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Why fighting corruption helps the poor

By David R. FrancisColumnist / November 13, 2003

Fighting corruption is no longer just a moral issue. It has become a major tool in the fight against world poverty.

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Once seen as the cost of doing business in much of the globe - sometimes even regarded as useful in greasing the way for development projects - bribery increasingly is viewed as a major stumbling block to progress.

And increasingly, governments and business groups around the world are beginning to do something about it.

"There has been a sea change in the past seven or eight years in awareness of the issue," says Daniel Kaufmann, the World Bank's top official on the corruption issue.

Three factors have been pushing the planet in this direction: the spread of democracy to many developing countries and former communist nations, recent research proving the terrible damage corruption does to the economies of poor nations, and the rapid spread of this knowledge across borders through the Internet.

The most sweeping move came two weeks ago when the General Assembly of the United Nations approved - unanimously - the Convention Against Corruption. Justice ministers and some heads of state from about 130 nations plan to gather in Merida, Mexico, from Dec. 9 to 11 to sign the new treaty.

"Corruption is an insidious plague that has a wide range of corrosive effects on societies," UN Secretary General Kofi Annan told the General Assembly. "It undermines democracy and the rule of law, leads to violations of human rights, distorts markets, erodes the quality of life, and allows organized crime, terrorism and other threats to human security to flourish."

As Mr. Annan noted, this evil phenomenon is found in all countries, rich and poor. The United States, despite its wealth, democracy, and elaborate system of justice, has been experiencing a troubling bout of financial fraud.

Corruption, though, hits poor countries especially hard by diverting money away from development.

New research finds that, over a generation, if a poor country with a high level of corruption manages to reduce corruption to a median level, it will enjoy a 400 percent improvement in its per capita income, according to Mr. Kaufmann. That translates into a jump from, say, $4,000 a year for every many, woman, and child to a relatively prosperous $16,000. By contrast, people subject to a truly corrupt government often see a reduction in their living standards.

Just signing a treaty, of course, does not block all corrupt activities. But the convention includes a major breakthrough. It requires signatory nations to return assets obtained through corruption to the nations from which they were stolen. "Corrupt officials will in future find fewer ways to hide their illicit gains," said Annan.

Though proving that money is ill- gotten may not always be easy, that provision may prevent corrupt dictators, such as Ferdinand Marcos, a past president of the Philippines, or Joseph Mobuto, former president of Zaire, from stowing billions of dollars abroad and getting away with it for years.

The Convention Against Corruption will require ratification by 30 nations to come into force. This process, usually involving legislative approval, could take 18 months or so.

Other moves are also afoot:

• Nigerian President Olusegun Obasanjo announced in Berlin Nov. 7 that his government would publish the revenues it receives from the oil industry. This would square with the British government-led Extractive Industries Transparency Initiative. Representatives of oil companies also indicated they would make public what they pay to Nigeria.

In some countries, "signature bonuses," royalties, and other payments have gone to hiring mercenaries or buying arms for a civil war. For instance, Human Rights Watch in Washington charges that over the past five years, $4.2 billion of Angolan state oil revenues disappeared before it could reach the coffers of the central bank. That sum is roughly equivalent to the total foreign aid Angola has received in that period.

• Anticorruption conventions approved by several international organizations - the Organization for Economic Cooperation and Development (OECD), the Organization of American States, the Council of Europe, even the African Union - have pushed many nations to pass their own antibribery laws.