What is Corruption?
Corruption in many countries is no longer silently accepted. Largely responsible for the change in attitudes were the increased awareness of costs associated with corruption and the rise in the number of countries that embrace democratic freedoms and market economies. But as the awareness of corruption becomes more widespread, the need for sustainable solutions is more urgent.
Corruption, as an institutional problem, prospers in countries with weak legal systems, poor enforcement mechanisms, vague and complex laws and regulations, and too much discretionary power with little transparency at various levels of government. Therefore, sustainable solutions require an institutional approach to combating corruption - not blaming it on individuals but reforming government agencies, reducing opportunities by simplifying laws, codes, and regulations, creating sound corporate governance mechanisms, and ensuring fairness and transparency in public-private sector relationships*.
Why do we care about corruption?
Corruption affects the stability and security of the society, and when is effected on society, it effects the local and private sectors. It could be noticed by businessmen, teachers in school, and patients in hospitals - basically everyone.
- "Give the people those which belong to them by right. If you don't do so, you will acquire a lot of enemies among the common people.
- command you not to offend the people, not to ignore them by considering yourselves higher than them because of your official position
- It is very difficult to be honest in the place where the lawlessness, famine, poverty, and corruption reigns
- The people with high morals should take more active position in business and social life of the society in order to provide the superiority over the swindlers, gangsters and corruption in this world."
Imam Ali a.s.
Corruption direct effect:
- Bribes/ Corruption lower the income earning potential of the poor because there are fewer private sector opportunities. Also, by limiting spending on public sector services, corruption facilitates inequality - it limits access to such essential resources as health care and education.
- Bribe/ Corruption abuse human rights; equal opportunities in all governing resources: such as social, economics, health, education will not be given equally to everyone.
- Corruption can abuse the democratic law, such as paying for votes, tax or public resources.
- Bribe/ Corruption affect the Economic reform. It stops the development of economy since bribery gives the priority for entering the labour market
- Another form of corruption, often ignored, is tied to the concept of conflict of interest. In fact, conflict of interest is often not recognized in many economies, as it is sometimes not even defined in a local language or its violation is not perceived as a problem. Essentially, the problem of conflict of interest is twofold. It can occur on the public-private level or on the private-private level. From the public-private perspective, it involves the notion that government officials are not supposed to be involved in for-profit enterprises, especially in the area of their public office, as they can provide favours and indirectly influence decision-making to provide favourable treatment to enterprises with which they are directly involved. Essentially, the problem in such a case is that personal interests may be in conflict with the interests of the public office. On the private-private side, the concept concerns the issue of one firm performing two conflicting tasks, such as auditing and consulting. This has been one of the forces behind financial scandals in both developing and developed countries.
*CIPE (Centre for International Private Enterprise
** IMF Report
Moreover, the World Bank has recently adopted a framework for addressing corruption as a development issue, in the context of assistance it provides to member countries. The framework has the following components:**
- Preventing fraud and corruption in Bank-financed projects by improving procurement and financial management policies related to the implementation of projects;
- Helping countries in their efforts to eliminate corruption;
- Taking corruption more explicitly into account in the formulation of country assistance strategies;
- Adding voice and support to the international efforts to reduce corruption, including by collaborating with regional development institutions on anticorruption measures.
Other players on the international scene also became interested in more transparent and accountable conduct of economic management. Nongovernmental organizations (NGOs) and other organs of civil society, including the media, showed greater interest in the economics of corruption and in the conduct of officials entrusted with the management of public funds. A variety of motives spurred this awakened interest. For the media, the demise of the once overarching ideological confrontation of the Cold War created room for a wider coverage of economic news. Economic prosperity in a number of countries and regions became headline news (Japan and Europe in the 1980s, the United States, the Asian tigers, and peripheral Europe in the 1990s), stimulated by the technology and information revolution, fascinated large portions of the globe and made for good copy in the press. The growing reach of the Internet spread the news of economic success, as well as of economic failure. In the midst of all of this activity, stories of corruption and malfeasance fed the curiosity of a global audience and brought questions of good governance and economic performance to the forefront of academic and policy debate.
Other interested parties incorporated the problems of corruption into their agendas for yet different reasons. NGOs in industrial countries took up the cause of monitoring aid spending of their own governments, while seeking to enhance the capacity of the recipient countries to use such aid more effectively. This enterprise invariably involved the NGOs in questions of transparency and accountability of the donors (and the institutions through which they channel the bulk of their aid funds), and in the drive for instituting good governance and anticorruption safeguards in recipient countries. In time, many NGOs were brought into the deliberations of the IFIs on questions of debt relief and its use, development assistance, and governance.
Other NGOs took up the fight against corruption directly. Foremost among them is Transparency International (TI). IMF recommendation
What forms have governance issues taken in IMF policy advice?
In general, the IMF has required greater transparency and accountability in the management of public funds, including strengthening revenue administration, enhancing the financial accountability of state enterprises, monitoring the use of public resources for poverty reduction (part of the enhanced Heavily Indebted Poor Countries (HIPC) Initiative), consolidating extra budgetary funds into the budget, enhancing transparency of tax and tariff systems, reinforcing central bank independence, strengthening prudential bank supervision, and improving the quality and timeliness of economic and financial statistics. Where issues of poor governance may have affected macroeconomic performance, the IMF has also urged member countries to address specific instances of poor governance and corruption (e.g., illegal logging in Cambodia following evidence published by Global Witness and fraud in government accounts reported by the Attorney-General in Kenya), and has recently strengthened policies to safeguard the use of IMF resources with regard to misreporting of information to the IMF. These measures have led to inquiries directed at central bank actions in Russia, Ukraine, and Indonesia.
In its approach to governance, the IMF has increasingly taken a proactive role along with the World Bank, stressing the importance of country ownership of policies for improving governance. Prevention is the centerpiece of the IMF's governance strategy. According to the strategy, participation in initiatives to strengthen governance, including the adoption of standards and codes, is voluntary. Furthermore, the strategy recognizes the importance of timely and well-targeted technical assistance to help alleviate constraints on institutional capacity.
The IMF is contributing to strengthening governance in member countries through various means.
The first is by supporting economic policies and structural reforms that limit the scope for ad hoc decision making, for rent seeking, and for preferential treatment of individuals or organizations. This approach is founded on the IMF's mandate to promote macroeconomic stability, and limits its role to those aspects of governance that could have a significant macroeconomic impact.
The second principal means through which the IMF is contributing to strengthening governance in member countries is by promoting transparency in financial transactions in the government budget, the central bank, and the public sector at large. This is being done by developing standards and codes of best practices.
Since April 2001, the IMF has strengthened its efforts to counter money laundering, as well as terrorism financing. Together with other financial institutions, it has a key role in preventing the abuse of financial systems as well as protecting and enhancing the integrity of the international financial system. In this regard, IMF and World Bank staffs have prepared a draft methodology to assess a country's compliance with certain standards, and this methodology is being applied to several pilot cases. Anti-money-laundering concerns are being included in IMF's surveillance and other operational activities when they are relevant from a macroeconomic perspective.
Third, the IMF contributes to improved governance in member countries by helping them through technical assistance to strengthen their capacities for effective public resource management, as well as the design and implementation of economic policies. The focus of IMF technical assistance has been on areas in which the IMF has a comparative advantage--strengthening public expenditure management, tax administration, banking systems, foreign exchange, and on improving the quality and timeliness of data. Since 1997, the IMF has developed new forms of technical assistance that attempt to ascertain the extent to which countries are complying with the above-noted standards and codes.
Why fight against corruption?
- In many Countries, corruption is institutional and dealing with it on a daily basis seems more convenient than combating it. Looking at corruption as an economic issue means that corruption is more than simply a wrong behavior. It means that corruption, while benefiting a few individuals, is costly to society, the private sector, and governments in the long run.
- Corruption must be rooted out because it Misallocates resources, resources that otherwise could be directed towards production of goods and services are often devoted to corruption. This includes direct resources involved in cash transfers, and indirect ones, such as maintaining contacts with government officials or providing an operation or production license to a less efficient firm. Corruption also misallocates resources that could otherwise be used for provision of public services. Funds for licenses or tax income, instead of contributing to the budget, may simply end up in the pockets of corrupt government employees.
Also, resources are not used most efficiently, as it is not the most efficient but rather the best-connected firm that gets a government contract.
- Corruption creates a culture where government officials are not held accountable for their actions. Also, in corrupt systems, laws and regulations on paper are not enforced consistently and fairly. Therefore, what matters is not the law but whom you know and how much you are willing to pay.
Recommendations
- NGOs and civil society organizations alone can't reduce corruption - business participation is the key to success. The stakes for the private sector are high - if businesses choose to remain on the sidelines and continue to participate in corruption, they face missing opportunities for foreign investment. Moreover, a lack of competitiveness will leave such businesses unable to survive in a highly demanding global economy. Experience shows that business participation - effective and consistent advocacy efforts on the part of associations and chambers of commerce - can lower corruption levels and allow more efficient markets and governments to arise. Increasingly, both local and international business communities refuse to accept the uncertainty that comes with extortion, bribery, and lack of fairness.
- Two recent influential studies found that larger representations of women in government reduced corruption. Assuming that the observed gender differentials were caused by women's inclinations toward honesty and the common good, both studies advocated increased female participation in government to combat corruption. This study argues that the observed association between gender and corruption is spurious and mainly caused by its context, liberal democracy - a political system that promotes gender equality and better governance. Data favor this "fairer system" thesis.
- Integrity and honesty are important social values that should be treasured.
- Corruption should not be tolerated and is harmful to everyone in society
- Everyone, including youngsters, is capable of contributing to the establishment of a corruption-free society by being a responsible and honest individual
by Mrs. Hanna Field
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