Tina Søreide

Drivers of Corruption : A Brief Review

Corruption is motivated by the possibility of securing something of value for oneself and one s allies. The desire to secure benefits is a human trait and generally positive for development; various forms of rewards drive humans to get up in the morning, do a good job, and act responsibly. The discussion now turns to the opportunity to secure more benefits than are entitled to within the existing rules of the game ; specifically, the opportunity to grab at the expense of society. A decision maker has the authority to influence an outcome that matters to the briber. For steering a decision in the briber s direction, the decision maker is compensated with a bribe. The steered decision and the bribe now become assets that usually exceed what at least one of the players would have obtained without the corrupt act. The opportunity to seize assets through some form of power misuse differs across sectors, organizations, and decision-making situations. This chapter describes the circumstances in which the risk of corruption is particularly high in other words, where the drivers of corruption can be found.

Infrastructure policy and governance failures

Interventions to fix market failures in infrastructure have often resulted in some form of governance failure and this contributes importantly to explain shortcomings in the supply of infrastructure services in developing countries and increasingly in developed countries in crisis. The development community continues to address sector dysfunctions from the sector level, often with a ‘one solution fits all’ approach, instead of approaching the political level, which is considered more challenging. This paper presents a systematic structured review of experiences with policy work in light of political economy explanations. Governance failures have different explanations – including populism, patronage, corruption or ownership shares in the private sector. This paper offers a structured framework for identifying the given governance challenge and discusses the need for more tailor-made approaches to sector-reform.

An Economic Analysis of Debarment

With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corruption and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, while in markets with low competition it may deter corruption as long as firms value public procurement contracts in the future and there is a certain risk of being detected in corruption. On the other hand, debarment - when it works - has an anti-competitive effect, and this effect will contribute to facilitate collusion between suppliers. Debarment may work as a tool against collusion, but only if targeting one firm at the time (such as a ring-leader or the specific beneficiary when the collusion is detected) - and not all the members of a cartel. If designed with an understanding of the market mechanisms at play, debarment can deter both collusion and corruption, thus improving the results of public procurement. If so, most current debarment regimes need modification.

Corruption and Criminal Justice

The author addresses the role of criminal justice in anti-corruption by investigating assumptions in the classic law and economics approach and debating the underlying criteria for an efficient criminal justice system. Drawing on real life challenges from the policy world, the book combines insights from the literature with updated knowledge about practical law enforcement constraints. Political and administrative incentive problems, which may hinder the implementation of efficient solutions, are presented and debated.

An Efficient Anticorruption Sanctions Regime? The Case of the World Bank

With its sanctions regime, the World Bank has sent a clear message to client governments and suppliers that it will not tolerate corruption. However, as this article argues, with its present design, the sanctions regime at the same time runs counter to the World Bank’s own development agenda. Thus, the regime will have limited effect in protecting funds for development, reducing corruption risks, promoting the integrity and functionality of markets, and strengthening domestic law enforcement institutions. A key problem is that efforts to strengthen law enforcement at the national level are too limited. The sanctions primarily target private suppliers, while governments are not held responsible when fraud or corruption occurs. This reflects the World Bank’s challenging mandate to offer financial support to developing country governments while also trying to secure efficient use of the funds after they have been transferred. In considering alternative designs for its anticorruption strategy, the Bank should collaborate with other international development banks to demand integrity mechanisms that rely upon and strengthen domestic law enforcement institutions and competition authorities in client countries.

Corruption and Competition for Resources

An increasing share of world FDI is carried out by multinationals from developing countries. These investors may have objectives and constraints that differ from their developed country counterparts. In this paper we focus on differences in attitudes to corruption, and how these may shape the competition for the right to extract resources in a developing country context. We show how differences in the investors’ level of technology and differences in the host country government’s trade-off between bribes and taxes determine who wins the competition for the resource and the winning price. One finding is that competition from a bribe-willing investor may induce a bribe-averse investor to enter into corruption. Surprisingly, however, we also find that competition with a bribe-willing investor may induce the bribe-averse investor to increase its tax payments.

Corruption, Grabbing and Development

All societies develop their own norms about what is fair behaviour and what is not. Violations of these norms, including acts of corruption, can collectively be described as forms of ‘grabbing’. This unique volume addresses how grabbing hinders development at the sector level and in state administration. The contributors – researchers and practitioners who work on the ground in developing countries – present empirical data on the mechanisms at play and describe different types of unethical practices.

Zero-tolerance to corruption? Norway’s role in petroleum-related corruption internationally

Norway is frequently presented as one of the few countries to have escaped ‘the resource curse’. Evidence for this claim is based on Norway’s consensus in favour of fiscally conservative spending, competent regulatory institutions, a zero-tolerance policy towards corruption, and vast savings in a sovereign wealth fund (SWT) for future generations. Internationally, Norway is known for its aid-financed oil for development program, its advanced technology exports and its emphasis on industry safety and labour rights. Has Norway effectively implemented its ‘zero-tolerance’ policy in its operations abroad as well? To illustrate this crucial issue more clearly, this paper briefly reviews Norway’s commitment to the international anti-bribery agenda, including the performance of petroleum companies, the role of the criminal justice system in enforcing the country’s anti-bribery legislation, and the government’s role as a political player, recipient of tax revenues and shareholder in the petroleum sector.

Corruption in State Administration

Corruption can arise in any bureaucracy with the authority to allocate benefits and impose costs. This paper articulates general economic principles that can help identify corrupt incentives and guide reform. It draws from models of bureaucratic behavior, especially the economic literature on asymmetric information and sanctions. In this literature, individuals are expected to make rational choices given their preferences and the limited information at their disposal. The paper applies basic economic ideas of scarcity, competition, sanctions, and incentives to the control of corruption in bureaucracies. It presents the intuitions behind the economic theories and discusses their practical value in anti-corruption policy design. The paper contrasts policies directed against civil servants found guilty of corruption with compliance regimes that target state institutions as a whole.

Carpe Per Diem: The Uses and Abuses of Travel Compensation in Developing Countries

This article presents the results of a qualitative study of the uses and abuses of travel compensation in the state administrations of three developing countries: Ethiopia, Malawi and Tanzania. We explain the incentive structures that drive abuses of standard compensation systems, and highlight the role of complicit managers who condone such practices. While abuses seem trivial when considered in isolation, in each of the countries they are considerable in aggregate terms and are likely to have distortionary effects on public service delivery. Incentives to change the systems and malpractices are weak because several categories of stakeholders benefit, albeit to varying degrees. The challenges must be understood in light of government incentive problems in pay-performance strategies and government–donor relationships. In addition to formal and external controls, solutions will require rethinking of the purpose and results of the many aid-financed seminars, which require out-of-office participation and programmes involving extensive travel.