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World: Intolerance Of Corruption Increases

Washington, 23 February 1999 (RFE/RL) -- Corruption -- both public and private -- is the center of attention in Washington this week as the subject which, in one official's words, "no one wants to talk about," gets an airing at two major conferences -- one private and the other governmental.

The role of the private sector is the focus of the first meeting being sponsored by the OECD, the Organization for Economic Cooperation and Development. U.S. Commerce Secretary Richard Daley opened that conference Monday, telling business people, professional groups and organizations from more than 30 countries that at its simplest level, corruption discourages investment:

Daley said it is an unnecessary tax on doing business and shouldn't be there. Business people everywhere say they do not want to go to a country where the government looks the other way.

Corruption is a serious economic problem. The OECD says it costs between $500 billion and one billion dollars every single year. Some even estimate that corruption takes between three and five percent of the entire global GDP (gross domestic product).

Former U.S. Congressman John Brademas, now Chairman of the U.S. National Endowment for Democracy, says that while the situation is bad, there is hope:

Brademas said corruption both in China and Russia is rampant. But increasingly there is a trend toward intolerance of corruption, helped by the post-cold war opening up of government processes, freer new coverage, and increased independence of the judiciary.

Daniel Kaufmann, a top official with the World Bank's Economic Development Institute, told the conference that corruption, often in the form of bribes to get government permits or licenses, especially hurts smaller companies:

Kaufmann said a small sized firm of 30 or so employees in Ukraine pays about $30,000 per year in total bribes. A few years ago you could even concoct an average bribe fee list for every single license required by business.

In Albania, Kaufmann said, the World Bank's institute found that businesses are well aware of what corruption is costing them:

Kaufmann said the overwhelming majority of firms are prepared, on average, to pay 10 percent more in taxes if corruption were eliminated. Corruption is such a high cost that business people are very explicit about being ready to pay higher taxes to be rid of it. Finance ministers ought to get the message of how much they're losing to corruption and over-regulation.

The OECD, which sponsored the international anti-corruption treaty that took effect last week, says the focus must be on both those who pay the bribes and those who take them.

A partner in the global accounting firm of Price-Waterhouse-Coopers, Peter Diekman, says those who receive illicit payments, or black money as it's sometimes known, compound the strain on the economy. They start another crime wave because they can't simply take their bribe money and go out and invest it legitimately:

Diekman said there is a simple economic force at work that criminals who have this kind of money try to find a way to legalize it by money laundering. This will always be the case because criminals, like anyone else, behave in a very normal economic way -- they want to get a good return on their money.

U.S. Under Secretary of State for Economic and Business Affairs, Stuart Eizenstat, says the problem is endemic throughout the world, in rich and poor, developed and developing nations. He said that for the nations in transition to market economies, there must be a recognition that corruption is a broad systemic problem with many economic aspects:

Eizenstat said the need for change in emerging and transitional economies is not just a matter of new laws. It requires nothing less than building civil society and open governments. To eradicate the culture of corruption, he said, we must replace cynicism about the rule of law with a renewed sense of optimism.

The problem of corruption and bribery in official government agencies will be tackled directly later in the week at a conference organized by U.S. Vice President Al Gore. Representatives from nations around the world, including Bulgaria, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Moldova, Poland, Romania, Russia, the Slovak Republic, Slovenia, and Ukraine are expected to attend.