Growing corruption and the need to diminish it
07/09/2015
In August 2015, demonstrations occurred in Iraq against the spread of corruption in state institutions and a lack of public services. These protests drew attention to the expansion of corruption in a number of Middle Eastern countries, and highlighted the need to adopt broad, specific strategies to contain and combat the practice. Corruption has resulted in negative repercussions on economic, developmental, social, and political levels, resulting in a popular demand to end corruption and increase the prosecution of perpetrators. These strategies remain incomplete and require further revision, alongside the development of effective mechanisms to fight the challenges ahead on the political, legislative, and regulatory levels.
Declining Rankings:
Corrupt practices have increased in a number of Middle Eastern countries in recent years amid crumbling political stability, changing governments, and intensified armed conflicts and violence. A number of these countries were ranked at the bottom of the Corruption Perceptions Index for 2014 issued by Transparency International.
Graph 1: Middle Eastern countries’ rankings in the Corruption Perceptions Index 2014
Source: Transparency International
Out of 175 countries, Iraq ranked 170th globally and Libya 166th, both placing among the ten most corrupt countries of the world. Lebanon dropped from 127th in 2013 to 136th in 2014, while Tunisia moved from 77th to 79th, and Algeria dropped from the 94th ranking to 100th. By taking some measures to fight corruption, Morocco moved up from the 91st slot in 2014, to 80th in 2014; while Jordan moved from 66 up to 55.
Stressful Consequences:
Indications of corruption have intensified and are reflected in negative manifestations from a macroeconomic perspective, as well as in the latent formulation of economic development plans, and a lack of satisfaction among citizens regarding government performance. These points are illustrated below:
1. Popular protests: Various countries in the region have held demonstrations against corruption such as Iraq, Turkey, and Lebanon. Iraqi protestors demanded that institutional corruption, which resulted in the deterioration of public services, particularly electricity, be ended. At the same time, they called for those responsible to be identified and punished. The Iraqi demonstrations were followed by protests in Turkey against accusations of corruption in the Justice and Development party, officials, and various ministers in the Turkish government at the time. During August 2015, popular demonstrations in Lebanon escalated due to a worsening trash problem in Lebanese cities. Lebanese protestors have accused public service officials of corruption and neglect.
2-Financial leaks: The demand to improve living conditions was one of the main driving factors in the Arab revolutions of 2011. Other factors included the provision of basic services, increasing employment, and to increase efforts to fight rampant corruption in the public and private sectors. These demands have not yet been translated into real efforts to combat corruption in countries where revolutions took place, nor in the remaining countries of the Middle East. For this reason, it is not surprising that some estimates place the volume of corruption in the Arab world to be valued between $300-400bn annually, which of course undermines economic growth in countries of the region and renders them unable to control public funds. The limp economic situation currently facing the region may not allow these leaks to continue for long, and financial pressures on governments are growing in tandem with escalating political unrest and declining oil prices. Thus the situation merits austerity measures and spending cuts, especially in oil-producing countries.
3-Low quality of services: The spread of corruption within the state apparatus is linked to weak performance on part of the public service system, and for this reason citizens are not happy with such services. Recently, Iraq and Lebanon witnessed widespread demonstrations against a weak public services system, due to the electricity crisis which has extended for years in Iraq and the trash crisis facing Lebanon. An analysis published by Transparency International in December 2014 revealed that the Iraqi army lost large quantities of US funding because the nation granted salaries to fictitious soldiers, and as a result the military’s ability to perform its role in protecting state lands and fighting ISIS was diminished. As major oil supplies in Algeria failed to be delivered due to corrupt practices, a number of Algerian officials with Sonatrach have been accused of making shady deals with a group of multi-national and European companies over the past three years in exchange for kickbacks and bribes.
4-Unattractive business environment: It is interesting to note that in countries with high corruption indicators, the business environment is often characterized by a plethora of restrictions on conducting business as well as the absence of a foundation for healthy competition. Thus in most cases, these countries have low rankings on business practice indexes issued by the World Bank. The World Bank ranked Libya 188th out of 189 countries in terms of corruption in 2014, while Iraq came in 156th place, Algeria 154th, and Lebanon 104th. These results confirm the contents of a study issued in August 2015 by the European Bank for Reconstruction and Development on the business environment in various countries in the Middle East and North Africa. The study found that among the many obstacles to conducting business in the region, corruption was ranked the second most important obstacle in a number of countries (Morocco, Egypt, Tunisia, Jordan), although the corruption ranking for each country varied.
Statistically speaking, it was disappointing to find that Tunisian companies pay 2.7% of their annual revenues for unofficial payments (such as bribes) in order to move business forward. This is the highest rate among countries included in the study, and rates for other countries such as Egypt, Morocco, and Jordan were less than 1%.
5-Efforts to Combat Corruption: A number of countries of the region have legislated a restructuring for efforts to combat corruption. This began when these countries announced that they would be setting out new strategies to fight the phenomenon, and in this regard, the Iraqi government recently approved a package of reforms in the face of the demonstrations, including reforming the financial, administrative, and regulatory systems. At the end of 2014, the Moroccan government set about implementing a new strategy called the ‘Strategy to Fight Bribes’ to ensure that the plan to combat corruption was implemented, and that a legislative and regulatory framework was established to catch culprits. The strategy also established an easier system for lodging complaints and new mechanisms to ensure that judicial rulings are executed quickly. With regard to Tunisia, coordination and consultations are underway with civil society to launch a national strategy to fight corruption. Tunisia is close to enacting new legislation to fight corruption, the most important of which pertains to authorizing financial disclosure, combating illicit enrichment, and access to information. Jordan adopted the National Integrity Charter in 2013, and is currently working to enact a new law to establish a national center for integrity.
In summary, these efforts to combat corruption seem ambitious to a large degree, but practically, these measures are linked to extremely crucial factors in strengthening implementation. This process requires a strategy based on integrated policies, wider guarantees and powers for regulatory agencies, prompt justice, access to accurate and updated information, transparency in government spending, eliminating bureaucracy and procedures, and spreading smart technology to help reveal corrupt practices.
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