For all the effort development agencies invest to help developing states combat corruption, recent reports of corruption in Japanese and Norwegian development aid projects along with an earlier paper on corruption in World Bank projects remind that the development community does little to attack corruption in the one area where it has the most control: the projects it funds.
Last week Thanhniennews, an English language Vietnamese news service, reported that Japanese consultants had admitted paying $1.3 million in bribes to Vietnamese officials to win contracts funded by the Japanese development agency while a Vietnamese official was alleged to have been bribed $780,000 on another Japanese supported project. Over the past 20 years Japan has provided Vietnam with some $20 billion in aid and is expected to furnish close to $2 billion in 2014. Experts on the Japanese-Vietnamese relationship say the revelations, like previous corruption scandals, will likely have little effect on the continued flow of Japanese aid. In 2008, for example, widespread bribery was discovered in a transportation project, and the only consequence was aid was cut off for four months.
Eirik Jansen writes in Corruption, Grabbing and Development: Real World Challenges, a recent volume from Elgar, about a corruption scandal in a $60 million Norwegian aid project in Tanzania. After eight years of glowing reports about the project’s success and annual audits showing expenses were properly accounted for, persistent rumors of abuse led the Norwegian government to retain a Danish auditor to carefully scrub project records. The findings: costs for seminars lasting only two days were billed as though they had run six; Tanzanian employees were given double per diem allowances and paid overtime for days they were on vacation; construction projects were overpriced and procurement rules ignored; inventory records were not maintained or were not accurate; and so on and so forth. When asked if $30 million of the $60 million spent on the project might have been lost to corruption, the Danish auditor replied that that figure “was not far from the truth.” What did Norway do when the full dimensions of the corruption were laid bare? Almost nothing.
In “Corruption in World Bank Financed Projects: Why Bribery is a Tolerated Anathema,” Nathaniel Hobbs recounts how corruption manifested itself in 90 World Bank projects worth just over $1 billion in Sub-Saharan African. The winning bidder is chosen on the basis of price, quality, and the amount of bribe it is willing to pay. Project payments during the course of contract execution depend upon approval by the recipient country’s personnel, something that can add as much as an additional 10% – 15% to the contract price. One staff member told Hobbs that this system operated in all 22 Bank projects he had supervised over an eight year period despite Bank controls designed to expose fraud and corruption.
In an earlier post I suggested that donor agencies are reluctant to admit how much corruption infests their projects for fear that the democratically elected legislatures that provide the funding will cut it off. Hobbs, Jansen, and the author of the Vietnam story offer additional reasons: diplomatic relations, career incentives of the aid workers, the hope that somehow things will get better on their own.
But these all seem lame to me, particularly given what the impact of the status quo. For no matter how loudly the development community condemns corruption rhetorically, its continued willingness to tolerate corruption in its projects speaks far louder. The evidence is in: corruption retards economic growth and undermines the state’s legitimacy. Its most harmful effects are often felt by the world’s poorest. Isn’t it time the community most committed to helping the poor, the development community, confront a corruption scandal of its own making?