Cost of corruption is $1 trillion: WB

Contrary to common perception, corruption is rampant not only in developing but also in developed countries, with more than one trillion dollars being paid in bribes each year across the globe, according to the World Bank.

“This is not simply a developing country problem. This one trillion dollars figure is an estimate of actual bribes paid worldwide in both rich and developing countries,” World Bank Institute (WBI) Governance Director Daniel Kaufmann has said.

The figure, calculated using 2001-02 economic data, compares with an estimated size of the world economy at that time of just over 30 trillion dollars and does not include embezzlement of public funds or theft of public assets.

Kaufmann noted that a calculation of the total amounts of corrupt transactions is only part of the overall costs of corruption, which constitutes a major obstacle to reducing poverty, inequality and infant mortality in emerging economies.

WBI research shows that countries that tackle corruption and improve their rule of law can increase their national incomes by as much as four times in the long term, and child mortality can fall as much as 75 per cent. “We have found what we label as the 400 per cent governance dividend,” he said.

A country with an per capita income of 2000 dollars that addresses corruption, improves its governance and the rule of law could expect to see its income rise to 8000 dollars in the long run.

Not surprisingly, tackling corruption and governance can provide a major boost to a developing country, according to Kaufmann.

There are many successes at the project level that also illustrate what is feasible, such as the citizen’s report card in Bangalore, India, which has resulted in an increase in citizen satisfaction with local agencies and a decline in corruption, or expenditure tracking surveys in Uganda, which led to a reduction in budgetary leakages away from local schools, WBI said.

Countries like Botswana, Chile, Costa Rica and Slovenia, which have curtailed corruption to levels comparable with those of many wealthy industrialized countries, challenge the popular notion that a country needs to become rich in order to address corruption.

Research utilising a comprehensive governance database of 200 countries shows, in fact, that higher national incomes per capita result from improving governance, rule of law and corruption control.

In fighting corruption the main challenge is getting enormous political resolve, by national governments, the private sector, including multinationals, and international bodies.

The World Bank, which until the mid-1990s had been constrained from assisting countries fight corruption, significantly stepped up its efforts under current President James Wolfensohn, he said.

Through projects in about 100 countries, the Bank is assisting in this area. The Bank is also following ‘zero tolerance’ policy on corruption internally and has an aggressive approach to minimize corruption on Bank-funded projects. The Bank publicly names companies found to have been engaged in corrupt practices in its projects.

So far, more than 100 firms have been debarred by the World Bank., August 1, 2004

Categories: Corruption, Odious Debts

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