News / Economy

Report: Corruption Cheats Developing Countries of Needed Money

Report: Corruption Cheats Developing Countries of Needed Moneyi
X
December 16, 2013 9:18 PM
Global Financial Integrity says China tops list from 2002 to 2011, with slightly more than $1 trillion in illegal outflows; Russia is second, with $880 billion
The developing world needs huge sums of money to address its many problems with health, housing, education, and more. A new report says corrupt practices by multinational companies, their government enablers, and others, however, are depriving people of a better life.

A financial watchdog group, Washington-based Global Financial Integrity [GFI], reports astounding sums of money are extracted every year from African, Asian, and Latin American nations. GFI’s new report says that in 2011, some $947 billion was taken out of these countries through what it calls illicit capital outflows.

GFI Director Raymond Baker said the 10-year total is even more staggering. “Over the decade from 2002 to 2011, we’re talking about $5.9 trillion that have moved out of the developing countries. Nothing is as harmful as this loss of capital to the poorer countries of the world.”

GFI’s report says China tops the list for that decade, with slightly more than $1 trillion in illegal outflows. Russia was second, with $880 billion. Mexico came in third with nearly $462 billion extracted. The highest ranked African nation was Nigeria, at 10th on the list, with more than $142 billion.

Different corrupt practices contribute to these illicit capital outflows, according to Alex Cobham of the Center for Global Development in London.  

“Partly, it’s about the proceeds of crime.  It’s the laundering, particularly, of drugs, of drug proceeds, and the proceeds of human trafficking," said Cobham. "But it’s also corruption itself, the theft of state assets - but that tends to be a small component. The largest component, from almost all of the estimates that we have, for almost all of the countries, is commercial tax evasion.”

Both Baker and Cobham say that tax evasion is largely accomplished through something called mispricing of trade - undervaluing minerals, goods, and other exports to tax authorities. Mispricing of trade also provides an avenue of corruption through false invoices providing kickbacks.

Sub-Saharan Africa is especially hit hard by illicit capital extraction. GFI’s report says in 2011, that region lost 5.7 percent of its gross domestic product, largely through tax avoidance done by mispricing natural resources and manufactured goods.

Global Financial Integrity’s director says developed nations must take the lead to reduce the massive extraction of capital that keeps some states and their people impoverished.

“The short answer to curtailing the problem of illicit financial flows is transparency - greater transparency in the global financial system. This means getting rid of disguised corporations, this means exchanging tax information across borders, this means companies automatically reporting their sales and profits and taxes paid in every jurisdiction where they’re in business,” said Baker.

Baker and others say that if developing nations could get their fair share from what is produced and extracted, they would have much more money to spend on public health, schools, housing, and other essential needs.

Jeffrey Young

Jeffrey Young came to the “Corruption” beat after years of doing news analysis, primarily on global strategic issues such as nuclear proliferation.  During most of 2013, he was on special assignment in Baghdad and elsewhere with the Special Inspector General for Iraq Reconstruction (SIGIR).  Previous VOA activities include VOA-TV, where he created the “How America Works” and “How America Elects” series, and the “Focus” news analysis unit.

You May Like

South Korea Divided on Response to North’s Cyber Attack

In past five years, officials in Seoul have accused Pyongyang of hacking into banks, government websites, causing chaos and inflicting millions of dollars in damages More

Video Calm Amid Fear in Daily Life in S. Sudan’s Bentiu

Residents have been trying to regain some sense of normalcy, but planning for the future remains uncertain as fear of attacks looms More

2015 Could Be Watershed for Syria Conflict

Republican control of US Senate in January could lead to more aggressive policy against IS militants in Syria - and against regime of Bashar al-Assad More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Jane Monheit Christmas Speciali
X
December 22, 2014 8:15 PM
Chanteuse Jane Monheit sings the holiday classic “Have Yourself a Merry Little Christmas,” and explains why it’s her favorite song of the season.
Video

Video Jane Monheit Christmas Special

Chanteuse Jane Monheit sings the holiday classic “Have Yourself a Merry Little Christmas,” and explains why it’s her favorite song of the season.
Video

Video Trade Talks Could Heat Up in 2015

With boosting trade a top priority for the Obama administration, 2015 may be the year that an agreement is finally reached on the Trans Pacific Partnership. But the trade deal, which is intended to boost trade between 12 Pacific countries, faces opposition as VOA's Jim Randle reports.
Video

Video Ugandan Doctors Aid Victims of Sudan's Civil War

In Sudan's state of South Kordofan, the number of amputees as result of civil war is in the thousands, but few have access to sufficient medical help. Adam Bailes recently visited the area and says a small team of Ugandan doctors has been providing remote help, producing new prosthetic limbs for those in need.
Video

Video Calm Amid Fear in Daily Life in S. Sudan’s Town of Bentiu

Six months ago, Bentiu was a ghost town. The capital of northern Unity State, near South Sudan’s important oil fields, had changed hands several times in fighting between government forces and rebels. Calm returned in November and since then, residents of Bentiu have been trying to regain some sense of normalcy. Bentiu’s market has reopened there are plans to start school again. But fears of new attacks hang heavy, as Benno Muchler reports from Bentiu.
Video

Video US Business Groups Press for Greater Access to Cuba

President Barack Obama's decision to do all he can to ease restrictions on U.S. trade, travel and financial activities with Cuba has drawn criticism from some conservatives and Republicans. People who bring tourists to the island and farmers who want to sell more food to Cuba, however, think they can do a lot more business with Cuba. VOA's Jim Randle reports.
Video

Video Three Cities Bid for Future Obama Presidential Library

President Barack Obama still has two years left in his term in office, but the effort to establish his post-presidential library is already underway. The bid for the Obama Presidential Library is down to four locations in three states -- New York, Hawaii, and Illinois. As VOA’s Kane Farabaugh reports, each of them played an important part in the president’s life before he reached the White House.
Video

Video Fears of More Political Gridlock in 2015

2014 proved to be a difficult year politically for President Barack Obama and a very good year for the U.S. Republican Party. Republican gains in the November midterm elections gave them control of the Senate and House of Representatives for the next two years -- setting the stage for more confrontation and gridlock in the final two years of the Obama presidency. VOA National Correspondent Jim Malone has a preview from Washington.
Video

Video Sudan School Becomes Target of Aerial Attacks

The school dropout rate is at an all-time high in Sudan's South Kordofan state because many schools have been destroyed during the three-year civil war between the government and SPLA-N rebel forces. Adam Bailes visited Sudan's Nuba Mountains' region and reports many children are simply too scared to go to school

All About America

AppleAndroid

World Currencies

EUR
USD
0.8157
JPY
USD
119.96
GBP
USD
0.6402
CAD
USD
1.1629
INR
USD
63.200

Rates may not be current.