include - APP/views/blogs/index.ctp, line 43
View::_render() - CORE/cake/libs/view/view.php, line 665
View::render() - CORE/cake/libs/view/view.php, line 375
Controller::render() - CORE/cake/libs/controller/controller.php, line 808
Dispatcher::_invoke() - CORE/cake/dispatcher.php, line 229
Dispatcher::dispatch() - CORE/cake/dispatcher.php, line 193
[main] - APP/webroot/index.php, line 88
For the final blog in the “More than Money” series, I’ve chosen to discuss an issue that often comes to mind for people when deciding whether or not to reach into their pockets to donate to development charities. It’s also currently one of the biggest barriers to ending extreme poverty, and stands in the way of progress in the development of important areas like health and education in many developing countries.
If you haven’t guessed it already, I’m talking about corruption.
For such a small word, corruption is packed with a lot of meaning. From small bribes required to gain access to public services to government officials pocketing foreign aid money, there are many different levels of the problem and it can seem overwhelming to try and tackle it. Although its occurrence is prevalent in both rich and poor countries, the consequences of corruption disproportionately affect people living in poverty.
As the clip by the ONE Campaign illustrates, developing countries do not necessarily lack the manpower or resources to overcome their own obstacles; it’s simply that they’re being held back from doing so. According to Transparency International’s 2010 Global Corruption Barometer, people living in poverty are twice as likely to have to pay bribes for basic services like health and education and more than 20 countries have reported significant increases in petty briberies since 2006, like having to pay money to their child’s school for illegal “mandatory contributions.”
Corrupt Public Officials
Having to pay additional money for services that you can barely afford in the first place puts a serious burden on people living on less than USD$2 a day. For instance, corruption increases the cost for connecting a household to clean water by up to 30% on average in developing countries, leaving many to forego services. Likewise, the average maternity ward patient in Bangalore pays around USD$22 in bribes to receive adequate medical care. This is unacceptable when there is currently 884 million people without access to clean water and only 63% of births in developing countries are attended by skilled health workers.
People living in poverty can’t afford another barrier standing in their way to these types of vital resources and services.
It’s also extremely damaging when desperately needed foreign aid money sent to developing countries for health, food or education programmes never gets past corrupt government officials. Estimates in 2006 showed that 50% of allocated health funds in Ghana never made it to the clinics or hospitals. In that same year it was discovered that the Kenyan government had spent USD$12.5 million on luxury cars for government officials’ personal use, while almost 50% of the country lived below the poverty line.
Unlike in many rich countries, poor communities are often powerless to hold their governments accountable and lack the ability or resources to ensure these situations stop happening.
Like Erik from Mozambique says in the video, “the battle here is access to information.” Organisations like Transparency International are working to make sure people living in poverty and the global community are able to access these types of statistics and information and then equipping people with the tools to be able to battle corruption in their communities. This is so important because as Rakesh from Tanzania points out, “the way change is going to happen is that people are going to make this happen. It’s not projects, it’s not great NGOs, it’s not great leaders, it’s people themselves.”
The Movement to End Extreme Poverty
People themselves are crucial to the entire fight to end extreme poverty. As we’ve discussed throughout this series, there are many sides to poverty beyond the dollar amount and unfortunately they can’t just be solved by foreign aid and NGO assistance. Local people in these poor communities need to be empowered and enabled to create their own change in the areas we discussed over the past few weeks; health, education, gender inequality and corruption.
That’s why we at the Global Poverty Project are building a movement of people who support actions like buying fair trade, putting pressure on governments to uphold their commitments to poverty alleviation measures, and staying informed on current poverty issues to support local efforts so that together we can see an end to extreme poverty in our generation.
We’ve been campaigning about the impact of bribery and corruption on the world’s poor at the Global Poverty Project, and on the weekend, another allegation of western complicity in corruption emerged.
Two Australian companies owned by the Reserve Bank (Australia’s central bank) and six employees have been charged with bribery in Australia’s first international bribery case. The Age picks up the story:
AUSTRALIA'S foreign bribery laws are to be strengthened in the wake of the Reserve Bank of Australia corruption scandal.
The Australian Federal Police has told The Sunday Age that it has been working on suggested legislative changes with the Attorney-General's Department as a result of a 26-month investigation that on Friday led to Australia's first-ever foreign bribery charges being laid against RBA banknote firms Securency and Note Printing Australia (NPA) and six former executives.
It’s excellent news that the Australian Federal Police are pursuing prosecution – far too often these cases are settled out of court, and it’s even better that there are moves afoot to strengthen foreign bribery laws.
The guilt or otherwise of the firms and people involved remains to be seen, but in the meantime, and with the implementation last week of the UK’s new Bribery Act, it’s a timely reminder of why it’s so important we fight bribery – not just to fight poverty, but because it’s bad for business.
I’m regularly told by business owners and people working in poor countries that they have no choice but to engage in bribery and corruption at times, and so today, I thought I’d take a step back and outline five reasons why that’s not a good enough excuse, and just shouldn't be accepted by boards, shareholders, staff and the community at large.
1. It’s illegal.
Seems straight forward enough, but much like speed limits and texting while driving, it seems that in this case, the law is far too often interpreted as a polite suggestion. It’s not. The fines and jail sentences for bribery are often bigger than those for some violent crimes. From a business point of view, a bribery conviction will usually debar your firm from bidding for any government contracts, and many large business contracts.
2. Your face and brand in the newspaper for all the wrong reasons.
Bribery cases get a huge amount of publicity, as the media and public are fascinated by the sordid details of backroom deals almost as much as they are by celebrity sex lives. Few in Australia had ever heard of Securency or the Australian Wheat Board before the press coverage caused their names to become synonymous with corruption.
3. “Other people are doing it” is not an ethical escape clause.
For as long as I can remember, my mother explained to me that the bad behaviour of other people doesn’t excuse, validate or permit me to do the same. I can’t murder people just because others do, I can’t steal just because others do, and I can’t bribe just because others do.
4. Bribery promotes a race to the bottom
Paying bribes promotes paying more of them in the future. If everyone pays a bribe to win a contract, then the person or organisation running the contract process will take all the money, reward the highest bidder, and expect even more next time. It’s a business cost that will just keep growing, with no relevance to the value of your businesses services.
5. Bribery weakens institutions and rewards the wrong people.
Business needs an effective rule of law to function. You need clear property rights, enforcement mechanisms, infrastructure that works, and a workforce with the skills and capacity to grow your business. Bribery undermines all of those things by rewarding people who cut corners and do deals instead of people achieving results. It gives more power to the bribe recipient, and means that you’re undermining the institutions that you rely on for your business to thrive.
In an age where corporate reputation is increasingly important, I’m astonished at the degree to which bribery is still tolerated by companies working in poor countries.
I care about fighting bribery and corruption because it hurts the world’s poorest the most. Bribery is a risk that businesses can manage and mitigate around, for the world’s poor, it’s all too often a life or death decision.
Regardless of your motivation, this new case, and the many more I’m sure are still to come are a reminder of this, and a reminder of why our ongoing education and campaigning is so important to help fight bribery in the broader fight against extreme poverty.
Over the past few months we have blogged extensively about the introduction of the UK Bribery Act. Finally, today, after months of delays, “reviews” and much debate about guidance notes, the act has come into force.
As we’ve seen corruption and poor governance cause and exacerbate extreme poverty and can cost lives. The act will make it not only illegal to offer or accept bribes but also, critically, to fail to prevent bribery.
Where prosecuted, companies will have to prove that they have adequate measures in place to prevent to stop bribes, whether they were aware of it taking place or not. These include providing anti-bribery training to staff, carrying out risk assessments for the markets being operated in, or carrying out due diligence on the people being dealt with.
A major bone of contention around the act has been it's effect on corporate hospitality - will we see an end to the corporate hospitality tents at wimbledon? The guidance notes state:
'Very generally, [bribery] is defined as giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so.'
Further to this it has been stated we will see a common sense approach applied, so that reasonable and proportionate hospitality will not been seen as a bribe. You can see Ken Clarke, the UK Secretary of State for Justice and government appointed Anti Corruption Champion, discussing this in this BBC news report. So perhaps we shall have to continue looking on enviously at the champagne and strawberries in those tents, but can be assured that once hospitality passes beyond the normal realms it will become a crime and be punishable by unlimited fines and imprisonment.
Whilst we do see this as a victory and a major step forward in the movement towards justice for all, it is important to remember that the implementation of the Bribery Act is not the be all and end all of this movement. Corruption is not just about bribes, we need to see effective action across the range of issues. Amongst them, we need to see the introduction of regulations requiring transparency in extractive industries and foreign aid, we need to tackle the illicit and harmful financial flows out of developing countries.
When he was appointed as Anti-Corruption Champion over a year ago, Ken Clarke promised to develop and implement a joined up strategy, but we have yet to see anything come out of his department besides todays implementation of the Bribery Act months after it was due to come into force.
There is an amazing opportunity here for the UK to take the lead in tackling corruption, and so that is why we are calling on Ken Clarke to live up to his tite as “Champion” and develop and publish his strategy.
Add you name to the call by signing our petition on the right.
Recently we’ve been revising our knowledge of corruption. We’ve rethought our perceptions and redefined our understanding of it.
We’ve done this because, whilst only being one word, it is a word that has a great influence on framing people’s attitudes towards global poverty, the reasons it occurs and, most importantly, what response we should make.
The reality is too often ‘corruption’ is used as a one word excuse to disengage. This is because it is an umbrella term which describes many forms of illegal activity that operate at different levels. In other words, it’s easy to blame ‘corruption’ as the problem – without understanding what the problem is.
So how should we understand and categorise corruption? And more importantly why does it matter?
Breaking down corruption
A useful place to start is from the United Nations’ report, ‘A User’s Guide to Measuring Corruption’. The report distinguishes between two forms of corruption: petty corruption and grand corruption. According to them petty corruption is defined as ‘street level’, everyday corruption. It occurs at the lower end of political interaction between citizens and public officials. Critically, petty corruption occurs where an individual comes into direct contact with officials of the state. For example this may include bribes paid in return for preferential treatment or services.
The other form of corruption, which is has a far greater reach, is called grand corruption.
So what is ‘grand’ corruption? And how ‘grand’ is it?
To begin with, Tearfund provide a useful definition in their report, ‘Corruption and Its Discontents – Assessing the impact of people living in poverty’.
According to them:
‘Grand corruption is that which takes place at the highest levels of political authority and decision making. It occurs at the formulation of public policies and may involve the appropriation or embezzlement of government funds, or the tailoring of public laws, codes and regulations for the benefit of particular ‘favoured’ groups in return for bribes, or simply to preserve political support and power.’
That’s a long definition. But it details how grand corruption operates.
And here is where it becomes interesting. As Tearfund continue:
‘Such forms of corruption pose a significant threat at the national level, for they have direct implications for a country’s economic and political stability, as well as affecting the overall level and distribution of public resources.’
As Tearfund argue, it’s the effect of grand corruption that has such great significance. What they mean when they describe as ‘affecting the overall level and distribution of public resources’ is, in a word, governance.
In short, gaining a fuller picture of corruption, its scale and its disastrous effect on development is critical because corruption fundamentally undermines governance.
So what is governance and what relationship does it have with corruption?
Governance is defined by the United Nations as the ‘exercise of political, economic and administrative authority to manage a nation’s affair.’ Taken a step further, good governance occurs where ‘public resources and problems are managed efficiently and in response to the critical needs of society.’
Rather than providing for the efficient and responsible management of a nation’s resources, corruption ensures that those in power too often act in their own interests choosing to enrich themselves at the expense of their population.
For example, according to Global Financial Integrity, they estimate that approximately US $50 billion in corrupt money is deposited each year into western bank accounts and tax havens. This is a staggering amount of money.
Yet, it’s five times less than the estimated US $250 billion in laundered funds that makes its way into US banks each year.
The significance of such large scale misappropriated funds and the leaders and officials who are engaged in this process can seem overwhelming. Yet they point to a far more serious problem.
The figures point out the connected reality that facilitates and encourages the existence of grand corruption. And it is in understanding the connections that is so empowering because we begin to see where we can make a difference.
The issues they point towards are the broader structural problems. It’s up to us to ask the questions regarding what involvement our systems, companies and rules have in facilitating poor governance and encouraging not only a culture but the reality of grand corruption. It’s only fair to ask then, where does the problem and, more importantly, responsibility lie?
Is ‘pointing the finger’ fair?
Ultimately, corruption, on a grand scale, is no longer about what happens over ‘there’, a problem that we have no ‘say’ in. Instead, the reality is, there is much we can do over ‘here’ to improve the situation. As the UN recognised, effective governance relies on ‘public participation, accountability and transparency.
This raises the following questions – what can and what are we doing to improve public participation, accountability and transparency in countries undermined by corruption?
The answers. Plenty. And, we’ve already started.
Right now, we at the Global Poverty Project along with our friends from the Publish What You Pay coalition are campaigning on greater transparency standards for the natural resource industry. For many countries, the revenue from natural resources provides the best opportunity to lift themselves out of poverty. To put this in perspective: in 2008 exports of oil and minerals from Africa, were worth approximately $393.9 billion. This figure is nearly 9 times the value of international aid to the continent which amounted to $44 billion.
We believe that releasing the information about the payments that oil, gas and mining companies make to resource rich, developing countries, has the ability to empower citizens to hold their governments to account. By publishing what they pay companies can help ordinary citizens, from the countries who grant them their licenses to operate in the first place, demand a fairer outcome for themselves. It can change the culture and sadly the reality of grand corruption.
Our campaign on this issue reflects our understanding that what we are not only capable of but that we can make a difference. It’s up to us to demand transparency from companies that are based in the UK but work and generate their profits by working in developing countries.
What do you think of when you read that word? How do you define it?
The reality is corruption is a difficult concept to grasp. Most of us instinctively ‘know’ it when we see it and can point out specific examples of corruption where they occur. However, to define corruption in a form that moves beyond an instinctive response towards a more considered understanding is a far more difficult process. Fundamentally, it comes down to agreeing upon a workable definition.
But this isn’t easy. In fact, there is no worldwide consensus on how exactly corruption should be defined. This is despite the United Nations passing a Convention Against Corruption.
It is critical however, to have a better grasp of corruption and its effect on exacerbating poverty in order to start tackling the problem.
To begin with a straightforward definition as offered by Transparency International defines corruption as the ‘misuse of public office for private gain’. Whilst this definition is useful, I find that it is limiting in its scope. By focusing on public office, it is based on a clear distinction between the public and private sector. Yet this denies the reality of corruption as it occurs.
Take Equatorial Guinea for example. As we blogged earlier, Teodorin Obiang, the son of the Dictator is able to afford a lavish lifestyle, all the while earning an ‘official’ salary of $5000 month. How does he do this?
In his own words from Human Rights Watch’s report:
Cabinet Ministers and public servants in Equatorial Guinea are by law allowed to owe [sic] companies that, in consortium with a foreign company, can bid for government contracts and should the company be successful, then what percentage of the total cost of the contract the company gets, will depend on the terms negotiated between the parties.
But in any event, it means that a cabinet minister ends up with a sizeable part of the contract price in his bank account.
It’s clear that on this definition Teodorin is corrupt. But beyond his corruption the picture becomes more complex.
We need to be mindful, when reading his words, to ask ourselves what role our laws, systems and companies play in fostering and enabling a corrupt regime.
To be precise, when looking at his statement I couldn’t help but think - what does ‘in consortium’ mean? How does a foreign company ‘bid’ for government contracts? And, what does it mean when terms are ‘negotiated’ between parties?
In short – we need to have a more robust definition that situates the scourge of corruption in its appropriate context. On this theme, Tearfund, in their report, ‘Corruption and its Discontents’, define it as ‘the abuse of entrusted power for private gain at the expense of others or of the society as a whole’.
Such a definition is inevitably broader. And it’s better.
By shifting the focus from those in ‘public office’ to those in ‘entrusted power’ their definition raises questions of the actions of not only Teodorin Obiang but also the involvement of foreign companies.
Furthermore, as they argue in their report, such a definition ‘recognises the wide range of actors involved. It allows us to see that corruption and governance are inextricably linked as they have to do with the use and abuse of power.’
Thus we can conclude, from their definition that the companies who ‘bid’ for and ‘negotiate’ contracts with Teodorin themselves occupy a position of entrusted power. Such a conclusion raises the issue, and I would argue, the reality, of our complicity.
This view reflects the statement by our friends CAFOD, Christian Aid, Global Witness, One World Action, Tearfund, The Corner House and, Transparency International. On International Anti-Corruption Day, they argued together.
When multinational companies bribe foreign public officials, it undermines the rule of law and the principle of fair competition and entrenches bad governance in developing countries, hindering their efforts to alleviate poverty and often contributing to instability and human rights abuses. Corruption, including bribery, impedes the delivery of vital public services, denying millions of people access to water, health and education across the developing world.
And this has been the reality of the experience of Equatorial Guinea. Whilst the government is no doubt corrupt – questions must be asked of the oil companies involved. And it is up to us to begin asking these questions.
As the US Senate concluded in their investigation:
Oil companies operating in Equatorial Guinea may have contributed to corrupt practices in that country by making substantial payments to, or entering into business ventures with, individual E.G. officials, their family members, or entities they control, with minimal public disclosure of their actions.
And here’s our opportunity.
With a broader, more realistic understanding of corruption is it possible to see the potential for our involvement and influence. Recognising the abuse of entrusted power provides the opportunity for us to use our voice. In this case, we have a role to pay to bring ‘minimal public disclosure’ to a higher, more transparent standard.
And it’s already begun.
Last year, the United States acted. They passed a law requiring companies in the natural resource industry to publish what they pay to foreign governments. The information released is aimed at preventing the blatant corruption occurring in Equatorial Guinea and elsewhere.
This year the UK and Europe are looking at legislating greater resource transparency standards as in the United States. And for this to happen, and to happen quicker, we need to raise our voice.
That’s what we’ve done, are doing and will continue to do. And you can join us too.