Objectives

Economic Growth
and
Corruption

What are the manifestations of

corruption?
What are the reasons for widespread
corruption?
What measures would you suggest for
reducing corruption?
Is there any role for international
cooperation in fighting corruption?
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Bribe-takers ranked

Poorer countries generally tend to

exhibit higher levels of corruption?

(Source: The Nation/Asia News Network, highlighted in the

Straits Times, 20/11/2014)

While the statement particularly highlights

abuse of international project funds as well
as public funds in Indonesia, corruption
takes many forms and is by no means
confined to Indonesia
In fact there is hardly any country which is
perfectly clean though poorer countries
generally tend to exhibit higher levels
of corruption

BANGKOK A survey in Thailand has

found that people were asked to pay the
highest combined amount of bribes and
tea money at the Land Departments
offices.
On average, public schools demanded
the largest bribes, at 11,796 baht
(S$467) each, followed by 10, 538 baht at
Customs offices, Chulalongkorn
Universitys Faculty of Economics
conduced the survey this year.
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Afghans forced to pay billions in bribes

(Source: AP, TODAY, 21/01/2010)

The most popular and simplest definition of corruption is that

.. it is the abuse of public power for private benefit
(Source: Tanzi, Vito (1998). Corruption around the world)
Corruption also exists in private sector activities
Sometimes, the abuse of public power is not necessarily for
ones private benefit but for the benefit of ones party, class,
tribe, friends, family, etc.
Not all acts of corruption result in bribes
a public employee who claims to be sick but goes on
vacation is also abusing his power for personal use
In many instances, bribes can be disguised as gifts
A bribe implies reciprocity but gift should not

Half of all Afghan adults paid at least one bribe to a

public official over the course of a year to cut through
red tape or get help with poor service, the UN
Office on Drugs and Crime said in a report on Tuesday.
Afghans paid nearly US$2.5 billion ($3.5 billion) in
bribes nearly a quarter of the countrys GDP in
the 12-month period ending last autumn.
The average bribe cost US$160, according to the
report, which was based on thousands of interviews.
Most of the payments went to officials but Afghans
were also asked to bribe school teachers and
doctors.

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Corruption Ranking

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Corruption Perception Index

(CPI)

(www.transparency.org)

Transparency International (TI) is the

global civil society organization leading the fight
against corruption (a Berlin-based NGO)
TI raises awareness of the damaging effects
of corruption and works with partners in
government, business and civil society to
develop and implement effective measures to
tackle it
TI defines corruption as the abuse of
entrusted power for private gain

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.. it is the abuse of public power

for private benefit

Published since 1995

Ranks countries according to
perception of corruption in the
PUBLIC SECTOR
An aggregate indicator that brings
together data from 13 sources that
cover the past two years (ranging
between 10, highly clean, and 0,
highly corrupt)
7

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TABLE 2

TABLE 1
Corruption Perceptions Index, 2015
(168 countries and territories)

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RANK

COUNTRY

Denmark

Finland

Sweden

New Zealand

Netherlands/Norway

Switzerland

Singapore

16

Austria/USA

18

Hong Kong SAR/Ireland/

Japan

83

Benin/China/Columbia/
Liberia/Sri Lanka

167

North Korea/ Somalia

Corruption Perceptions Index

ASEAN countries

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154

Eritrea/Syria/Turkmenistan/Yemen (1.8)

158

Haiti/Guinea- Bissau/Venezuela (1.7)

161

Iraq/Libya (1.6)

163

Angola/South Sudan (1.5)

165

Sudan (1.2)

166

Afghanistan (1.1)

167

North Korea (0.8)

167

Somalia (0.8)

2014
(Rank)

2013
(Rank)

2012
(Rank)

2011
(Rank)

2010
(Rank)

2009
(Rank)

1995

Brunei
Darussala
m

insufficient
survey
information

insufficient
survey
information

6.0 (38)

5.5 (46)

5.2 (44)

5.5 (38)

5.5 (39)

N/A

Cambodia

2.1 (150)

2.1 (156)

2.0 (160)

2.2 (157)

2.1 (164)

2.1 (154)

2.0 (158)

3.44

3.6 (88)

3.4 (107)

3.2 (114)

3.2 (118)

3.0 (100)

2.8 (110)

2.8 (111)

1.94

2.5 (139)

2.5 (145)

2.6 (140)

2.1 (160)

2.2 (154)

2.1 (154)

2.0 (158)

N/A

Malaysia

5.0 (54)

5.2 (50)

5.0 (53)

4.9 (54)

4.3 (60)

4.4 (56)

4.5 (56)

5.28

Myanmar

Laos

TABLE 3

COUNTRY

2015
(Rank)

Indonesia

2.2 (147)

2.1 (156)

2.1 (157)

1.5 (172)

1.5 (180)

1.4 (176)

1.4 (178)

N/A

Philippines

3.5 (95)

3.8 (85)

3.6 (94)

3.4 (105)

2.6 (129)

2.4 (134)

2.4 (139)

2.77

Singapore

8.5 (8)

8.4 (7)

8.6 (5)

8.7 (5)

9.2 (5)

9.3 (1)

9.2 (3)

9.26

Thailand

3.8 (76)

3.8 (85)

3.5 (102)

3.7 (88)

3.4 (80)

3.5 (78)

3.4 (84)

2.79

Vietnam

3.1 (112)

3.1 (119)

3.1 (116)

3.1 (123)

2.9 (112)

2.7 (116)

2.7 (120)

10N/A

Corruption acts as a tax

Corruption Perceptions Index, 2015

RANK

Country

Corruption can be seen as a tax that

distorts the choice between activities, and
lowers the returns to public and
private investments
Much worse than a tax as revenues do
not contribute to the public budget, to
be spent on socially useful activities
A study examining the impact of
corruption on foreign direct investment
(FDI) found that an increase in
corruption would have the same
negative effects as a 50 percentage point
increase in marginal tax rates on foreign
investment income
11

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World Bank Group

Uganda example

(Source: Straits Times 07/02/2008)

Another study of manufacturing firms in

Uganda, found that a 1% increase in
bribes paid by a firm was associated with a
reduction in firm growth of 3%
while a 1% increase in taxation reduced
firm growth by only about 1%
Survey evidence from transitional
economies suggests that firms would be
willing to pay significantly higher formal
taxes in exchange for eliminating corruption
(World Development Report 2002, pp 106)
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Manifestations of corruption
1. Corruption also undermines the
competitive forces (as new firms must
pay bribes at every turn beginning from
registering the business) that are central
to well-functioning markets
2. Corruption lowers public spending on
health and education, which in turn
limits opportunities for poor people to
invest in their human capital and to
participate in markets
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A country moving from the lowest end of the CPI

distribution to a position in the middle of the pack:
may enjoy an increase in investment by up to 8%
of GDP; per capital income growth may rise by
over 1%
Every US$100 million of stolen assets
restituted to a developing country could fund full
immunization of four million children, or about
250,000 water connections for households, or as
many as 50 million to 100 million Artemisininbased treatment for malaria
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Manifestations of corruption
3.
4.

Across countries, greater corruption is also

associated with lower overall tax revenues
Corruption undermines the legitimacy of the
state itself and weakens the capacity of the
state to provide institutions that support markets
study of firms in Indonesia with close links
to Suharto regime concluded that onequarter of the value of these firms was
directly attributable to their political
connections (World Development Report
2002, pp 106)

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What are the root causes of corruption?

World Development Report 1997

emphasized three factors:
1. a distorted policy environment that
creates greater opportunities for public
officials to manipulate rules for their own
benefit
2. a weak judiciary that is unable to
provide a credible threat of punishment
when official misconduct is discovered
3. poor civil service management and low
public sector pay

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More open international trade

lowers corruption
There is growing evidence that countries that are
more open to international trade (improves
information flows, competition, and removes tariff
barriers) have lower corruption
The evidence also shows that a more complex
regulatory environment breeds corruption
Cross-country evidence shows that corruption is
significantly higher in countries where inflation is
high and variable (information about prices is
difficult to obtain and that creates opportunities for
corruption in public procurement)
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TABLE 4: Anti-Corruption Strategies of

Selected Asia-Pacific Countries

How to combat corruption?

(Source: Quah (2008))

Tanzi, Vito (1998) (Corruption around the

world) recommends action on four fronts:

Pattern

1. Honest and visible commitment by leadership to

fight against corruption
2. Reduce demand for corruption by scaling down
regulations and other policies such as tax
incentives
3. Reduce supply of corruption by increasing public
sector wages, effective controls and penalties
on public servants
4. Solve the problem of financing of the political
parties
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Features

Selected Countries

Anti-corruption laws
without an anticorruption agency

Mongolia and Papua

New Guinea

Multiple anticorruption agencies

China, India,
Philippines

Single anti-corruption
agency

Singapore, Hong
Kong SAR, Thailand,
South Korea

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Study Conclusions
Of the three patterns of corruption control, Pattern
3 is more effective than Patterns 1 and 2
The key factor responsible for combating corruption
effectively in a country is the political will or
commitment of its political leadership
Pattern 2 is also not a good option as the
reliance on multiple anti-corruption agencies in
China, India, and the Philippines has not been
effective in curbing corruption because of the lack of
coordination, inter-agency competition, and the
dilution of the anti-corruption effort by spreading
the limited resources among these agencies.
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Singapore

(Source: Quah (2008))

The first anti-corruption law was introduced in Singapore

when the Prevention of Corruption Ordinance (POCO)
was enacted in December 1937
The POCO was implemented by the Anti-Corruption Branch
(ACB) of the Criminal Investigation Department (CID)
of the Singapore Police Force
The ACB was replaced by the Corrupt Practices
Investigation Bureau (CPIB), which was established as an
independent agency in October 1952
When the Peoples Action Party (PAP) government
assumed office in June 1959, corruption was a way of life
in Singapore and perceived by many to be a low-risk, highreward activity

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Pattern 3 is more effective than Patterns 1

and 2 because the independent anti-corruption
agency is a specialized agency concerned solely
with minimizing corruption. The agencys
single-minded focus on combating corruption is
a tremendous advantage as it is not
distracted by other priorities.
The CPIB in Singapore and the ICAC in
Hong Kong focus their energies and resources
on curbing corruption unlike Indias CBI, which
is concerned also with also with tackling
terrorism and organized crime in addition to
fighting corruption.

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To minimize corruption and change the public

perception of corruption to a high-risk, low-reward
activity, the PAP leaders initiated a
comprehensive anti-corruption strategy in
1960 by enacting the Prevention of Corruption
Act (POCA) and strengthening the CPIB
As Singapores GNP per capita in 1960 was
S$1,330 (US$443), the PAP government could not
afford to raise the salaries of civil servants.
Accordingly, it was left with the alternative of
strengthening the existing anti-corruption
laws to reduce the opportunities for corruption
and to increase the penalty for corrupt behaviour

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Combating corruption in
Botswana and Lithuania

The CPIB is the anti-corruption agency responsible for

enforcing the POCAs provisions
The CPIB performs three functions:
1. receives and investigates complaints on
corruption in the public and private sectors
2. investigates malpractice and misconduct by
public officials
3. examine the practices and procedures in the
public service to minimize opportunities for corrupt
practices
Unlike Hong Kong SARs Independent Commission
Against Corruption (ICAC), the CPIB can perform its
duties without a large staff as its location within the
Prime Ministers Office and its legal powers enable it
to obtain the required cooperation from both public and
private organizations
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In 1974 Hong Kong SAR established a

three-pronged anti-corruption strategy
focused on investigation, prevention,
and education, implemented by the
autonomous Commission Against
Corruption
Drawing inspiration from its success,
similar initiatives have been adopted in
countries as diverse as Botswana and
Lithuania
25

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Botswana

Botswana
Following a series of high-level
corruption scandals, Botswana created
a Directorate of Corruption and
Economic Crime in 1994 with
powers to investigate and prosecute
suspects, prevent corruption, and
educate the public
The directorate is an autonomous
agency under the office of the
President

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In its first two years of operation, it

launched 828 investigations, bringing 141
persons before the court and recovering
approximately $1 million in fines,
forfeitures, seizures, and taxes
It has sustained an active publicity
campaign through seminars, poster
campaigns, displays at trade exhibitions,
and cartoon strips, as part of the moral
education of the young
27

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Fighting graft
doing a global public good

Lithuania
In 1997 Lithuania established a Special
Investigation Service that reports to
the President and the Parliament
The number of prosecutions for bribetaking increased sevenfold between 1997
and 2002 (from 10 a year to 73), and the
cases of prosecution for abuse of office,
from 2 in 1997 to 19 in 2002
World Development Report 2005
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Fighting graft
doing a global public good

[https://www.unodc.org/documents/treaties/UNCAC/Publicati
ons/Convention/08-50026_E.pdf}

Developing countries might have a long way to go in

improving transparency, accountability and good
governance
But progress made by these countries will be deemed
insufficient as long as the international financial
architecture provides a risk-free alternative for the
concealment of stolen funds
An estimated US$20 billion to US$40 billion leaves
developing countries each year as illicit flows a
significant part of this money is corruptly stolen funds
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References

Developed countries can step up the pace and

undertake decisive and creative measures to
facilitate the recovery of stolen assets
Can also make substantial progress by establishing
independent anti-corruption bodies,
implementing public asset declarations for
public officials as well as establishing
transparent, competitive and objective
procurement systems
World Bank through its Stolen Asset Recovery
Initiative, it helps developing countries to recover
stolen assets
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UN Convention against Corruption agreement

recognizes global responsibility in fighting
corruption

31

Elliot, Kimberly Ann (1996). Corruption and the Global

Economy, Washington, D.C.: Institute for International
Economics, Chapter 10
Gray, C. W. and Kaufmann, Daniel (1998). Corruption
and Development, Finance and Development, March
Klitgaard, Robert (1998). International cooperation
against corruption, Finance and Development
Quah, J, S.T. (1988). Corruption in Asia with Special
Reference to Singapore: Patterns and Consequences,
Asian Journal of Public Administration, 10 (1), pp 80-98
Quah, J, S.T. (2008). Combating Corruption in the AsiaPacific Countries: What do We Know and What Needs to
be Done?, presented at the Asia-Pacific Governance
Institutes Conference on The Many Faces of Public
Management Reform in the Asia-Pacific in Bangkok,
Thailand, July 7-9
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References
Quah, J, S.T. (2011). Curbing Corruption in Asian
Countries: An Impossible Dream?. Research in
Public Policy Analysis and Management, Volume
20, pp 439-469. United Kingdom: Emerald Group
Publishing Limited
Tanzi, Vito (1998). Corruption around the world,
IMF Staff Papers, Vol. 45, No.4, December
Transparency International (1995, 2009-2015).
Corruption Perceptions Index,
http://www.transparency.org
World Bank (1997,2002,2005). World
Development Report
World Bank (2002). Building Institutions for
Markets, World Development Report
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