Myanmar Should Adopt Formal User Fees To Displace Petty Bribery

Corruption is part everyday life in Myanmar. While the wealthy can use bribery to get around the law, for the vast majority of Burmese citizens, bribery is necessary to get things done even when the law is on your side. The term “tea money” exists in common parlance to describe the small bribes necessary to obtain even the most basic of services—bribes that are so ubiquitous that many people don’t think they count as corruption. The imposition of unofficial, discretionary and discriminatory “fees” means that formally public services are in practice “privatized.”

One explanation for the persistence of this petty corruption is that both the national government and the regional governments lack the revenue necessary to provide the public services that, under Myanmar’s Constitution, the government is supposed to provide. According to the Asia Foundation, “Decades of deliberate neglect of Myanmar’s tax-administration system have left the country with one of the lowest tax takes in the world [….] Myanmar’s tax revenues in 2016–17 were only 6–7% of GDP. This compares to 10–20% of GDP for countries at similar levels of income.” The country does earn significant revenue from natural resources, but these rents have gone into the pockets of military elites; other revenue sources are severely limited. When the demand for government services and benefits outstrips the supply, people become willing to pay extra for the promised public goods. The idea that these extra fees are acceptable is exacerbated by the fact that Myanmar’s lower-ranking public servants earn very low official salaries. But allocating public services on the basis of bribe payments is not fair, equitable, transparent, or efficient.

In an ideal world, Myanmar would reform its tax system, collect adequate revenue, pay its public servants decent salaries, and be able to provide all of the goods and services to which its citizens are legally entitled. But while we can all hope Myanmar works toward that goal, nothing like that is going to happen anytime soon.

A more practical short-term solution is to raise the official administrative fees—or “user fees”—for public services. Continue reading

Guest Post: The World’s Biggest Anticorruption Legislative Package You Haven’t Heard About Is in Brazil

Today’s guest post is from Professor Michael Freitas Mohallem (head of the Center for Justice and Society at Fundação Getulio Vargas (FGV) in Rio de Janeiro, Brazil), Bruno Brandão (Director of Transparency International, Brazil), and Guilherme France (a researcher at FGV).

Transparency International’s Brazilian chapter, together with scholars at FGV’s Rio and Sao Paolo law schools, are leading a wide-ranging effort, with input from multiple sectors of Brazilian society, to develop a package of legislative, institutional, and administrative reforms—the “New Measures Against Corruption”—that will address the systemic causes of corruption and offer long-term solutions. The project, which was developed over approximately 18 months in 2017 and 2018, was prompted by two related developments. First, so-called Car Wash (Lava Jato) operation has uncovered one of the biggest corruption scandals in modern times, implicating hundreds of politicians, civil servants, and business leaders. Second, although the Lava Jato operation led to a proposal, spearheaded by some of the Lava Jato prosecutors themselves, for “Ten Measures Against Corruption,” which was endorsed by over 2 million people, that effort was stymied by the National Congress. So, despite the success of Lava Jato in exposing and punishing corruption, Brazil has not yet developed the necessary long-term reforms to address the underlying sources of the problem.

The New Measures Against Corruption are intended to provide a path forward for Brazil, setting out a bold reform agenda that addresses issues relating to prevention, detection, and prosecution of corruption. The New Measures consist of a package composed of 70 anticorruption measures—ranging from draft federal bills, proposed constitutional amendments, and administrative resolutions—in 12 categories:

  1. Systems, councils and anticorruption Guidelines;
  2. Social accountability and participation;
  3. Prevention of corruption;
  4. Anticorruption measures for elections and political parties;
  5. Public servant accountability;
  6. Public servant investiture and independence;
  7. Improvements in internal and external control;
  8. Anticorruption measures for the private sector;
  9. Investigation;
  10. Improvements in criminal persecution;
  11. Improvements in the fight against administrative improbity;
  12. Tools for asset recovery.

The complete report on all 70 proposals (which runs 626 pages, and so far is only available in Portuguese) is here. Further discussion of the specific proposals would be welcome, both from domestic and international commentators, and we hope that at some point soon we will be able to provide summaries and translations of all of the measures. But in the remainder of this post, we want to offer some more background on the process that we used to develop the New Measures, as well as the prospects going forward for pushing the government to adopt these reforms. Continue reading

Complying with Antibribery Laws: Mike Koehler’s Strategies for Minimizing Risk Under the FCPA and Related Laws

Professor Mike Koehler is perhaps the leading critic of the Foreign Corrupt Practices Act – or at least of how the U.S. Justice Department and Securities and Exchange Commission currently enforce it.  On his FCPA Professor Blog, he regularly bemoans the way the enforcement agencies have stretched a law its authors wrote to outlaw hard core bribery to make donations to foreign charities, internships for relatives of business associates, birthday gifts to business partners, and other seemingly innocuous  conduct a serious felony under American law. Such broad interpretations of the law’s antibribery stricture could never withstand judicial review he argues, but because the costs, reputational and otherwise, of challenging an FCPA enforcement action are so great, companies facing FCPA charges quickly settle rather than contest the agencies’ interpretation in court.  The result is the agencies not only enforce the law but their interpretations in effect make it as well.

So what advice does Professor Koehler proffer businesses wanting to avoid running afoul of the FCPA or the similar laws of other nations in his new book Strategies for Minimizing Risk Under the Foreign Corrupt Practices Act and Related Laws?  Does he urge a corporation threatened with an enforcement action based on an overly broad reading of a law to fight back?  Has he produced a polemical guide to compliance?  One written for the risk-taking corporate maverick?  Is this how he separates his book from the many other compliance guides flooding the market?

Not at all. To the contrary, what distinguishes Professor Koehler’s book from many of its competitors is its straightforward, easy to read exposition of what any firm should do to minimize the chances that, thanks to the wayward act of an employee or consultant, it will face allegations it has bribed a government official. In eight tightly-written chapters, he brings his encyclopedic knowledge of FCPA cases, pre-trial settlements of enforcement actions, and the commentary on antibribery law to bear to explain how to develop and implement a sound, reasonable, cost-effective antibribery compliance program. Along the way he chucks the jargon that has grown up around antibribery compliance programs, opting instead for clearly written prose that demystifies rather obscures the process all firms should follow to develop and implement preventive measures.

Take his account in chapter six on how to conduct a risk assessment. Continue reading

The Debate Over the International Anticorruption Court Continues… This Time in Podcast Form!

As many GAB readers are aware, Judge Mark Wolf’s vigorous advocacy for the creation of an International Anti-Corruption Court (IACC), modeled on but distinct from the International Criminal Court, has prompted a great deal of commentary and discussion on this blog (see, for example, here, here, here, here, and here), and elsewhere.

Last month Judge Wolf and I had the opportunity to sit down with Alexandra Wrage, the President of TRACE International, to discuss the IACC proposal on an episode of TRACE’s “Bribe, Swindle, or Steal” podcast. The direct link to the podcast is here. You can also find the link on the TRACE podcast main page, which also includes links to a number of past podcasts on anticorruption-related topics, which might also be of interest to GAB readers.

Part-time Legislatures Should Use Disclosure, Not Recusal, To Regulate Conflicts of Interest

For most state legislators in the United States, public service is a part-time gig; forty U.S. states have part-time or hybrid legislatures. These part-time state lawmakers have regular jobs, and while some are conventional—law or business—some are less so. (There’s the pizza delivery guy in Arkansas, the boxing and mixed martial arts judge in Nevada, the hula dancer in Hawaii, and the alligator hunter in Louisiana.) Part-time legislatures are popular because they’re cheap—New Hampshire pays its legislators just $100 per year—and also because of distrust of professional politicians and a romantic notion that the legislature should instead be a forum for citizens of varied professional backgrounds to bring their unique perspective to the lawmaking process.

But part-time legislatures also entail significant corruption risks for three reasons. First, when legislators have private sector jobs, it may be easier for them to conceal bribe payments as legitimate outside income. Second, part-time legislators’ low public salaries may make them more inclined to accept bribes or otherwise abuse their office than better-paid full-time legislators. These two factors have been discussed previously on this blog. Here, I want to consider a third factor: the potential conflicts of interest between an official’s public and private work.

A part-time legislator’s dual responsibilities will often, perhaps inevitably, conflict. Teachers will vote on education issues, doctors on health care bills, and business owners on tax plans. Lawyers, lobbyists, and insurance agents may vote on legislation that directly affects their clients. Part-time legislators may even introduce bills advancing their private professional interests. Take the Missouri legislator who introduced and secured passage of a bill prohibiting cities from banning plastic bags at grocery stores—and who also happened to be the director of the Missouri Grocers Association. Similarly egregious, lawyers serving as part-time legislators have sponsored bills raising the salaries or pensions of judges before whom they had cases. One might worry too that part-time legislators, especially those who are lawyers or lobbyists, will implicitly or explicitly use their public positions as a way to drum up business, precisely because potential clients might think that hiring a part-time legislator will increase the odds of favorable legislative treatment. And even if a part-time legislator is not influenced in the slightest by her private professional interests, conflicts like those just described still risk creating the appearance of corruption. What can be done about this?

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Anticorruption Bibliography–November 2018 Update

An updated version of my anticorruption bibliography is available from my faculty webpage. A direct link to the pdf of the full bibliography is here, and a list of the new sources added in this update is here. As always, I welcome suggestions for other sources that are not yet included, including any papers GAB readers have written.

It’s in China’s Interest to Fight Corruption on the Belt and Road

The Belt and Road Initiative (BRI), first proposed by Chinese President Xi Jinping in 2013, is a program through which China will spearhead the funding and construction of new infrastructure and trade networks across Eurasia and Africa. The centerpiece of the BRI is hard infrastructure: roads, railroads, ports, pipelines, and power plants. The scale of the proposed investment is immense: $1 trillion for projects spanning 75 countries.

The risk of corruption in such large-scale infrastructure is also immense, but at least initially, the BRI ignored corruption. When China’s National Development and Reform Commission (NDRC), the powerful government organ in charge of economic planning, issued the first comprehensive statement of the principles and framework undergirding the BRI back in March 2015, anticorruption principles were nowhere mentioned, nor did the published framework include any anticorruption measures. A later, more detailed policy document, published in 2017, also failed to include any mention of anticorruption. This posture is generally consistent with China’s traditional “non-interference” foreign policy, which makes Chinese authorities reluctant to go after overseas corruption.

More recently, though, Beijing has begun to respond to the BRI’s corruption risks. President Xi himself urged greater international cooperation on anticorruption at the June 2017 Belt and Road Forum. In September 2017, China’s Central Commission for Discipline Inspection helped organize a symposium called “Strengthening International Cooperation for a Clean Belt and Road.” And last December, the NDRC and other regulatory bodies issued new rules governing overseas investment by private Chinese companies, including a prohibition on “brib[ing] local public officials, or personnel from international organizations or related enterprises.” That same month, China’s State-Owned Assets Supervision and Administration Commission issued new guidance that requires state-owned enterprises to strengthen their anticorruption compliance procedures.

These are steps in the right direction. The question is whether the government’s newfound focus on corruption in the BRI is serious. Skeptics point out that Chinese authorities have never prosecuted a Chinese company or official for foreign bribery. Others suggest that the new regulations are more about controlling Chinese outbound investment than combating overseas corruption. I’m somewhat more optimistic, though, that Chinese authorities are serious about tackling corruption in the BRI. In my view, taking BRI corruption seriously is in the Chinese government’s interest for four reasons:

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