CORRUPTION VIRULENT IN MANY COUNTRIES – 2009 CORRUPTION PERCEPTIONS INDEX

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BY PATRICK DONAHUE
Bloomberg

U.S. and world leaders have fallen short in efforts to combat global corruption as policies to fight the international recession lose urgency, a Transparency International official said.

Group of 20 leaders haven’t exploited initiatives meant to steady the world economy to also reduce worldwide corruption levels, Francois Valerian, director of Transparency International’s private sector programs, said in an interview. He spoke as the group, a non-governmental organization that monitors corruption around the world, released its 2009 Corruption Perceptions Index.

“The sense of urgency that we had last fall seems to have vanished, for the very simple reason that the capital markets seem to have recovered,” Valerian said yesterday by phone from Berlin, where the group is based. “Our concern is that we are back to business as usual.”

This year’s index, which measures the perception of corruption in a country, showed that 129 of the 180 nations reviewed scored below five on a 0-to-10 scale, with 10 indicating the least corrupt, Transparency said. New Zealand climbed to the top of the list as the cleanest state, followed by Denmark and Singapore. At the bottom were countries burdened by war, lack of infrastructure or dictatorship: Myanmar, Afghanistan and Somalia.

The U.S. slipped a notch to 19th place from 18th, even though the country’s score climbed to 7.5 from 7.3. Transparency cited “widespread concerns” about American oversight of the financial sector. U.S. administrations and Congress have failed to strengthen regulation of executive pay, derivatives trading and bankruptcy protection, Valerian said.

Fraud, Bribes

“Clearly they did not play the role they should have played before the onset of the crisis,” he said.

The Obama administration plans to announce today an effort by government agencies to combat financial fraud, according to a person familiar with the matter who spoke on condition of anonymity. The U.S. economic downtown has caused an increase in economic crimes, including mortgage fraud, white-collar crime and health-care fraud, according to the Justice Department’s inspector general.

In industrialized countries, fraud can turn away investors who seek to avoid risk. In developing countries, corruption fuels a cycle of poverty as non-functioning institutions fail to provide goods and services, the group said.

Bribery — excluding investment losses, and damage to development and economic growth — siphons off $1 trillion a year from the global economy, one measure of corruption, Transparency cited a 2004 World Bank Institute report as showing.

The group said corruption is a “substantial threat to a sustainable economic future.”

Regulated Derivatives

Valerian faulted the G-20 for not putting forward plans that go far enough toward increased regulation, such as for derivatives, which he cited as one of the primary causes of the financial crisis. He said the G-20’s Financial Stability Board, which includes the group’s central bankers, regulators and finance ministers, has been tasked with delivering reports rather than ensuring reforms are implemented.

“They’ve done a lot of talking and public discourse,” Valerian said, “but they are falling short of real and quick implementation of what was urgently needed last fall.”

Transparency International lauded the Organization for Economic Cooperation and Development’s initiatives in taking on tax havens, though said there’s little the OECD can do if jurisdictions continue to allow tax evasion, flouting the tax rules of most leading developed countries. At the behest of the G-20, the OECD published a list of countries that haven’t followed through on their promises to play by global tax rules.

More Treaties Needed

“We are giving the OECD the benefit of the doubt,” Valerian said. More treaties need to be signed to exchange data, he said.

Identifying corruption and championing transparency has become more vital in a year when governments increase spending, unleashing “fast-track disbursements of public funds,” Transparency International’s chairwoman, Huguette Labelle, said in a statement.

Countries that improved in their rankings included China, Poland, Russia and Bangladesh — all of which instituted anti- fraud programs. Kazakhstan and Guatemala also improved.

On the downside were Greece and Latvia, which drew attention because of corruption scandals. The Czech Republic, Slovakia and Ukraine also suffered losses in this year’s index because of shortcomings in the public sector, the group said.

Corruption in Afghanistan, where President Hamid Karzai won a second term in an election marred by fraud, is rampant, driven in part by the opium trade.

“Examples of corruption range from public posts for sale and justice for a price to daily bribing for basic services,” the organization said of Afghanistan.

The index has become a benchmark gauge of perceptions of a country’s corruption, an assessment of risks for investors. It’s a composite index that combines data from 10 independent institutions.

See Related: WORLD POLITICS

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