Bribery and Corruption in Public Sector - Essay Example

Bribery and Corruption in Public Sector Human society has struggling with the problem of corruption since the earliestforms of governance, which refers the insincere or fraudulent behaviour of those in authority, normally relating to bribery. Protection of public office from being abused by the holders was also a part of ancient Greek society were Aristotle recommended measures such as ensuring all the collected money is issued openly in front of the whole city in addition to depositing copies of the public accounts different wards. Since the days of Aristotle, human concern about corruption has multiplied due to the available evidence of how destructive the vice can be to a country’s development prospects (World Bank, 2004). On supply-side of corruption, the main impact on business enterprises is the increased risks and cost of doing business. Business organization have to factor in their budgets money to spent on bribery in order for those in authority to grant them necessary services like work permits or allow delivery of certain goods and services. On a global scale, it is estimated that business enterprises have to pay out about US$ 100 billion in bribes yearly, an amount that is about twice the GDP of New Zealand (Johnston, 2000). Further, international bribery and corruption leads to billions of dollars being lost in terms of exports for business organizations that follow existing guidelines by pursuing contracts through fair competition. Such businesses are denied access to various markets as a result of refusal to pay people in authority in host countries (Hudec, Kennedy and Southwick, 2002). Research has indicated that corruption has adverse effect on a country’s GDP growth with Lambsdorff (2005) asserting that increased corruption level by a single point on a scale of ten (representing highly clean society) to zero (being a highly corrupt society) lowers a country’s productivity by 4 per cent of GDP. The reduced GDP and productivity level in a country have a further negative repercussion that runs across a country’s economy resulting in a lower quality of public infrastructure, health and education services in addition to a reduced capital accumulation levels. Bribery and corruption on the demand side is led by the public officials who use their positions for personal gains which has negative effect on a country’s development. Among the impacts of demand side corruption is that allocated development aid has been ineffective in dealing with the problems affecting the population while also furthering income inequalities and aggravating poverty levels. As a result of public officials demanding bribery, a country acquires negative publicity while also reputation suffers therefore eroding trust from partner states (Stachowicz-Stanusch, 2010). Additionally, officials who demand bribery do not serve the interests of their citizens resulting in a situation where it is almost impossible for the poor and other disadvantaged members of the society to access public services as they do not have enough to pay such officials (Kameswari, 2006). Among the effects of bribery and corruption on macroeconomic stability of a state is that it results in a loss of confidence by both local and foreign investors thereby affecting a country’s foreign exchange markets. A proper example of how corruption harms a county’s macroeconomic stability can be drawn from Gabon’s BCCI scandal that was exposed in 1991 leading to the destruction of the country’s pension system (Tarantino, 2008). Even as data on corrupt activities have shown questionable results, existing statistics shows that bribery and corruption in public sector accounts for a significant fraction of economic activities undertaken within particular economies under investigation. For instance in Kenya, the Controller and Auditor General announced in 1997 that, questionable public expenditure went as high as a total of 7.6 percent of GDP (Tarantino, 2008). In a study conducted by the World Bank in Latvia, over 40 percent of the population sampled from different Latvian households and enterprises confessed that corruption in their society was an accepted component of their lives and was essential in helping them solve many of their problems. The fact that corruption was deeply embedded in different societies of the world was further confirmed by a study of Tanzania’s public sector service delivery. In the case of Tanzanian, results indicated bribes received by public officers from different sectors of the economy such as the judiciary, police, tax services, and lands department amounted to about 62 percent of official public budget in these sectors. Study done in the Philippines by the Commission on Audit indicates that an annual figure of almost $4 billion from the public coffers is diverted from the intended public service expenditure due to public sector corruption (World Bank, 2004). There has been a global condemnation of corrupt practices both in public and private sector which in some cases has led to the removal of public officers from their positions in addition to facing charges in law courts. Additionally, a number of governments and agencies concerned with development have dedicated considerable resources and energies to combating corruption. However, some of these initiatives have not been successful given its magnitude and the positions that those perpetuating it hold in society (Ahmad, 2006). Those who perpetuate corruption rely on the existing governance system that provides cover for them and their activities. Studies conducted on bribery and corruption in public sector has identified a number of key drivers of the vice (Gurgur and Shah, 2002; Huther and Shah, 2000). These studies in addition to the findings in case studies conducted by the World Bank (2004) in, Philippines, Kenya, Latvia, Guatemala, Tanzania and Pakistan identified key corruption drivers as, firstly, widespread acceptance of the notion the public officers are in their positions in order to serve the interests of particular groups connected to them thorough ethnic, geographic or other affiliations. Secondly, those in office weaken the rule of law to facilitate their corrupt activities without being held accountable for their actions. The third driver of corruption is existence of weakened institutions of accountability, which renders them ineffective in fighting bribery and corruption in public sector. Lastly, countries that have in place national leaders with weak a resolve to combating corruption thereby making them either unwilling or unable to address the issue forcefully (World Bank 2004; Gurgur and Shah, 2002; Huther and Shah, 2000). The US has put in place mechanisms for combating bribery and fraud such as the adoption of Foreign Corrupt Practices Act, 1977 (FCPA, which makes it illegal for companies to pay bribes to foreign officials and politicians to be granted rights to do business in their countries. FCPA covers activities of any US or foreign corporation whose securities are registered under the USA Securities and Exchange Act in addition to businesses set up under the laws of the United States or whose core place of business operation is in the United States. The law stipulates various penalties for offenders with violation attracting a penalty of up to US $2 million for businesses while individuals face up to ten years with fines of US $100,000 but penalties could be higher in case of wilful violations. However, FCPA might have some limitations especially when foreign citizens are involved which reduces the impact in terms of dealing with international bribery and corruption (Deming, 2010; Tarun, 2010) In UK, the Anti-bribery Act is the main piece of legislation by the government to fight bribery and corruption. The act which came to force on July 2011 offers a contemporary legal structure for combating bribery both in the United Kingdom and worldwide. This policy framework by the UK authorities has often been noted as being among the toughest anti-corruption legislation in the globe. The law covers such aspects as active bribery, passive bribery, bribery of foreign public officials in addition to commercial organizations failure to prevent bribery by an associated person. The toughness of the Anti-bribery Act lies in its scope where a suspect can be prosecuted for crimes whether committed within UK or abroad. For those found guilty of various offences under the Anti-bribery Act in UK, a maximum of 10 years imprisonment can be the sentence in addition to facing unlimited fine, confiscation of property based on Proceeds of Crime Act 2002 and the directors of concerned companies being disqualification based on Company Directors Disqualification Act 1986 (Breslin, Ezickson and Kocoras, 2010). Fighting bribery and corruption has preoccupied human beings from ancient societies to the modern world making it one of the most long-lasting problems that mankind has failed to deal with. Corruption and bribery in public sector have far-reaching adverse implication in a country’s economic prospects leading widening inequalities, poverty in addition to preventing the population from accessing public services. In case the measures put in place currently do not provide the necessary impetus to eradicate it, coming generations will still face the same problems albeit with higher intensity due to continued technological advancement and tricks of evading the anti-corruption trap. Although in some cases bribery and corruption has become deeply embedded to the extent of becoming a natural part of economic undertakings, governments and other development agencies need to improve their efforts in combating the problem. References Ahmad, E. (2006) Handbook of fiscal federalism. Cheltenham: Edward Elgar Publishing. Breslin, B., Ezickson, D., & Kocoras, J. (2010) The Bribery Act 2010: raising the bar above the US Foreign Corrupt Practices Act. Company Lawyer, 31(11), 144-1027.  Deming, S. H. (2010) The Foreign Corrupt Practices Act and the new international norms. Chicago: ABA Publication. Gurgur, T. and Shah, A. (2002) “Localization and Corruption: Panacea or Pandora’s Box?” In Ehtisham Ahmad and Vito Tanzi, eds., Managing Fiscal Decentralization. London and New York: Routledge Press. Hudec, R. E., Kennedy, D. L., & Southwick, J. D. (Eds.). (2002) The political economy of international trade law: essays in honor of Robert E. Hudec. Cambridge: Cambridge University Press. Huther, J. and Shah, A. (2000) “Anti-corruption Policies and Programs: A Framework for Evaluation”, Policy Research Working Paper 2501. Washington: World Bank. Johnston, D. (2000) “Honesty is the Best Policy”, OECD Observer, No 220, April 2000 [Online], Available: http://www.oecdobserver.org/news/archivestory.php/aid/232/Honesty_is_the_best_policy_.html [5 February 2014]. Kameswari, G. (2006) Anti-corruption Strategies: Global and Indian Socio-legal Perspectives. New Delhi: ICFAI Books. Lambsdorff, J. G. (2005) ‘How Corruption Affects Economic Development,’ Transparency International: Global Corruption Report 2005. London: Pluto Press. Stachowicz-Stanusch, A. (Ed.). (2010) Organizational Immunity to Corruption: Building Theoretical and Research Foundations. Charlotte: IAP publishing. Tarantino, A. (2008) Governance, Risk, and Compliance Handbook: Technology, Finance, Environmental, and International Guidance and Best Practices. New Jersey: John Wiley & Sons. Tarun, R. W. (2010) The Foreign Corrupt Practices Act handbook: a practical guide for multinational general counsel, transactional lawyers and white collar criminal practitioners. Chicago: ABA Web Publication. World Bank (2004) Mainstreaming Anti-Corruption Activities in World Bank Assistance: A Review of Progress since 1997. Washington: World Bank. Read More