“Bribery and corruption in the public sector, is endemic and unavoidable in all societies.”
In 2012, the biggest stories of corruption were the allegation against Wal-Mart regarding the payment of bribes amounting to US$24 million in its Mexican operations (Barstow, 2012). A year before, in 2011, a survey was carried out by the Transparency International in 30 countries for their views on corruption. “The results found that 27 percent, or more than one in four businesspeople surveyed, think that they had lost business in the last 12 months due to bribery” (Hardoon, 2012). Corruption is a multifaceted event that involves a wide variety of actions taken by individuals. A simple definition of corruption has been settled as “the abuse of public office for private gain” (Shleifer & Vishny, 1993). One of the key tools or corruption is bribery; it is hard to detect corruption as the parties enter a secret agreement.
Though corruption covers a broad range of crimes which are associated with the illegitimate use of the office; bribery is restricted to the offering or accepting of some illegitimate payment. Corruption and bribery hold great significance as they tend to distort the trade and also hinder the democratic development of the markets that are emerging (Fan & Lin et al., 2009). Bribery and corruption have costly results when taken place in the private sector; foreign investments may be deterred and even lead to making the country instable economically (The World Bank Group, n.d.). The biggest issue is that corruption is inherent in the public sector; there is no escape for the government-linked businesses from becoming a part of the crime and have to participate in bribery (Canfield, 2011). Particularly in the developing countries, the corruption in the public sector is a major threat but the truth is that in all the societies, corruption has become an unavoidable act in the public sector (Buscaglia, 2003). This paper sheds light on the causes of corruption and also on how and why this endemic has spread all across the societies and what must be done to handle this issue. Some cases from different societies and nations have also been discussed in the paper.
Causes of Corruption
The most critical reason why corruption occurs in the public sector is when economic rents are generated by policies as the government as an institution weakens (The World Bank Group, n.d.). The motivation of the employees who work in the public sector is undermined by many factors like declining salaries and no connection between the promotion and performance. Further, when they see that their seniors and political leaders make use of the public office for private gains, the motivation to remain honest also weakens (The World Bank Group, n.d.). Most important aspect is that the element of accountability becomes weak in such settings. The bureaucracy does not perform well due to the lack of ethical values; and so the institutions that ought to act as watchdogs forget their real purpose (The World Bank Group, n.d.).
One of the reasons why corruption takes place is that it does not distort the efficiency of the economy in the short run; so, bribe is seen as a market payment to make sure that efficient use of the resources is done according to the requirements of the party. But in the long run, the efficiency and speed of the public officials would be highly distorted when bribes are not given (Fan & Lin et al., 2009; M'eon & Weill, 2010). Secondly, considering the theoretical aspect, bribes enhances the economic efficiency as the firm easily avoids those regulations which are highly restrictive (Rose-Ackerman, 2009). But eventually the firms make a habit to evade all kinds of regulations and the result would be that smaller firms would have to pay for this cost (The World Bank Group, n.d.). Though in the short-run, bribe and corruption can lead to positive outcomes; in the long-run, the public officials would change all the rules of the game when bribe is missing and consequently hurt the efficiency of economy, political legitimacy and become highly unfair (Pellegirni, 2011; The World Bank Group, n.d.).
It has always been believed that the African culture is a birthplace for corruption; Iddrisu Haruna argued in his book “Zero Tolerance: Public Sector Corruption in Ghana”, that it was the ineffectual functioning of the state that led to the corruption. It has become a necessity to give bribe to the public servants to make them do their jobs; even though it is the fundamental right of the citizens to have such services like telephone and education and the state must have made sure to provide these. The honest officers are constantly being harassed and reminded that their honesty leads to insufficient salaries and a low quality living style for their families (Aubrey, 2006).
Education is a basic right to humans; but corruption and bribery has even impacted the schools in different ways ranging from fraudulent purchase of the textbooks, improper maintenance of the school facility, and to causing increase in the levels of absenteeism of the teachers (Kremer & Chaudhury et al., 2005). The teachers are de-motivated in India because the education system is being directly influenced by politicians. In order to pass a class, bribery is being used which negatively impacts the education. Even the inspection system is being bribed by the teachers who threaten to report the absence. Further, it has been reported by the Transparency International that child enrollment is also dependent upon the payment of bribe; this also hinders the parents from sending their children to school as it is financially not possible (Canfield, 2011).
Nigeria is a land rich in natural as well as human resources and is considered to be the most populated country in Africa. During the late 1970s, it was considered as the fastest growing area of Africa but due to corruption, the economic growth and the potential developments have been undermined and now Nigeria falls under the least developed countries according to the table of World Bank League (Adeymi, 2012, p. 183). The education system is in crisis; unemployment is rising; crime rate is on increase; and there are inadequate health services (p.183-184). Due to corruption, the funds are diverted from fulfilling the public purpose to only filling the private purses (Adeymi, 2012). The political corruption is used by the public servants, press, bureaucrats, and the political leaders; they have not only deteriorated the government’s image but also weakened its credibility and hurt the economy overall. There is also economic corruption in Nigeria which involves the financial institutions like the banks, stock brokers and the insurance companies (Aransi, 2008).
Iyoha states, “It is estimated that Nigeria received over US$22 billion from oil export receipt between 1981 and 1999. Yet the number of Nigerians living in abject poverty—this is, on less than $1 a day-more than doubled between 1970 and 2000 and the proportion of population living in poverty rose from 36% in 1970 to 70% in 2000” (Akindele & Adeyemi, 2011). The local government was created to ensure democracy but it has been alleged with the corrupt practices including: “over-invoicing of goods, unauthorized withdrawals, reckless virement, inflation of contract sums, misappropriation of funds and outright embezzlement” (Lawal & Oladunjoye, 2010).
Not only this, but China is also under constant threat of corruption; to add difficulty, there is general lack of transparency. Different surveys conducted of the government officials and even the civilians indicate that the top most concern of the public is corruption. As the Transparency International indicates on the Corruption Perception Index, China averaged a score of 3.4 during 2001 to 2006 on the scale of 1-10 (higher the score, lesser corrupt a country was perceived) (Pei, 2007).
Another basic right of the public is the access to water; the water sector has specially been studied in India and Pakistan to identify the corrupt practices. The weakness of the water utilities institute is compounded by lack of accountability (Shordt & Stravato et al., 2006). Corruption in the water sector limits the generation of revenue for the government and the water utilities; discourages investment; reduces the quality as well as the quantity of services for the poor; declines the performance of the system and hurts the public integrity. According to the survey of Transparency International, the Water and Power Development Agency of Pakistan is considered to be the second most corrupt institution of Pakistan; more than 31000 complaints were received in 2002 of this institution (Unknown, 2008).
Amongst the public institutions in 86 countries, the Transparency International identified that police is considered to be the fourth most corrupt institution where the first three are political parties, public officials and parliament and the legislature (Transparency International, 2010). Bribery is the common practice while police officers are hired and even posted. As compared to the developed countries, the police officers are more corrupt. In the developing world specifically India, bribery is considered as a fundamental right of a constable. In contrast, in developed countries, the victims of corruption are those who are engaged in illegal activities and not the innocent people; this is why in developed countries, the corruption is more like referred to as a fringe activity which is a right act for the illegal behaving people (Bayley & Perito, 2011). It has been identified that the Nigerian police has a history of committing crime against those they are on duty to protect and they are “a symbol of unfettered corruption, mismanagement, and abuse” (Power, 2009).
The Foreign Corrupt Practices Act was passed in 1977 to ensure that no bribes are paid or offered to any officials of foreign government to obtain business; this also applies for those who bribe to develop a competitive advantage. Bribes are usually considered a cultural practice to develop long term relationships for business. In order to comply with the FCPA, the businesses must have an effective compliance program (Henning, 2013). This law came into force when more than 400 companies of United States bribed the foreign officials. In China recently, a Morgan Stanley associate was involved in a Fraud case but they were not fined because they had the appropriate anti bribery program: “After considering all the available facts and circumstances, including that Morgan Stanley constructed and maintained a system of internal controls, which provided reasonable assurances that its employees were not bribing government officials, the Department of Justice declined to bring any enforcement action against Morgan Stanley” (Unknown, 2012). If a case of bribery is identified, then the accused company must perform internal investigation extensively and then turn in all the information to the government itself; it could lead to high costs, canceling of the export license, high fines and even the executive in charge could be charged with criminal allegations. Even the corruption in the financial statements is addressed by the accounting provisions of the act so that accuracy and transparency can be ensured for reliable reports (Eyden, 2013).
UK Bribery Act was passed on 8 April 2010 and came into force in 2011; it followed the US law for anti-corruption. Bribery Act has broader international representation and more applicability. It defines the “foreign public official” more narrowly and even covers bribery on a private level. This act takes into consideration both active and passive bribery which is the giving and the taking of bribe (Quoted Companies Alliance, 2011). As compared to the FCPA, the Bribery Act does not exempt any facilitation payments. This act has been welcomed by ethical companies and it is perceived that it is a stronger weapon to combat corruption and bribery used to obtain unfair advantage over those companies which are ethically competing in the business (Amaee, 2011). Strong backing and commitment is required to ensure its enforcement so that a sustainable change in behavior is seen.
Corruption and bribery have become a necessary part of the lives of the people all around the globe; regardless of the society and the region, it has been seen that the public sector is highly corrupt and has lost its credibility with the public in general. The most critical effect of the corruption is that it has become an endemic which is gradually exposing the country to systemic risks. Especially with it being present in the public sector, the financial systems become fragile; the establishment of the enforcement of law becomes highly tainted there is a decline in the efficiency of the government officials. With the public sector affected, the health system declines in the country and it is mainly because the regulatory system becomes highly inefficient. With all these risks, the country becomes exposed to major crisis situations; due to globalization and the elimination of geographical boundaries, the corruption in one country has spillover effects and when dealing with other nations, the effect spreads globally.
A country ruled by corrupt leaders cannot become a true liberal democracy and would not be credible strategic partner. The neighboring countries could also be affected by the environmental disasters which are caused by corruption endangering the health of the global public and safety also. Special emphasis needs to be given to information sharing and increase in the legal cooperation among the countries so that illegal and corrupt practices can be eliminated. Anti-Corruption regulatory bodies should be given authority and power to handle the cases and global support needs to be provided to them. Further, each country must be focus on redesigning reforms for its public sector and identify the reasons which are causing the public service officials to get corrupt and eliminate them. There should be strict penalties along with motivation for being honest. UK Bribery Act and FCPA are strong laws but they still require more support and compliance. Each country must be induced to undertake the key reforms and to comply with the international laws and practices which enforce the ethical and legal norms. The issue is that each country is lacking in people-oriented leadership, credibility and responsibility. Until and unless there is good leadership, it is not possible for any country to develop strong institutions; so, in order to develop the socio-economic state of the society and to eliminate corruption, a positive change is required in the ruling class or the leaders’ attitudes.
Amaee, R. (2011). Bribery Act will need strong backing to be effective. THE LAWYER, [online] 16th May. Retrieved from: http://www.thelawyer.com/bribery-act-will-need-strong-backing-to-be-effective/1007912.article [Accessed: 24 Dec 2013].
Adeyemi, O. (2012). Corruption and Local Government Administration in Nigeria: A Discourse of Core Issues. European Journal of Sustainable Development, 1 (2), 183-184.
Akindele, S. & Adeyemi, O. (2011). Corruption and the Nigerian State: A Critical Discourse. Saarbrucken Germany: Lap Lambart Academic Publishing, p. 3.
Aransi, I. O. (2008). Bureaucratic corruption in the public service: a case study of the Nigerian local government. In: Adeyomo, D. O. & Olojede, I. eds. (2008). Reading on governance and accountability in nigeria. Germany: Cuvillier Verlag International Scientific Publisher, p. 63.
Aubrey, L. (2006). Zero Tolerance: Public Sector Corruption in Ghana (review). African Studies Review, 49 (2), p. 216.
Barstow, D. (2012). Vast Mexico Bribery Case Hushed Up by Wal-Mart After Top-Level Struggle. The New York Times, [online] 21st April. Retrieved from: http://www.nytimes.com/2012/04/22/business/at-wal-mart-in-mexico-a-bribe-inquiry-silenced.html?_r=0 [Accessed: 23 Dec 2013].
Bayley, D. & Perito, R. (2011). Police Corruption What Past Scandals Teach about Current Challenges. United States Institute of Peace, p. 5.
Buscaglia, E. (2003). Controlling organized crime and corruption in the public sector. 3 pp. 3--34.
Canfield, K. (2011). Estimating the Effects of Corruption on Educational Outcomes in the Indian Public Schooling System.
Eyden, T. (2013). Complying with the Foreign Corrupt Practices Act. Accounting Web, [online] 10th April. Retrieved from: http://www.accountingweb.com/article/complying-foreign-corrupt-practices-act/221547 [Accessed: 24 Dec 2013].
Fan, C., Lin, C. & Treisman, D. (2009). Political decentralization and corruption: evidence from around the world. Journal of Public Economics, 93 (1), 14--34.
Hardoon, D. ( 2012,6th September). Bribery is bad for business. Transparency International, [web log] Retrieved from: http://blog.transparency.org/2012/09/06/bribery-is-bad-for-business/ [Accessed: 12 Jan 2014].
Henning, P. (2013). Taking Aim at the Foreign Corrupt Practices Act. The New York Times, [online] 30th April. Retrieved from: http://dealbook.nytimes.com/2012/04/30/taking-aim-at-the-foreign-corrupt-practices-act/?_r=1 [Accessed: 24 Dec 2013].
Quoted Companies Alliance (2011). Bribery Act 2010. Think it won't affect your company? Think again.. [online] Retrieved from: http://www.theqca.com/information-centre/regulations/37321/bribery-act-2010-think-it-wonand39t-affect-your-company-think-again.thtml [Accessed: 24 Dec 2013].
Kremer, M., Chaudhury, N., Rogers, F. H., Muralidharan, K. & Hammer, J. (2005). Teacher absence in india: a snapshot. Journal of the european economic association, 3 (2-3), pp. 658-667.
Lawal, T. & Oladunjoye, A. (2010). Local Government, Corruption and Democracy in Nigeria. Journal of Sustainable Development in Africa, 12 (5), p. 232.
M'eon, P. & Weill, L. (2010). Is corruption an efficient grease?. World development, 38 (3), pp. 244--259.
Pei, M. (2007). Corruption threaten's china's future. Policy Brief. [report] Carnegie Endowment for International Peace, p. 1.
Pellegrini, D. (2011). Causes of Corruption: A Survey of Cross-Country Analyses and Extended Results. Corruption, Development and the Environment, 29-51.
Power, S. (2009). The Enforcer: A Christian Lawyer’s Global Crusade. The New Yorker, 19th Jan, p. 52ff.
Rose-Ackerman, S. (2009). When is corruption harmful. Political corruption: concepts and contexts, pp. 353--371.
Shleifer, A. & Vishny, R. W. (1993). Corruption. The quarterly journal of economics, 108 (3), pp. 599--617.
Shordt, K., Stravato, L., Dietvorst, C. & O’Leary, D. (2006). About corruption and transparency in the water and sanitation sector. International water and sanitation centre (irc), thematic overview paper, 16, p. 7.
Transparency International (2010). Global Corruption Barometer. Berlin: Transparency International.
The World Bank Group. (n.d.). Helping countries combat corruption: the role of the world bank. [online] Retrieved from: http://www1.worldbank.org/publicsector/anticorrupt/corruptn/cor02.htm#note1 [Accessed: 12 Jan 2014].
Unknown. (2008). Corruption in water sector linked with slow progress. THE NATION, [online] 26th June. Retrieved from: http://www.nation.com.pk/karachi/26-Jun-2008/Corruption-in-water-sector-linked-with-slow-progress [Accessed: 23 Dec 2013].
Unknown. (2012, 27th Nov). FCPA Guidelines: 10 hallmarks of effective compliance programs according to the DOJ and SEC. KPMG, [web log] Retrieved from: http://blog.kpmg.ch/advisory/fcpa-guidelines-10-hallmarks-of-effective-compliance-programs-according-to-the-doj-and-sec/ [Accessed: 24 Dec 2013].