UK’s role in promoting corruption, cronyism and graft

The UK Select Committee on International Development is currently holding an inquiry into the causes of corruption and the role of governmental agencies, multilateral development banks and the private sector in promoting it.

The UK Select Committee on International Development is currently holding an inquiry into the causes of corruption and the role of governmental agencies, multilateral development banks and the private sector in promoting it. The Corner House, a UK based research and solidarity group, has prepared a submission to the Committee, focusing on the institutional failures within the World Bank and the UK Export Credits Guarantees Department (ECGD) which encourage corruption. The summary is appended below.

Summary and recommendations

1. Corruption – broadly defined as ‘the abuse of public or private office for personal gain’ – has become a major international concern. Its impacts on development, democratic accountability and Third World debt are profound, with the burden falling most heavily on poorer sections of society (paras 9-19).

2. Surveys reveal widespread acceptance of bribery among European companies operating in the developing world. Anti-corruption drives by popular movements and governments in the South have exposed many instances of alleged corruption involving UK companies, some of which are now before the courts.

3. In many cases, these corruption allegations relate to companies or projects which have received tax-payer support through UK-backed agencies such as the World Bank (paras 20-56), the UK Export Credits Guarantees Department (ECGD) (paras 57-84) and the Department for International Development (DfID). While making no judgement on individual cases, The Corner House believes that the overall evidence of public monies being mismanaged or abused is sufficiently solid to merit investigation by the UK National Audit Office.

4. The Corner House also believes that there is an urgent need to shift the focus of anti-corruption measures. In seeking to explain corruption, most commentators tend to dwell on developing countries, not industrialised ones, on the bribe-takers, not the bribe givers. The intimate connection between corruption in the South and the institutional culture, bureaucratic practices and priorities of public and private institutions in the North is thus effectively obscured.

5. Indeed, if corruption is growing throughout the world, it is in large part fueled by policies and programmes that are being pushed by Western governments and which are further underwritten by poor governance and misdirected funds in the North.

6. The Corner House urges the Committee to direct its investigation towards examining these structural causes of corruption. Adopting this approach, it believes, may encourage policy makers:

To focus less on the perceived “lack of political will” to tackle corruption and more on those vested interests that daily generate immense political will to block investigations when they are initiated and to undermine anti-corruption drives; To look not only at how regulations could be improved but also at the daily institutional practices that actively encourage the flouting of existing development guidelines and anti-corruption regulations; and To look not only at ways of opening up decision-making to public participation and scrutiny but also at the institutionalized racism that assumes the Third World to be inherently corrupt and corruptible and which thereby underwrites bribery even where nominally accountable procedures are in place.

7. More specifically, The Corner House would urge the Committee to examine the links between the growth of corruption and UK public and private sector practices. In particular, it would draw the Committee’s attention to:

The continuing failure of UK-backed Multilateral Development Banks to address an institutional culture that rewards the approval of loans over the rigorous scrutiny of their impacts, including governance impacts (paras 50-55);

The failure of UK agencies such as the Export Credits Guarantee Department (ECGD) to introduce the binding sanctions and rigorous investigative procedures necessary to deter and punish corruption, for example through the blacklisting of companies involved in corrupt practices (paras 62-81); Deficiencies in UK company law and private sector corporate governance that encourage corruption, for example, by failing to require the disclosure of information on corruption allegations to shareholders (paras 92-98); The reluctance of the UK regulatory authorities to investigate allegations of corruption and the failure of the UK government to bring prosecutions on the basis of existing anti-corruption legislation (paras 77-81 and 100-102);

The imposition by the World Bank, the International Monetary Fund and bilateral aid agencies of rapid privatisation programmes which, in the absence of an appropriate legal and institutional framework, have encouraged a ‘fire sale’ approach to the sale of public enterprises which has in turn provided fertile ground for cronyism and corruption (paras 103-106).

For the full text of the submission, please contact Nick Hildyard

Nick Hildyard, The Corner House, October 23, 2000

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