According to the Global Corruption Barometer 2009 prepared by Transparency International, http://www.transparency.org/publications/gcr/gcr_2009#press; also see http://www.transparency.org/news_room/in_focus/2009/gcr2009#dnld:
• Countries such as Brazil, China and India already boast some of the world’s largest markets, and their companies play an increasingly active and important role in global business. As this report documents, encouraging efforts are under way to update many aspects of regulatory and governance standards in these countries. Nevertheless, these efforts need to be deepened and extended beyond the ‘first in class’ companies. Firms from India, China and Brazil are regarded by their peers as among the most corrupt when doing business abroad.
• Corruption is not a marginal issue but a central concern for business – in developing, emerging and industrialised countries alike. It affects multinationals in the United States and Europe. It touches manufacturing powerhouses in China, information technology service providers in India, farmers in Latin America and extractive industries in Africa, central Asia and the Middle East. It is an issue for large-scale conglomerates, family-owned businesses and individual entrepreneurs. In developing and transition countries alone, corrupt politicians and government officials receive bribes believed to total some US$20 to 40 billion annually – the equivalent of around 20 to 40 per cent of official development assistance. Moreover, the problem appears to be growing.
• In countries such as Egypt, India, Indonesia, Morocco, Nigeria and Pakistan, more than 60 per cent of the business executives polled in the TI survey reported having been solicited for bribe payments from key institutions in government.
• In India, for example, a review of several multimillion-dollar, World-Bank-funded projects in the health sector found multiple incidences of possible fraud, corruption and collusion of suppliers. As part of a US$114 million anti-malaria project in India, four European chemical companies were alleged to have formed a cartel in 1999 to submit identical bids to supply pyrethroid insecticides, equally divide the contracts among themselves, inflate prices and limit competition from companies submitting lower bids.
• Countries such as Brazil, Japan and South Korea have stepped up their cartel prosecution activities. China’s new antimonopoly law entered into force in August 2008, and India is expected to follow suit with a stronger competition law in 2009.
• Although the Competition Act was enacted by parliament in 2002, it remained largely a non-starter because of court cases filed by lawyers, mainly over the composition of the Competition Commission. The Supreme Court of India stayed the implementation of the provisions of the act in January 2005 and asked the government to amend the law. The government, after much deliberation and delay, amended the Competition Act in August 2007. With the passage of the amendments by parliament, it is expected that the commission will become fully operational by the end of 2008 or early 2009. In addition to its advocacy role, which it already performs the Competition Commission will be able to check corporate malpractice and abuse, the misuse of dominant positions and cartelisation. It will also have the power to enquire into mergers and acquisitions and prevent the formulation of conglomerates to the detriment of consumers. The act will assist the government in probing cartel-like behaviour.
• As the rise of Infosys in India shows, asserting corporate integrity in a high-corruption environment is both feasible and good business. Infosys has grown from a small software company in 1981 to a multinational information technology service provider while steering clear of corruption in a setting infamous for red tape and high corruption risks.
• A key challenge for the future is how to expand initiatives such as the Extractive Industries Transparency Initiative (EITI) into a more comprehensive road map that will help countries to manage their natural resource revenues better and more fairly, starting from the award of concessions through to the drawing up of transparent public budgets. Such efforts would need the support of the wider international community, which means a diplomatic push to involve China and India too.
• At the national level, business code of ethics are on the books in about three-quarters of the largest 1,000 companies in South Africa, the 800 largest companies in India and the largest 100 companies in the Netherlands. In the United States, 57 per cent of companies with a workforce of at least 200 people have a code.
• As the Global Corruption Report 2008 demonstrates, lower-level officials in India’s water sector were found to be buying their positions and recouping these ‘investments’ by extracting extra payments from the clients they were supposed to serve. Similarly, higher-level officials have to share with their superiors some of the rents they extract from selling jobs and turning a blind eye to corrupt behaviour on the ground.
• Stock exchanges in many other countries have been much slower in addressing conflicts of interests. India’s regulator proposed Chinese-wall-like rules for analysts only in 2008
• Thirty per cent of respondents in Transparency International’s 2008 Bribe Payers Index indicated that companies from India are likely to bribe low-level public officials in order to ‘speed things up’.
• The Securities and Exchange Board of India is tackling fraud and corruption with consent orders: companies can pay monetary fines for financial crimes rather than going through drawn out litigation. There are concerns, however, that consent orders are being given too freely, with serious crimes being excused for as little as US $2000.
• Two major securities scams have been publicised: the Harshad Mehta securities fraud and the Ketan Parekh scam. Both scams were quite simple: brokers pushed up the prices of selected shares through artifi cial trade to attract retail investors and then suddenly withdrew from the trade. In several cases the share prices of bogus or paper companies were raised to very high levels. Once the scandals had been exposed the share prices collapsed, resulting in huge losses to investors.
• The first stock index for Environmental, Social and Governance issues was established in 2008.
• NGOs have also taken advantage of high-profile situations to push the anti-corruption agenda, with considerable success. For instance, the remarkable revelations of far-reaching arms corruption on the part of the Indian government in 2001 by the Tehelka internet group of journalists was, over time, to contribute to efforts by NGOs to promote significant domestic reforms in arms procurement.
• In 2008 the country’s central bank, the Reserve Bank of India (RBI), published guidelines for recovery agents. They prescribe a code of conduct and procedure for recovery agents’ training, and are intended to ensure that banks refrain from hiring disreputable people to recover debts and to prevent bad practice in the offering and management of loans by banks. They require the banks to follow the procedure prescribed by the law to recover loans and warn that, if the banks fail to mend their ways, the RBI as regulator will take action against the erring banks.
• With increased globalisation and the opening of markets in China, illegal trading activities are also fl ourishing across the northern border with China. Not only are low-cost Chinese goods smuggled into Nepal and then India, contraband items are smuggled into China from Nepal.
Transparency International’s (TI) 2009 Global Corruption Barometer (the Barometer) presents the main findings of a public opinion survey that explores the general public’s views of corruption, as well as experiences of bribery around the world. It assesses the extent to which key institutions and public services are perceived to be corrupt, measures citizens’ views on government efforts to fight corruption, and this year, for the first time, includes questions about the level of state capture and people’s willingness to pay a premium for clean corporate behaviour.
The Barometer is designed to complement the expert opinions on public sector corruption provided by TI’s Corruption Perceptions Index and the views of senior business executives on international bribery flows reflected in TI’s Bribe Payers Index. It also aims to provide information on trends in public perceptions of corruption. Now in its sixth edition, the Barometer enables assessments of change over time; in terms of the institutions deemed to be most corrupt, the effectiveness of governments’ efforts to fight corruption, and the proportion of citizens paying bribes. The 2009 Barometer interviewed 73,132 people in 69 countries and territories between October 2008 and February 2009. The main findings are as follows:
Corruption in and by the private sector is of growing concern to the general public
• The private sector is perceived to be corrupt by half of those interviewed: a notable increase of eight percentage points compared to five years ago.
Political parties and the civil service are perceived on average to be the most corrupt sectors around the world
• Globally, respondents perceived political parties as the single most corrupt domestic institution, followed closely by the civil service.
Experience of petty bribery is reported to be growing in some parts of the world – with the police the most likely recipients of bribes
• More than 1 in 10 people interviewed reported having paid a bribe in the previous 12 months, reflecting reported levels of bribery similar to those captured in the 2005 Barometer. For 4 in 10 respondents who paid bribes, payments amounted, on average, to around 10 per cent of their annual income.
Ordinary people do not feel empowered to speak out about corruption
• The general public does not routinely use formal channels to lodge bribery-related complaints: three quarters of people who reported paying bribes did not file a formal complaint.
Governments are considered to be ineffective in the fight against corruption – a view that has remained worryingly consistent in most countries over time
• Overall, the general public consider their governments’ efforts to tackle corruption to be ineffective. Only 31 per cent perceived them as effective compared to the 56 per cent that viewed government anti-corruption measures to be ineffective.
• The Open Budget Survey 2008 finds that, overall, the state of budget transparency around the world is deplorable. In most of the countries surveyed the public does not have access to the comprehensive and timely information needed to participate meaningfully in the budget process and to hold government to account. This lack of transparency encourages inappropriate, wasteful, and corrupt spending and—because it shuts the public out of decision-making—reduces the legitimacy and impact of anti-poverty initiatives.
• The Open Budget Survey provides government officials, legislators, development practitioners, civil society organizations, journalists, and researchers with an independent, comparative measure of government budget transparency in 85 countries around the world. The Survey report also suggests reforms that countries might adopt to improve budget transparency, increase public participation, and strengthen institutions of accountability.
• Only five countries of the 85 surveyed—France, New Zealand, South Africa, the United Kingdom, and the United States—make extensive information publicly available as required by generally accepted good public financial management practices. A further 12 countries provide substantial information to the public.
• The remaining 68 countries score poorly on the OBI. The 25 countries that provide scant or no budget information include low-income countries like Cambodia, the Democratic Republic of Congo, Nicaragua, and the Kyrgyz Republic, as well as several middle- and high-income countries, such as China, Nigeria, and Saudi Arabia.
• In 23 of the 25 poorest performing countries, the public cannot even see the Executive’s Budget Proposal before it is approved by the legislature.
• Almost all countries publish the annual budget after it is approved by the legislature. The exceptions are China, Equatorial Guinea, Saudi Arabia, and Sudan. Most countries provide much less information during the drafting, execution, and auditing stages of the budget process. This prevents the public from having input on overarching policies and priorities, improving value for money, and curbing corruption.
• In Croatia, Kenya, Nepal, and Sri Lanka, in particular, significant improvements either were influenced by the activities of civil society groups or have created opportunities for greater civil society interventions. Important improvements in budget transparency were also documented in Bulgaria, Egypt, Georgia, and Papua New Guinea.
• Lower income countries Peru and Sri Lanka both provide their citizens with a significant amount of budget information, and Ghana and Uganda score above average among aid-dependent countries.
• It is thus encouraging that a small but growing number of countries surveyed (17 out of 85) produce Citizens Budgets. These include high-income countries like Norway and New Zealand, as well as low- and middle-income countries like Ghana, India, and El Salvador.
• Some of the smaller improvements in country performance are also important. For example, a number of countries, including Ghana and Norway, have started publishing a Citizens Budget. Other countries, such as El Salvador, Uganda, and Vietnam, are making more information available during budget execution. Morocco and Russia are now including figures on past expenditures in their budget documents, making it easier to track trends in resource allocation and spending. Finally, the governments of Ecuador and India, among others, have improved their budget timetables and are publishing more information on extra-budgetary items.
• Civil society organizations (CSOs) specializing in budget issues help to build legislatures’ capacity in several ways. For example, CSOs in India, Mexico, Croatia, and elsewhere prepare accessible summaries and guides to their countries national budgets. Upon receiving the first CSO-produced guide to the Croatian budget, one member of the legislature exclaimed to the Deputy Minister of Finance, “Now we don’t have to (only) listen to you anymore, we have (our own) guide!”
• Delays in releasing Audit Reports reduce the opportunities for civil society to use audit information to advocate for improvements in government performance. Unfortunately, 48 countries do not publish Audit Reports within the recommended timeframe. For instance, Mexico, India, and Romania all release their Audit Reports more than 12 months after the end of the fiscal year.
• In India, the Mazdoor Kisan Shakti Sangathan (MKSS) fought to obtain access to official records on public works programs and then organized public hearings where local communities audited this information, exposing fraud and other forms of corruption. MKSS’s work contributed to the enactment of a national Freedom of Information law, as well as the National Rural Employment Guarantee Scheme, in India.
• The International Budget Partnership (IBP) and the Institute for Development Studies at Sussex University in the U.K. recently carried out six case studies of budget-focused organizations. The studies covered organizations working in Brazil, Croatia, India, Mexico, South Africa, and Uganda to interpret and disseminate budget information. The work of these organizations enabled broader civil society engagement and a stronger role for the legislature in the budget process. In four of the case studies civil society budget work also had a direct impact on improving budget systems, pro-poor allocations, and the quality of expenditures.
State of the affairs 2007
ïƒ˜ This round of TII-CMS India Corruption Study 2007 confirms a wide gap between perception and actual experience about corruption in public services – irrespective of recent measures to improve service delivery and curb corruption.
ïƒ˜ About one-third of BPL households, across the country paid bribes in the last one year to avail one or more of the 11 public services covered in the study, which shows the poor are not spared even in the case of targeted programmes.
ïƒ˜ In the last couple of years, several initiatives have been taken in the country to improve delivery of public services. Citizens’ Charters, RTI Act, Social Audit, e-governance measures including the massive computerization, etc. are among some of these. The benefits of these measures have not substantially percolated down to the poor as yet.
ïƒ˜ The percentage of BPL households who paid bribes, out of those who are availing the services covered in the last one year ranges from 3.4 percent in the case of School Education to as high as 48 percent in the case of Police Service.
ïƒ˜ About four percent of BPL households used “a contact” in the previous year to avail such services as PDS, School Education, Banking Services; and as high as 10 percent in the case of Housing and Land Records/Registration.
ïƒ˜ Nearly two percent of BPL households could not avail PDS, School Education and Electricity, as they could not pay bribe or had no contact or influence to get access to services. In fact, in the last one year, more than four percent of BPL households could not avail Land Records/Registration, NREGS, Housing and Police Service for the same reason.
ïƒ˜ The fact that most of the poor who claimed to have paid bribe - did so directly to one or the other functionary within the delivery set up, is a revelation, particularly because quite often the reasons for repeat visits were absence of staff and/or their apathetic attitude. This lends strength to the perception that the poor are not a priority even in the case of some of the programmes designed for them.
ïƒ˜ Procedural delays are the other reasons that make BPL households vulnerable to paying bribe or depriving them from availing the service. There is hardly any evidence in this study that IT or e-governance initiatives taken on a large scale in different States, involving some of the services, made much difference in the levels of perception about corruption or even actual experience.
ïƒ˜ Police and Land Records/ Registration services stand out for their “alarming level” of corruption involving BPL households among the 11 services covered in this study. Whereas, School Education (up to class XII) and Banking Service (including postal service) comes out with “moderate level” of corruption, this also implies that even these services are not free from corruption.
ïƒ˜ As regards the relative position of States on corruption in availing the 11 public services by BPL households, Assam, J & K, Bihar, Madhya Pradesh and Uttar Pradesh have an “alarming level” of corruption, while Himachal Pradesh, Uttaranchal, Delhi and Punjab have “moderate level”
ïƒ˜ The important fact is that the poor deserve better attention in getting access to public services particularly some of the targeted programmes meant specially for them, than they seem to be getting now.
ïƒ˜ Despite claims and some initiatives for redressal of complaints in services like Police, they have not helped either in reducing perceptions nor experiences of BPL households. However, in the case of Schools and Banking Services some dent seems to have been made.
ïƒ˜ Overall, in the case of Police, Land Records Registration and Housing Services in particular, a higher percentage of BPL households who tried to avail these services found that corruption had increased in the last one year.
ïƒ˜ The percent of households with BPL income not having a “BPL card” was relatively high in North-East states, West Bengal and Delhi.
ïƒ˜ The study estimated that Rs. 8,830 million, in all, was paid as bribe by BPL households in the last one year, in availing 11 public services. It is estimated that the poorest households of our country paid Rs. 2,148 million to police as bribe.