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World: Transparency Report Focuses On Corruption In Construction

  • Mark Baker

The latest report from the corruption watchdog Transparency International (TI) singles out the global construction industry for special scrutiny. In a report released on 16 March, the group identifies the 3-trillion-dollar construction industry as the most corrupt segment of the world economy. And it says the cost of this corruption is more than just wasted money. Corruption can lead to shoddy workmanship, which in turn can damage the environment and even cost lives. RFE/RL spoke to Transparency International's chief executive.

PRAGUE, March 16 (NCA/Mark Baker) -- Big construction projects -- office complexes, shopping centers and road works -- conceal thousands of opportunities for bribery and kickbacks.

No country is immune from corruption, and the costs can be higher than simply misspent money.

That's the lesson in this year's Global Corruption Report, released on 16 March in London.
"We are encouraged by the momentum that the peaceful revolutions in Georgia and Ukraine created toward tackling corruption. We recognize, though, that both countries are going to require a lot of sustained reform efforts over many years if they are going to live up to what the new anticorruption governments have promised."

Transparency International's chief executive, David Nussbaum, says the construction industry -- among all segments of the economy -- is uniquely prone to corrupt practices. "Most of these big projects are unique," Nussbaum said. "We can't compare the price with lots of other exactly similar things because they are one-offs (eds: one of a kind)."

That means there's no easy way to detect when costs have been artificially inflated so that people can either siphon money off for themselves or pay bribes.

He says the situation is often made worse by the fact that building projects usually require permission from government officials -- opening up even more possibilities for bribery.

And he says since the contracts are often so large and lucrative, companies themselves are under strong pressure to get them. "These contracts can be of huge importance to the companies that get them," Nussbaum said. "They don't come up that often. Once they've been awarded, if someone else gets them, you've lost them -- and that may be very serious for the companies involved."

This year's focus on construction is particularly important given the enormous amount of aid pledged to the victims of the Indian Ocean tsunami tragedy.

Nussbaum says such ad hoc relief efforts are breeding grounds for corrupt practices, since few safeguards are in place to ensure aid money is used correctly. "The circumstance do lead to a lot of opportunities for corruption," Nussbaum said, "and this means that it is particularly important to take very proactive steps to ensure that corruption does not take over and damage the good work that the money is supposed to do."

One of the proactive steps being pioneered by Transparency International is what Nussbaum calls an "integrity pact." In other words, he says the parties to a project agree not to offer bribes or to engage in illegal practices. "All the bidders for a contract have to sign up for a 'no-bribes' pledge," Nussbaum said. "But what makes this rather different from general pledges is that there is a framework, which means there are consequences if people don't abide by that, in which they may be barred from future contracts."

Nussbaum says these types of pacts are being used in bigger projects, including a new multimillion-dollar airport now being built in the German capital, Berlin.

There's often not much the average citizen can do to fight corrupt practices. But Nussbaum says the responsibility is on people to ask questions of their elected representatives and to demand accountability.

The annual Global Corruption Report highlights a theme and surveys progress in fighting corruption in 40 countries around the world. Transparency International's popular "corruption perceptions index" is published annually in the fall.

Transparency International says President Mikheil Saakashvili has made tackling corruption his first priority. TI says Saakashvili's tough actions against high-ranking officials in the former government initially won the confidence of the general public. But the report says nongovernmental organizations are concerned that civil and human rights have been undermined by the zealous anticorruption campaign.

Nussbaum says Georgia and Ukraine both have a long way to go in their anticorruption efforts. "We are encouraged by the momentum that the peaceful revolutions in Georgia and Ukraine created toward tackling corruption," Nussbaum said. "We recognize, though, that both countries are going to require a lot of sustained reform efforts over many years if they are going to live up to what the new anticorruption governments have promised."

Transparency International says President Vladimir Putin's crackdown on corruption has come under fire for selectively targeting political opponents, most notably Mikhail Khordorkovsky, the former chief executive of the oil giant Yukos. The organization says a new presidential commission has been set up to tackle corruption but has little power to do more than advise the president.

Transparency International points out that several countries have recently introduced anticorruption laws. The most noteworthy may be Azerbaijan, which is often identified as one of the world's most corrupt countries. The report says Azerbaijan's new law came into effect in January, against a backdrop of skepticism about whether it will translate into concrete action.

"Laws by themselves are necessary, but not sufficient for tackling corruption," Nussbaum said. "They need to go along with having the requisite institutions in the country. And secondly, those institutions having appropriate independence from the authorities."

Transparency International says a series of new laws adopted by the Romanian parliament aim to limit abuses of political office. These include restricting the use of parliamentary immunity, new asset disclosure requirements for politicians, and a code of conduct for civil servants.

Serbia adopted a new law on party finances that introduced public funding for political parties. The report says loopholes in the law limited its impact in the June 2004 presidential elections, however, and that the electoral commission lacks the resources to verify campaign finance reports.