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Worldwide Corruption Continues to Block Development

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Bribery, nepotism, and other forms of corruption exist to a greater or lesser extent in all countries, but its corrosive effects hurt poor nations the most. The World Bank considers corruption one of the greatest obstacles to economic and social development because it undermines the rule of law and weakens the institutional foundations upon which economic growth depends.

In this first of a series on worldwide corruption, VOA's Bill Rodgers reports on what corruption is, where it is more pervasive, and how it can be stopped.

It was a secret video of Peru's one-time intelligence chief, Vladimiro Montesinos, paying a bribe to a congressman that led to the downfall of President Alberto Fujimori's government. When the video, taped by Montesinos himself, was leaked to the media in September 2000 it unleashed such a scandal that the Fujimori government fell less than three months later, ending 10 years of autocratic rule.

The Montesinos bribery scandal is a textbook example of the corrosive effects of corruption on a country's political life, its institutions, and economy. Yet Peru is not the only country plagued by corruption.

"Corruption is something that afflicts all of us. There is no country that does not have a challenge in terms of controlling corruption," says Nancy Boswell, who heads the U.S. chapter of Transparency International - a group which monitors global corruption.

"There are always going to be people who are corrupt," she adds. " I don't think at the end of the day that any one of us believes that one country has more of that culture or less of that culture. It really is a question of have they been able to develop the institutional mechanisms to control it."

Corruption takes many forms - from bribery of police or government officials, insider trading in stock markets, nepotism in hiring for jobs. Groups like Transparency say it is extremely difficult to quantify the amount of corruption that takes place each year because of its secretive nature. However, some estimates put the global figure for bribery alone at more than one-trillion dollars annually. In just the construction industry, Transparency estimates, ten percent of the four trillion dollar industry disappears because of corruption.

Corruption expert Louise Shelley says the effect of graft is especially damaging for poor countries.

"If you have five percent of an economy being paid in bribes or seven percent, a strong economy like an Italy can tolerate that. A weaker economy that loses a similar percentage of its assets will be much worse off," she says.

A country plagued by corruption also will have difficulty in attracting foreign investment - one of the keys in generating economic development.

"Companies, if they can help it, will not go to countries where corruption is rampant," says Boswell. "Survey after survey demonstrates that companies go where there is a hospitable environment and part of that is less corruption. So that is an important factor as well. For countries that want to attract investment and trade, focusing on fighting corruption is an absolutely vital element for that equation."

With some exceptions, it is the countries that rely on a single natural resource for most of their income that are most susceptible to corruption. Oil rich countries - like Venezuela and Nigeria - are examples of this. In its annual corruption index, Transparency International ranks these two nations as among the worst for corruption. Louise Shelley, who heads the Washington-based Terrorism, Transnational Crime and Corruption Center, explains why oil-rich countries are so susceptible.

"Because you have one natural resource that generates huge amounts of money and that natural resource is concentrated in the hands of a central elite or ruling figure and therefore it becomes a very close held group that controls this natural resource," she says. "And because there is such an international market for it, there's just enormous corruption that accompanies it."

The United States is not immune from corruption. Recently, there have been several scandals involving misdeeds by U.S. lawmakers.

Congressman Randy "Duke" Cunningham, for example, was forced to resign his office last year and was sentenced to jail for taking more than two million dollars in bribes.

But it is in dictatorships like those in Burma or Belarus where corruption flourishes because there is no transparency, no free press, and citizens have almost no rights. Louise Shelley points to the 2003 Rose Revolution in Georgia as an example where citizens mobilized to depose a corrupt, authoritarian government.

"You need citizens that are so fed up with the corruption that is in existence that they demand change," she says. "And that they are ready to change their ways and their behavior so they are not complicit in this corruption. There needs to be a social contract where the society decides it is going to do something about it. We've seen it in Italy, we've seen it in Georgia, where there are major efforts made with the society and the government in tandem to do something about a serious problem."

Anti-corruption marches have been staged in Peru and other nations where citizens are demanding change.

But ending corruption requires more than just demonstrations. Anti-corruption laws have to be passed and the judiciary must be empowered to enforce them. To this end, a United Nations Convention signed by more than 130 countries went into effect in December, outlining a list of recommendations for how government, the private sector and citizens can help stop corruption.

Much of the focus is on business. Since 1977, the United States has had a law on the books, called the Foreign Corrupt Practices Act, which forbids U.S. businesses from paying bribes when operating abroad. The OECD - which groups together 30 industrialized countries - has a convention that makes it illegal for the companies of member nations to engage in bribery.

Prior to the 1999 OECD convention, some industrialized countries permitted their companies to engage in bribery abroad and even allowed those expenses to be tax deductible.

Transparency International's Nancy Boswell says she is hopeful measures such as the OECD treaty will help curb corruption, but she adds a change of attitude is also required.

"Every time we see the damage, particularly in the poorest areas of the world, and we understand the disproportionate impact of corruption on the poor, then I think we remember it is really important for all of us to play a role," she says. "Business, for example, thinks about 'Am a going to get the deal?' and they think about competition. It is important that they also understand there's an impact to their actions that flows down the chain to the very poorest."

The stakes are highest for developing countries. Boswell and others agree that these nations must stamp out corruption if they hope to someday emerge from the mire of underdevelopment and poverty.

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