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

Turbulent Transition Imperils Tunisia’s Arab Spring Gains

Critics say new anti-terrorism laws worsen Tunisia's situation while others put faith in country’s vibrant civil organizations, women’s movement More

Burundi’s Political Crisis May Become Humanitarian One

United Nations aid agencies issue warning as deadly violence sends tens of thousands fleeing More

Yemenis Adjust to Life Under Houthi Rule

Locals want warring parties to strike deal to stop bloodletting before deciding how country is governed More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Texas Town Residents Told to 'Just Leave' Ahead of Flood Threati
X
Greg Flakus
May 29, 2015 11:24 PM
Water from heavy rain in eastern and central Texas is now swelling rivers that flow into the Gulf of Mexico, threatening towns along their banks. VOA’s Greg Flakus visited the town of Wharton, southwest of Houston, where the Colorado River is close to cresting.
Video

Video Texas Town Residents Told to 'Just Leave' Ahead of Flood Threat

Water from heavy rain in eastern and central Texas is now swelling rivers that flow into the Gulf of Mexico, threatening towns along their banks. VOA’s Greg Flakus visited the town of Wharton, southwest of Houston, where the Colorado River is close to cresting.
Video

Video New York's One World Trade Center Observatory Opens to Public

From New Jersey to Long Island, from Northern suburbs to the Atlantic Ocean, with all of New York City in-between.  That view became available to the public Friday as the One World Trade Center Observatory opened in New York -- atop the replacement for the buildings destroyed in the September 11, 2001, attacks.  VOA’s Bernard Shusman reports.
Video

Video Seoul Sponsors Korean Unification Fair

With inter-Korean relations deteriorating over the North’s nuclear program, past military provocations and human rights abuses, many Koreans still hold out hope for eventual peaceful re-unification. VOA’s Brian Padden visited a “unification fair” held this week in Seoul, where border communities promoted the benefits of increased cooperation.
Video

Video Purple Door Coffeeshop: Changing Lives One Cup at a Time

For a quarter of his life, Kevin Persons lived on the street. Today, he is working behind the counter of an espresso bar, serving coffee and working to transition off the streets and into a home. Paul Vargas reports for VOA.
Video

Video Modular Robot Getting Closer to Reality

A robot being developed at Carnegie Mellon University has evolved into a multi-legged modular mechanical snake, able to move over rugged surfaces and explore the surroundings. Scientists say such machines could someday help in search and rescue operations. VOA’s George Putic reports.
Video

Video Shanghai Hosts Big Consumer Electronics Show

Electronic gadgets are a huge success in China, judging by the first Asian Consumer Electronics Show, held this week in Shanghai. Over the course of two days, more than 20,000 visitors watched, tested and played with useful and some less-useful electronic devices exhibited by about 200 manufacturers. VOA’s George Putic has more.
Video

Video Forced to Return Home, Afghan Refugees Face Increased Hardship

Undocumented refugees returning to Afghanistan from Pakistan have no jobs, no support system, and no home return to, and international aid agencies say they and the government are overwhelmed and under-resourced. Ayesha Tanzeem has more from Kabul.
Video

Video Britain Makes Controversial Move to Crack Down on Extremism

Britain is moving to tighten controls on extremist rhetoric, even when it does not incite violence or hatred -- a move that some are concerned might unduly restrict basic freedoms. It is an issue many countries are grappling with as extremist groups gain power in the Middle East, fueled in part by donations and fighters from the West. VOA’s Al Pessin reports from London.
Video

Video 3D Printer Makes Replica of Iconic Sports Car

Cars with parts made by 3D printers are already on the road, but engineers are still learning about this new technology. While testing the possibility of printing an entire car, researchers at the U.S. Department of Energy recently created an electric-powered replica of an iconic sports roadster. VOA’s George Putic has more.
Video

Video Al-Shabab Recruitment Drive Still on In Kenya

The al-Shabab militants that have long battled for control of Somalia also have recruited thousands of young people in Kenya, leaving many families disconsolate. Mohammed Yusuf recently visited the Kenyan town of Isiolo, and met with relatives of those recruited, as well as a many who have helped with the recruiting.
Video

Video A Small Oasis on Kabul's Outskirts Provides Relief From Security Tensions

When people in Kabul want to get away from the city and relax, many choose Qargha Lake, a small resort on the outskirts of Kabul. Ayesha Tanzeem visited and talked with people about the precious oasis.
Video

Video Kenyans Lament Losing Sons to al-Shabab

There is agony, fear and lost hope in the Kenyan town of Isiolo, a key target of a new al-Shabab recruitment drive. VOA's Mohammed Yusuf visits Isiolo to speak with families and at least one man who says he was a recruiter.
Video

Video Scientists Say Plankton More Important Than Previously Thought

Tiny ocean creatures called plankton are mostly thought of as food for whales and other large marine animals, but a four-year global study discovered, among other things, that plankton are a major source of oxygen on our planet. VOA’s George Putic reports.
Video

Video Kenya’s Capital Sees Rise in Shisha Parlors

In Kenya, the smoking of shisha, a type of flavored tobacco, is the latest craze. Patrons are flocking to shisha parlors to smoke and socialize. But the practice can be addictive and harmful, though many dabblers may not realize the dangers, according to a new review. Lenny Ruvaga has more on the story for VOA from Nairobi, Kenya.

VOA Blogs

World Currencies

EUR
USD
0.9115
JPY
USD
123.92
GBP
USD
0.6554
CAD
USD
1.2443
INR
USD
63.800

Rates may not be current.