Among other activities, Transparency International (TI) publishes every year a corruption perception ranking of different countries. For the last couple of years Nigeria has topped the ranking; India is perceived to be the eighth most corrupt country in the world, behind Russia, Indonesia and a clutch of Latin American countries. Our Pakistan hating patriots would be happy to note that our neighbour is perceived by TI to be the fifth most corrupt country in the world.
The traditional reluctance of the International Monetary Fund and the World Bank to tackle the issue of corruption head on was due to the belief that corruption is a political, not economic, issue. And, their charters prohibit interference in member countries political matters. Mr Eigen and Transparency International think otherwise. For one thing, the dividing line between politics and economics is thin. More directly, Mr Eigen argues that corruption often leads to misdirected investments as it influences decision-makers to favour areas where their take can be higher, over those more likely to benefit the economy arms purchases over schools, for example.
Mr Eigens and TIs efforts seem to be bearing fruit. The first result was the adoption by the IMFs Interim Committee, in September 1996, of a declaration titled Partnership for Sustainable Growth. This emphasised promoting good governance in all its aspects, including ensuring the rule of law, improving the efficiency and accountability of the public sector, and tackling corruption as an essential element of a framework within which economies can prosper.
The first country to be hit by the new focus on corruption was Kenya. Last month, the IMF suspended disbursements under a $ 220 million line of credit. The proximate cause was the refusal of the Kenyan authorities to reinstate the head of customs and excise a key bureaucrat trying to fight corruption in indirect tax administration who had been removed for his efforts. The World Bank has since followed suit and suspended a structural adjustment credit of $ 71.6 million. The Kenyan shilling has collapsed from 54 to a dollar to 71.5 and there are apprehensions that Kenya may start defaulting on its international debt obligations before the end of the year its reserves are down to $ 800 mn. While Kenya has promised to revamp its administration to eliminate corruption, and re-opened the dialogue with the IMF, the latter wants to see action, not mere promises, before releasing assistance.
The Bretton Woods Twins actions in Kenya certainly open a new chapter in their dealings with the developing world: Kenya is hardly likely to be the last country to be hit on the issue of corruption. In a way, what the IMF and World Bank have done reflects the change in industrial countries attitude towards corruption in the post-cold war era.
Earlier, the U.S. and its allies were quite happy to tolerate the most corrupt third world leaders so long as they proclaimed their anti-communist credentials. The recently dead, and not much lamented, Mobutu Sese Seko of Zaire was probably the most notorious example of corrupt dictators happily welcomed by western democracies: he is estimated to have looted billions of dollars from his poor country.
If the end of the cold war has made such marriages of convenience unnecessary, there is also a less-than-altruistic reason for the anti-corruption drive as far as the US is concerned. The anti-corruption initiative is manifesting itself not only in IMF/World Bank policies, but equally in the Organisation for Economic Cooperation and Development (OECD, the 28-member rich countries club). The US is pushing OECD to get all its members to pass laws outlawing bribery of foreign government officials in pursuit of commercial contracts, on the lines of its own 20-year-old Foreign Corrupt Practices Act.
In most other OECD countries, while bribing of home government officials is a punishable offence, such rectitude is not extended to officials, or politicians, in foreign countries. Indeed, in many of them, bribes paid to foreign officials are allowed as a legitimate, tax deductible business expense. The US would like to change that and create a more level playing field. It estimates that it loses anywhere from $ 40 billion to $ 100 billion of international contracts every year because its companies are barred from paying bribes under the FCPA; their competitors face no such inhibitions, and use corruption and bribery as powerful marketing tools. And, FCPA has teeth, as Lockheed (in Egypt) and GE (in Israel) found to their cost.
In one of her more famous utterances, Mrs Gandhi characterised corruption as an international phenomenon. Increasingly, anti-corruption pressures are also getting internationalised.
