Author Archives: Richard Messick

Income and Asset Disclosure Statements: No Anticorruption Magic Bullet

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For the second time in the space of a couple of months I find myself explaining to the leaders of an anticorruption agency that a program requiring senior officials to disclose their income, assets, and other details of their personal finances won’t end corruption or, for that matter, cure the common cold or otherwise solve all their nation’s ills.  There seems to be some kind of myth floating around the development community and at least some self-anointed anticorruption “experts” that such a program can by itself lead to the exposure of a great deal, if not all, of corrupt activity.

If only it were that easy.  The truth is the evidence points in virtually the opposite direction. Continue reading →

The Scandal of Corruption in Development Aid

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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. Continue reading →

Going After the Bribe Takers: The World Bank Program

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Two weeks ago I wrote about the growing disparity between transnational prosecutions for paying bribes and those for receiving bribes.  The number of cases where OECD countries have prosecuted their nationals or firms subject to their jurisdiction for bribing developing country officials has been growing steadily, but there are disappointingly few cases where a developing state has gone after its nationals for accepting bribes.  Last week I suggested one way to increase the number of cases against bribe-taking officials is to publicize whenever a firm or individual has been convicted of paying a bribe in a developing state.  For every payer, there is a taker, and if the details of the case are widely publicized, my contention was that civil society, the media, and the political opposition would then press the authorities to prosecute the taker.

The World Bank has tried something similar when an investigation reveals corruption in one of its projects, and the experience suggests that, though not a silver bullet, the effort is worthwhile.

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Going After the Bribe Takers: Step One

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Last week I wrote about the gap between prosecutions for transnational bribe paying and transnational bribe taking.  Even after a bribe payer in one state has been convicted or pled guilty, most countries where the bribe was paid have shown little interest in investigating who took the bribe – an often easy inquiry given the evidence unearthed in the bribe payer case.  I also noted that in almost every instance the bribe was paid by a firm in an OECD country to a government official in a developing state.

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What About the Bribe Takers? (1)

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Yesterday Matthew noted the success of the OECD Anti-Bribery Convention in curbing the bribery of public officials by individuals or firms subject to the laws of the 40 countries that have now ratified it.  The enforcement data is surely impressive.  Reports by Transparency International show a steady increase in investigations and prosecutions by the parties to the convention, and the latest OECD data, from 2012, disclose that since the convention took effect in 1999 over 300 individuals and 200 enterprises have been convicted or pled guilty to bribery-related charges with cases pending against another 150 persons and 20 plus firms.

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Perceptions of Reality: Transparency International’s Corruption Perceptions Index

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Matthew wrote last month about the February competition the U4 Anticorruption Resource Center and the United Kingdom’s Department for International Affairs sponsored to spur creation of new measures of corruption.  What he did not say is that one subtext for the contest was the growing frustration with the use of Transparency International’s Corruption Perceptions Index (CPI) to measure the actual level of corruption in a country.

This is not the fault of TI.   The organization is careful to say on its web site that its index does not measure the actual extent of corruption and goes to great lengths to explain how the index is constructed, stressing that it is a ranking of how corrupt countries are perceived to be using the opinions of business people and country experts.  Indeed the title selected, “Corruption Perceptions Index,” couldn’t be any clearer about what is being measured.  But journalists and academics frequently treat the index as if it measured actual corruption, rather than perceived corruption, or assume that perceptions match reality fairly closely.  And that’s where problems may arise. Continue reading →

Bright Line Rules: A Way to Reduce Politicized Enforcement?

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Yesterday Matthew discussed the wisdom of the Thai anticorruption agency’s recommendation that Thai Prime Minister Yingluck Shinawatra be charged with failing to prevent corruption.  The case would be brought under Article 157 of the Thai Criminal Code, a broadly worded law providing that a public official commits a crime if someone is injured as a result of the official’s failure to exercise his or her duties.

Statutes with such a broad sweep are a standard response to corruption in many countries, enacted out of a fear that a clever criminal can find a way around tightly drawn provisions of law.  Indeed, countries as diverse as Tanzania, South Korea, Indonesia, and Vietnam have all enacted broadly drawn laws that criminalize the “abuse of public office for private gain.”  However, such laws vest enormous discretion in the hands of law enforcement.  A critical–and often overlooked issue–is whether law enforcers should enjoy such discretion. Continue reading →

When Transparency Makes Corruption Worse: Cartels in Public Procurement

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Yesterday Matthew commended the work of Mihály Fazekas, István János Tóth, and their colleagues to those concerned with corruption in public procurement.  I second that recommendation.  In their July 2013, slyly-named “Corruption Manual for Beginners”, the authors describe better than anyone yet how a government buyer can connive to steer a contract to a particular seller — from skewing the contract specifications so that only the favored firm can meet them, to failing to notify others about the procurement, to disqualifying on specious grounds firms that submit bids lower than the favored firm’s bid.

Yet despite the value of the contribution, the authors have not (yet) provided a similarly penetrating analysis of another form of public procurement corruption: that which results not from a conspiracy between a government buyer and one seller but that between the buyer and a group of sellers organized into an industry cartel.  Judging from the results of investigations in settings as different as the American states, the Netherlands, the Philippines, Nepal, France, Columbia, Uganda, Slovakia, and India, this type of corruption maybe be at least as common as the single seller form.  Costly too.  More than half the time, the price a buyer pays in a cartelized market is 25 percent or more higher than what it would have been had there been no collusion among the sellers.

The distinction between these two types of collusion–one involving a single favored seller, the other involving a cartel of sellers–is important, because the appropriate policy response is quite different. When the procurement process is corrupted by a cartel, the standard prescription for combating corruption–transparency–is not only ineffective but self-defeating.  Continue reading →

Personal Financial Disclosure by Chinese Officials: Will China Finally Get Serious?

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Matthew noted yesterday how continuing revelations of the vast wealth some Chinese officials have accumulated put China’s leaders in a bind.  If they don’t curb corruption, they risk undermining their legitimacy; on the other side, so many senior individuals are involved that a serious crackdown could ignite a power struggle.

An important gauge of the direction the leadership will choose is how vigorously it enforces a directive issued in November 2013 requiring public servants to disclose details about their and their family members’ finances.  Requiring senior officials to reveal their personal finances can be a valuable tool in the battle against grand corruption, as one of China’s East Asian neighbors can testify.  In the Philippines, the Statement of Assets, Liabilities, and Net Worth officials must file has been central to exposing the corrupt dealings of a president and a chief justice as well as revealing a nest of corrupt tax collectors. Continue reading →

Bill Gates on Corruption in Development Projects: Is This How He Ran Microsoft? (Part II)

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In an earlier post I showed that Bill Gates’ supposition that only 2 percent of expenditures in development assistance projects were lost to corruption was wildly off the mark.  I also asserted that such lowball estimates are a major hurdle to more effective aid programs: When corruption losses are lowballed, so are the resources devoted to combating corruption.  If losses are 2 percent of the total budget, then it makes little sense to spend 4 percent of the budget trying to prevent them.  But if losses are 20 percent, then 4 percent spent on audits and investigations is a miserly sum.  If losses are closer to 40 percent, then spending 4 percent borders on criminal negligence.

So where did Gates get the 2 percent figure? It turns out that the likely source for that figure illustrates not only how casually influential people sometimes throw around baseless numbers, but also the perverse incentives that development programs sometimes face to downplay the seriousness of corruption in their projects.

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