Could Corruption Sink Uganda’s Development Plan?

Posted in: Anti-Corruption, Blog, Government, In The News by Marco Puccia on May 5, 2010

An interesting article in The Guardian (UK) recently expressed concern over the threat the corruption in Uganda could play in dismantling its otherwise strong National Development Plan. Development experts have commended the plan, but cautioned that its success is strongly predicated on transparency and accountability.

Corruption and the country’s rapid population growth risk hindering the economic growth forecasted in Uganda‘s recent National Development Plan (NDP), according to a report in the Observer newspaper.

The report warns that without proper monitoring and evaluation, the ambitious plan, unveiled earlier this month, would surely fail to deliver.

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“The NDP’s successful implementation will in many ways hinge on the government’s ability to ensure compliance with internal government reporting requirements,” Theophane Nikyema, the United Nations Development Programme (UNDP) resident coordinator, told the Observer.

As a Whistleblower Protection Act (protecting whistleblowers from incrimination and offering 5% of money recovered) makes its way through Parliament, the bill is met with skepticism and a national sentiment that corruption is endemic and a “way of life” in Uganda. A recent World Bank report estimates that $250 million is stolen by government officials every year in Uganda. According to a separate report by the Public Procurement and Disposal of Public Assets Authority, $184 million are lost annually in procurement scams — a number that accounts for approximately 70% of the national budget and more than what the country receives in annual foreign aid!

“Corruption is one of the most serious problems hindering development in Uganda,” says Mukotani Rugyendo, senior advocacy and communications officer, at Uganda Debt Network, an advocacy and lobbying coalition against corruption.

While the Whistleblowers Act above would be a great step in the right direction, the government needs to make a public example that it is willing to prosecute corrupt colleagues. Another necessary step is making sure that villagers know how much money in government contracts was given to build a local school, for example, so that they can account for how the funds are spent. Access to information, a cultural shift in understanding the misdeeds of corruption, the tools for M&E as well as reporting, and the political strength and willpower to prosecute corrupt individuals and institutions are all needed to help stymie corruption in Uganda.

While the goal of the National Development Plan to become a middle-income country in 30 years is reasonably feasible, it could just as reasonably be sunk by the selfish graft and corruption that haunts the country and the continent’s development.

[Photo Credit: Flickr User International Rivers]

Economist: The Corruption Eruption

Posted in: Anti-Corruption, Blog, In The News by Marco Puccia on May 3, 2010

A great article called “The Corruption Eruption” was published in The Economist over the weekend. The article hit on the rising attention around corporate corruption and makes the argument that combating corruption within your organization is not just an ethical issue — it makes strong business sense as well.

The ethical case against corruption is too obvious to need spelling out. But many companies still believe that, in this respect at least, there is a regrettable tension between the dictates of ethics and the logic of business.

False: Bribery Is the Price You Must Pay To Ender Some of the World’s Most Difficult Markets

The article cites the examples of Reebok, Google, Novo Nordisk, and IKEA as Western companies that have successfully prospered in emerging markets without engaging in corruption. In fact, “IKEA has gone to great lengths to fight corruption in Russia, including threatening to halt its expansion in the country, firing managers who pay bribes and buying generators to get around grasping officials holding up grid connections.”

“What is more, Mr Nichols argues, it is misguided to dismiss entire countries as corrupt. Even the greasiest-palmed places are in fact ambivalent about corruption: they invariably have laws against it and frequently produce politicians who campaign against it. Multinationals should help bolster the rules of the game rather than pandering to the most unscrupulous players.”

False: Bribery Can Speed Up The Otherwise Glacial Pace of Bureaucracy

According to a World Bank study by Daniel Kaufmann and Shang-Jin Wei, companies that pay bribes actually end up spending more time negotiating with bureaucrats. Furthermore, the cost of borrowing tends to be much higher for corrupt companies because of regulatory fluctuation.

In fact, standing up against corruption can help speed things along for your organization! The article cites Texaco as a great example of this:

“Texaco, and oil giant now subsumed by Chevron, had such an incorruptible reputation that African border guards were said to wave its jeeps through without engaging in the ritual shakedown”

The Hidden Costs of Corruption

1.) Slippery Slope - Once you give into corruption the first time, more solicitations will invariably follow. Word will quickly spread to others that you are willing to “pay”, and the ingenuity of bribe-takers will quickly come up with new ways to solicit payments. Many corrupt businesses and organizations open themselves up to blackmail.

2.) The Psychological Toll – The article cites Philip Nichols of the Wharton School explaining that “corrupt business people habitually compare their habit to having an affair: no sooner have you given in to temptation than you are trapped in a world of secrecy and guilt.”

Increased Visibility, Legal Pressure Being Applied

With increased methods for rapid and anonymous communication (Blogging, Twitter, E-mail, etc.), more public pressure is being applied to companies and organizations to act in an ethical manner. Corruption is much more difficult to hide these days, and the likelihood of getting caught is much higher today than even just 5-10 years ago.

Legal pressure on pursuing cases of corruption is also on the rise. Legislation such as the Foreign Corrupt Practices Act (FCPA) and Britain’s Bribery Act has been revamped with stricter authorities and increased attention. Legislation has been left open to interpretation, allowing prosecutors to pursue even less-blatant cases of corruption (eg. lavish entertainment). Under the legislation, senior managers can be held personally liable for corruption on their watch — risking both massive fines and prison time.

The Department of Justice is actively pursing 150 FCPA-related cases today, as opposed to only 8 in 2001. 38 countries have signed onto the OECD’s 1997 anti-corruption convention (opening the door for cross-border prosecutions). Several high-profile cases including Britain’s BAE Systems being fined $140m, Daimler paying out $184m in fines, and Seimens being fined $1.6 billion has set a new tone in the fight against corruption.

The Next Steps…

According to a survey of 500 prominent firms by Transparency International, the average company only scored 17 out of a possible 50 points on “anti-corruption practices”. The article reads:

Companies need to develop explicit codes of conduct on corruption, train their staff to handle demands for pay-offs and back them up when they refuse them.

Explicitly standing up against corruption through your organization is not just a piece of “Corporate Social Responsibility” or ethical standards. It can literally strengthen your organization and ability to conduct business in the market you are trying to reach!