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February 19, 2013

Asian Economic Growth Masks Growing Corruption Problem

by Ron Corben

Corruption in Asia continues to be a drag on growing economies, draining billions of dollars from economic development and triggering a public backlash in some places. Calls for reform are coming from the private sector and United Nations even as the region’s economic prospects improve.  
 
When protestors took to the streets of Bangkok last year, calls were made for the Thai Government of Prime Minister Yingluck Shinawatra to address signs of growing corruption in Thailand.
 
A 79-year-old businessman pointed to rising costs of doing business, including bribes for officials.
 
“I am an industrialist. I cannot stand anymore because we have to pay under the table so much money," he said. "Before, all right you have to accept that before it was about five and ten per cent. But now it’s a minimum 30 per cent - minimum is 30 per cent."
 
Estimates for how much economic activity is lost to corruption are difficult to judge, but a recent study by the University of the Thai Chamber of Commerce concluded that over two per cent of national output or some $11 billion is likely to be lost to corruption this year.
 
The university said many from the private sector who were surveyed said they are paying more bribes to government officers and politicians to win government contracts.
 
Thai political economist, Pasuk Pongpaichit, says although there is evidence that indicates authorities are making progress in curbing lower level corruption, the slowing global economy means growing competition for lucrative government contracts.
 
"Globalization, the international pressure for Thailand to become more transparent is being felt and various government departments are responding to it. It doesn’t mean that things are going to happen very quickly," she said. "On the other hand, as the world economy is slowing down and the local business is become more competitive, you could see that on specific cases the rate of corruption may have increased because of the higher competition.”
 
Analysts say the Thai Government is already under scrutiny for spending more than $11 billion on water management infrastructure following the 2011 floods and a further $67 billion on rail and other building projects. Economists have also charged a $33 billion rice price support program for farmers is beset by corruption allegations.
 
Bandid Nijathaworn, a former central bank deputy governor and now president of the Thai Institute of Directors, says corruption in Thailand appears to be more of a problem now than 10 years ago.
 
"Corruption is a global problem," he said. "You see corruption appearing as headlines in many countries. So it has become a global issue both in national organization and individual country’s governments trying to tackle it. In the case of Thailand we are having a greater challenge because the problem seems to be worsening than maybe 10 years ago.”
 
Despite posting robust economic growth during the past decade, many countries in Asia still rank poorly on international anti-corruption indices.
 
A recent report by the U.S.-based Center for International Policy said that in China alone between 2001 and 2010, $2.74 trillion in illegal funds left the country, through criminal financial schemes, corruption, tax evasion or other illegal activities. For Thailand the figure stood at $64 billion over the same period. In India, the center of major ant-corruption rallies last year, the figure stood at $123 billion.
 
United Nations Office on Drugs and Crime (UNODC) regional anti-corruption adviser, Shervin Majlessi, says given Asia’s growing influence in the world economy, there is a greater need for oversight.
 
"Generally, speaking when you have this kind of fast economic growth we are witnessing in this region, it comes with the same challenges and opportunities in terms of corruption," he said. "The challenge is obviously there is more financial flows, there are bigger contracts, procurements, the opportunities for corruption to increase. So you need stronger anti-corruption systems and regimes in place."
 
In 2003 the U.N. passed a Convention against Corruption. In South East Asia, Burma, ratified the convention in December - the last to do so of the 10 member Association of South East Asian Nations (ASEAN).

UNODC’s Majlessi says for ASEAN governments the key is to implement the reforms set out under the U.N. convention.
 
"Now the whole of ASEAN is finally covered by this convention. So this is kind of positive news," he said. "There is a key challenge in the implementation of this kind of international norms and standards and that taken time including legal reforms, international reforms and most importantly political will to actually implement this kind of instrument."
 
The Asian Development Bank is also supporting ASEAN through a Corporate Governance Scoreboard to promote transparency in business.
 
Thai Institute of Directors' Bandid Nijathaworn, who oversees a new group of companies aimed at fighting corruption, says private sector involvement is also critical for anti-corruption efforts to succeed.
 
“I think the momentum is building and people and people feel that in order to address the corruption issue you need to look at both the demand side and the supply side of corruption," he said. "Usually companies are being looked at on the supply side of the corruption, so getting the companies together we hope to reduce the supply side of corruption.”
 
Analysts say the corruption fight needs to go beyond government law enforcement, and include non-government and private sector organizations.