

Italy 29 35 40

South Africa 38 48 46

Greece 42 50 47

Brazil 46 54 62

Egypt 54 70 70

India 71 83 88

Ukraine 83 106 107

Zambia 75 92 107

Russia 79 86 126

Nigeria 90 132 155

Bangladesh 91 133 158

- Source: Transparency International CorruptionPerceptions Index 2005

Recent developments in relation tocorruption have also included theemergence and strengthening of civilsociety organisations internationallydedicated to challenging corruptionand to promoting transparency andaccountability – the best known ofthese organisations includeTransparency International, thePublish What You Pay Campaign andthe Extractive IndustriesTransparency Initiative.

Measuring Public Perceptionsof Corruption

Each year, the Global Corruption Barometer,published by Transparency International,measures the results of public opinion andexperience (among 55,000 people in 69 low,middle, and high-income countries) ofcorruption. The Barometer seeks to capturehow and in what ways corruption affectsordinary people’s lives, thus providing anindication of the form and the extent ofcorruption from the view of citizens aroundthe world.

The Barometer asks people about theiropinions regarding those sectors in societyconsidered to be the most corrupt and whichspheres of life are most affected, it alsoexplores bribery in depth, and presentsinformation on: how frequently families paybribes; how these payments take place;whether they are paid to gain access to publicservices; and how much they pay.

The findings of the 2005 barometer reflectthe patterns evident in previous years – thosesurveyed ranked political parties, parliaments,the police and the judiciary as the mostcorrupt institutions internationally. Politicalparties were given the worst overall score,and were seen as the most corrupt sector in45 out of 69 countries; however, there weresome interesting regional differences. Whilecitizens in Asia, Western Europe, and LatinAmerica focus on political parties andparliaments as the most corrupt, the public inAfrica is most concerned about the integrityof its police forces, and citizens in Central and

Eastern Europe regard the police and theirparty system as equally corrupt.

As regards the business sector and the media,the most critical views were expressed inWestern Europe, especially in Scandinaviancountries, and while the health and educationsectors were not scored harshly, there weresignificant levels of concern about unofficial‘user charges’ that may be hindering theaccess of many people to basic social services.In terms of the impact of corruption ondifferent spheres of life, respondents clearlystated that the political spheres in theircountries are affected by corruption. However,a high percentage of people also thought thatthe business sector was similarly affected,especially in Africa and Western Europe.Conversely, fewer people in Latin America hadthis opinion.

Respondents from low-income countries tendto have more negative views of the effect ofcorruption on their personal lives compared tomiddle income and high income countryrespondents. 57% of those surveyed thoughtthat corruption had increased either a little ora lot with respondents in Latin America andAfrica the most negative.

Looking to the future, respondents were lesspessimistic – the average person thought thatcorruption would stay the same rather thanworsen while views from Latin America and,in particular, Africa tended to be morepositive for the future.

As regards bribery, citizens frompredominantly rich countries report low levelsof bribery and those from poorer nations

Most affected by corruption 2005(1 = not corrupt at all, 5 + extremely corrupt)

Sector/institution Level of corruption

Political Parties, Parliament/Legislature, Police, Legal System/Judiciary 4.0 – 3.5

Business/Private Sector, Tax Revenue, Customs, Media and Medical Services 3.4 – 3.2

Utilities, Education System, military, Registry and Permit Services,NGOs and Religious Bodies 3.0 – 2.6

- Source: Global Corruption Barometer 2005, Transparency International

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report higher levels but there are stillsignificant differences across regions andincome groups. The cost of bribery can besignificant for individual households. Whencompared to GDP per capita, it is clear thatfamilies in some countries spend verysignificant percentages of their incomes onbribes. According to the 2005 barometer, it ismore common in Latin America and SouthAsia for bribes to be asked for directly whilein Eastern Europe bribes are regularly requiredfor access to public services.

Where corruption affects political life to a large extent

More than 70% Bosnia and Herzegovina, Bolivia, Greece, Israel, Peru, Philippines, Taiwan

51% - 70% Argentina, Bulgaria, Canada, Cameroon, Chile, Colombia, Croatia, Czech Republic,Dominican Republic, Ecuador, France, Ghana, Indonesia, India, Italy, South Korea,Lithuania, Macedonia, Mexico, Nigeria, Panama, Paraguay, Poland, Portugal, SouthAfrica, Russia, Serbia, Thailand and Turkey

31% - 50% Costa Rica, Ethiopia, Georgia, Germany, Guatemala, Hong Kong, Ireland, Japan,Kosovo, Kenya, Moldova, Nicaragua, Pakistan, Romania, Senegal, Singapore, Togo,UK, Ukraine, Uruguay and the USA

11% - 30% Austria, Cambodia, Denmark, Finland, Iceland, Luxembourg, Malaysia, Netherlands,Norway, Spain, Switzerland, Venezuela

- Source: Global Corruption Barometer 2005, Transparency International

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Bribes paid by household members Nominal amount Amount inin the previous 12 months in $US purchasing power

parity $US

Cameroon 205 560

Lithuania 195 432

Ghana 181 1095

Ukraine 160 860

Serbia 171 No data

Guatemala 147 303

Nigeria 114 280

Mexico 111 161

India 102 523

Moldova 86 280

Respondents from low-income countriestend to have more negative views of theeffect of corruption on their personal livescompared to middle income and highincome country respondents.

Companies and corruption

According to the 2002 Bribe Payers Index,there were very high levels of bribery indeveloping countries by corporations fromRussia, China, Taiwan and South Korea inparticular, as well as from many industrialnations – Italy, Hong Kong, the United States,Japan, France and Spain.

The BPI highlights the fact that companiesexporting from Russia and China to emergingmarket economies are using bribes “on anexceptional and intolerable scale. The extentto which companies from Taiwan and SouthKorea use bribes abroad is only marginallyless. The authorities of all of these countriesneed to do more to prevent bribery by theirfirms abroad.” The index also shows that USmultinational corporations regularly pay bribesto foreign government officials. The US scoreof 5.3 (out of a best possible ‘clean’ mark of10) is matched by Japanese companies and isworse than the scores for corporations fromFrance, Spain, Germany, Singapore and theUnited Kingdom. Those countries whosecompanies are least likely to offer bribes areAustralia, Sweden, Switzerland, Austria,Canada, the Netherlands and Belgium.

The BPI was conducted in 15 emergingmarket economies - Argentina, Brazil,Colombia, Hungary, India, Indonesia, Mexico,Morocco, Nigeria, the Philippines, Poland,Russia, South Africa, South Korea andThailand – all among the largest countriesinvolved in trade and investment withmultinational firms. A total of 835 interviewswere carried out between December 2001and March 2002, principally with seniorexecutives of domestic and foreigncompanies, but also with executives ofchartered accountancies, national chambersof commerce, national and foreigncommercial banks and commercial law firms.

The BPI highlights the fact that the highestlevels of corruption are to be found in publicworks and construction sectors as well as inthe arms and ‘defence’ sectors. Sectorsconsidered least likely to be affected bycorruption such as agriculture scored only 5.9

(against a maximum ‘clean’ score of 10)whereas public works and construction wasscored 1.3, followed by arms and ‘defence’with 1.9 and the oil and gas sector with ascore of 2.7.

The OECD Anti-BriberyConvention

This convention - officially known as theOECD Convention Against Bribery of ForeignPublic Officials in International BusinessTransactions - is aimed at tackling corruptionby sanctioning bribery carried out bycompanies based in OECD member states.The convention came into effect in February1999 and countries that have signed theConvention are required to enact legislationthat criminalises the act of bribing a foreignpublic official. As of April, 2006, 36 countrieshave ratified the convention.

Each country accepting the Convention mustadopt the necessary national legislation tocriminalise the bribery of foreign publicofficials and to address related obligationsunder the Convention. These obligationsinclude insisting on corporate responsibilityfor the offence, sanctioning the laundering ofthe bribe and the proceeds of foreign bribery,penalising related accounting omissions andfalsifications, providing mutual legal assistanceand extradition. The OECD has no authorityto implement the convention, but insteadmonitors implementation by participatingcountries.

Every participating country has an interest inensuring that all other partners in theConvention are living up to their obligationsand this is done through monitoring andsurveillance procedures that are carried out bythe OECD Working Group on Bribery througha process comprised of two phases. Phase 1evaluates the adequacy of a countries’legislation to implement the Convention andPhase 2 assesses whether a country isapplying this legislation effectively. TheWorking Group evaluates each country’sperformance and makes recommendationsthat are forwarded to the Government ofeach participating country.

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Three recent 2006 reviews of the Convention‘at work’ in the cases of Japan, theNetherlands and Denmark noted thefollowing:

• Japan - had not demonstratedsufficient efforts to enforce its foreignbribery offence and includedrecommendations that Japan shouldproactively investigate and prosecuteforeign bribery cases, urgentlyundertake an assessment of theimpediments to the effectiveinvestigation and prosecution of theoffence and further strengthen thelegislative framework for fightingforeign bribery including by moving theoffence to the Penal Code

• The Netherlands - needs to be moreproactive in the investigation andprosecution of bribery of foreign publicofficials in international businesstransactions. Given the size of the

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Dutch economy and the level ofinternational trade of Dutchcompanies, particularly in risky sectorsand markets, more investigations andprosecutions of foreign bribery wouldbe expected but there have been notrials or convictions to date

• Denmark - should increase thepenalties for foreign bribery, themaximum sanction for foreign briberyis lower than for comparable offencesin the Danish Penal Code and does notmeet the necessary threshold forallowing Danish law enforcementauthorities to use special investigativetechniques. And although Denmark hasengaged in significant legislative effortsfor implementing the OECD Anti-Bribery Convention, other problems,such as the absence of an efficientframework for detection and reportingof foreign bribery, should be addressed.

More information – www.oecd.org

Buying Influence? Political Partiesand Funding

The International Institute for Democracy and ElectoralAssistance (IDEA), an intergovernmental organisationwith member states from all continents, was created in1995 and has a mandate to support sustainabledemocracy worldwide. Its finances come fromcontributions from member states and through fundingfrom, for example, European Commission, Inter-American Development Bank (IADB), United NationsDevelopment Programme (UNDP), Ireland, University forPeace (UPEACE), United Nations Foundation etc.

As part of its work, IDEA focuses on three areas of‘democratic challenge’ - citizenship and representation(including gender, electoral participation etc.), verticalaccountability (electoral and political party processesand systems) and horizontal accountability (constitution-building processes and institutional reforms).

In early 2004, IDEA published a handbook on thefunding of political parties and outlines a number ofkey lessons learned from ‘established democracies’:

• Political parties and competition for politicalpower are essential for sustainable democracyand good governance

• Competing parties need adequate resources fornecessary activities in order to strengthendemocracy and accountability as well astransparency

• Money is an essential part of this process andthus in new democracies it should not be treatedsolely as a problem

• The challenge is to find the best ways ofmatching the need for a sustainable financialbase for parties with the wider public interest ofcurbing or curtailing corruption

• The funding of political activity by parties andcandidates should be made an issue of publicdebate. Disclosure and reporting rules and theirimplementation can provide for adequatetransparency of political funds

• Too much reliance on funding from either theprivate or the public sector of society is unwise.

Despite such advantages, the risks involved include:

• General scarcity of resources - if a society is poorthe funding of politics may be too limited to beeffective, parties may turn to foreign or‘undesirable sources’ which could lead todependence or to a loss of legitimacy

• Inequality of resources available for competingparties: governing parties have easier access tofunds and are thus in a better position thanopposition parties. Also, there are alwayssegments of society which are better off thanothers and this will translate into unequalpolitical terms

• Interested money - special interests canmotivate a political contribution, those whobenefit from the status quo may give financialsupport to parties that do not favour change.Parties of the “haves” may raise more fundsthan parties of the “have-nots”. Also,donations by corporations and trade unionscan reveal the difference between grass-rootsfunding and “plutocratic financing”

• Individual donations by persons entitled to votefrom their own funds raises another questiondecided by the US Supreme Court in 1976. Itdecided that the inalienable political rights ofany citizen automatically includes the liberty tospend unlimited amounts of his or her ownmoney on behalf of any personal opinion,preferred candidate or political party.

Reviewing the situation of funding internationally,IDEA notes a number of issues:

• Banning or limiting funding is difficult toenforce and, in new democracies, subjectingsuch funding to disclosure, law andaccountability would constitute significantprogress

• The core need is to build political consensusnationally rather than simply implementinginternational regulations or proposals

• Enforcement remains problematic as it impliesrespect for the law and an effective andimpartial judiciary

• A number of positive strategies have helped in,for example, Latin America, where limiting thelength of political campaigns has reduced costand limiting access to TV advertising has helpedreduce undue influence etc

• Disclosure rules can assist but only in certaincircumstances, e.g. where a vibrant andindependent media and civil society exist

• Public funding for political parties is morewidespread than imagined (internationally, 65countries have provision for direct funding and79 for indirect funding)

• Parties currently in power have a distinctadvantage over those in opposition.

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Region Current Situation

Africa Multiparty politics recent but growing, political financing largely unregulated, entrenchedpowerful parties using state resources for own ends, business interests dominate and partystructures and membership is weak. The African Union is working to promote transparencyand accountability and in countries such as Ghana, South Africa and Uganda, reform isunderway. Mali bans foreign political donations but not local, Benin limits campaignexpenditure, has limits on public, but not private, funding. Kenya removed the ban on fundingin 1992 and approved state funding in 1999. The most prominent methods of funding aredonations (e.g. Ghana, Zambia, Nigeria, Kenya, South Africa - usually large – national andinternational or smaller, from citizens overseas usually for opposition parties), corrupt‘kickbacks’ (e.g. Ghana, Cote d’Ivoire), state subventions (Ghana, Zimbabwe) and returns oninvestments by political parties (e.g. Zimbabwe) or through setting up ‘front organisationse.g. NGOs, foundations – Ghana, Kenya). ‘African governments exploit the opportunities ofoffice to ‘bankroll’ their parties without many of the political constraints and restraints thatoperate in mature democracies’.

Continental Significant differences between north and south, strong degrees of regulation in countriesWestern Europe such as Germany (and Canada) where respect for law is high, as is real party membershipCanada, the US and public support for state funding. Considerable ‘tightening up’ with European Unionand Australia legislation and provision for EU future funding and Council of Europe agreements on

transparency as well as prohibitions on party funding including enforcement and sanctionsand strong civil society groups and interest. Italy, Austria, Israel, Sweden and Japan areviewed as high spending countries and the UK, Canada, Australia and the Netherlands asbeing moderate. Sources of funding include small grassroots or citizens (often tax exempt toa certain level) e.g. UK, Canada, Australia, corporate or interest group funding e.g. LabourParty in the UK, Australia (‘still effectively concealed’) and Canada (75 – 90% of funding). Inthe US, there are limits to corporate funding (excludes certain groups including trade unions,corporations and foreigners) but rich donors and corporations routinely bypass these andindividual Political Action Committees have become very notable in funding political parties –these represent particular ‘interest groups’. Public funding is increasing in importance and isprovided in Australia, Canada, the US, but is much more limited in the UK.

Latin America Multiparty democracy now established and mostly stable with a strong private sector andcivil society. Significant interest in recent years in party funding with new initiatives in manycountries and regionally under the rubric of the Council of Presidents and Prime Ministers ofthe Americas. Major problems with information availability and reliability, with many politicalscandals and with enforcement. Funding that combines private and public resources is thenorm but with the former generally dominant. Public funding in some countries for manyyears e.g. Uruguay (1928) or very recently e.g. Dominican Republic (1997). Significantdegrees of corruption despite limits and restrictions on contributions to parties in 13 of the18 countries – most ban donations from foreign governments, institutions and individuals.Oversight, enforcement and accountability are major problems. But evidence of someprogress with 8 of the 18 countries - Argentina, Bolivia, Chile, Colombia, Ecuador, Mexico,Nicaragua and Peru – requiring a degree of public disclosure. Key issues now includereform, legislation, enforcement, oversight, public disclosure, public accountability andeffective sanctions.

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Regional trends in funding for political parties– some examples

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Corruption in Africa – costing €148billion per year

Corruption is estimated to cost Africa approximately$148 billion each year, equivalent to the amount ofVAT fraud in the EU each year.

While it is clear that corruption is a widespreadinternational phenomenon affecting all countries toa greater or lesser degree, most international andAfrican commentators argue that it is now endemicand widespread in the majority of African countries.A 2002 World Bank study of Ethiopia concludedthat corruption was the most important problemthat households face after poverty. A similarsituation exists in many other countries withAfricans themselves ranking corruption among thetop three problems behind poverty andunemployment. For example, in Cameroon,Morocco, Nigeria and Tanzania more than 25% ofthe households recently surveyed (by the UNEconomic Commission for Africa 2005) said thatcorruption was a serious problem.

In the 2005 Corruption Perception’s Index, thescores for all African countries except Botswanawere 5 or below on the 10-point scale. Botswana,which ranked 32 with a score of 5.9, was thehighest score in Africa with Nigeria, Cote d’Ivoireand Angola all at the bottom of the leagues. Infact, of the bottom 14 countries – those consideredto be among the world’s most corrupt – nine werein Africa.

In many African countries, corruption has become asystematic plague that characterises much of thepublic sector, a considerable amount of the privatesector and spreads also into civil societyorganisations. The areas most identified wherecorruption exists include recruitment andpromotion, public expenditure, the provision andmanagement of public services, taxation, theawarding of contracts, petty corruption at lowerlevels of the public service, misuse of resources etc.The consequences for the majority of Africans areobvious and significant.

In its 2005 African Governance Report, the UNEconomic Commission for Africa paints a snapshotimage of the nature and character of the problemas follows:

‘One manifestation of corruption in the public service isbribery. The general perception among Kenyans is thatthe civil service is not only corrupt but also inefficient.Many civil servants and ministers have been implicatedin corrupt deals, such as favouritism in awardingscholarships, positions and contracts, which erodespublic confidence in state institutions. In Malawi thepublic rating of the integrity of the civil service and theexecutive is very low, with a general perception thatcorruption runs deep in the public sector. In Nigeriacorruption is considered a national malaise that causesordinary citizens to have little trust in the state.

In Ghana corruption is widely perceived to be rife in thepublic bureaucracy. A 1999 corruption and governancesurvey conducted there by the Centre for DemocraticDevelopment found that 62–87% of households hadpaid bribes to government agencies, with Motor,Transport and Traffic Unit, the Customs, Excise andPreventive Service, the regular police and immigrationservice topping the list of bribe-takers. In the survey44% of the private businesses said that they have madeunofficial payments to public officials, some frequentlyor always.’

However, contrary to the view often put forward bysome commentators, the situation is not similaracross the Continent – there appears to a regionalpattern to the levels of corruption in Africa (as noted in the 2005 Governance Report cited above):

• The integrity of the government and the levelsof corruption were rated more poorly in Westand East Africa than in Southern Africa

• In Benin, Burkina Faso, Cameroon, Niger,Uganda, Ethiopia, Kenya, Mali, Nigeria andChad there was a perception of higher levels ofcorruption in the tax collection system

• In Namibia, Botswana, South Africa andMauritius the perception is of much lowerlevels of corruption

• In Namibia, Botswana and South Africa, morethan 95% of the experts surveyed said that thetax collection system is largely free fromcorruption.

Commentators have identified a number of key reasonswhy corruption is so endemic in Africa – these include:

• The greed and rapaciousness of many seniorpoliticians, public servants, businesspeople andcommunity leaders who see the resources of theircountries – including its citizens – as an

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opportunity for their personal benefit. Manyof them see this as normal and natural,something that accompanies high office andleadership. This situation is often true oftraditional leaders as well as ‘modernisingelites’ and it is true for all sectors – politics,business and civil society

• The levels of institutional weakness and thelack of effective democracy at a variety of keylevels in many African countries, plus thegeneral weakness of civil society structuresand influence – all make it possible forpolitical leaders and public servants toembezzle national resources and to abusetheir power without being effectively checkedand, ultimately, held accountable

• In many African countries, adequatelegislative structures, competences and skillsto oversee Ministries and politicians as well asthe public service often do not exist or areweak and ineffective, revenue and financedepartments are poorly staffed and regularlylack resources and/or autonomy. Many of thepublic regulatory institutions and lawenforcement agencies are also viewed asbeing very corrupt - for example, the policeforce is routinely seen as corrupt along withtax officials and the judiciary

• The low salaries and poor living standards ofmost public servants and the need for verymany of them to ‘supplement’ their salaries inorder to provide for their families routinelyfosters corruption. Teachers, police, localgovernment officials etc. are regularly unpaidfor months at a time and, are thus, forced touse their positions to make ends meet

• Another key reason lies in the behaviour andviews of external forces - foreign companiesand private interests often prey on weakinstitutional mechanisms and levels of povertyamong key groups to offer bribes in order towin contracts, influence political andlegislative decisions as well as to maintaininfluence. There have been many andspectacular cases of bribery and corruptioninvolving resource companies, pharmaceuticalcompanies, ‘defence’ contractors, publicworks companies, telecommunicationscompanies etc. This situation has beensignificantly strengthened by the recent drive

to ‘privatise’ state resources and to ‘open up’many African countries to international‘competition’.

“Western governments must also show that they areserious about tackling their own companies that bribeabroad. The OECD Anti-Bribery Convention, whichoutlaws bribes to foreign public officials, came intoforce in 1999, but we are still awaiting prosecutions inthe courts of the 35 signatory countries. Thegovernments of these countries have an obligation todeveloping countries to investigate and prosecute thecompanies within their jurisdictions that are bribing.Their bribes and incentives to corrupt public officialsand politicians are undermining the prospects ofsustainable development in poorer countries”.

- Peter Eigen, Chairman of Transparency International

However, there are signs that the situation is beingtackled in different states and at a variety ofdifferent levels:

• Zambia, Ghana and Uganda have begun tostrengthen anti-corruption structures andinstruments

• In Tanzania, for example, the governmentstrengthened the Prevention of CorruptionBureau, by hiring well-trained investigators andproviding them with better facilities. In 2002,1,461 complaints were filed with the Bureau—1,311 of them involved public officials, 88involved private individuals and 62 involvedpolitical parties. At least 20 highly placed publicofficials retired, and one minister was tried onallegations of corruption

• In Mali and Benin, civil society organisationshave become more active and effective. In Malifour civil society groups have been establishedprimarily for this purpose: the NationalObservatory for the Fight Against Corruption,the Centre of Studies, Reflection, Sensitisationon Corruption and Poverty in Mali, the Alliancefor Transparency in Mali (the Malian branch ofTransparency International) and the MalianNetwork of Journalists for the Fight AgainstCorruption and Poverty. In Benin the PublicMoralisation Unit of the Office of the Presidenthas encouraged civil society to be involvedagainst corruption, leading to the setting up ofa Front des Organisations Nationales Anti-Corruption (FONAC).

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Fuelling Poverty: oil, war andcorruption

In industrialised democracies – even those rich innatural resources – government expenditure isprincipally funded through taxation (and publicsector borrowing). But in countries with oil thatstart out poor, a huge, often the largest,proportion of government income comes from thesale of oil and of the rights to exploit oil, and fromtaxing companies which carry out oil extraction. Inthe case of Angola, an estimated 87 per cent ofthe country’s income comes from oil, much of itpaid directly to the government by foreigncompanies.

When a government earns a significant and direct‘rent’ from a natural resource, it hinders thedevelopment of representative politics by removingthe need to collect taxes effectively. Withoutpaying taxes, people’s stake in society is reducedand their desire to see their money spent onproviding the services they need is diminished. Inthis way, the governments of oil-dependentdeveloping countries become less accountable totheir people, even though they may have beenchosen through elections. In short, oil impedesdemocracy.

Huge amounts of money washing about with scantlevels of accountability create the text-bookconditions for corruption. If people do not knowwhere their government’s money is going, or evenwhere it is coming from, then it is probable that atleast some of it will find its way into the privatepockets of the powerful.

A report by Michael Ross of the University ofCalifornia demonstrated a firm link between oiland authoritarian rule. Ross was intrigued by theabsence of democracy in the Middle East anddecided to test whether it was linked to the heavyreliance on oil of many of the states concerned.

Ross took a sample of 105 countries and analyseddata from 1971 to 1997 asking three questions ofthe claim that oil impedes democracy. First, is ittrue? Second, does it only affect Middle Easternregimes? Third, why does it happen?

His results were startling. For every one-point rise inoil wealth, Ross observed a 0.72 drop on a 0-10democracy scale. In other words, his research

suggests oil works directly against the developmentof representative politics. He also found that thiseffect is not restricted to the Middle East, but isobserved in other areas where oil-rich states areclustered, such as sub-Saharan Africa. Rossconcluded that the likely explanation for thephenomenon was that oil encouraged high ‘rent-seeking’ by public officials and politicians, moneywhich is used to ‘allay popular demands fordemocracy’.

The IMF estimates that in Angola more than US$1billion of government income from oil – or 20 percent of the total – disappears every year. Somebelieve this sum could be as high as US$1.4 billion.But it is not only the misuse and disappearance ofpublic money that is at stake. The payment ofbribes or commissions by foreign oil companies –sometimes using public money from westerncountries – to secure lucrative oil contracts is alsocommon.

Loik Le Floch Prigent, the former president ofFrench state oil company Elf Aquitaine – nowprivatised and merged with Total Fina – wasconvicted in 2002 of presiding over the commissionpayments on oil deals with African countries,including Angola. In court, Le Floch Prigentadmitted that intermediaries were used to keep thesystem opaque. ‘We know that there were peoplebetween us and the leaders of these countries,’ hesaid. It is perhaps no coincidence that the country’spresident, Eduardo dos Santos, is also Angola’srichest citizen.

In April 2003, a federal court in New York heardhow Mobil Oil, now part of Exxon Mobil Corp, waspart of a US government investigation intoallegations of corruption involving Americanexecutives and Kazakhstan government officialsover oil deals. An indictment against a formersenior Mobil executive accused him of evadingtaxes on a US$2 million kickback he allegedlyreceived for negotiating oil deals with Kazakhstan.A New York businessman was also indicted onconspiracy charges accusing him of making morethan US$78 million in unlawful payments to twosenior Kazakh officials to win oil deals. Prosecutorssaid that one official used bribe money to buyjewellery worth more than US$180,000 and payfor a Swiss spa visit while the other official used atleast US$45,000 to send his daughter to an

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exclusive Swiss finishing school. Both men andExxon Mobil denied any wrongdoing.

Generally, people in oil-rich developing countriesdo not have the information on which to seriouslyscrutinise their governments. So much of theirgovernments’ revenue comes from direct paymentsmade by international oil companies. These areneither declared when the companies make thepayments, nor when the government spends therevenue. An abundance of oil therefore createsopportunities for so-called ‘rent-seeking behaviour’by politicians who find themselves privy to largeamounts of unscrutinised income. And once theyhave received their payments – both legitimate andillegitimate – they are largely free to spend it onensuring that they remain in power.

In the 1990s it is estimated that rebels, warlords,corrupt governments and other predatory groupsearned an estimated US$12 billion worldwide inrevenues from marketing their countries’ naturalresources.

- Extract from a report by Christian Aid (2003) FuellingPoverty: oil, war and corruption

Christian Aid is a member of Publish What YouPay – an international NGO coalition thatcampaigns for the mandatory disclosure of taxes,fees, royalties and other payments by oil, miningand gas companies to governments and otherpublic agencies. For further information seewww.publishwhatyoupay.org

Another generation ofchildren remain locked in acycle of poverty, deprived ofschooling and healthcare.

Why is transparency in the oil, gas and mining industry important to children?

- Source: Beyond the Rhetoric Measuring revenuetransparency in the oil and gas industries.

Tackling Corruption– some case studies

Publish What You PayCampaign

The Publish What You Pay Campaign wascreated to assist citizens of resource-richdeveloping countries hold their governmentsaccountable for the management of revenuesfrom the oil, gas and mining industries.Natural resource revenues are an importantsource of income for governments of over 50developing countries, including Angola,Indonesia, Kazakhstan, Nigeria andVenezuela. When properly managed theserevenues should serve as a basis for povertyreduction, economic growth and developmentrather than contributing further to corruption,conflict and social division.

The Publish What You Pay coalition of over300 NGOs worldwide calls for:

• the mandatory disclosure of paymentsmade by oil, gas and miningcompanies’ to all governments for theextraction of natural resources

• resource-rich developing countrygovernments to publish full details onrevenues. This is a necessary first steptowards a more accountable system forthe management of natural resourcerevenues.

The campaign was founded by GlobalWitness, CAFOD, Oxfam, Save the Children,Transparency International and George Soros,Chairman of the Open Society Institute. Thecampaign now also includes several nationalNGO coalitions from around the worldworking towards greater resource revenuetransparency, including in Australia,Azerbaijan, Cameroon, Chad, CongoBrazzaville, Democratic Republic of Congo,France, Georgia, Ghana, Indonesia,Kazakhstan, the Kyrgyz Republic, Liberia,Mauritania, the Netherlands, Nigeria, Norway,the United States and the United Kingdom.

More information fromwww.publishwhatyoupay.org

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The Extractive IndustriesTransparency Initiative (EITI)

The Extractive Industries Transparency Initiativewas announced by UK Prime Minister Tony Blairat the World Summit on SustainableDevelopment in Johannesburg, September2002. The aim of the Initiative is to increasetransparency over payments by companies togovernments and government-linked entities,as well as transparency over revenues by thosehost country governments. The Initiativefocuses on revenues from oil, gas and miningcompanies (taxes, royalties, bonuses and otherpayments) which can exacerbate poorgovernance and lead to corruption, conflictand poverty due to the lack of accountabilityand transparency.

EITI is based in the UK’s Department forInternational Development and works closelywith the World Bank and the IMF. In additionto working with implementing governments,EITI is supported by donors, by many of theworld’s largest oil and mining companies aswell as by investors in those companies and bydifferent civil society groups such as the PublishWhat you Pay Campaign.

To date, some 20 countries have eitherendorsed, or are now actively implementingEITI across the world – including Peru, Trinidadand Tobago, Azerbaijan, Nigeria, and EastTimor. These countries have agreed to:

• widely publish details of all material oil,gas and mining payments by companiesto governments and of all revenuesreceived by governments from oil, gasand mining companies

• ensure credible, independent andverified independent auditing

• ensure this approach is extended to allcompanies including state-ownedenterprises

• involve civil society as an activeparticipant in the design, monitoring andevaluation of this process

• develop a public plan that is sustainablefor the proper use of such resources.

More information - www.eitransparency.org

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Transparency International

Transparency International is the best known andlargest international civil society organisationhighlighting and campaigning against corruptionand is an international network of more than 90locally established national organisations. Theselocal bodies fight corruption in their owncountries in a number of ways:

• they bring together relevant players fromgovernment, civil society, business and themedia to promote transparency inelections, in public administration, inprocurement and in business

• they use advocacy campaigns to lobbygovernments to implement anti-corruptionreforms.

Transparency International seeks to challenge theapparent inevitability of corruption and to offerhope to its victims. It is politically non-partisanand does not undertake investigations of allegedcorruption or expose individual cases, but attimes does work in partnership withorganisations that do.

For Transparency International, the reality ofcorruption means:

• A father who must do without shoesbecause his meagre wages are used to paya bribe to get his child into a supposedlyfree school

• the unsuspecting sick person who buysuseless counterfeit drugs, putting theirhealth in grave danger

• a small shop owner whose weekly bribe tothe local inspector cuts severely into hismodest earnings

• the family trapped for generations inpoverty because a corrupt and autocraticleadership has systematically siphoned offa nation’s riches.

Other times, corruption’s impact is less visible:

• the prosperous multinational corporationthat secured a contract by buying anunfair advantage in a competitive marketthrough illegal kickbacks to corruptgovernment officials, at the expense of thehonest companies who didn’t

• post-disaster donations provided bycompassionate people, directly or through

their governments, that never reach thevictims, callously diverted instead into thebank accounts of criminals

• the faulty buildings, built to lower safetystandards because a bribe passed under thetable in the construction process, that collapsein an earthquake or hurricane.

More information - www.transparency.org

It is now recognised internationally that building up localdemocracy, accountability and participation is one of the mosteffective ways to tackle corruption. Supporting and strengtheninglocal groups campaigning for democracy is fundamental. (Election posters, Zambia, 2006).

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Readings

■ Transperancy International Yearly, Global Corruption Report, London, Pluto Press

■ UN Economic Commission for Africa, 2005, United Nations

See

■ www.golbalcorruptionreport.org

■ www.publishwhatyoupay.org

■ www.savethechildren.org