Anti Corruption

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USAID/Central Asian Republics
Beth Salamanca
February 10, 2004
What We’ll Cover

   What is Corruption?
   Why Corruption is an Issue for USAID
   Types and Causes of Corruption
   How Bad is it in Central Asia?
   Costs & Consequences of Corruption
   What Are We Doing About It?
   Next Steps
What Is Corruption?

Misuse of public office for private
  – Embezzlement
  – Nepotism
  – Bribery
  – Extortion
  – Influence peddling
  – Fraud
What it is Not
   Corruption facilitates an environment for
    criminal activities such as:
    – Drug trafficking
    – Money laundering
    – Prostitution
   USAID does not address criminal activities
    under its anti-corruption programs;
   USAID does not focus on corruption
    between private entities
Why Corruption is an Issue
   Significant obstacle to economic and
    democratic development
   Reduces impact and sustainability of
    USAID development activities
   Has destabilizing effect on a country’s
    politics and economics
     Types of Corruption
   Systematic vs. Sporadic
    – Corruption is the rule vs. being the exception to the rule
   Organized vs. Disorganized
    – Organized: involves a number of officials across multiple
      organizations taking part in and sharing gains
           Example: a customs official gets his job through a favor or bribe,
            then has to share a portion of the bribes he collects with superiors
    – Disorganized: Occurs opportunistically, on case-by-case basis
           Example: a judge takes a bribe for a desired ruling on a case
   Grand Corruption vs. Petty Corruption
    – Large scale abuse of public trust vs. small scale;
           Large Scale: a public official purchases an airline then denies landing
            rights to other air carriers;
           Petty: a Policeman extracts a bribe instead of writing a traffic ticket
Other Types of Corruption

   Political – Involves elected public
    official who gives preferential
    treatment in exchange for votes or
    campaign contributions
   Bureaucratic – Involves bureaucratic
    officials, e.g., tax, fire, health
    inspectors who charge bribes to visit
USAID Focuses on

 Systematic
 Organized
 Grand
- Because of corrosive effects on host
  government political and economic systems
- To increase sustainability
- To leverage limited resources
How Bad is it in Central Asia?

2001               2002             2003
                  USA (16)
USA (17)
                                 USA (19)

                  UZ (69)
KZ (73)
UZ (74)           RU (74)
RU (81)
                   KZ (87)       RU ( 87)
                                 KZ (101)
                                 UZ (103)
                                 KG (119)
                                 TJ (128)
    Costs & Consequences
    Political Consequences
   Makes for bad government -- based motives of
    corrupt officials, not on the will of the people
   Reduces rule of law
   Limits concept of one person, one vote—payoffs
    skew elections
   Erodes institutional capacity of government as
    corrupt officials siphon resources
   Undermines government legitimacy – reduces
    peoples trust and tolerance
    Costs & Consequences
    Economic Costs
   Increases the cost of doing business due to bribe
   Reduces competition by giving unfair advantage to
    bribe givers
   Distorts public revenues and expenditures -- contracts
    go to the highest briber, not the most skilled or best
   Scares away investors -- investors need predictability;
    don’t want to pay ―unofficial taxes‖
   Decreases government revenue base -- people loose
    faith in their government so stop paying taxes
    Causes of Corruption
   Wide Government Authority – more likely when officials have
    wide control of transactions
   Little Accountability – no checks & balances; the lower the
    chance of discovery, the higher the rate of corruption; officials
    can get away with it if there is little oversight, transparency or
   Insufficient Incentives – incentive to be self-serving is greater
    incentive to be public serving; poor wage causes need to skim
   Personal Loyalties – loyalty to families, friends, ethnic groups is
    the principle driver, not Rule of Law. ―Patronage System‖ is
    where people gain advantage through personal rather than
    official channels
   Ineffective Government – induces disregard for system
     Cornerstone Principles of
     Anti-Corruption Policy
1.   Clear national security interest in reducing
     corruption to ensure stable political systems
     and democracy
2.   Fight against corruption must occur at national
     and local levels in every country on a number of
     fronts to root out and prevent corruption
3.   International community plays key role in
     encouraging governments to act by raising
     visibility and political profile of national and
     local actions
Anti-Corruption Goals

1.   Unite governments under common
     anti-corruption commitments
2.   Help governments meet or exceed
     those commitments
3.   Mobilize popular will and private
     sector action
4.   Lead by example
3 Components of an
Anti-Corruption Strategy

•    Investigate and prosecute corrupt officials
•    Sustained public education and awareness program
•    Help to institute preventive measures in gov’t structures
USAID Responses to
Institutional Reforms ~ Change how public & private sectors interact
   Wide Authority  Limit Authority
     – competitive procurement, competition in public services
   Little Accountability  Improve Accountability
     – Reduce opportunities for corruption
             Streamline tax collection, clarify customs code, e.g., Trade Facilitation &
              Investment; Fiscal reform Project
     – Increase transparency:
             financial disclosure; increased transparency in commercial lending and banks
             open budget, e.g., Fiscal Reform Project promoting transparency of the
              national budget and expenditures
             financial management systems, e.g., Fiscal Reform Project
     – Oversight: audit capability, anti-corruption agency, hot lines, whistleblower
     – Sanctions: criminal/administrative sanctions, judicial reform (ABA/CEELI)
   Ineffective Incentives  Realign Incentives for Gov’t Employees
     – Provide a living wage, increase professionalism, ethics codes, eliminate ghost
USAID Responses to
Societal Reforms ~ Mobilize public support for change
 Monitor & Measure
    – Survey and publish perceptions, e.g., Transparency
      International -- Corruption Perception Index
   Raise Awareness
    – Let people know the costs of corruption – investigative
      journalism, public relations campaigns, simple signage
   Mobilize Public Will for Change
    – Via international pressure and professional organizations,
      OECD, UN, CIPE, World Bank
Anti-Corruption Team
Who We Are                         What We Do:
17 ACT members                      Develop and implement methods
   Kaya Adams, DM                   to assess host country needs
   Clifford Brown, KCO             Seek opportunities for successful
   Aigul Berdygulova, PS            anti-corruption interventions;
   Michael Fritz, DO               Develop and implement anti-
   Gulmira Kuanzhanova, EF          corruption programs;
   Oksana Lebedeva, FM             Coordinate implementation of
   Jessica Leonard, HE              USAID and US Government anti-
   John Lord, Contracts Officer     corruption programs with other
   Jeremiah Maurer, Web Design      donors in the CAR; and
   Patty McCabe, TKO               Develop and carry out activities for
   Ashley Moretz, TCO               enhancing skills among AC Team
   Gennadiy Orekhov, DM             members and staff.
   Robert Simmons, UCO
   Any Tohill Stull, PS
   Altay Toxanbayev, A&A
   Mark Urban, EF
   Sergey Yelkin, EW
   Beth Salamanca, MS
Anti-Corruption Team
   NGO Training on Foreign Corrupt Practices Act
   Anti-Corruption Center – Transparency Kazakhstan
   Anti-Corruption Websites
     – Internal: http://intranet/anti-corruption/index.html
     – External:
   USAID/CAR Corruption Survey Baseline
   Cross-cutting activities - all sectors, all countries
   Inventory of Anti-Corruption Activities
     – Matrix by SO, IR and Country
     – Country Descriptions
   Policy; PAAMS MO to include AC Checklist
   Respond to State Department and USAID/W queries
   Technical training for staff and partners
   Donor Collaboration
Where We Go From Here
   Anti-Corruption Specialist provides Technical Assist.
   Anti-Corruption Training, Almaty - 3/4/04
   Regional Anti-Corruption Assessment, 3/21 - 4/9
    – Roundtables for each Tech Office; each Country Office
    – Nature and extent of problem
    – Determine political will for change, identify receptive
      actors at national and local level
    – Identify opportunities and constraints
   Develop AC Strategy and Action Plan
   Train the Mission on new Strategy/Action Plan
   Execute the Plan