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The Cost of Corruption and Red Tape

10/30/2005 - 5:30 AM PST

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Index Reveals Extent of Graft Around the World

BERLIN, OCT. 30, 2005 (Zenit) - More than two-thirds of countries in a recent survey showed serious levels of corruption. On Oct. 18 the Berlin-based organization Transparency International released its latest annual report, the Corruption Perceptions Index 2005.

The CPI ranks countries on a scale of 1 to 10, with 10 being clean, in terms how corruption is perceived to exist among public officials and politicians. The score is awarded after studying data from surveys and reflects the views of businesspeople and analysts, including local experts in the countries evaluated.

Of the 159 countries surveyed, no fewer than 113 scored less than 5 out of 10, and 70 scored less than 3. "It is noteworthy that many of the lowest scoring countries on the index are also among the poorest," commented Transparency International Chairman Peter Eigen during the report's launch.

"The two scourges feed off each other, locking their populations in a cycle of misery," he said. "Corruption must be vigorously addressed if aid is to make a real difference in freeing people from poverty."

Eigen was careful to point out that rich countries also suffer from corruption. As well, they bear part of the blame for corruption in developing nations. In the past, he noted, companies from the wealthier nations freely paid bribes when doing business overseas. The anti-bribery convention formulated by the Organization for Economic Cooperation and Development has improved matters. But Eigen said that rich and poor countries alike must now work hand-in-hand to break the cycle of corruption.

The report explained that foreign investment is lower in countries perceived to be corrupt, which further thwarts their chance to prosper. Reducing corruption would help them attract more investment, and increase their rate of development.

No region is exempt from corruption problems, noted David Nussbaum, chief executive of Transparency International. Even in the extended European Union, the average score is only a passable 6.7, "indicating that many of its countries are still wrestling with a sizable corruption problem."

The areas worst affected are Central and Eastern Europe and Central Asia, with an average score of 2.7. This indicates "devastating levels of perceived corruption which pose a serious threat to political and social stability, as well as compromising the everyday lives of the people in those countries," said Nussbaum.

Debt relief at risk

Transparency International also noted that corruption could place in risk the economic benefits of debt relief. Nineteen of the world's poorest countries have been granted debt service relief under the Heavily Indebted Poor Countries initiative. But not one of these countries scored above 4 on the CPI, indicating serious to severe levels of corruption.

The risk is that the money freed from making debt payments will not be used for development, but could be wasted through corruption and mismanagement. The report also argues that stamping out corruption is critical to making aid more effective.

Becoming richer, however, will not mean that countries can relax their efforts against corruption. Transparency International noted that a long-term analysis of changes in the CPI shows that the perception of corruption has decreased significantly in some lower-income countries, such as Estonia, Colombia and Bulgaria, over the past decade. At the same time, some higher-income countries, such as Canada and Ireland, have experienced a marked increase in the perception of corruption.

The report expressed the hope that the U.N. Convention against Corruption, due to enter into force this December, will establish a global legal framework for fighting against corruption.

The convention is designed to accelerate the retrieval of stolen funds and pushes banks to take action against money laundering. It will allow nations to pursue foreign companies and individuals that have committed corrupt acts on their soil, and to prohibit bribery of foreign public officials.

Doing business

Another series of obstacles to economic development was dealt with in the report "Doing Business in 2006: Creating Jobs." The report, published in September by the World Bank, argues that reforming governmental regulations to reduce red tape and simplify taxes would greatly stimulate business activity.

"Jobs are a priority for every country, and especially the poorest countries," stated Paul Wolfowitz, president of the World Bank. "Doing more to improve regulation and help entrepreneurs is key to creating more jobs -- and more growth."

The report contrasted the economic success of the Eastern European nations, which have led the way in streamlining regulations and encouraging entrepreneurs, with African ...

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