DEVELOPMENT-FINLAND: The Battle Against Corruption

By IPS Correspondents Reprint | | Print |

Linus Atarah

HELSINKI, Mar 3 2000 (IPS) - Mention the word ‘corruption’ and one immediately paints a picture of military dictators and dirty governments.

However corruption is increasingly becoming a global phenomenon.

The German Christian Democratic Union (CDU), which ruled the country for 16 years until 1998, has been rocked by crisis due to allegations of misuse of funds by its leadership.

How to fight corruption in developing countries was the theme of a one-day seminar held here this week. The seminar was organised by the Department for International Development Co- operation of the Ministry for Foreign Affairs.

Hansjorg Elshorst, managing director of Transparency International told the seminar that the most direct harmful effect of corruption was that projects tended to be selected on the basis of financial gain rather than importance.

It also encouraged large scale and over-priced projects that were generally of low quality. Linked to this was the fact that large and oft time useless investments were preferred over small scale and possibly more useful ones.

Devendra Raj Panday, of Transparency International and a former finance minister of Nepal, observed that pervasive corruption results in apathy, cynicism in people and extends to the whole decision-making system.

“This is because people feel powerless to take any action and corruption has risen from personal greed to an institutional scourge,” he said.

One solution proposed by Panday, is to build a democratic political systems in the developing countries, because according to him, democracy helps check corruption.

However, trying to foster democracy runs into a paradox. “A democratic system involves having viable political parties who, by necessity, need funds.

“But in a system where corruption is so endemic, it is difficult to organise a fair fund-raising activity without engaging in paying or receiving bribes,” he said.

One way around this paradox was to inject a sense of community responsibility in people and emphasise the importance of social values such as dignity of labour.

Transparency International is an global non-governmental organisation, based in Berlin, Germany, whose main activity is focused on fighting global corruption.

On its latest survey of global corruption, Finland ranked second to Denmark as the least corrupt country in the world.

Almost all the countries at the bottom of the table are developing countries. For instance, Indonesia, Nigeria and Cameroon occupy the bottom of the league as the most corrupt countries, according to the Transparency’s index.

Development co-operation is an effective tool in fighting corruption, but according to Hansjorg Elshorst, this is a multi- front battle.

For it to be sustainable there is the need to change the conditions in the industrialised countries. For instance, by criminalising corruption by using legislation.

“You cannot make two worlds, one clean world and a dirty one, when those who are in the clean world are actively promoting and taking part in making the other world dirty,” he said.

Even though not underestimating the extent of corruption in the south, Elshorst said he is convinced that a large part of the corruption that is going on is promoted by northern companies with tacit approval of their governments.

For instance, he said, until Transparency International intervened, bribes were an accepted tax reduction practice in Germany.

That means, amounts of money German companies used in paying bribes to foreign officials could be reduced from their taxes.

“If you promote a business culture that corrupting foreign officials is acceptable, then you shouldn’t express surprise that the same people back in Germany think that it is fine.”

Many industrialised countries have instituted various measures to fight this aspect of corruption. The United States passed a Foreign Corruption Act in 1977 that makes it criminal for US companies to give bribes in business transactions with foreign companies.

The practice has been picked up in the OECD countries that have began ratifying a convention against the bribery of foreign public officials.

The convention allows for the prosecution of southern officials back in their own countries, even if they are suspected of corrupt practices in a foreign country.

Sanctions can play a role in reducing the level of corruption in developing countries, but it is limited.

Sanctions are a blunt instrument rather, what is needed is internal pressure from civil society and the media, says John Githongo of Kenya’s chapter of Transparency International.

He said there are three major types of corruption. The first is small-scale corruption which exists at the lower levels of the power hierarchy and involves small sums of money.

Grand corruption, on the other hand, is what goes on at the medium level and involves relatively large sums of money. But the most damaging of all to the economies of the developing countries is what he calls ‘looting’.

Looting involves huge sums of money – millions of dollars -that is used to set up a project with the intention of not accomplishing it but diverting the funds for other purposes.

He cited the example of a road construction project where the huge sums of money are used to fund ruling political parties, or simply siphoned off to a Swiss bank account.

To fight corruption, in Africa and other developing countries, Githongo said industrialised countries need to support the few leaders who have showed a commitment to the eradication of the problem.

“Instead of saying that the country has no problem with corruption, what needs to be done is reinforce the efforts with more support.”

Globalisation, he says, is a philosophy translating into action. “It is acceptable to use any method to become rich. An overemphasis on shareholder values over all other things is part of this phenomenon,” he adds.

Jeremy Gould a researcher with the University of Helsinki, said strengthening state institutions, the rule of law and the criminal justice system are the most effective means of fighting corruption.

However, he said, globalisation has resulted in a minimising of the role of the state and that has turned out to be a windfall for corrupt practices in countries where state structures have been weak.