Corruption Review of Literature

Bureaucratic Corruption in Asia
Causes, Consequences and Controls
Ma. Concepcion P. Alfiler, Ledevina V. Carino, Rance P. L. Lee and A.T. Rafique Rahman
JMC Press, Inc.; College of Public Administration, U.P.
Manila, 1986

Foreword:
*As one goes up the hierarchy of officialdom, his latitude of discretion becomes wider, conversely, the lower one is in the hierarchy, the more limited is his area of choice of action.

*The potential for abuse lies in the discretionary power of public servants.

*The pervasiveness of the problem of the misuse of power and authority has been felt in both developed and developing countries alike. In other words, the problem of graft and corruption is a universal one.

*The collapse of some governments, it has been observed, has in fact been precipitated by their inattention to the problems related to the misuse of power and authority. When left unchecked, corruption can undermine duly-constituted governments.

*While the problem of graft and corruption has been felt, perceived and recognized in almost all countries, what constitutes corrupt acts of public officials has not been clearly delineated.

*From one point of view, using the standards of behavior for the public office as a basis for passing judgement on the action or decision, such acts constitute misue of public authority.

This book “look into the causes, structural patterns and consequences of graft and corruption” and the “historical dimension and the control measures which have been adopted in the different countries to minimize the problem.”

*The challenge of how to promote the responsible use of power and authority, particularly in developing countries in Asia, remains. Indeed, the problem of the misuse of power is a major component of the broader issue of reconciling political/administrative power and political/administrative responsibility. What are the effective means to achieve this goal? The establishment of ombudman-type institutions to hear and investigate complaints, including charges of corruption, against public officials, and changes in the structure, process and procedures in government management may be resorted to in the effort to counter the problem of graft and corruption. On the other hand, it may be only with the introduction, acceptance, observance and enforcement of ethical standards in the public service that the misuse of power could be prevented or minimized. (Foreword)
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*The procurement practices of one of the bureaus of the Philippine Department of Public Works and Communications was such that, in the purchase of three items alone, the agency would have lost 16,727.25 pesos if no re-canvassing was made. In another case where the agency almost bought from a ghost supplier, items were found to have been overpriced by 35,432.40 pesos. For another transaction involving two items, the agency would have lost 182,935.60 pesos if the agency did not re-canvass prices for these itmes from other suppliers.

In Nepal, it was also estimated that there was more than 10% leakage in the procurement of construction materials, machines, equipment required for big projects on road contruction.(p.55)

*Computation on costs for getting a permit showed that a bribe of 400 pesos which cut-processing time from 1 ½ months to a week could save the client as much as 2,640 pesos as it allowed the taxi to earn for the other five weeks.

*Bautista qualified that the amount given might vary with the bureaucrat's mood and the willingess of the client to accede to the former's subtle demands. As a rule, however, more highly placed bureaucrats or those who could exercise more discretion could demand more bribe money than those who performed routinary acts. For this reason, a meter tester ordinarily got more than a clerk who simply tped or released the license.

Not all the cases were able to determine the amount of money changing hands in administrative corruption. Those which provided data appear to point to the fact that the value of the bribe increases when the client engages in illegal activites, when the transaction is a recurring one and also when the goods or services obtained from the government was highly valuable, i.e., a constructon contract. The amount correspondingly increases if the client has the resources to pay the bribe and views the giving of the bribe money as more of an investment to prevent further harassment or more losses in the operation of his business. (p.57)

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Curbing Corruption
Toward a Model for Building National Integrity
Economic Development and Institue of the World Bank
Edited by Rick Stapenhurst and Sahr J. Kpundeh
The World Bank Washington DC, Copyright 1999

*Furthermore, management capabilities did not grow along with the rapidly enlarging scope of government responsibility and operations. Making and implementing decisions became a process of improvisation under conflicting regulations and procedures, resulting in erratic government performance.

*Systematic policymaking and implementation were impossible in the context of limited fiscal maneuverability, which included chaotic public management; lack of timely, reliable, and relevant information; and counterproductive government controls, which were improvised, distorted, and not updated in more than 30 years.

*Reporting obligations were unclear, contradictory, or simply nonexistent. There was seldom any compliance. No real government accounting standards existed.

*Without timely, reliable, and relevant management informations systems, policy formulation and implementation were inconsistent and unpredictable.

*”Precontrol” was the paradigm of governmental control – to comanage with veto power and without responsibility. The precontroller could paralyze the flow of government activity. In veiw of the enormous diversity of specialties required in modern government, rarely was the exercise of precontrol an effective preventive measure against error or corruption.” (p.70)

*Public sector purchasing and contracting have always been a significant source of corruption. Although contracting agencies have been employed for almost 10 years to monitor projects, cost overruns are still sizable. There are worrisome indicators that mechanical procedures do not guarantee quality, especially in consultant bidding. Neither contracting agencies nor import/export-verifying companies make updated information available about standard costs.(p. 72)

*All these reforms contribute to controlling corruption by activating the capacity of communities for social censure, promoting the economic potential of new generations as an alternative to corruption, and eliminating the opportunities for corruption inherent in an overextended and entrepreneurial governmenr. Notwithstanding these benefits, transparency and accessibility to information continue to be the most fundamental requirements that are lacking for effective and honest government dedicated to public service.(p. 73)

*Reforms may be conceptualized under the four headings of prevention, enforcement, public awareness, and instution building. In each case, the goal is to make corruption a high-risk, low-profit undertaking.

*Simplifying government programs and procedures will help reduce the opportunities for corruption. The more efficient the design of a program, the less prone to corruption it will be. One reform is to eliminate those “gatekeepers” who are in a position to exact tolls from users. Another is to reduce the number of steps required to gain government approvals and payment for goods supplied.

*Areas of discretion should be minimized or, where possible, eliminated. Where retained, clear written guidelines for exercising such discretion should be published. Staff manuals and similar materials should likewise be published and made accessible to department users and others. Opportunities for corruption will also be reduced by demystifying the role of government, because corruption thrives when the public is unaware of its rights. (p. 99)

*It is important to create an open, genuinely competitive, and transparent system of public procurement. To reinforce anticorruption efforts, professional associations of accountants, auditors, and lawyers should denounce participation in corrupt activities (including money-laundering) and make such behavior cause for being professionally barred. The reporting of all gifts and hospitality received by government officials should be required, as well as the reporting and recordidng of all political donations.

It is desirable, too, to review and enforce appropriate conflict-of-interest regulations. This might involve introducingg ethics programs and periodically holding group discussion of real-life ethical dilemmas drawn from civil servants' own experiences. In some cases it might be desirable to remove certain activities from the mainstraem of the public service. (p. 100)

*The removal of “monopolies” within the bureaucracy is also important in order to provide rival sources of services...

*Finally, coalitions of interests in support of corruption prevention should be built. Such coalitions should draw in both the private sector and civil society and in certain cases undertake public awareness campaigns to decrease tolerance of corruption. (p.101)

*Anticorruption strategies ca be divided into four broad categories.:

*. . . Strategies in the third category address government programs that may give rise to corruption because they are poorly designed or unnecessary. Regulatory statutes might be reviewed to determine if they are necessary and whether they can be streamlined.

*Public procurement specifications might be redesigned to emphasize standardized, off-the shelf products to reduce manipulation of tailor-made specifications. (p. 109)

*The consequences of degradation of the ethical environment in public organizations and departments will be weak guidance on standards of conduct, poor compliance with procedures, management indifference or ignorance, inadequate financial and management information systems, lax working practices, poor staff relations, too much suborganizational autonomy, poor recruitment and training policies, and crucially, little or no attempt by senior officials to control, monitor, or police the contact with private sector values, practices, personnel, and procedures. (p.110)

*The circular instructed public officials to review and improve the measures taken to prevent corruption by minimizing the opportunies for unethical practices.

*They were also requested to take appropriate anticorruption measures in those departments where wrongdoing was most likely to occur. Such measures included improving work methods and procedures to reduce delays; increasing the effectiveness of supervision by enabling superior officers to check and control the work of their staff; rotating officers to ensure that no individual or group remained too long in a single operational unit; carrying out surprise checks on the work of officers; making the necessary security arrangements to prevent unauthorized access to deparment premises; and reviewing anticorruption measures every three to five years, with the aim of introducing further improvements. (p.111)

*To be effective, a program to reform the procedural basis of government to increase transparency and discourage corruption should include:

An open, genuinely competitive, and transparent system of public procurement.
A radical simplification of regulations, not only to diminish the need to resort to bribery, but to ease the transaction of business of all sorts and facilitate access to public services generally
An adequate salary structure that will eliminate the need for civil servants to supplement their incomes through bribery,...
Strict limitation and regular supervision of the discretionalry authority of officials
Frequent transfers of officials, to prevent long-term relationships with suppliers and customers from developing
Effective and well-understood laws and procedures preventing improper association between officials and suppliers, covering such matters as the receipt of gifts and hospitality(p. 112)
Published and publicly available guidelines for decionsmaking
Speedy and effective reviews of decisions allegedly made without following published guidelines
Efficient investigatory agencies
Appropriate channels for subordinate officials to use when reporting corruption by their superiors.(p. 113)

*If the state has not established clear, well-enforced guidelines for economic activity and the exercise of administrative discretion, private individulas may play it safe by paying officials to give them the needed permits or protection. It is only one step further for these same officals to prevent the entry of competitors for government business, or to divert public funds for private purposes.

*Efforts to reduce corruption by decentralizing decisionmaking can, however, backfire badly. Unless a strong team is appointed to oversee and audit public procurement, corruption can – and most probably will – flourish.(p. 113)

*Public procurement in particular is notorious for the levels of corruption attained by dishonest politicians and officials. Throughout the world, procurement procedures that foster bribery and corruption have been allowed to develop. Nonetheless, there are approaches that may reduce corruption in this traditionally very difficult area. One is the “no-bribery pledge” now being introduced in Educador for major public procurement exercises. Tendering chief executive officers are required to personally warrant that no bribery has taken place and to personally certify returns of all commissions and other payments made to or for the benefit of third parties in connection with particular transactions. Another approach is the introduction of specific mechanisms for monitoring the awarding and exectution of public contracts, such as the ones now instituted in Jamaica and, and more recently, Belize.(p. 114)

*There is also the matter of gifts received by those in public office. Gifts can take many forms - … Some are acceptable; others are not. Excessive hospitality, such as an all-expense paid vacation for a purchasing officer and spouse, is clearly unacceptalbe. More difficult to classify are such things as lunches or festive presents, although accepting even seemingly trivial gifts and hospitality can, over time, lead officials to become unwittingly ensnared by “donors.” The dividing line usually rest at the point where the gift places the recipient under some obligation to the gift-giver. The acceptable limit will differ from one society to another, but it can be set in monetary terms so that gifts exceeding it must be declared. (pp.134-135)

*A “casual gift” means any conventional hospitality on a modest scale or an unsolicited gift of modest value offered to a person in recognition or appreciation of his services, or as a gesture of goodwill towards him, and includes any inexpensive seasonal gift offered to staff or associates by public and private bodies or private individulas on festive or other special occasions, which is not in any way connected with the performance of a person's official duty so as to constitute an offense...

*But simplification will not always reduce corruption if the rules are very rigid. Bureaucratic rigidity frequently breeds illicit behavior on the part of both public servants and suppliers. Thus simplicity will work only if it is not excessively arbitrary and if senior officials or independent enforcement officials aggressively pursue anticorruption measures. (p. 135)

*Improved Procurement Procedures

Kpundeh and Heilman (1996) have outlined a number of criteria for improving public service procurement procedures. First, procurement should be economical. It should result in the best quality of goods and services for the price paid, or the lowest price for the stipulated or acceptable quality. This does not necessarily mean procurement of the least costly or highest quality goods available, but the best combination of these factors to meet the particular needs.

Second, contract award decisions should be fair and impartial. Public funds should not be used to provide favors; standards and specifications must be nondiscrimnatory; suppliers and contractors should be selected on the basis of their qualifications and the merit of their offers; and all bidders should receive equal treatment in terms of deadlines and confidentiality.

Third, the process should be transparent. Procurement requirements, rules, and decisionmaking criteria should be readily accssible to all potential suppliers and contractors, preferably announced as part of the invitation to bid. The opening of bids should be public, and all decisions should be fully recorded.

Fourth, the procurement process should be efficient, with the rules reflecting the value and complexity of the items to be procured. Procedures for purchases of small value should be simple and fast; for more valuable and complicated items, more time and more complex rules are required to ensure that principles are observed. Decisionmaking for larger contracts may require committees or a review process, but bureaucratic intervention should be kept to a minimum.

Fifth, accountability is essential. Procedures should be systematic and dependable, and records should be maintained that can explain and justify all decisions and actions. Competence and integrity in procurement encourages suppliers and contractors to make their best offers, in turn leading to improved procurement performance. Purchasers that fail to meed high standards of accountability and fairness, should be identified quicklty as poor partners with which to do business.

Finally, a sound and consistent framework is required to establish the basic principles and practices to be observed in public procurement. This can take many forms, but there is increasing awareness of the advantages of a uniform procurement code setting out the fundamentals for all government agencies, supplemented by more detailed rules and regulations for the implementing agencies. A number of countries are reviewing existing laws that may have developed in haphazard fashion over many years and consolidating them into such a code. (pp.136 – 137)

*Many people we met - even from the public sector – did not hesitate to classify corruption as rampant.... Corruption is a major issue in Uganda, at all levels of society.... Unethical practices, [we] found, were rampant throughout all levels of the civil service, from the bottom to the top.... Corruption [is] primarily a means of survival on the part of junior civil servants and others; at the top, it involves spoilage and misapplication (even misappropriation) of funds on a large scale by senior civil servants and politicians.

*There was a feeling that the government may be taking steps to fight corruption but not effectively enough.... People argued that far too little was happening, too few were being successfully prosecuted and too many notoriously corrupt individuals were retaining high level position in the Government. (p. 199)

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Improving Government Performance:
Discipline, Efficiency and Equity in Managing Public Resources
Public Expenditure, Procurement and Financial Management Review
A Joint Document of the Government of the Philippines
The World Bank and the Asian Development Bank, April 30, 2003

*Fiscal sustainability and the government's ability to finance poverty-reducing programs continues to be at risk from falling revenues, rising public debt and debt service and off-budget risks. This constrained environment makes it doubly important to focus on increasing fiscal flexibility through increasing revenue collections and enhancing the discipline, efficiency and equity of public expenditures.

*Fiscal flexibility is being steadily eroded as revenues shrink and mandated expenditures remain high. Discretionary expenditures, severely constrained by low revenue collections, rising debt service and high expenditures on personal services, no longer provide adequate flexibility to respond to evolving needs. (Executive Summary vii)

*Allocative Efficiency

22. Composition of expenditures. The economic composition of spending has deteriorated in
recent years as both maintenance and other operating expenses (MOOE) and capital outlays have decreased as a share of GNP.(Exec. Summary x)

24. Allocative efficiency is also diminished by various distortions: although the Government has made some progress recently with limiting the scope of distortiion, more could be done to hold “development fund” expenditures to higher standards. A major concern is the allocation of scarce resources to special budget funds that are not necessarily aligned with NG policy priorities and non-transparent in their use. (Exec. Summary xi)

29. Better medium-term expenditure planning and budgeting would make overall budget management and expenditure allocation more responsive to national priorities. Currently, resource, planning and implementation constraints are threatening maintenance and public investment in core poverty-reducing public programs. (Exec. Summary xii)

39. For the past three years the government has been implementing reforms in public expenditure management, led by the DBM. Such reforms require considerable time, commitment and coordination to yield the benefits of greater fiscal discipline, improved strategic allocation of resources and gains in operational efficiency. The policy framework for reforms and the basic building blocks of improved public expenditure management have been put in place. (Exec. Summary xiii)

41. The challenges in moving forward are to maintain the momentum of reforms, to coordinate and manage the process, to prioritize key actions and to continue to refine and strengthen the institutional framework. This requires sustained management and mainstreaming in line departments, couple with the establishment of effective processes to link national, regional and LGU-level planning, prioritizing and implementation of poverty alleviation programs and pro-poor services. (Exec. Summary xiv)

42. ...The government has made important strides with the development of the New Government Accounting System (NGAS). Now implementation needs to be managed carefully. Additionally, internal control weaknesses create cash management risks that need to be addressed by improving accounting and reporting requirements. (Exec. Summary xiv)
*Operational Efficiency

44. Procurement reforms to increase competition and transparency could enhance the cost efficiency of resource use and also improve governance. The potential for, and possible gains from, procurement reform are high. This is appropriately an area that has recived much attention from reformers. In fiscal 2000-2002, outlays for procurement of goods, works and services by national agencies, LGUs and GOCCs averaged more than PhP115 billion annually.

45. The Ombudsman, the Commission on Audit and the Philippine Center for Investigative Journalism have estimated that large amounts of public funds are being lost to both political and bureaucratic procurement-related corruptiomn. Although no reliable estimates are available of losses due to public sector procurement-related corruption, the perception of large leakages continues to persist. An October 2001 study by Procurement Watch, Inc. indicated that the potential leakage through procurement corruption could have run to about PhP95 billion in 2001. The DBM estimates that this could have been used to fund the DepEd twice over, or build more than 500,000 houses, or construct more than 1000 kilometers of farm-to-market roads. The experience of textbook and drugs procurement under World Bank – financed projects indicates that adoption of improved procurement processes and practices could reduce prices by about 40 percent.

46. A key achivement has been the enactment in late 2002, and signing into law in January 2003, of a new Procurement Reform Law. This follows several steps in recent years to streamline public procurement rules and regulations. Thus, enactment and implementation of the Procurement Reform Law applicable to the national government, LGUs and GOCCs was appropriately the top administration priority in procurement reform. Promulgation of the implementing rules and regulations will strengthen the legal and institutional framework for procurement, enhance transparency and accountability, generate further budgetary savings, and also contribute to improving governance. The law contains provisions to simplify pre-qualification procedures, encourage electronic procumerement, reduce officials' discretion on bids and awards, establish a Government Procurement Policy Board for oversight and regulation of government procurement, professionalize the public procurement function, protect procurement officials from unjust legal suits arising from the performance of their duties, and impose criminal and civil liabilities for those found guilty of collusion.

47. Electronic procurement systems can enhance transparency, promote competition, and reduce the time for procurement of common-use supplies. Such systems have been developed in various public sector agencies in the Phillipines, … (Exec. Summary xv)

*The Philippines has also been prominent in involving civil society in the public procurement process at the national and local levels as a menas to enhance accountability and transparency.

48. Priority action on the procurement front would comprise: (a) promulgation of the IRRs for the Procurement Reform Law; (b) strengthening electronic procurement processes side by side with wider publicity for government procurement through media such as newspapers, radio and television; © continued support for civil society monitoring of procurement processes at the national and local levels; (d) establishment of a Procurement Policy Board as the sole regulatory and oversight entity for public procurement; and (e) long-term support for building procurement capacity, including at the LGU level. (Exec. Summary xvi)

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