Corruption, what and why ?

Corruption increases the cost of public services to the people where they are called upon to pay directly for such services as in the case of electricity or water or any other.

by A. D. V. de S. Indraratne

( December 15, 2015, Colombo, Sri Lanka Guardian) A legal definition of ‘corruption’ is both difficult and complex. A U.S. Supreme Court judge remarked that corruption is difficult to define but that it is like pornography and that we all know it when we see it. Most people would agree that corruption involves the use of public office for the private gain of the office holder. It should not always necessarily involve financial gain. There could be corruption in the form of gifts or favours in kind. For example, soliciting or receiving of sexual favours could be considered an act of corruption.

Sri Lanka legislation defines ‘corruption’ in Section 70 of the Bribery (Amendment) Act No. 20 of 1994. Any public servant who causes a loss to any other or to the government for the advantage of himself or any other person and commits any of the five acts specified under(a), (b) (c) (d) and (e) of Section 70 of the Act commits an act of corruption. Transparency International, an Anti-Corruption Organization has defined corruption as the “abuse of entrusted power for private gain”. The World Bank definition goes a little beyond and defines corruption as “the abuse of public office for private gain, when an official accepts, solicits or extorts a bribe. Public office is abused, when private agents actively offer bribes to circumvent public policies for competitive advantage and profit. It is also abused for personal benefit even if no bribery occurs, through patronage and nepotism, theft of state assets or the diversion of state revenue”. (Helping Countries Combat Corruption- the Role of the World Bank,1997)

None of the above definitions, it has to be admitted, taken separately covers the entire gamut, nature and forms of corruption. Therefore, combining them, so to say, the following definition could be adopted as a comprehensive one: corruption is the misuse or abuse of entrusted power or authority by officers, officials and authorities through practices such as embezzlement, fraud, extortion, bribery/kickbacks, nepotism or favouritism, including theft of State assets and diversion of State revenue, for their personal gain or of others connected to them. Those who offer bribes to obtain an unfair advantage or benefit from public officials and public authorities should also be considered corrupt, even though our definition does not strictly cover them.

Corruption increases the cost of public services to the people where they are called upon to pay directly for such services as in the case of electricity or water or any other. The Bribery Act No. 11 of 1974 was passed in order to deal with bribery, under which a Bribery Commissioner’s Department was set-up. The Declaration of Assets & Liabilities Law was passed in 1975 applicable to Members of Parliament and public officials. The Bribery Commissioner’s Department dealt only with bribery allegations against public employees which included employees in State Corporations. However, bribery charges against the Ministers and Members of Parliament were not within its scope. There were, however, Commissions of Inquiry set up by Parliament to inquire into complaints of bribery against politicians. The Thalagodapitiya Commission was one such Commission, which found some politicians guilty. They were removed from Parliament and deprived of civic rights for a specified period. Although bribery was a punishable offence, the law did not include “corruption”, as such, as a punishable offence. This lacuna was rectified with the passing of Act No. 20 of 1994 and the setting up under that law of the permanent Commission to Investigate Allegations Against Bribery and Corruption (CIABC).

Factors responsible for corruption

There are many factors which lead to, or cause, corruption. Let us take them one by one.

Poor or bad governance gives rise to corrupt practices. Poor or bad governance is the opposite of good governance. Governance is defined here as “a) the process by which governments are selected, held accountable, monitored and replaced, b) capacity of governments to manage resources efficiently and to formulate, implement and enforce sound policies and regulations; and c) [the quality of (sic) and respect for institutions that govern economic and social interactions among them”(Daniel Kaufmann, Francesca Recanatini and Sergiy Belitski, 2002) If there is good governance in this sense, there will be hardly any room for corruption.

In countries where there is bad governance, its leaders may find “the creation and allocation of state rents serves political purposes-rewarding supporters, buying off opponents, ensuring the backing of key groups, managing the ethnic diversity and accumulating resources to fight elections. For this purpose they forge alliances with business groups, create and distribute rents through the bureaucratic apparatus” (Helping Countries Combat Corruption – the Role of the World Bank 1997).

This is true of Sri Lanka and is the primary reason for corruption in the public sector. In fact the Constitution of the country appears to encourage public sector corruption. This may partly explain the lack of a political will that has been there in this country to eliminate corruption.

Since it is mainly poor governance that breeds corruption, it is useful to take a brief look at systems of governance in Sri Lanka. Up to 1972 there were some checks and balances with separation of powers among the legislature, the executive and the judiciary. In the new constitution of 1972 the control of the executive/public service including the police and security forces as well as the judiciary came under the party with a majority in parliament i.e. the governing party and the Cabinet of ministers. This was repeated in the 1978 constitution i.e. the present constitution, with the recruitment, promotion, and transfers and even dismissals in the public service vested with the politicians, many of whom do not possess any relevant qualifications and experience. Most officials, especially the heads of statutory boards are political appointees and often do not possess the necessary skills or qualifications to run them efficiently. Officials with qualifications are often not adequately trained, or are disgruntled or not recognized even if they do good work; because of favouritism or nepotism. The officials, who are inclined to become ‘whistle blowers’, could either lose their jobs or be consigned to a ‘pool’ vested with no responsibility, as the politicians now control recruitments, promotions, transfers and even dismissals.

It is said that corruption is being accepted by the public in the developing countries which are emerging from a feudal culture where the giving and receiving of gifts by officials was generally regarded as acceptable and not morally culpable. It is also true that in feudal times the subjects called on those in authority with gifts and did not think there was anything wrong with that. Therefore bonds of caste, creed, race, kinship and other divisions including political affiliations may still be more important than merit in recruitment to jobs, provision of various public goods etc. in Sri Lankan society.

The failure to take punitive action

The failure to take severe punitive action is another reason for increased corruption. Corrupt officials distort public sector choices to generate large rents for themselves. Economists say such corruption promotes a rent seeking economy and not an entrepreneurial economy required for economic progress and development. Applied to our country “globally least competitive but most corrupt”. Our efforts hitherto have been confined to tackling bribery and corruption only at the lower levels of the government. One has only to examine the cases filed by the CIABC to see how this is borne out. There were numerous allegations published in the press, which the CIABC has no power to investigate on its own. This shows institutional failure which has to be remedied.

The Judiciary uses its common law powers to deal with persons for contempt of court, to deal with persons who dare to expose corruption in the Judiciary. In most democratic countries the Judiciary’s common law power of dealing with contempt has been regulated by statute. The Judiciary is not accountable to any other arm of government. Parliament too has no control over it. In other democratic countries like the UK and the USA, there are Standing Committees for oversight of the judiciary and the appointment of judges has to be approved by the Upper House of Parliament.

Civil society has failed to be stirred by the exposures of corruption in the media; the reason for this is the ignorance on the part of the ‘ordinary citizen’ as to the extent to which his/her life has been affected by corruption or it may be a result of his/her inertia due to dependence on State services for his/her existence.

“Capital spending is highly discretionary unlike current spending …since politicians and officials have to make a large number of decisions regarding the size of the capital spending, choice of projects, their geographical location and its design especially when auditing institutions are weak. For a private enterprise a contract can be highly profitable. Therefore managers are willing to offer ‘commissions’ to politicians and officials making decisions. In fact, it could be even legal and tax deductible in certain countries. Officials can manipulate the process to select a particular project by providing inside information at the time of issuance of tenders.

Officials can assure the inclusion of the cost of any commission in the bid; the initial low bid can be adjusted upward along the way to reflect modifications to the basic design. Contractors can also reduce spending on the project by the amount of the bribe. By skimping on the quality of work and materials used it can also be done by overpricing if the contract is stipulated in a cost plus fashion. Thus the tax payer can end up with a project of inferior quality that will require costly upkeep and repair, while some projects are completed and never used” (Vito Tanzi and Hamid Davodi, 1998 ).

Evidence also could be illuminating in connection with the degree of discretion enjoyed by public officials in the choice of private parties to supply public goods and services and the exact terms of those contracts, as stated earlier. It can also affect the changes in the terms of contracts during project implementation. Extra-contractual payments are a source of corruption.

Corruption has often been argued to exist because of the lack of competition which generates rents that can be illegally appropriated. This general idea has often led people into thinking that, since increased competition reduces rents, it also leads to lower corruption. Rose-Ackerman (1996) maintained that “In general any reform that increases the competitiveness of the economy helps reduce corrupt incentives.” This factor is important in procurement where there is perceived to be much corruption. This is important in the case of a good to be procured which is not homogeneous but can be produced at different quality levels. In exchange for a bribe, the department which is purchasing can buy lower quality products, which may meet with the specifications but are cheaper. Such goods may fetch a price which is comparatively high for the successful bidder but uncompetitive for suppliers who quote for a superior quality. A National Procurement Agency has been set up due to the initiative of the World Bank and it has produced a Manual of Procedures. However, the latter has no statutory status and there is no law to compel the government departments and agencies to comply with it.

Political competition takes the form of undermining the government in power and unseating it before the due date for the next general election rather than providing a dynamic opposition in Parliament which could be an effective check on corruption and bad governance. The Opposition parties lack the competence to analyze the reports of the Auditor General which are placed before Parliament. There is no Code of Ethics for the Members of Parliament or even for the members of the political parties.

The institutions of government are not functioning or are functioning poorly and checks and balances are ineffective, as stated earlier under the political factors promoting corruption. The watchdog institutions that provide information on which detection and enforcement are based — such as investigators, auditors, accountants, and the press — are all weak. Yet strong investigative powers are critical; because both the parties to corruption often benefit and would not like to blow the whistle. So corruption is extremely difficult to detect.

Even if detection is possible, punishments are apt to be mild when corruption is systemic—it is hard to punish one person severely or at all when so many others (often including the “enforcers”) are likely to be equally guilty. There is also no social stigma attached to those even if convicted of bribery or corruption, In fact a Member of Parliament, the late D. B. Monnekulame, who was convicted for bribery, re-contested at a subsequent election and won his seat.