POLITICS: Asian Bank Plans Crack Down on Corruption

By Thalif Deen Reprint | | Print |

Thalif Deen

UNITED NATIONS, Jul 20 1998 (IPS) - The joke currently doing the rounds in Southeast Asia is that Indonesia is the only country in the world where you can obtain a receipt for giving a bribe.

Long regarded as one of the world’s most corrupt nations, Indonesia has been labelled a “kleptocracy” – a system of government where leaders have enriched themselves by brazenly stealing from the people. Last week the Manila-based Asian Development Bank (ADB), which approved 9.1 billion dollars in loans to nations in the region last year, initiated a campaign to attack corruption.

One of the countries that will come under heavy ADB scrutiny is Indonesia. and a pending 1.5 billion dollar loan is to be linked to “stringest auditing requirements as well as other measures to improve accountability and transparency.” The ADB has given Indonesia an August deadline to finalise anti- corruption legislation that will outlaw money laundering.

“We are very serious and we mean business,” says Linda Tsao Yang the ADB’s U.S. Executive Director. “We want very specifically to link progress on anti-corruption to overall lending levels to a country, and within a country to a specfic project.”

Arguing that not all Asian countries are corrupt, the ADB has praised both Singapore and Hong Kong for their aggressive fight against corruption over the years. It’s a different story in Indonesia. After a visit to Jakarta recently, a New York Times reporter wrote how tourists can glimpse the corruption the moment they step out of the Jakarta airport. “The taxi you hop in is owned by one of Suharto’s sons, the toll road is owned by the daughter, and one of the hotels you check in is invariably owned by another son,” he said.

Under ousted President Suharto, the country virtually was owned and run by his extended family as a big thriving enterprise reminiscent of the Italian Mafia. Forbes magazine lists Suharto as the world’s sixth wealthiest person, with his family fortune estimated at more than 30 billion dollars: the average annual Gross Domestic Product (GDP) of Bangladesh and more than twice that of Sri Lanka.

Under pressure from the international community, Indonesia’s new President B.J. Habibie is trying to make a clean break. But sceptics are wondering how far he will go to root out corruption entrenched in every layer of society.

In its annual rankings, the Berlin-based Transparency International (TI) has retained at least three countries – Indonesia, Pakistan and Nigeria – among the world’s top 10 corrupt nations, year in and year out. Last year’s top 10 also included Russia, India, China, the Philippines, Thailand, South Korea and Malaysia.

When Pakistan was downgraded from number one to number two in the annual rankings, the Pakistanis were overjoyed. The joke was that the Pakistanis had bribed their way to avoid the dubious distinction of heading the list.

The late Mobutu Sese Seko of the former Zaire (now Democratic Republic of the Congo) was rated one of the world’s most corrupt among world leaders. At a press conference, he was asked whether it was true he was the second wealthiest political leader in the world. A seemingly outraged Mobutu shouted back: “It’s a lie. It’s a lie,’ and then added with a straight face, “I am only the fourth richest.”

Frank Vogl, Vice President of Transparency International, says that many bribes paid in the course of international commerce originate in firms headquartered in the same industrial countries whose governments are now, more than ever, calling for new anti- corruption campaigns in developing nations.

The argument that corruption is mostly pervasive in developing nations was refuted at the U.N. Crime Congress in Cairo last year.

“Corruption was not limited to Third World countries but often had its roots in the entrepreneurial practices in liberal democracies,” Antonio di Pietro, an Italian magistrate argued. “Corruption is like a coin,” he said, “It has two sides: one side is the corruptor and the other the corrupted.”

Giving money as a bribe to a civil servant in a country in Africa by an entreprenuer in an advanced industrial country was the moral and ethical responsibility of liberal democracies, he said. He asked how it was that advanced countries never prosecuted such people?

A discussion paper put out by the U.N. Development Programme (UNDP) last year identified several industrial nations of condoning bribery in granting huge contracts in their own countries.

In Germany, for example, bribes were paid to win multi-million dollars contracts to build a new terminal at the Frankfurt airport. In France, 14 persons were charged with corruption in connection with contracts for computers. In Belgium, senior figures in the Socialist Party are believed to have accepted 1.9 million dollars in bribes in connection with a defence contract.

Conscious of the fact that the price of corruption comes out of the pockets of consumers, the United Nations, the World Bank and the Paris-based Organization for Economic Cooperation and Development (OECD) have intensified their efforts to root out bribery worldwide. The World Bank says that corruption is generally linked with activities of the state – in particular, its monopoly and its discretionary power – which provide a fertile ground for corruption.

The United Nations has approved a declaration urging the 185 member states to criminalise all acts of bribery in international transactions and deny tax deductibility for bribes, as currently practised in some Western nations.

Under intense U.S. pressure, the OECD – described as a club of industrial nations – committed its members to rewrite tax rules that for long have encouraged bribery of foreign officials. The new rules, when enacted, would make illegal payoffs ineligible for tax deductions.

“This is a sea change, a very important step in breaking the international chain of corruption,” says David Aaron, the U.S. representative in OECD. “It takes governments out of the business of subsidising corruption by giving tax breaks for bribery.”