University of
Birmingham
School of Public Policy International Development Department Combating Corruption:What the Ecuadorian Anti-Corruption Agency Can Learn from International Good Practice.Student
Name: Maria del Mar Landette M. Registration
Number: 0450666 Degree Programme: MSC
Governance and Development Management Supervisor: R. Andrew Nickson Word Count: 12,000 Date: September
2002 Executive Summary Public sector corruption is a
pervasive and global phenomenon that has attracted much attention in the last
decade because of its negative effects on the development process of nations.
The costs of corruption to the economy, legitimacy and social development of a
state are very high, manifesting themselves not only in terms of slow economic
growth and inefficiency, but also causing a distortion of development programs,
weakening government institutions, increasing economic and social inequality in
society, hampering the process of reforms, and undermining democracy and the
rule of law. Governments, aided by international
development agencies, have established national anti-corruption strategies to
prevent and combat corrupt activities in the public sector. Some of these initiatives include: ·
Structural
reforms that focus on streamlining the civil service, strengthening the ethical
codes that should guide its work, strengthening financial controls and
procurement practices, and re-evaluating the needs and resources that civil
servants require to do their job properly. ·
Judicial
reform and anti-corruption legislation to create a strong and enforceable legal
framework to guide the activities of the public and private sector, and to
deter and punish corrupt behaviour. ·
Economic
liberalisation policies that minimise the opportunities for corruption by
increasing competition, transparency and accountability, and limit the
discretion and monopoly of public sector institutions in economic markets. ·
Increasing
the participation of civil society organisations and the private sector as
allies in the fight against corruption. Strategies to combat corruption are
often led by independent anti-corruption agencies created specifically to
spearhead the fight. These agencies
have proven to be successful in countries like Hong Kong, Singapore and
Botswana. Hong Kong’s Independent
Commission Against Corruption (ICAC), Singapore’s Corrupt Practices
Investigation Bureau (CPIB) and Botswana’s Directorate of Corruption and
Economic Crimes (DCEC) provide useful information on the characteristics and
scope of action of anti-corruption agencies that are key to the effectiveness
of their work. Some of these include: ·
A
strong, enforceable legal framework. ·
Independence
of action, resources and staff, and the power to investigate and pursue corruption
at the highest levels of government. ·
Political
and bureaucratic support, and the capacity to access information, witnesses and
documentation. ·
Community
involvement and support, and adequate accountability mechanisms that involve
civil society. The Ecuadorian Commission for the
Civic Control of Corruption (CCCC) is a relatively new agency established in
1997 as a government watchdog mechanism. Unlike ICAC, CPIB or the DCEC, it does
not have real independence of action or the power to pursue an effective
anti-corruption agenda. In order for
the CCCC to be an effective mechanism, a review of the legal framework to
support the agency’s work is crucial, as is vesting the commission with
stronger powers of investigation and the ability to search, seize, arrest
suspects and freeze assets. The
agency’s participatory model can also be an effective tool in the monitoring
and restructuring of key government control agencies and the judiciary, if the
commission is given the authority to audit the procedures and processes of
institutions, and the power to prosecute corruption cases. In Ecuador, as elsewhere, the fight
against institutionalised corruption is a long and difficult task, requiring a
collaborative effort from all the members of society, and a political
leadership that is committed to a process of deep reform and continuous
change. Corrupt behaviour is not a
‘cultural trait’ that is inherent in certain societies. It is a problem of distorted ethical, moral
and economic perceptions, which can be changed as demonstrated by countries
that have been successful in their fight against corruption. Table of Contents Executive Summary 2 Introduction 6 Chapter 1 - Costs and consequences of corruption 9 1.1 Economic costs 11 1.2 Institutional costs 13 1.3 Social costs 15 Chapter 2 - Initiatives to control corruption 18 2.1 Public
Sector reforms 20 2.2 Judicial
reform and anti-corruption legislation 24 2.3 Economic
liberalisation policies 26 2.4 Civil
society participation and the role of the private sector 29 Chapter 3
- Comparative typology of anti-corruption agencies 33 3.1 Independent Commission Against
Corruption, Hong Kong 37 3.2 Corruption Prevention Investigation
Bureau, Singapore 40 3.3 Directorate of Corruption and
Economic Crimes, Botswana 45 3.4 Civic Commission for the Control of
Corruption, Ecuador 49 Chapter 4 - Anti-Corruption Agencies: Good Practice Guidelines 56 Chapter 5
- Conclusion 61 Annex
1. Corruption Perception Index, 2001 63 Annex 2. Letter
written by the author to the Director, JFK
School of Government, Harvard University 66 Bibliography 67 Introduction The topic of corruption has
sustained increased interest during the past decade as part of the discussion
of good governance and government reform.
The realisation that corruption is a complex issue that affects both
developed and developing countries has triggered efforts at both the
international and national levels to develop mechanisms to control
corruption. These efforts have included
the establishment of international anti-corruption conventions and agreements,
(OECD 1997 Anti-Bribery Convention; OAS 1996 Inter-American Convention against
Corruption), the work of international development agencies supporting reforms
to curb corruption (World Bank 1997a,b; UNDP 1997), and the exposure of corrupt
countries and bribe-paying companies by NGOs such as Transparency
International. At the national level, governments
have introduced anti-corruption legislation to regulate the activities of both
the public and private sector, have enacted economic and civil service reforms
as mechanisms to control corruption in the public sector, and have created or
strengthened watchdog organisations to investigate and punish the misuse of
power by those in public office. The core of this dissertation is the
analysis of one of these watchdog mechanisms, namely anti-corruption agencies
and their effectiveness as tools to combat corruption in the public
sector. In order to do this, the cases
of the national anti-corruption agencies of Hong Kong, Singapore, Botswana and
Ecuador are examined, and key variables in their structure and
organisational arrangements compared to determine best practices that can be applied
by the Ecuadorian anti-corruption agency in its fight against public sector
corruption. The first
chapter of this dissertation provides a brief background into public sector
corruption, its costs and consequences.
The costs of corruption are examined in three different dimensions: the
economic costs, the institutional costs, and the social costs. In each section the consequences to the
nation-state of corrupt activities are looked at, utilizing a review of current
literature by authors who have analysed the impact of corruption in each of
these areas. The first section studies
the devastating effects that corruption has on the economic development of the
state, hampering investment, creating inefficiency, increasing costs, and
especially misallocating resources that are critical to economic growth. From an institutional perspective, the
second section considers the effects of corruption on the legitimacy of the
state, and the possibility of capture of the state’s resources by organised
criminal groups, along with the consequences for democracy and good
governance. Finally, from a social
perspective, the effect of corruption on social development, citizenship and
civil society participation is examined. The second chapter focuses on national initiatives to control corruption. These initiatives include public sector reforms, judicial reform and anti-corruption legislation, economic liberalisation policies, civil society participation and the role of the private sector. Each of these initiatives are considered separately, where they stem from, what are their main components and how these strategies are key in a holistic approach to combat corruption. The third chapter provides
a comparative typology of anti corruption agencies in Hong- Kong, Singapore, Botswana
and Ecuador. The comparison includes a discussion of the background
leading to the creation of these agencies, and a matrix of their
characteristics: internal structure, legal framework, scope of action,
and other key organisational arrangements.
From these characteristics, and the analysis of their activities,
conclusions are drawn regarding the effectiveness of the institutional
arrangements of these agencies that support or impede their work against corruption. The fourth
chapter tries to gather good practice guidelines identified in Chapter 3 that
can be applied to the conditions found in Ecuador, suggesting a variety of
fundamental considerations relating to the effectiveness of the Ecuadorian
anti-corruption institution, and its success.
The research for this dissertation
was partially based on the analysis of current literature related to
corruption, anti-corruption initiatives and anti-corruption agencies, and a
field study, including interviews conducted in Ecuador. The main source for the information on the
Ecuadorian anti-corruption agency was provided by the agency itself. I am especially grateful to the Director of
Investigations of the CCCC, Rafael Gutierrez, who not only provided relevant public
data, but also a candid discussion of the real issues behind the problem of
systemic corruption in Ecuador. Chapter 1 - Costs and
Consequences of Corruption It is now widely accepted that
corruption is the ‘cancer’ of the modern state, limiting economic growth,
hampering investment, and reducing the effectiveness of development programs,
while diverting important, and often scarce public resources, towards distorted
political priorities. Although there
are many definitions of public sector corruption in the literature, two
definitions are very useful in creating a boundary for the discussion of this
topic. The first is “the abuse by public sector officials of
entrusted power, for personal gain or for the benefit of a group to which they
owe allegiance” (Williams and Doig, 2000: 55). The second is more simple and straightforward: “the abuse of
public office for private gain” (World Bank, 1997a: 12). Corruption, as Robert Klitgaard
describes it, happens when “agents have a monopoly power over clients, when
agents have a great discretion, and when accountability of the agents to the
principal is weak”. In different terms,
corruption = monopoly + discretion – accountability (Klitgaard, 1988:75). Other authors view corruption as “a meeting
of opportunity and inclination”, where the opportunity for corruption depends
on the size of the public rents available, the power that the public officer
has in bargaining with the private interest, the level of accountability, and
the risk involved in the corrupt practice (Langseth, Stapenhurst and Pope,
2000: 54). The causes of corruption are many
and vary greatly from country to country, but are generally linked to
ineffective government institutions, poor management practices, a high degree
of political and bureaucratic monopoly power, and also to bureaucratic
traditions that support relationships between the public sector and the
citizens such as clientelism or patronage.
In many developing and transitional countries, there is a dual system of
formal rules that punish corruption, and an informal system where corruption is
accepted as a normal practice. In such
cases, accountability is usually weak, there is no transparency in public
decisions, and public service ethics are eroded (World Bank, 1997). The impact of corruption in the
economic and social development of countries has been analysed and researched
by many scholars, including Paulo Mauro (1998), who not only points to the
negative consequences of corruption on economic growth, but also to the
resulting lack of investment in education and human capital that occurs in
highly corrupt countries. Authors, such
as Ades and di Tella (1995), and Doig and Riley (1998), confirm with empirical studies, that a high
degree of corruption leads to political instability, massive human and capital
flight, and a general deterioration of social and economic conditions. Corruption also seems to be more
pervasive and have a deeper negative impact in developing countries. As Peter Eigen, Chairman of Transparency
International (TI), stated in the launching of the 2001 Corruption Perception
Index (CPI), “the world's poorest are the greatest victims of
corruption". The 2001 CPI measures
the perception of corruption in 91 countries, utilizing surveys from seven independent
institutions and reflecting the opinion of business people, academics and
country analysts. Countries are ranked
from a top score of ten, reflecting a low perception of corruption, to a low
score of one or below, suggesting an extreme level of corruption. According to TI’s assessment, fifty-five
countries, many of which are among the world's poorest, scored less than
five. Additionally, the eight countries
perceived as the most corrupt, scoring less than two, are all developing or
transitional countries. (See Annex 1
CPI index 2001 ) This perception is supported by
authors such as Montinola and Jackman (2002) who examine government corruption
in a cross-section of countries, concluding that low- income countries, which
tend to underpay public sector employees, are more susceptible to corruption.
Corruption in developing countries has a perverse effect, deepening poverty,
increasing social and economic inequality, and preventing governments from
providing essential public services.
The costs of corrupt practices in developing countries can be
categorized into three main areas: economic costs, institutional costs and
social costs. 1.1 Economic
Costs The public sector is a most powerful
actor, as it controls and manages the distribution of a country’s resources and
wealth. Corruption in this management
of resources can be present in the demand and the supply side of this
monopoly. The demand side stems from
public sector employees misusing their power and influence for their private
gain, and the supply side refers to the private sector utilizing bribes to win
public sector contracts or receive preferential treatment. According to the World Bank, bribes
are one of the main tools of corruption (World Bank, 1997). Bribery can influence the government’s
decision to allocate benefits, assign contracts, lower taxes or other fees
collected by the government, issue licenses, speed up the time of bureaucratic
processes, or change the outcome of legal procedures. The economic effects of bribery and corruption have many
dimensions, and have been researched from a viewpoint of short-term and
long-term efficiency, and the long-term growth and development of a
nation. Although some literature suggests
that from a theoretical perspective, bribes may in the short term enhance
efficiency, by circumventing long and cumbersome legalities and cutting red
tape in bureaucratic procedures (Lui, 1985), authors such as Bardham 1997, and
Rose-Ackerman 1999, argue that corrupt markets are much less efficient than
legal markets, as the illegality of transactions, and the presence of bribes,
may discourage the most efficient participants from entering into the market,
creating a false efficiency, where the willingness to pay a higher bribe is
rewarded, rather than the capacity to provide the best product or service. In the long term, these expectations
of bribery completely distort the manner in which benefits are allocated,
creating an informal system where nothing works if ‘hands are not greased’, and
that encourages citizens to break the law.
This not only creates additional costs but also brings losses to the
state, as citizens and companies evade taxes, refusing to pay into a corrupt
government system that is perceived to be squandering the resources it
receives, and where doing business is risky and unpredictable. In terms of the effects on long-term
economic growth and development of a nation,
corruption has been shown to significantly reduce private national and
direct foreign investment, and to slow economic growth (Mauro, 1995). Corruption has a negative effect on investment because a highly
corrupt country is perceived to be high risk, and investors prefer to minimize
risks when considering places where to invest, leading to capital flight as
national investors seek certainty for their business arrangements, and foreign
investors prefer less risky markets.
1.2 Institutional
costs Corruption has a direct impact on
the legitimacy of a government. When the power of the state is misused for
political or personal gain, it engenders mistrust and discontent in the
political and bureaucratic machinery.
In patrimonial states, for example, bureaucratic and political leaders
monopolise power and resources, creating a political system to “maximise the
rent-extraction possibilities”, effectively robbing the state and its citizens
(Rose-Ackerman, 1999). The social
groups excluded from the patronage of the state may show their dissatisfaction
or frustration with the system outside of the democratic election process,
adding to the country’s political instability, and increasing the possibility
of internal conflict and violence. In highly corrupt governments,
political power is used to buy elections, weakening democracy and making the
state a tool for the reward of supporters, and for the persecution of political
opponents. In clientelistic states,
political and bureaucratic leaders turn over the management of state resources
to allies, who, in practice, dominate and control policymaking, using their
power to achieve favourable legislation or policies. As Rose-Ackerman, 1999, argues, in these clientelistic states
there is the danger that a corrupt police force, justice system, or political
class collude with organised criminal groups to carry out illegal activities,
infiltrating legal businesses as well.
The domination that these organised criminal groups can exert over legal
businesses and the government is extremely dangerous, creating an atmosphere of
lawlessness, uncertainty and violence that threatens to undermine the very
existence of the nation. Authors who have researched the
effects of corruption on the state, (Wade,1983; Williams,1987; Hutchcroft,
1997) argue that corruption weakens government institutions, alienates citizens by making them cynical
about the political process, and leads to their withdrawal from the political
system, in many cases increasing the inequality existent in the system. In developing countries, where government
institutions are often ineffective, policymaking is not transparent, civil
society is not well organised, and bureaucracies are not accountable,
corruption has a devastating effect on the legitimacy of the state, creating
political instability that in many cases results in the toppling of
governments, and in others, in the establishment of dictatorships. Even in countries with a strong
democratic tradition, corruption erodes the effectiveness of government
institutions because it creates inefficiency within these organisations, and
poor management practices that affect the capacity of the agencies to perform
their functions. Lack of resources
breeds dissatisfied civil servants that often work for low wages and receive no
incentives, leading them to rent-seeking activities in order to supplement
their low income, and to the loss of the best-qualified personnel who are
attracted by the private sector (Larbi, 2001).
Corruption
is seen by organisations like the OECD not as a cause but as a symptom of
systemic organisational failure, which thrives when government institutions are
ineffective, laws are not enforced, and in general poor governance is the norm
(OECD, 2000). Corruption is the
antithesis of good governance, because key elements of good governance, such as
high standards of transparency, accountability and public sector ethics, are
not present in a corrupt system. Corruption also becomes an obstacle to the
implementation of reforms that seek to establish good governance principles, as
entrenched interests in the civil service and in society try to derail the
reform efforts that threaten to end their privileged positions. Finally, the resulting lack of public
confidence in bureaucratic organisations and in political leaders, also becomes
an obstacle to the attainment of good governance, as civil society withdraws
from the public arena, resulting in a lack of pressure for reform that allows
government institutions to continue operating in the same manner. 1.3 Social
costs It is commonly assumed that the
state has a responsibility to protect the weakest and most vulnerable groups in
society: children, the elderly, the poor, making policies and carrying out
social programs geared at increasing their welfare. The waste of resources resulting from corruption in government
activities has a severe negative impact on these social programs, which are
usually the first to be cut when resources are scarce, leaving these vulnerable
groups unprotected, and increasing their risk of falling into extreme poverty
levels. Even if there are resources
available, in corrupt regimes, these are usually re-directed to more
politically motivated expenditure, such as infrastructure development (Tanzi
and Davoodi, 1997) rather than to education and social welfare programs that
tend to have less opportunities for corrupt practices (Mauro, 1998). This can be clearly seen in many developing
countries, where there are multimillion-dollar roads and bridges leading to
communities that do not have a clean water source, a proper school, or
automobiles to use the new highways, and that gradually deteriorate without
maintenance. A lack of investment in
education and human capital, results in a nation without a qualified work
force, unprepared for the competitive environment of current globalised
economies. Corrupt governments, where patronage
and personal preferences dictate government policies, are also subjected to
deep divisions within society into regional, ethnic, social and economic
groups, where the struggle for power can lead to the confrontation of these
groups outside of the law. In this
scenario, the less powerful members are systematically cast aside from all
policymaking, increasing the inequality existent in the society, and
re-enforcing a culture of what authors such as Husted call “power distance”, or
an acceptability of the unequal distribution of power that gives special
privileges and benefits to the political class (Husted, 2002). Pervasive and institutionalised
corruption has a demoralising effect on citizens, who perceive the state as a
‘black hole’ that swallows all the resources it receives, and where nothing can
be done to change or improve the situation.
The notion of citizenship as a right and a responsibility is
eroded, re-enforcing the predominance
of personal interests over the well-being and goals of society. Institutionalised corruption
engenders a culture of illegality in every aspect of public life. Even when
government agencies are not engaged in corrupt practices, the perception that
the entire system is corrupt results in suspicion and lack of respect for
public authorities. By discrediting all public sector efforts, this perception
can also undermine legitimate opportunities to institute reforms. In highly corrupt systems, the tolerance for
consistent law breaking erodes the rule of law and leads to a loss of
confidence in the legal system, resulting in citizens taking the law into their
own hands. Additionally, endemic corruption in
the public sphere leads to what Williams and Doig call the “failure to lead by
example”, where citizens perceive that if bureaucrats and politicians are
corrupt, there is little reason why they too should not act in a corrupt manner
(Williams and Doig, 2000). This
‘legalisation’ of corruption in both the public and private sectors is truly
the most dangerous enemy of a nation’s development and progress. Chapter 2 - Initiatives
to control corruption Controlling corruption is as complex an issue
as corruption itself, and some authors such as Robert Williams believe that
“eliminating corruption completely from public life is an impossible
dream.”(Williams and Theobald, 2000: x). Corruption takes on different forms in
every country. However, there is some consensus among academics and
policymakers that corrupt activities need to be attacked on several fronts,
taking a systematic approach that prevents corruption from occurring in the
first place, by making it a “high risk and low return undertaking” (Lanseth,
Stapenhurst and Pope, 2000: 61). Anti-corruption strategies are proposed and
supported at the international, regional, national and local levels. Although we are concerned mostly with the
application of anti-corruption initiatives at the national level, it is
important to point out that many of these mechanisms are supported by
international agencies such as the World Bank, OECD, UNDP, Transparency International,
and by regional development agencies in Europe, Asia, Latin America and
Africa. There are two prominent models of controlling
corruption that have come out of these international organisations: the World
Bank and Transparency International’s (TI) “National Integrity System” and the
OECD’s “Ethics Infrastructure”. Both
mechanisms advocate the need for a holist approach that promotes public sector
ethics with the support and participation of the private sector and civil
society, highlighting eight main elements in the fight against corruption. These mechanisms have been used here to
identify five areas of anti-corruption initiatives: public sector reforms,
anti-corruption legislation, economic liberalisation policies, civil
society participation and the role of the private sector, and watchdog
instruments, such as anti-corruption agencies.
Since the latter strategy is the subject of the next chapter, here we
briefly focus on the other four mechanisms and their main components. Table 1: Summary of
Anti-Corruption Mechanisms
Source: Author’s elaboration based on World Bank, Transparency
International and OECD. 2.1
Public
Sector Reforms Public Sector reforms to tackle corruption necessarily include programs
to strengthen public institutions and the creation public sector control,
guidance and management mechanisms that prevent or minimise the opportunities
for corrupt activities (OECD, 1996).
Reform initiatives vary from country to country, but in general, can be
characterised into two main areas: civil service reform and financial
management/budget reform. Underlining
these strategies is the political will, leadership and commitment to carry them
out, which is a fundamental requirement for these reforms to be
successful. 2.1.1
Civil
Service reform. One of the major goals of civil service reform programs is the need to
build a professional civil service with an ethos of public service and high
standards of behaviour. It is
recognised that a well-trained, well-paid and professional civil service is the
basis for effective public institutions.
Reform initiatives therefore include the establishment of clear ethical
codes of conduct that are enforced by civil service regulations and
civil/criminal law. These codes of
conduct should promote accountability and transparency by requiring the
declaration of assets and income of public sector managers, limiting the types
of ‘gifts’ public officers can receive, and regulating the potential conflicts
of interest in the public service. Acknowledging that in many developing countries public sector salaries
are inadequate, and that this leads to pressure to engage in corrupt
activities, reforms also include improvements to the remuneration of civil
servants, establishing fair salary structures and motivating productivity and
efficiency through merit-based promotion and other incentives. Additionally, establishing training programs
geared at institutionalising codes of
conduct and ethical standards are included, along with mechanisms to protect
civil servants from political interference (World Bank, 1997). Other civil service reform initiatives include organisational
restructuring such as separating the operational from the policy arms of
institutions, incorporating performance management, streamlining work processes,
simplifying bureaucratic procedures, increasing the efficacy of reporting
mechanisms, instituting periodical reviews of targets, and reformulating and
redesigning public policies and programs to eliminate those that serve no
purpose and are riddled with corruption.
Eliminating or reducing the monopoly power of bureaucratic institutions
is another reform that tackles the potential for abuse when there is too much
discretionary power and little accountability
(Williams and Doig, 2000). A number of countries have instituted civil service reforms such as
those mentioned above, not only to uncover corrupt activities but also to
prevent them. Among them, for example,
Poland, Korea and Japan have instituted human resources management controls,
such as standardised recruitment policies and disciplinary sanctions for breach
of ethic codes across the civil service, while Spain, Hungary and Mexico have
established processes for detecting and preventing the conflicts of interest of
public sector employees (OECD,
1999). The governments of Uganda,
Tanzania, Ethiopia and Ghana have also begun a series of civil service reform
programs, with the support of the World Bank, to establish codes of conduct and
public service standards, provide leadership training for public servants, and
monitor their declaration of assets to prevent conflicts of interest (Larbi, 2001). In the area of salary improvements, one of the most successful examples
is the case of Singapore, where a strategy of gradual pay rises accompanied by
strict penalties for fraudulent activities has led to a public service that is
considered among the most effective and productive in the world, and where
public sector employees are well recognised and highly regarded (Quah, 1999). Another strategy has been followed by the government of Uganda,
where the non-monetary benefits of civil servants are being monetarised in
order to make their benefits package more real and visible, in the hope that
this will highlight the advantages of being a civil servant and the risk of
losing the job because of unethical behaviour
(Pope, 2000). 2.1.2 Financial Management/ Budget reform
Lack of transparency in the management of state resources, in budgetary
processes and resources allocation, facilitates the possibility for corrupt
activities. Therefore, reforms in this
area are geared at improving financial management systems to serve as tools for
preventing, discovering and punishing fraudulent operations (World Bank, 1997).
A key reform initiative entails making the budget a real, open and
transparent process, where resources are allocated according to the
government’s priority policies, programs and targets, and not as the ‘wish
lists’ of its political supporters.
Effective financial management systems place clear responsibilities for
managing resources, and facilitate the audit of expenditures, reducing the
opportunities for the unofficial use of resources. Internal financial
management controls and external auditing have been implemented successfully in
OECD countries such as Poland, Hungary, Italy, Sweden, Belgium, and Korea, and
in Mexico, Colombia, Chile and Ecuador among developing countries (OECD, 1999;
TI, 2000). Financial reforms are also used
to strengthen key institutions such as tax and revenue departments, customs
agencies and other government departments that are often susceptible to fraud
and corruption (World Bank, 1997). For
example, Mexico introduced reforms in the tax and customs service in an attempt
to reduce corruption and tax evasion, and additionally raise revenues for the
state. Although some of these reforms
were difficult to implement, their success has been recognised by both
government officials and the business sector
(Rose-Ackerman, 1999). Another reform scheme includes improving government procurement
procedures, an area that is especially vulnerable to corrupt practices. In developing countries, government institutions often lack the capacity to manage
contracts and the procurement of goods/services, making the development of a
code of standardised procurement rules and regulations a key initiative. The consolidation and standardisation of
multiple government agency rules into a single public sector procurement code
can help to carry out procurement decisions in an efficient, fair, impartial,
transparent and accountable manner, and can also facilitate the detection and
punishment of corrupt actions (Williams and Doig, 2000). The United States has been particularly
successful in instituting procurement reform, some aspects of which have been
adopted by Japan and Korea, resulting in the dismantling of a cartel of
contractors that regularly colluded to fix prices and tender offers (Rose-Ackerman, 1999). 2.2 Judicial reform and anti-corruption
legislation An effective legal system is crucial for the fight against corruption,
just as an ineffective or politicised
judiciary is the best friend of corruption.
The first step in a judicial reform process is a review of the country’s
legal framework, to uncover weaknesses and inconsistencies in the laws, as well
as out-dated legislation that should be removed from the civil and criminal
codes. Other reforms include
strengthening the independence of the courts by changing the system of
appointments/removal of judges, improving procedures and the administration of
cases, giving the citizens better access to the justice system through
alternative mechanisms, and countering corruption of court staff by
establishing fair pay scales and judicial ethics training (World Bank, 1997). Where the judicial system is honest and respected, it can counter the
activities of a corrupt government, as in the case of Brazil, where former
President Collor de Mello was impeached by Congress and the process upheld and
monitored by the Supreme Court, leading to his dismissal from office (Geddes
and Ribeiro Neto, 1999). In Italy and
in Spain, the independence of judges and magistrates has been central to the
recent anti-corruption prosecutions and investigations, although the people
involved in the scandals were powerful business and government officials
(Rose-Ackerman, 1999). Accountability of the judicial system to the public and to the
government is essential in tackling corruption within the courts. Those responsible for the investigation,
prosecution and management of corruption cases must have the highest moral
standards and be subjected to periodical review of their work, as well as
having clear accountability mechanisms to superiors and an adequate system to
address complaints. Where there is widespread
corruption in the legal system, judicial misconduct can be investigated by a
special prosecutor’s office or by a commission of enquiry set up specifically
for this purpose (Langseth, Stapenhurst and Pope, 2000). The fight against corruption requires specific anti-corruption
legislation that defines public standards of behaviour and enforces them
through investigation and prosecution (OECD, 2000). Anti-corruption legislation should work with the existing civil
service rules, regulations and codes of conduct by clarifying and increasing
the effectiveness of these legal instruments.
In OECD countries such as Belgium, France, Hungary and Italy, for example, bribery is typified as a criminal
offence, while in the Czech Republic, Germany, Ireland and Mexico, there is
additional anti-corruption legislation that prohibits illicit enrichment,
making false statements to mislead officials and interfering with public
processes, including procurement bids.
While most countries have regulations and other secondary legislation
that impose restrictions and sanctions on corrupt activities, Japan and Korea among OECD countries have
unique legislation that sanctions actions such as “deserting public office and
causing a discredit to the public service”
(OECD, 1999: 15). Regardless of how well-written and well-intentioned anti-corruption laws
are, they are completely ineffective without enforcement, making it is
essential that civil and criminal laws are used consistently to enforce and
penalise corrupt activities. The
experience of many developing countries, including Nigeria, suggests that the
main weakness of legal reforms and instruments in combating corruption is that
they ultimately depend on the will and perseverance of political leaders
(Theobald, 1990). Where political power
is used to shield corrupt activities of family, friends or political
supporters, no laws, codes or punishments will have an impact on corruption. 2.3 Economic
liberalisation policies For many developing countries, economic reform is a strategic component
of anti-corruption strategies, in particular for transitional countries, where
the state had a complete monopoly over the means of production, such as the
post-Soviet states. In these countries,
as well as in others with a one party system, or long-standing ruling parties,
such as Mexico, Italy and Japan, both substantial state intervention in the
economy, and weak political competition have facilitated systemic
corruption (Morris, 1991; Heywood,
1997). Economic liberalisation policies include the privatisation of state
assets, deregulation and the expansion of competition in the markets. These economic reforms are supported by
public choice theory[1]
and a neo-liberal economic model, that views corruption as product of the
distortion of the market by the actions of a monopolistic force, the
government. In order to reduce
corruption, it is therefore necessary to reduce this monopoly and let the
market act to promote competition and reduce the opportunities and incentives
for corrupt actions (Williams and
Theobald, 2000). 2.3.1 Privatisation Privatisation of state assets involves the sale and transfer of these
assets to the private sector. By
reducing the discretion of public managers and transferring the responsibility
to the private sector, privatisation increases competition and transparency,
key ingredients in the fight against corruption (World Bank, 1997). Privatisation should be part of a state
reform process that advocates a smaller and more efficient public sector, one that
should concentrate its efforts in the areas where, because of the imperfections
of the market, it must continue to be involved in order to guarantee fairness
and equity in the access of the citizens to basic public goods and services. In competitive markets and areas such as telecommunications, energy
generation and infrastructure development, privatisation of state assets, in
the long run, produces benefits that are indisputable, including better
products and services, wider availability of these services, reduced costs to
the state and the consumers, and additional income to the government that
should allow it to invest in priority areas and programs. In the short term, however, privatisation
efforts can bring additional opportunities for corruption, if, for example,
state assets are sold off in processes that are not as transparent and
competitive as they ought to be, resulting in what Williams calls the “licensed
theft of state property” (Williams, 2000: xii). Additionally, if the transfer does no more than replace a public
monopoly with a private one, and citizens continue to lack access to reliable
and effective services, then the change of ownership is irrelevant, and
probably more detrimental to the welfare of the consumers than if the assets had
stayed in public hands. In many cases, the corruption that is present in privatisation
processes, similar to the corruption present in the contracting of goods and
services, is a direct result of the lack of capacity of the institutions
managing the processes. It is therefore
necessary that these institutions are strengthened, that their negotiation and
management skills are developed, and that an appropriate regulatory framework
for the privatised sector is established prior to the transfer, with a strong
and independent regulatory authority at the forefront of the process. The opportunities for rent-seeking and favouritisms in the privatisation
process can be minimised by actively encouraging the participation of the best
possible providers, making the process publicly known and information widely
available. A transparent and credible
privatisation process, with clear rules, regulations and a solid legal
framework, reduces the opportunities for corruption before, during and after
the transfer, and should be the goal of governments wishing to use the
privatisation of state assets as a tool to increase competition and minimise
corruption. 2.3.2 Deregulation and the
expansion of competition Deregulation, or the removal of ‘artificial’ impediments to free
competition is usually considered alongside privatisation and the expansion of
competition in an effort to use market forces to regulate the production,
distribution and pricing of goods and services, rather than the monopolistic
control of the government (Theobald,
1990). Macro and micro-economic
policies that encourage the strengthening of markets and free competition
restrict the possibility of rent-seeking and the bribing of public officials. Deregulation entails the lowering or elimination of import restrictions
and other barriers to trade, eliminating exchange rate controls, licensing
systems, marketing boards, and other systems of monopoly distribution and
import/export control, eliminating price controls, cutting subsidies to public
and private companies, and reducing burdensome regulations and other barriers
to market entry for new firms. Some of these reforms are fairly easy to
implement and can produce visible results in little time, creating a system
where the state supports rather than governs markets (World Bank, 1997). Another type of competition that can be used as a deterrent to corrupt
activities is competition within the public service. Competitive bureaucracy, as advocated by authors such as
Rose-Ackerman, involves a strategy whereby public officials can provide equal
services to consumers, and these in turn have the choice to purchase these
services or goods from a variety of sources.
This can be applied, for example, to postal services, passports and
documents, and other public benefits available to all consumers. When this is the case, discretion is
reduced, and if an officer solicits a bribe, the consumer can easily go to
another officer for the same service, lowering the possibility for illegal
activities, and increasing the risk to the officer of being caught and losing
his/her post. For competitive
bureaucracy to work, three conditions need to exist: first, that all citizens
be entitled to the benefit; second, that officers do not have the discretion to
give away more benefits than requested; and third, that bureaucratic
hierarchies can easily monitor the activities of their officers and hold them
accountable for the revenue collected (Rose-Ackerman, 1999). 2.3 Civil
society participation and the role of the private sector It is commonly accepted that any successful
anti-corruption strategy requires the active participation of civil society:
organised groups of citizens, non-governmental associations, religious
organisations, the media and the private sector. Public support for anti-corruption initiatives is crucial. This is the reason why it is necessary to
devise strategies to increase awareness of the costs and consequences of
corruption, not only at the macro level of the state, but also what corruption
means to the citizens, and to companies on a daily basis. Strategies aimed at changing the perception of
corruption as a ‘necessary evil’ are required where systemic corruption is
present and citizens are accustomed to paying bribes as a normal
occurrence. These, have included: informative programs that highlight the
citizen’s rights to public services and benefits, and also their duty to
complain and report corrupt behaviour in their dealings with public servants. In Tanzania, for example, a survey to
understand the perceptions of the public about corruption, and also the civil
servants’ idea of what corrupt behaviour entailed, helped to devise campaigns
to change perceptions, combat citizen’s apathy, and understand what prevents
citizens and public officers from reporting corrupt behaviour (Langseth, Stapenhurst and Pope, 2000). The media has a specific responsibility in
informing citizens, reporting corrupt practices or the success of
anti-corruption probes. The work of the
press can be very effective in exposing corruption, as they are particularly
well placed, have the investigative power and control the means of distributing
the information widely, turning issues into public scandals, and generating a
sense of outrage and the need to take action on the part of citizens and also
of the government (Perry, 1997).
Regional media organisations, such as PROBIDAD[2],
a network of journalists who promote free press in the fight against corruption
in Latin America, have been particularly successful in publicising news about
corruption in the region, and are part of a new wave of journalists that
contribute to the fight against corruption by increasing the awareness of its
pervasiveness and its consequences. Reports
of the government’s ‘moral crisis’ can produce reforms. However, they can also
result in individualized purges that distract attention from the real
organisational issues that permit corruption.
It is therefore important that corruption scandals be used to attack,
not only the individuals who are guilty, but also the underlying causes and
incentives. Additionally, the danger of
corruption scandals and subsequent purges is that a corrupt government may use
them to discredit and remove political opponents, put up a false “political
show” of fighting corruption, and in the process, destroy the legitimacy and
credibility of the media as a tool to expose real issues (Theobald, 1990: 139). The private sector is also an important
participant in any anti-corruption strategy, as it is both a victim and an
accomplice in public sector corrupt practices.
Companies that carry out illegal practices in order to do business with
corrupt governments, incur great costs that outweigh the compensation they
receive. It is important to highlight
these costs, and the advantages of operating in a legal environment with
judicial security and clear rules for competition. The private sector should be part of a
coalition of civil society groups, media organisations and reformers within the
government to push for policies that promote integrity in the dealings with the
public sector. Such coalitions already
exist in countries like Ecuador, Colombia and Morocco, where business
associations support and participate in government anti-corruption campaigns,
helping to disseminate policies and making their employees aware of corrupt
practices and how to counter them (OECD, 2000). Additionally, the private sector can use its resources to help
combat corruption, as part of the company’s commitment to social responsibility,
and participate with civil society organisations and the media to help monitor,
expose and denounce corrupt activities of both public institutions and private
organisations (Irene Hors, 2000). Corruption in the public sector does not happen within a vacuum, and in
order to fight it, there must be a concerted effort by all parties involved in
one way or another: the government,
civil society, the media and the private business sector. The anti-corruption strategies at the
national and international level, although fairly new, are already beginning to
bear fruit, with coalitions of businesses, citizens and governments working
together to promote ethics, transparency and a culture of rejection of corrupt
behaviour. Chapter 3 - Comparative typology of
anti-corruption agencies A key component in the World Bank/ TI
National Integrity System and
the OECD’s Ethics Infrastructure is the establishment of anti-corruption bodies
and other watchdog mechanisms in an effort to monitor, investigate, deter and
punish corrupt behaviour.
These bodies include: Ombudsman
Office, Supreme Audit Institutions and Anti-Corruption agencies. Since the main focus of this Chapter is the
role of anti-corruption agencies, using the cases of Hong Kong, Singapore,
Botswana and Ecuador, the discussion of the other watchdog mechanisms is
limited to a brief analysis of their characteristics. The office of Ombudsman, called by
many names in different countries, is specifically set up to receive complaints
from the public regarding the administration and work of public sector
institutions. Once a complaint is
received, the office investigates the allegations and determines if there is
indeed a practice that is illegal, or if the action taken by the public
officials is fraught with inefficiency or mal-administration. The scope of action of the office varies
from country to country. In some cases they have prosecutorial capacity, while
in others their action is limited to passing the information to the appropriate
sanctioning body, the police or judiciary.
The office can also recommend changes in policies and procedures, thus
aiding in the prevention of corrupt practices. Supreme Audit Institutions include
the Auditor General, National Comptroller and other government bodies
responsible for the internal financial management and auditing of government
expenses and revenues. These
institutions are key in guarding the transparent, accountable and efficient use
of financial resources, assuring the legality and integrity of financial
transactions, and providing key information on the government’s management of
its resources. In cases of
mal-administration or corruption, these institutions, depending on their
statutory functions, can refer the cases to the appropriate authorities for
further investigation and punishment if the case requires it. For both the Ombudsman and Supreme Audit
Institutions to be effective in their work, they require independence of
action, adequate budgeting for their activities, freedom to manage their resources
and their staff, and especially protection from the pressures that other
agencies, political parties and civil servants may exert upon them (TI, 2000). In many developing countries, the
need to find alternative mechanisms to the conventional law enforcement
agencies that may be over-extended in their capacity or may themselves be part
of a corrupt system, has resulted in the creation of anti-corruption agencies
as specialised bodies to spearhead anti-corruption strategies. These agencies have been created as the
enforcement bodies of anti-corruption legislation, with specific powers to
detect and deter corruption. The
particular scope of action of these agencies varies from country to country,
but in general, these agencies have the authority to receive, investigate and
detect corrupt activity, and some have prosecutorial powers. Additionally,
anti-corruption agencies are usually responsible for creating awareness
campaigns, and mobilising and educating citizens about public sector ethics and
corruption. The
discussion on the effectiveness of anti-corruption agencies has spurred quite a
debate among academics and government reformers (Doig, 1995;Quah, 1999; Pope
1999; TI, 2000). What then, are the
characteristics of anti-corruption agencies that have proven to be successful
in their fight against corruption, and conversely, what characteristics make
the work of anti-corruption agencies difficult? Four agencies: Hong
Kong’s Independent Commission Against Corruption (ICAC), Singapore’s Corrupt
Practices Investigation Bureau (CPIB), Botswana’s Directorate of Corruption and
Economic Crime (DCEC) and Ecuador’s Civic Commission to Control Corruption
(CCCC) were examined in order to answer this question. For each of these agencies, we looked at
various characteristics: what
conditions gave rise to their creation, their legal framework, scope of
action, staffing, budget, degree of independence, internal structure, and
community relations. The characteristics of
each agency are summarised in Table 2. Table 2 Anti-Corruption agencies: Summary of Findings
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