House of Commons - International Development

Select Committee on International Development Fourth Report

SECTION 1: THE NATURE OF CORRUPTION

7. His Excellency Prince Ajibola, the High Commissioner for Nigeria, told the Committee "Corruption is a canker that, when it gets deep into the fabric of any society, invariably and ultimately destroys that society".[10] Transparency International define corruption as "the misuse of public power for private gain".[11] Corruption takes many forms and examples include bribes paid by:

people qualified to receive a benefit but who are prevented from doing so by an official demanding a payment;
people who have no right to a benefit in order to secure it;
firms and individuals to avoid delays and to expedite services.[12]

8. It is clear, however, from the evidence we have taken, that the definition of corruption goes beyond simple bribery and extortion and includes "absenteeism, diversion of resources, nepotism, cronyism..."[13] as well as influence peddling, fraud, payment of 'speed money' and embezzlement.[14] However, it seems that to date much of the thinking and discussion has been limited to the more tangible financial forms of corruption. DFID should seek to ensure that wider forms of corruption, and not simply bribery and extortion, are considered in designing measures to combat corruption in its projects and programmes.

9. Although there are varying degrees of corruption, it is useful, for the purposes of discussion, to divide it into two categories: petty corruption and grand corruption. Transparency International used the term petty corruption to describe "facilitation or grease payments sought and obtained by junior officials who are actually or ostensibly rendering a service to the public".[15] They explained in their memorandum that such payments were usually made for a service that was meant to be free, related to fictitious services or that stemmed from imaginary offences (such as at a police road block). This kind of petty corruption is very often driven by the low wages of public officials. Grand corruption refers to corruption in the course of large-scale deals involving leaders, senior officials and companies trading or investing on an international basis.[16]

Petty Corruption

10. Petty corruption can be a largely transparent operation. Payments are sometimes openly solicited and received, and occasionally there is a widely accepted tariff of payments.[17] But corrupt payments are often accompanied by uncertainty: uncertainty over when a payment might be requested, how much to pay, how often to pay and how many people need a payment, before the service is provided or the desired outcome achieved. Anne Cockcroft, CIET[18], gave the example of the provision of drugs in hospitals, saying "...the drug round is taking place in the middle of the night, the last drug round of the day, and suddenly the people coming round with the drugs say, 'Well, unless you pay us this amount now, that's it, you don't get the drugs'".[19]

11. There are often complex links between petty and grand corruption with junior officials passing on part of their takings to more senior officials.[20] Anne Cockcroft said it was petty corruption that ordinary people were overwhelmingly aware of. People had an interest in the grand corruption scandals but such scandals had little direct impact on people compared with the impact of pervasive petty corruption.[21] CIET argued that petty corruption has historically been considered less important than grand corruption, which involves much larger sums of money in each corrupt transaction. As a result, most efforts to combat corruption have been topdown and centralised, focusing on grand rather than petty corruption, with little, if any, involvement of ordinary citizens.[22] CIET said "it is pervasive petty corruption that has a disproportionately severe impact on the poorest members of society".[23] We agree with CIET that tackling petty corruption could be the single most important way of reducing poverty.[24] We believe that tackling petty corruption is vital if other efforts to reduce poverty are not to be undermined. Successfully tackling petty corruption in a country could provide the right context for successfully tackling grand corruption. DFID should ensure that there is a coherent and comprehensive strategy for tackling petty corruption running through all of its country strategies. Opportunities for petty corruption should be designed out of all projects and programmes.

Grand Corruption

12. General Mohammed, National Security Adviser to President Obasanjo of Nigeria, described a number of forms of grand corruption from the blatantly obvious - taking funds directly from the central bank as cash, to the more subtle - part of the payment on a contract with an inflated price is shared with a corrupt official or government minister as a kickback, or the extortion of money from creditors to ensure settlement of accounts.[25] Prince Ajibola said where kickbacks involved European firms, the money sometimes never left Europe but was simply moved from one account to another. He saw scrutiny of company accounts and reporting of suspicious transactions as the key to stopping this kind of activity but seemed surprised that so little of this corrupt activity was actually spotted.[26] The fact that corruptly acquired money may simply be moving around within a financial market, rather than moving between jurisdictions, has implications for those seeking to prevent the laundering of corruptly acquired funds.

13. CIET said that grand corruption "... has long been recognised as an issue in development at the macro level, with large amounts of money being stolen by corrupt senior officials and political leaders in developing countries, and large bribes being paid by international concerns in order to secure business opportunities".[27] Transparency International said grand corruption was driven by the greed of those involved. Grand corruption perpetuates poverty by undermining development and economic progress,[28] damaging the economic status of countries and discouraging investment.[29] Clare Short said grand corruption led to a horrendous waste of economic resources.[30] She explained that much of the debt problem in highly indebted poor countries could be related to grand corruption through failed projects and wasted money. She noted that grand corruption was difficult to tackle as it was often high profile politicians who were involved. She also noted that there were good people in every country with whom it was possible to work.[31] DFID should work with developing countries to establish an environment for eliminating grand corruption. We would ask DFID to examine what needs to be done to help developing countries control the behaviour of ministers and senior officials with discretionary powers. A useful starting point would be the provision of technical assistance for the development of systems, such as publicly available registers of interest, ministerial and civil service codes, and oversight and scrutiny bodies such as Auditors-General and Parliamentary Commissioners to investigate allegations of corruption. We believe effective parliamentary scrutiny over all financial matters including development assistance is essential.