Consequences of Corruption at the Sector Level and Implications for Economic Growth and Development is the OECD’s latest report on corruption. Released March 25, it was written at the request of G-20 governments and follows an earlier one the organization did for the G-20’s September 2013 meeting. Whereas that report examined the impact of corruption on rates of economic growth and levels of development, this one adopts a micro perspective, analyzing the effect of corruption and suggesting ways to fight it for four sectors of national economies: i) extractive industries, ii) utilities and infrastructure, iii) health, and iv) education. Among its more striking conclusions:
- ”independent, competent and better regulatory and law enforcement systems” are critical for combating corruption;
- “transparency should be an integral component of all anti-corruption strategies;” and
- “anti-corruption measures must . . . be targeted and tailored.”
Additional examples of focused, cutting edge policy recommendations can be found by clicking “Continue reading.”
In fact, readers hunting for policy recommendations, or even where to look for policy advice, will find the report very disappointing. What they will find are more banalities like those spotlighted above: strengthen formal accountability systems, “address” informal payments (i.e., small bribes) in the health sector, track expenditures in education using public expenditure tracking surveys, and so forth. Little that is new and much that is pedestrian.
There are to be sure some useful nuggets buried in the text. The organization puts its weight behind long-standing recommendations to improve the way corruption is measured and to step up monitoring and evaluation of anticorruption policies. It also underlines the importance of addressing procurement corruption in the pre- and post-tender phases. But the ratio of the platitudinous to the useful is very high. This is disappointing given the target audience is the G-20, governments which represent 85 per cent of the world’s production, 80 per cent of world trade, and two-thirds of the world’s population. The high ratio is also surprising because on a range of corruption-related subjects – from public sector ethics to the bribery of foreign public officials to corruption in different industries (click here and here for examples) – the OECD is a leading source of authoritative analysis and good practice.
The problem may be with the terms of reference the G-20 gave the organization. As OECD Chief of Staff and principal author Gabriela Ramos explains in the forward, the report was written for two reasons: “to shed light on the link between corruption and economic growth and development by unraveling available information” and secondly to develop “recommendations for more effective anticorruption strategies.” The relationship between the two themes is the belief (assumption? hope?) that, in the staff chief’s words, “improved knowledge of the consequences of corruption may promote more robust and systematic implementation and bolster political momentum for effective collective action against corruption.” Twenty years on into the global movement to curb corruption, with 175 nations now a party to the United Nations Convention Against Corruption and 41 to the OECD Antibribery Convention, it seems hard to believe one more report showing how harmful corruption is will stimulate more action. This is said even though the short chapter on the effect of corruption on the delivery of health care is as good and powerful a summary of the issue as one could ask for.
Do the report authors really think that the reason for inaction on anticorruption policies is that policymakers don’t appreciate the damage corruption does to their economies and their citizens’ well-being? Even if they were moved to take action by the short summaries showing the harm corruption does to their utility, mining, health, and education sectors, they would find little help on what to do in the report. For example, the report urges G-20 governments “to call on firms to have strong internal controls to prevent bribes” (p. 17) but provides no guidance on what the controls might consist of or how they might be implemented. At the least, the report might have pointed to the Good Practice Guidance on Internal Controls, Ethics, and Compliance, issued by the OECD Antibribery Convention’s Working Group in 2009. It contains detailed recommendations on internal control mechanisms and how to implement them. Ignorance of the guidance document is presumably the most likely explanation for the oversight.
Not only does that oversight reveal poor staff work within the organization, but it produces bad advice as well. The report recommends government tell firms to put in place mechanisms to control bribery. No, this is not right. The good practice guidance is one of several sources that recognize that internal control systems need to curb more than just bribery – conflicts of interest and collusion to name just two.
Another glaring omission is the absence of any reference to the July, 7, 2012, OECD Council of Minister’s Recommendation on Fighting Bid Rigging in Public Procurement. Work by the OECD suggests that kickbacks from the inflated prices collusive bidding on public contracts produces are a major source of corruption in many countries, and though the report discusses corruption in public works in the sections on utilities, education, and health (many health and education ministries oversee the building of new schools and hospitals), it makes no mention of bid rigging or of the OECD’s leading role in efforts to curb it.
Part of the reason for these oversights may arise from the way the reports’ authors have chosen to define corruption. They distinguish “political corruption” from “bureaucratic corruption” and “collusive corruption” from “extractive corruption.” The definitions make it sound very much like “political” and “collusive” refer to corruption on a large scale and “bureaucratic” and “extractive” corruption the small time corruption arising from demands by teachers, doctors, other service providers for bribes. Yet they hasten to argue that this is not the case. The “relevance [of extortive corruption] goes beyond petty corruption,” they insist (p. 29, emphasis in original). Moreover, in their terminology, embezzlement does not qualify as a form of corruption nor does putting people on the public payroll who never show up for work (p. 59).
Besides the curious way of defining corruption, the new terminology is also confusing. As used in the report, “political corruption” has nothing to do with illegal political contributions, vote buying, or other unlawful means for gaining power (p. 117), and collusive corruption has no relationship with bid rigging or cartelization. The terminology seems to blind the authors to one of the most important forms of corruption infecting the mining and utility industries: large, hidden payment to political parties from powerful private cartels in return for concessions and public contracts.
In the fields of public integrity and anticorruption, the OECD “brand” is highly respected for analytical quality and sound advice. One hopes the report will not compromise the brand.