| I. The FactsJust days before a much-awaited | | | | its 91-country strong Corruption Perceptions |
| donor conference, the influential International Crisis | | | | Index.Many rich world corporations and wealthy |
| Group (ICG) recommended to place all funds | | | | individuals make use of off-shore havens or |
| pledged to Macedonia under the oversight of a | | | | "special purpose entities" to launder money, make |
| "corruption advisor" appointed by the European | | | | illicit payments, avoid or evade taxes, and conceal |
| Commission. The donors ignored this and other | | | | assets or liabilities. According to Swiss authorities, |
| recommendations. To appease the critics, the | | | | more than $40 billion are held by Russians in its |
| affable Attorney General of Macedonia charged a | | | | banking system alone. The figure may be 5 to 10 |
| former Minister of Defense with abuse of duty | | | | times higher in the tax havens of the United |
| for allegedly having channeled millions of DM to his | | | | Kingdom.In a survey it conducted last month of |
| relatives during the recent civil war. Macedonia has | | | | 82 companies in which it invests, "Friends, Ivory, |
| belatedly passed an anti-money laundering law | | | | and Sime" found that only a quarter had clear |
| recently - but failed, yet again, to adopt strict | | | | anti-corruption management and accountability |
| anti-corruption legislation.In Albania, the Chairman | | | | systems in place.Tellingly only 35 countries signed |
| of the Albanian Socialist Party, Fatos Nano, was | | | | the 1997 OECD "Convention on Combating |
| accused by Albanian media of laundering $1 billion | | | | Bribery of Foreign Public Officials in International |
| through the Albanian government. Pavel Borodin, | | | | Business Transactions" - including four non-OECD |
| the former chief of Kremlin Property, decided not | | | | members: Chile, Argentina, Bulgaria, and Brazil. The |
| appeal his money laundering conviction in a Swiss | | | | convention has been in force since February 1999 |
| court. The Slovak daily "Sme" described in | | | | and is only one of many OECD anti-corruption |
| scathing detail the newly acquired wealth and | | | | drives, among which are SIGMA (Support for |
| lavish lifestyles of formerly impoverished HZDS | | | | Improvement in Governance and Management in |
| politicians. Some of them now reside in | | | | Central and Eastern European countries), ACN |
| refurbished castles. Others have swimming pools | | | | (Anti-Corruption Network for Transition Economies |
| replete with wine bars.Pavlo Lazarenko, a former | | | | in Europe), and FATF (the Financial Action Task |
| Ukrainian prime minister, is detained in San | | | | Force on Money Laundering).Moreover, The moral |
| Francisco on money laundering charges. His | | | | authority of those who preach against corruption |
| defense team accuses the US authorities of | | | | in poor countries - the officials of the IMF, the |
| "selective prosecution".They are quoted by Radio | | | | World Bank, the EU, the OECD - is strained by |
| Free Europe as saying:"The impetus for this | | | | their ostentatious lifestyle, conspicuous |
| prosecution comes from allegations made by the | | | | consumption, and "pragmatic" morality.II. What to |
| Kuchma regime, which itself is corrupt and | | | | Do? What is Being Done?Two years ago, I |
| dedicated to using undemocratic and repressive | | | | proposed a taxonomy of corruption, venality, and |
| methods to stifle political opposition ... (other | | | | graft. I suggested this cumulative definition:The |
| Ukrainian officials) including Kuchma himself and his | | | | withholding of a service, information, or goods |
| closest associates, have committed conduct | | | | that, by law, and by right, should have been |
| similar to that with which Lazarenko is charged | | | | provided or divulged.The provision of a service, |
| but have not been prosecuted by the U.S. | | | | information, or goods that, by law, and by right, |
| government".The UNDP estimated, in 1997, that, | | | | should not have been provided or divulged.That |
| even in rich, industrialized, countries, 15% of all | | | | the withholding or the provision of said service, |
| firms had to pay bribes. The figure rises to 40% | | | | information, or goods are in the power of the |
| in Asia and 60% in Russia.Corruption is rife and all | | | | withholder or the provider to withhold or to |
| pervasive, though many allegations are nothing | | | | provide AND That the withholding or the provision |
| but political mud-slinging. Luckily, in countries like | | | | of said service, information, or goods constitute |
| Macedonia, it is confined to its rapacious elites: its | | | | an integral and substantial part of the authority or |
| politicians, managers, university professors, | | | | the function of the withholder or the |
| medical doctors, judges, journalists, and top | | | | provider.That the service, information, or goods |
| bureaucrats. The police and customs are | | | | that are provided or divulged are provided or |
| hopelessly compromised. Yet, one rarely comes | | | | divulged against a benefit or the promise of a |
| across graft and venality in daily life. There are no | | | | benefit from the recipient and as a result of the |
| false detentions (as in Russia), spurious traffic | | | | receipt of this specific benefit or the promise to |
| tickets (as in Latin America), or widespread | | | | receive such benefit.That the service, information, |
| stealthy payments for public goods and services | | | | or goods that are withheld are withheld because |
| (as in Africa).It is widely accepted that corruption | | | | no benefit was provided or promised by the |
| retards growth by deterring foreign investment | | | | recipient.There is also what the World Bank calls |
| and encouraging brain drain. It leads to the | | | | "State Capture" defined thus:"The actions of |
| misallocation of economic resources and distorts | | | | individuals, groups, or firms, both in the public and |
| competition. It depletes the affected country's | | | | private sectors, to influence the formation of |
| endowments - both natural and acquired. It | | | | laws, regulations, decrees, and other government |
| demolishes the tenuous trust between citizen and | | | | policies to their own advantage as a result of the |
| state. It casts civil and government institutions in | | | | illicit and non-transparent provision of private |
| doubt, tarnishes the entire political class, and, thus, | | | | benefits to public officials."We can classify corrupt |
| endangers the democratic system and the rule of | | | | and venal behaviours according to their |
| law, property rights included.This is why both | | | | outcomes:Income Supplement - Corrupt actions |
| governments and business show a growing | | | | whose sole outcome is the supplementing of the |
| commitment to tackling it. According to | | | | income of the provider without affecting the "real |
| Transparency International's "Global Corruption | | | | world" in any manner.Acceleration or Facilitation |
| Report 2001", corruption has been successfully | | | | Fees - Corrupt practices whose sole outcome is |
| contained in private banking and the diamond | | | | to accelerate or facilitate decision making, the |
| trade, for instance.Hence also the involvement of | | | | provision of goods and services or the divulging of |
| the World Bank and the IMF in fighting corruption. | | | | information.Decision Altering Fees - Bribes and |
| Both institutions are increasingly concerned with | | | | promises of bribes which alter decisions or affect |
| poverty reduction through economic growth and | | | | them, or which affect the formation of policies, |
| development. The World Bank estimates that | | | | laws, regulations, or decrees beneficial to the |
| corruption reduces the growth rate of an | | | | bribing entity or person.Information Altering Fees - |
| affected country by 0.5 to 1 percent annually. | | | | Backhanders and bribes that subvert the flow of |
| Graft amounts to an increase in the marginal tax | | | | true and complete information within a society or |
| rate and has pernicious effects on inward | | | | an economic unit (for instance, by selling |
| investment as well.The World Bank has appointed | | | | professional diplomas, certificates, or |
| last year a Director of Institutional Integrity - a | | | | permits).Reallocation Fees - Benefits paid (mainly |
| new department that combines the | | | | to politicians and political decision makers) in order |
| Anti-Corruption and Fraud Investigations Unit and | | | | to affect the allocation of economic resources |
| the Office of Business Ethics and Integrity. The | | | | and material wealth or the rights thereto. |
| Bank helps countries to fight corruption by | | | | Concessions, licenses, permits, assets privatized, |
| providing them with technical assistance, | | | | tenders awarded are all subject to reallocation |
| educational programs, and lending.Anti-corruption | | | | fees.To eradicate corruption, one must tackle |
| projects are an integral part of every Country | | | | both giver and taker.History shows that all |
| Assistance Strategy (CAS). The Bank also | | | | effective programs shared these common |
| supports international efforts to reduce corruption | | | | elements:The persecution of corrupt, high-profile, |
| by sponsoring conferences and the exchange of | | | | public figures, multinationals, and institutions |
| information. It collaborates closely with | | | | (domestic and foreign). This demonstrates that no |
| Transparency International, for instance.At the | | | | one is above the law and that crime does not |
| request of member-governments (such as | | | | pay.The conditioning of international aid, credits, |
| Bosnia-Herzegovina and Romania) it has prepared | | | | and investments on a monitored reduction in |
| detailed country corruption surveys covering both | | | | corruption levels. The structural roots of |
| the public and the private sectors. Together with | | | | corruption should be tackled rather than merely its |
| the EBRD, it publishes a corruption survey of | | | | symptoms.The institution of incentives to avoid |
| 3000 firms in 22 transition countries (BEEPS - | | | | corruption, such as a higher pay, the fostering of |
| Business Environment and Enterprise Performance | | | | civic pride, "good behaviour" bonuses, alternative |
| Survey). It has even set up a multilingual hotline | | | | income and pension plans, and so on.In many new |
| for whistleblowers.The IMF made corruption an | | | | countries (in Asia, Africa, and Eastern Europe) the |
| integral part of its country evaluation process. It | | | | very concepts of "private" versus "public" |
| suspended arrangements with endemically corrupt | | | | property are fuzzy and impermissible behaviours |
| recipients of IMF financing. Since 1997, it has | | | | are not clearly demarcated. Massive investments |
| introduced policies regarding misreporting, abuse of | | | | in education of the public and of state officials are |
| IMF funds, monitoring the use of debt relief for | | | | required.Liberalization and deregulation of the |
| poverty reduction, data dissemination, legal and | | | | economy. Abolition of red tape, licensing, |
| judicial reform, fiscal and monetary transparency, | | | | protectionism, capital controls, monopolies, |
| and even internal governance (e.g., financial | | | | discretionary, non-public, procurement. Greater |
| disclosure by staff members).Yet, no one seems | | | | access to information and a public debate intended |
| to agree on a universal definition of corruption. | | | | to foster a "stakeholder society".Strengthening of |
| What amounts to venality in one culture (Sweden) | | | | institutions: the police, the customs, the courts, |
| is considered no more than hospitality, or an | | | | the government, its agencies, the tax authorities - |
| expression of gratitude, in another (France, or | | | | under time limited foreign management and |
| Italy). Corruption is discussed freely and forgivingly | | | | supervision.Awareness to corruption and graft is |
| in one place - but concealed shamefully in another. | | | | growing - though it mostly results in lip service. |
| Corruption, like other crimes, is probably seriously | | | | The Global Coalition for Africa adopted |
| under-reported and under-penalized.Moreover, | | | | anti-corruption guidelines in 1999. The otherwise |
| bribing officials is often the unstated policy of | | | | opaque Asia Pacific Economic Cooperation (APEC) |
| multinationals, foreign investors, and expatriates. | | | | forum is now championing transparency and good |
| Many of them believe that it is inevitable if one is | | | | governance. The UN is promoting its pet |
| to expedite matters or secure a beneficial | | | | convention against corruption.The G-8 asked its |
| outcome. Rich world governments turn a blind | | | | Lyon Group of senior experts on transnational |
| eye, even where laws against such practices are | | | | crime to recommend ways to fight corruption |
| extant and strict.In his address to the | | | | related to large money flows and money |
| Inter-American Development Bank on March 14, | | | | laundering. The USA and the Netherlands hosted |
| President Bush promised to "reward nations that | | | | global forums on corruption - as will South Korea |
| root out corruption" within the framework of the | | | | next year. The OSCE is rumored to respond with |
| Millennium Challenge Account initiative. The USA | | | | its own initiative, in collaboration with the US |
| has pioneered global anti-corruption campaigns and | | | | Congressional Helsinki Commission.The |
| is a signatory to the 1996 IAS Inter-American | | | | south-eastern Europe Stability Pact sports its own |
| Convention against Corruption, the Council of | | | | Stability Pact Anti-corruption Initiative (SPAI). It |
| Europe's Criminal Law Convention on Corruption, | | | | held its first conference in September 2001 in |
| and the OECD's 1997 anti-bribery convention. The | | | | Croatia. More than 1200 delegates participated in |
| USA has had a comprehensive "Foreign Corrupt | | | | the 10th International Anti-Corruption Conference |
| Practices Act" since 1977.The Act applies to all | | | | in Prague last year. The conference was attended |
| American firms, to all firms - including foreign ones | | | | by the Czech prime minister, the Mexican |
| - traded in an American stock exchange, and to | | | | president, and the head of the Interpol.The most |
| bribery on American territory by foreign and | | | | potent remedy against corruption is sunshine - |
| American firms alike. It outlaws the payment of | | | | free, accessible, and available information |
| bribes to foreign officials, political parties, party | | | | disseminated and probed by an active opposition, |
| officials, and political candidates in foreign countries. | | | | uncompromised press, and assertive civic |
| A similar law has now been adopted by | | | | organizations and NGO's. In the absence of these, |
| Britain.Yet, "The Economist" reports that the | | | | the fight against official avarice and criminality is |
| American SEC has brought only three cases | | | | doomed to failure. With them, it stands a |
| against listed companies until 1997. The US | | | | chance.Corruption can never be entirely eliminated |
| Department of Justice brought another 30 cases. | | | | - but it can be restrained and its effects confined. |
| Britain has persecuted successfully only one of its | | | | The cooperation of good people with trustworthy |
| officials for overseas bribery since 1889. In the | | | | institutions is indispensable. Corruption can be |
| Netherlands bribery is tax deductible. | | | | defeated only from the inside, though with plenty |
| Transparency International now publishes a name | | | | of outside help. It is a process of self-redemption |
| and shame Bribery Payers Index to complement | | | | and self-transformation. It is the real transition. |