By Anand Goolsarran
Corruption is the misuse of public power for private gain. A misuse of public power occurs where, in the exercise of their duties, officials deviate from formal rules or established procedures for their personal gain, and in doing so, the public interest is sacrificed in favour of their private interest.
Forms of corruption
Corrupt behaviour manifests itself in four main forms: bribery, extortion, embezzlement and fraud. An act of bribery takes place when a person makes a payment to an agent of the State in exchange for an advantage or a benefit to which the person is not otherwise entitled, such as the provision of a service, the granting of a licence, a tax rebate or the award of a public contract.
Extortion involves the agent using his/her positional power to extract money or other benefits from another person although the latter is legally entitled to the service or benefit without such a payment. The agent often uses coercion, violence or threat of violence to enforce the corrupt act. Embezzlement is the theft of public resources by the agent while fraud occurs when the agent uses the knowledge at his disposal to deceive, conceal, distort or manipulate information for his/her personal gain.
Corruption in the public sector
Corruption in the public sector appears to be more prevalent in areas where the State interacts with the public such as public procurement, regulatory agencies, granting of permits, privatization, foreign exchange, police, the judicial system and taxation. It tends also to be biased in favour of capital projects where large amounts of resources are expended.
In the area of public procurement, specifications for goods and services can be framed in such a manner as to place a favoured contractor in a position of advantage vis-à-vis other competitors. This, as well as other inside information, such as the details of other competititors’ bids and the “Engineer’s Estimate”, can also be leaked to the preferred contractor while the actual assessment of bids can be biased in favour of him or her.
When bribes are paid to win, for example, a road contract, the contractor has to find some way of recouping his/her costs. Invariably, this is done by executing the works below the required specifications or by substituting inferior material, especially if the Engineer, who is overseeing the works on behalf of the State, is also a recipient of bribes. For example, instead of placing four inches of bitumen as the final top layer on a road, he or she may place two inches. The result is that within six months, the road may start to shown signs of deterioration.
Goods of a capital nature are obviously more expensive than for current operations. A corrupt official would therefore prefer to acquire specialized products that are capital intensive, sophisticated and custom-built rather than off-the-shelf products where the prices are generally known. Military equipment may be favoured in preference to those for education or health. The acquisition of such equipment in most cases would not be subject to a system of competitive bidding by virtue of its nature i.e. procurement is usually done through sole sourcing. In such cases, there are no competitive prices, and the prices charged would tend to be inflated and the differences kicked back as bribes.
Measuring Corruption
In view of the opaque nature of corruption, objective assessments of the levels of corruption are not readily available. Perhaps the best substitute measure is the Corruption Perceptions Index (CPI) which is compiled annually based on surveys carried out of the perceptions of knowledgeable people, such as senior businessmen and political country analysts. For example, 183 countries were included in the 2011 CPI, and the data were gathered using polls and surveys from independent institutions such as the World Markets Research Centre, the World Economic Forum, Economist Intelligence Unit and the International Institute for Management Development. The results, when computed using statistical methods, correlate well and provide some confidence about the actual levels of corruption.
Most of the countries surveyed consider the CPI as an authoritative pronouncement of what is perhaps the best substitute measure for the actual levels of corruption. Those that share a deep concern for transparency, good governance and greater accountability, view the index as an important measure in their fight against corruption. An improvement of a country’s CPI score as well as its ranking is considered an indicator of a reduction in the level of corruption. The first step in the fight against corruption must therefore be the recognition of the existence of corruption and the extent to which it is perceived to exist in a particular society.
Implications of Corruption
The economic consequences for countries with high levels of corruption are indeed very grave. Goods and services become more costly thereby negatively impacting on the quality and standard of living of citizens. Trade is also distorted since preference is given to goods/services that offer the greatest bribes. In this regard, capital programmes are favoured in preference to those relating to basic health care, education delivery, agriculture and housing, among others. Because of this tendency, corrupt governments tend to contract high levels of long-term public debt since loans from international financial institutions are usually taken to finance capital projects.
Corruption results in the misallocation of scarce resources and areas that are in genuine need of developmental assistance are overlooked in preference to those that offer the greatest rewards for the corrupt official. Investor confidence is also shaken and countries that are in dire need of foreign investment are deprived of it. As a result, international flow of goods, services and capital is affected, and investment ratios deteriorate. In fact, various studies have shown that high levels of corruption are associated with low ratio of investment to GDP, low foreign inflows of direct investment and low levels of capital inflows.
In addition, the loss of confidence is felt within the country and there is a tendency for professionals and other decent-minded citizens to migrate to the more developed countries to seek employment opportunities and a better way of life. There is therefore a brain drain with the concomitant spiraling effect of not having the relevant skills to effectively manage the operations of the State. High levels of corruption result in the perpetuation of weak governments through the loss of skills.
Combating Corruption
Corruption is likely to be minimised if four basic principles are followed:
The arm’s length principle where decisions are made based on merit, thorough analyses of the facts and pertinent arguments, and on equality of treatment, rather than on personal and other relations. There should be no room for nepotism, favouritism and perceived conflict of interest;
Citizens’ participation and involvement in public decision-making. When this happens, there is collective responsibility for actions taken and allegations of corrupt behavour are likely to be minimized;
Decision-making needs not only to be transparent but should be seen to be so. In this regard, a free and independent media coupled with reasonable access to information on government programmes and activities are indispensable tools for fighting corruption; and
Limiting the use of discretion. Discretion tends to produce decision-making that is skewed, inconsistent and lacking in uniformity. This practice can result in allegations of corrupt behaviour regardless of the best of intentions. In addition, corrupt individuals will almost certainly seek to exploit the use of discretionary powers for their personal benefit.
International and regional communities have initiated several measures to combat corruption. These initiatives set out general principles that member countries can follow in fighting corruption. For example, the African Union Convention provides for member states to institute legislative and other measures for strengthening internal accounting and auditing, hiring, procurement and management of public goods and services. An interesting component relates to education programmes to sensitise citizens about public good and public interest and to promote ethical behaviour. While these efforts need to be applauded, in the final analysis, corruption has to be tackled at the national level through a sincere commitment on the part of governments.
Conclusion
There is a strong positive correlation between democracy, good governance and accountability. There should therefore be an encouragement in the promotion of democratic values and in the strengthening of weak democratic institutions. Vague, archaic and cumbersome rules and regulations also need to overhauled and modernized, and the use of discretion in decision-making should be severely restricted.
Decision-making also needs to be open and transparent with a high degree of participation and involvement of civil society. A free and vibrant media should also be encouraged. In addition, important watchdog agencies such as the National Audit Office should be in the forefront in the fight against corruption and should be provided with adequate resources to do so.
