AMMAN, 24 May 2004 — Recent efforts to fight corruption in several Arab countries suggest that governments of the region have finally started to address an issue that has long tarnished their reputation among international investors and undermined confidence in the credibility of their bureaucracies. In Egypt for example, anticorruption campaigns have targeted an ex-minister and the head of the customs department together with several other senior officials. The Moroccan government has also started to crack down on widespread fraud amid local government officials. In Jordan, a previous head of the Central Intelligence Department was convicted by the court of law for participating in a money embezzlement scheme, a move unheard of in the past. The Palestinian parliament voted to fire the governor of the Palestinian Monetary Authority because he was involved in corruption. There are other cases where senior government officials have been persecuted in Lebanon, Libya, Bahrain and Kuwait. But all these efforts are considered to be the early stages of the fight against corruption.
Transparency International, a Berlin based non-governmental organization devoted to fighting corruption worldwide, found that bribe taking in many developing countries is widespread, primarily because of low public sector salaries, greed, and the fact that senior public officials and politicians feel they have de facto immunity from prosecution. In certain countries, corruption run so deep that officials would give you a receipt for your bribe. Meanwhile, the propensity to pay bribes to public sector officials by multinational corporations is considerable. According to BusinessWeek, the cut for the “middlemen” in certain Gulf countries runs from 10 percent to 40 percent on military contracts and 5 percent to 20 percent on public works. The Corruption Perception Index (CPI) released annually by Transparency International draws on 17 data sources from 13 independent institutions that include: The Gallup International, the World Economic Forum, the World Business Environment Survey of the World Bank, the Institute of Management Development (in Lausanne), PriceWaterhouseCoopers, the World Markets Research Center, the Political and Economic Risk Consultancy, the Economist Intelligence Unit and Freedom House’s Nations in Transit. With the exception of three data sources that relied on expatriates’ perceptions, the sources mostly sampled residents, who provided local estimates of the degree of corruption, as seen from their own cultural context.
According to the CPI, Finland was ranked as the country that has the least corrupt civil service and was given a score of 9.7 out of a perfect score of 10. Iceland, Denmark, New Zealand, Singapore, Sweden, Netherlands, and Switzerland were close behind. Bangladesh and Nigeria, in contrast, were found to have the highest level of corruption among the 91 countries in the list. Among the Arab countries Oman ranked highest with a score of 6.3, just below Israel at 7, followed by Bahrain (6.1), Qatar (5.6), Kuwait (5.3), UAE (5.2), Tunisia (4.9) and Jordan (4.6). Egypt, Morocco, Lebanon, Algeria, Yemen and Libya followed in that order scoring below the average for the Arab countries of 3.9 out of 10.
Transparency International attributed the region’s low score to a number of factors such as red tape and bribery in the public administration, mismanagement and waste at state-run utility companies, embezzlement and money laundering charges in one or two Arab countries and unresolved corruption cases in others. In its Annual Report, Transparency International says that access to information is the cornerstone of the campaign to combat corruption. In this, both civil society and the media play a crucial role. The curtailment of the independence of the media has seriously hampered anti-corruption strategies in the region. The role of civil society is very important when pushing for awareness. The general public knows there is corruption, but it does not have the tools to fight it. Transparency International also blamed Western firms for the high levels of corruption in certain developing countries, due to their bribery practices when doing business there.
According to Reporters Without Borders, the Arab countries had the worst record of press freedom in 2003. Free press can act as a watchdog to help curb corruption. This can be achieved by developing the media, the laws regulating the publication of newspapers and the establishment of broadcasting stations and television channels based on independent ownership and management, without interferences by government authorities. Also the establishment of civil society institutions should be encouraged in the region by amending the restricting laws on founding societies, syndicates and volunteer unions, regardless of the nature of their activities whether political, social, cultural of economic.
Small and medium sized family owned businesses are also vulnerable to corruption, especially if they succumb to shortsighted views on reducing their tax dues by underreporting financial results or mixing company and personal funds. Most family owned businesses in the region are still lagging on issues of transparency and disclosure and should create structures that fit the requirements for long-term success of good governance for both the family and the business. The financial benefit of transparent disclosure in terms of the ability of the business to access various sources of funding at attractive terms would far outweigh the immediate benefit of underreporting to reduce tax liabilities.
The worst thing is that people in the region have reached now a state of apathy in accepting corruption. Although national anticorruption agencies can be critical in preventing corruption before it becomes rampant, not only are they difficult to set up but they often fail to achieve their goals once they have been established. They do not dare to investigate even the most corrupt government officials because most of them lack the power to prosecute and some are poorly staffed.
Globalization is creating a much higher cost for countries that tolerate corruption. Joining the global economy is equivalent to taking the country public, only the shareholders are no longer the citizens of that country, they include as well participants in the international markets. These new players do not just vote once every four or six years if at all, instead they vote every month and every day through their direct investment, their mutual funds, their brokers and increasingly more directly via the Internet. Corruption for them is just another name for unpredictability. They know quite well that there are alternatives in other countries and other markets and this reduces their interest to invest in countries where corruption is rampant, irrespective of the return expected.
Governments and business leaders in the region need to create a code of conduct based on transparency, rule of law, good governance and high standard of business practices, all within the context of local culture. Transparency International has called on rich countries to provide help to governments in the developing world pressing on them the need to implement results oriented programs to fight corruption, and to consider more carefully corruption practices when they grant or lend money. The World Bank for instance, is now supporting projects that require public officials to sign a no bribes agreement, backed by sanctions including black-listing. Such support must go hand in hand with international backing for civil society to monitor the implementation of these strategies. In parallel, donor countries and international financial institutions should take a firmer line, stopping financial support to corrupt governments and blacklisting international companies caught paying bribes abroad.
(Henry T. Azzam is chief executive officer at Jordinvest.)