EXECUTIVE SUMMARY
Corruption undermines development and growth and
constitutes a serious threat to attempts to eliminate poverty.
The elimination of corruption should be central to a responsible
development strategy. But it is not only a matter for the Department
for International Development (DFID). The actions of the Home
Office, the Department of Trade and Industry (DTI) and a host
of regulatory and investigatory bodies have a profound effect
on corruption in the developed world. Our investigation has revealed
a lack of coherence, focus and determination across Whitehall
in tackling this subject.
The Nature of Corruption
Corruption takes many different forms. Petty corruption
- the payment of small bribes for services - has a severe and
direct impact on the poor and must be addressed if efforts to
reduce poverty are not to be undermined. Grand corruption - bribery
relating to large scale deals - discourages investment and hampers
growth, whilst depriving developing countries of muchneeded
resources.
Causes of Corruption
Corruption is principally entrenched by weak institutions.
Where the criminal justice system is weak, the rule of law can
be unevenly applied providing a fertile breeding ground for corruption.
The level of bureaucracy has a bearing on how pervasive corruption
becomes. Pay in the public sector is one of the main drivers of
petty corruption. Wage levels and management controls and systems
must be addressed in any public sector reform programme that aims
to reduce corruption.
The Impact of Corruption on Development
Corruption has a devastating impact on the poorest
people in society by denying them access to public services since
they are frequently unable to pay the necessary bribes. The quality
of services and the efficient allocation of resources are both
adversely affected by corruption. Corruption also deters foreign
direct investment, with a resulting impact on economic growth.
Tackling Corruption in Developing Countries
The Committee supports the Department for International
Development in its work with developing country governments fighting
corruption. Improving governance and building better institutions
are key parts of DFID's strategy.
Sector wide and budgetary support are only suitable
where a government has demonstrated a real commitment to tackling
corruption. Where a government is unwilling to make the necessary
commitment donors will need a flexible approach to the provision
of development assistance in order to ensure the necessary safeguards
can be put in place. This may include providing support at a regional
or subregional level or providing assistance through NGOs.
Civil society and local people should be directly
involved in tackling corruption and can fulfil a useful role by
externally monitoring services. DFID should ensure that local
people are involved through participatory poverty assessments
and social audits.
Tackling Corruption - Action in the UK
The Government aims to limit corruption by supporting
anticorruption strategies in developing countries, safeguarding
development assistance, eliminating bribery from international
business and tackling money laundering.
The Committee criticises the fact that the Government
has yet to introduce legislation to implement the OECD Convention
on the Bribery of Foreign Public Officials in International Business
Transactions after current legislation was found to be inadequate
by the OECD. Simple and clear legislation should be brought forward
as a matter of urgency.
Legislation exists to control money laundering but
it is unclear who enforces it and in what circumstances it is
enforced. Corruption and money laundering cannot be tackled effectively
without better coordination across Government.
The private sector must examine the contribution
that it makes to corrupt practice and take greater responsibility
for eliminating it, including ending the practice of facilitation
payments.
Conclusions
We must continue to help developing countries build
an environment that will eliminate corruption. We must not only
support developing countries who have made a real commitment to
tackle corruption but must also put our own house in order. The
Government cannot credibly continue to make improvements in governance
a condition for development assistance when it has failed to implement
the OECD Convention on the Bribery of Foreign Public Officials.
The lack of focus and coordination is hampering efforts to tackle
corruption and money laundering in the UK. There is a need for
one department or body to take a lead and provide a focus for
current activity. We urge the UK Government to act on these issues
swiftly.
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