Rick has blogged previously about how disclosure programs and transparency measures alone will not solve public sector procurement corruption. Though these measures may be better than nothing, releasing information accomplishes little unless there are mechanisms in place with the resources to review it, corroborate it, and act on red flags.
From the Open Government Initiative for data sharing in the United States to the plurilateral Open Government Partnership abroad, online government or “e-government” is an important trend in global public administration. In addition to improving government efficiency and citizen access, studies suggest that e-government can also facilitate accountability and reduce corruption. Of course, there is reason to be skeptical as to whether successes of e-government champions such as Estonia and South Korea can translate to developing countries, where resources are more limited and corruption is often most severe. But a 2009 study that excluded OECD countries found that a significant increase in the services supplied online could account for as much as a 13 percentile improvement in a country’s ranking in the World Bank’s Control of Corruption index, even after controlling for changes in gross domestic product and press freedom.
In a piece on this blog last March, Rick highlighted a perverse consequence of requiring transparent bidding in government procurement. Although bid disclosure is intended to prevent public officials from secretly favoring companies that pay bribes, it can facilitate collusion among bidders by making it impossible for cartel members to defect from collusive agreements without getting caught. As a result, the cartel is easily enforced and the public pays an inflated price for the goods or services being supplied, yielding improper profits for the winning firm just as if it had paid a bribe to secure the contract.
Rick’s example reminds us of the importance of considering the collateral consequences of anti-corruption remedies before employing them. Nonetheless, public procurement reform could be an instance in which it is desirable to shift the method of corruption, even if we can’t reduce the total loss to corruption on a dollar-for-dollar basis. Even if the private cartel problem worsens, this could be a cost worth bearing if it leads to less collusion between government procurement officers and favored private firms.
Two days before the Mexican government unveiled draft regulations for its ambitious opening of the state-run energy sector to private participation late last month, Oscar-winning director Alfonso Cuarón published a letter posing ten questions to Mexican President Enrique Peña Nieto. “The reform will result in multimillion-dollar contracts” for private companies, wrote Cuarón. “In a country such as ours with a weak (and often nonexistent) rule of law, how can large-scale corruption be avoided?” To the surprise of some, the President’s office issued a point-by-point response just a week later, naming a spectrum of anti-corruption measures adopted in the new regulations such as public bidding and agreements, disclosure of contractor expenses, a commissioner code of ethics, and institutional and procedural checks and balances unified under the oversight of the Secretary of Energy. (Full text in Spanish here.)
The project to reform Mexico’s energy sector – particularly the state oil company PEMEX, which generates one-third of all government revenue and is bestowed of both a powerful workers union and tremendous symbolic importance in Mexican history – was always going to be controversial. President Peña Nieto’s success in getting the law passed in December 2013 has been his signature achievement, lauded by the Washington Post as turning Mexico into “the Latin oil producer to watch — and a model of how democracy can serve a developing country.”