Tag Archives: corruption

How the Trade Facilitation Agreement Fights Corruption at the Border

Moving goods across borders is a source of corruption around the world.

The process of moving goods across borders is a major source of corruption around the world.

As the world commemorates International Anti-Corruption Day, renewed progress in the implementation of the Trade Facilitation Agreement (TFA) provides a reason for optimism in the fight against corruption.

Reached during last year’s World Trade Organization (WTO) accord in Bali, the TFA creates binding commitments across 159(+) WTO members to expedite movement, release and clearance of goods, improve cooperation on customs matters, and moreover, help developing countries effectively meet these obligations.

The TFA is also a potentially invaluable tool for tackling corruption as the simplification of customs procedures can greatly reduce opportunities for corruption. As the World Bank’s Customs Modernization Handbook sets forth, customs procedures are a key source of corruption, as officials and workers seek bribes in order to move goods in and out of the country.

Given the formidable barrier that corruption poses for both developed and developing countries, one may question how explicitly this agreement will challenge corruption, and what this will look like in terms of activities creating outcomes. In an Economic Reform Feature Service article released by CIPE today, Laura B. Sherman, senior legal adviser at Transparency International USA, breaks the larger TFA into its individual components and addresses in practical terms how each will translate into activities that prevent corruption.

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Building a Culture of Compliance in Emerging Markets

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Corruption is a destructive tax on business that hampers entrepreneurship and economic development. In the last two decades significant progress has been made in making the fight against corruption a top priority for governments and businesses worldwide.

Yet many challenges remain, including spreading best practices in anti-corruption compliance beyond large companies to smaller firms in global value chains. The launch of CIPE’s new guide on anti-corruption compliance for mid-sized companies in emerging markets, held yesterday in Washington, DC, at the OpenGov Hub, focused on ways to boost third party compliance in difficult environments.

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TI-USA Recognizes James Wolfensohn with Integrity Award

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The World Bank was founded on the principle of non-interference in the political affairs of its member countries, with the focus exclusively on fighting poverty through economic development. For decades, that meant that corruption was a taboo subject in the global discourse on development, even as it crippled the economies and societies of countries around the world.

That changed on October 1, 1996 when then-President of the World Bank, James Wolfensohn delivered his famous speech at the Annual Meetings where he called corruption what it is: a cancer on development.

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Could Rana Plaza Help Make Labor Standards a Corruption Issue?

rana-plaza

In recent years, the private sector has been increasingly responsive to supply chain issues. This is a result of two distinct forces – one related to corruption, and the other related to issues such as human trafficking and child and other labor issues. While the focus on corruption has largely resulted from legislation such as the FCPA and UKBA, interest in labor-related supply chain issues has often been spurred by NGOs, public pressure, and the media.

However, investigations resulting from the Rana Plaza garment factory collapse may change that. On April 24, 2013, over 1,130 people were killed in the building collapse while many employees were making clothing for western companies. While the accident and the resulting public outcry drove some companies to sign accords promising to establish fire and building safety programs, other companies did nothing.

In July of this year, the Bangladesh Anti-Corruption Agency filed charges against 18 people in connection with the disaster, finding that they “grossly breached the building code.” Although bribery may have played a role in the accident — municipal workers were held liable for giving Rana permission to build more floors on top of the existing structure, although they had no authority to do so — the commission’s decision makes no mention of bribery or corruption. Instead, they hold private sector actors accountable directly on the basis of violating local building codes.

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To Benefit from Energy Resources, Lebanon Needs Better Institutions, Not Just Greater Transparency

A map showing the offshore areas being opened to oil and gas exploration. The auctions have been repeatedly delayed.

A map showing the offshore areas being opened to oil and gas exploration. The auctions have been repeatedly delayed. (Photo: Deloitte)

By Sami Atallah

A paradox confronts countries endowed with oil and gas resources. Despite their riches, these countries tend to grow slower in the long term, have higher income inequality, be more corrupt and even become authoritarian. This, of course is not the fate of all such countries — many have managed to turn the oil curse into a blessing. Those that did had two things going for them: a high level of human capital and good institutions that upheld checks and balances on power.

Although Lebanon is well endowed with human capital, its institutions are generally weak. The Taef agreement redistributed power more equally across the three key institutions — the presidency, the parliament and the prime ministership — that are associated with the three dominant sects, and in many ways, undermined the political system.

For one, the executive authority became diffused to an extent that it is no longer obvious who is in charge. The members of the parliament seem less interested in legislating and holding executive authority accountable and more interested in providing services to constituents. The political parties have mastered the game of electoral survival by crafting election laws through redistricting and vote counting in ways that get them reelected with little to show for. They have resorted to clientelistic strategies of buying votes and providing services in return for political loyalty. Furthermore, the judiciary and the oversight agencies whose job it is to hold the government accountable were at best sidelined but most often intentionally weakened through political interventions or bureaucratic understaffing.

In sum, the political elite govern the country largely by the logic of dividing the spoils among themselves through illegal subcontracting of projects, violating tendering requirements, as well as contracting companies despite conflicts of interest. This has resulted in high levels of corruption, embezzlement, mismanagement and waste benefiting the political elite at the expense of the rest of the population.

It is against this backdrop that the Lebanese Petroleum Administration (LPA), the body entrusted to govern the oil sector, came into being. Between November 2012 and August 2013, the LPA proceeded rather efficiently and with more transparency than most Lebanese institutions in approaching the sector. It held consultative meetings and workshops, and managed to lay the groundwork for the launch of the offshore licensing round. Now it is waiting on the government to pass the last decrees for the process to continue, and has found itself caught up in the Lebanese political mill with no clear way out of the deadlock.

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Case Studies: Advancing Anti-Corruption Efforts in Armenia and Thailand

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Corruption is a systemic problem that plagues many transitional countries across the world, rooted in weak rule of law and lack of private property rights. Not only does corruption erode trust in public institutions, such practices also hinder economic growth and weaken democratic governance.

The corruption challenge can be addressed by building responsive institutions that offer basic assurances of private property rights and ensure law and order. CIPE programs address the root causes of corruption through a multi-pronged approach. CIPE programs mobilize the private sector to raise anti-corruption standards and advocate for reforms; streamline regulations and reduce implementation gaps to limit opportunities for corruption; improve corporate governance to strengthen firm-level integrity; facilitate collective action to level the playing field and coordinate company efforts; and equip small and medium-sized enterprises to resist bribery and meet the requirements of global value chains.

Two recent case studies, described below, show these CIPE approaches in action.

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Anti-Corruption Compliance in Kenya

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Transparency International’s Corruption Perceptions Index ranks Kenya in a distant 136th place. That low ranking confirms the sentiment often encountered in Nairobi: corruption is widespread in many aspects of life, from bribing a policeman to avoid charges for alleged traffic violations to graft at the highest levels of government, as poignantly described by a British journalist Michela Wrong in her book about Kenyan whistleblower John Githongo, It’s Our Turn to Eat.

Not surprisingly, many segments of the Kenyan society are fed up with the status quo and ready for change. That includes many companies in the private sector that see their growth potential and competitiveness stifled by the highly corrupt environment. Such companies are not waiting for the government to clean up its act and instead are taking the initiative to limit corruption through setting up or strengthening internal compliance procedures.

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