Wednesday, December 10, 2008

Anti-Corruption Day, Blagojevich and Zardari

When Barack Obama was elected president, Governor Blagojevich of Illinois saw opportunity in the vacancy created in the U.S. Senate. "I've got this thing and it's f------ golden, and uh, uh, I'm just not giving it up for f------ nothing," he allegedly said, according to U.S. Atty. Patrick Fitzgerald of Chicago. Fitzgerald has the governor's recorded conversations demanding $500,000 to a million dollars to sell the senate seat.

How ironic! The governor of a major American state that is sending its senator to the White House as president got charged with massive corruption on Dec 9, 2008, the day designated as International Anti-Corruption Day by the United Nations.

This latest corruption scandal in the United States confirms that corruption exists in all parts of the world to varying degrees, including the industrialized world. However, this report also illustrates that, unlike Pakistan and many other less developed countries, there is greater accountability in the West for the people in power. Official corruption is almost universal but the extent of corruption and the strength of anti-corruption enforcement measures vary widely. It is not the constitution or the laws on the books that make a difference; it's the independence of the career civil servants and the judiciary that differentiates the US system from what is observed in Pakistan and other developing nations. The US attorneys, for example, pursue investigations and prosecutions independently of the politicians who appoint them. The judges are appointed for life and they do not take dictation from politicians and their appointees either.

At the time of the recent India-US nuclear deal approval, members of India's parliament, including convicts released on parole, were offered all kinds of incentives to vote in a certain way. Both the government and the opposition tried desperately to entice them with promises of largess, influence and plum jobs in return for their vote. The BJP opposition, however, could not match the resources of the governing Congress party and the deal was approved.

There have been significant bribery allegations involving Indian politicians and officials and corporations such as Bofors, Enron and Xerox. The Swedish firm Bofors AB allegedly paid Rs.640 million ($13 million) in bribes to middlemen to get the contracts for the deal signed in 1986. Nearly a decade later, Enron India spent US$ 20 million in "educating" Indian bureaucrats about the role of private companies in power generation, an euphemism for bribes. Two telecommunications companies, Essar and Swisscom, were alleged to have paid a former minister, Sukh Ram, a hefty amount during early 1996 to help change the original license conditions, which it had signed with the Department of Telecommunications. Except Bofors, none have been prosecuted to any extent. Meanwhile, India's spending on defense procurement and infrastructure spending involving foreign companies has increased several fold without much scrutiny of how the deals are made.

Not only is there lack of accountability in the developing nations, it seems that corrupt politicians such as Pakistan's President Zardari, widely known as Mr. Ten Percent, get rewarded with high offices by the illiterate electorate living in a feudal society, with the assistance of amnesties arranged by the United States. It is what President Bush often describes as "soft bigotry of low expectations" when the West pushes for the pardon of corrupt politicians in countries such as Pakistan, in clear violation of the UN Conventions against Corruption. What is worse, such policies of condoning corruption are pursued in the name of promoting democracy in the third world.

The behavior of condoning corruption in the third world extends to the private sector as well, with American and European companies routinely engaging in bribery in Africa, Middle East and Asia. For example, Forbes reported last year on Siemens involvement in bribery in the developing world as follows: "The World Bank is looking at an electrical power plant project in Pakistan concluded in the mid-1990s, which was built and later partially maintained by Siemens and financed by the World Bank. The World Bank is concerned that Siemens' costs for the project may have been overpriced.Siemens is currently engulfed in a slush-fund scandal, in which prosecutors allege that managers siphoned off hundreds of millions of euros in company money to obtain foreign contracts.Siemens' own internal investigation uncovered 420 mln euros in suspicious payments going back to 1999 which may have been made to obtain telecommunications equipment contracts in a range of foreign countries. The Bavarian State Prosecutors office has said the sum is estimated in the triple-digit millions of euros." Subsequent to these reports, Daniel Noa, Siemens' top anti-corruption chief, stepped down after only six months at the company, with little explanation given.

There have also been reports from Munich about Siemens pleading guilty to bribing politicians and officials in Nigeria, Russia and Libya. Last month, Siemens said it would take a charge of about 1 billion euros ($1.29 billion) this fiscal year as part of a settlement of bribery investigations by authorities in Germany and the United States.I believe such reports represent only the tip of the iceberg of corruption involving Western multi-nationals and politicians and officials in developing nations.

There are definitely laws on the books in the West such as the Foreign Corrupt Practices Act (FCPA) in the United States. Almost all ethics classes taught in the Western management schools and company training courses cover this topic. However, the question is whether these laws are really enforced and how often are the companies held accountable? Or do they simply rely on the foreign governments to report misbehavior? It would be a fantasy to expect the officials and politicians on the receiving end to report incidents of bribery as they are the main beneficiaries. But I think the German, French, US, British and other governments of developed nations who claim higher moral positions should be cracking down on these reprehensible practices just to enforce their own laws and live up to their own higher standards. While it may be argued and it is like putting the shoe on the wrong foot, I see it as the only hope we have of containing such widespread corruption in developing nations that is robbing their people blind.

Here's a video clip on global corruption by US corporations:

Related Links:

Bhutto Convicted in Switzerland

Corruption in Pakistan

Transparency International Survey 2007

Is Siemens Guilty?

Zardari Corruption Probe


Anonymous said...

That means Americans also have got some impact of South Asia!

Riaz Haq said...

Official corruption is almost universal but the extent of corruption and the strength of anti-corruption enforcement measures vary widely. It is not the constitution or the laws on the books that make a difference; it's the independence of the career bureaucrats and the judiciary that differentiates the US/western system from what we see in Pakistan and other developing nations. The US attorneys, for example, pursue investigations and prosecutions independently of the politicians in power or their political appointees. The judges do not take dictation from politicians and their appointees either.

Anonymous said...

I think including Pakistan with other developing nations is a little optimistic.

nota said...

I am not questioning the truth of the accusations against Blagojevich did. To me what is interesting is the timing of this revelation (Blagojevich allegedly has Mob ties as well, but being a Governor from Ill. it is almost a pre-requisite :) ).

Most of you might not know that just a day before this scandal "broke", Gov. Blagojevich had taken an excellent step:

Illinois Governor Suspends Business With Bank Of America (BoA)

So now all that talk about BoA is forgotten. I must ask if this was the case of taking Blagojevich down for stepping on the toes of BoA?

In other related news, it appears Obama and his chief of staff Emmanuel Rahm were certainly involved as well in the senate seat selling scam and the affair is rightly being called Obamagate....

Emanuel Gave Blagojevich List of Names
Rahm Emanuel Reportedly Spoke with Blagojevich About Senate Seat
Obama's Corruption Eruption

Riaz Haq said...

Vijay Prashad, an Indian writer writing for Counterpunch, alleges that several Indian businessmen were involved in raising money for Blagojevich on behalf of Jesse Jackson Jr's bid to be nominated for the senate seat vacated by Obama. Here's what Prashad says:

People who attended the party (fundraiser) made it clear, anonymously, that Nayak brought them together to put his friend Congressman Jesse Jackson Jr.’s name up for the Senate. It had become clear that Senator Barack Obama would win the presidential contest to be held the next week, and these deep pockets realised that his elevation would open the Senate seat. The Governor of Illinois would have the right to fill the seat until the next election cycle. Nayak, Bedi, Bhatt and others wanted to put in a good word for their friend, Congressman Jackson. Gabhawala told Chicago Tribune that he saw Bedi and Nayak try to convince Babu Patel, a Blagojevich fund-raiser, to use his influence and money on Jackson’s behalf.

Riaz Haq said...

Here's report on water related corruption in Pakistan:

"Pakistan’s irrigation network has always served the privileged elite at the expense of the poor. World Bank and government programs have consistently favored feudal landowners. When the irrigation system was established, the government failed to recognize the land rights of the original inhabitants and allotted irrigated plots to rich landowners and military personnel. While large and very large farmers control 66% of all agricultural land in Pakistan, almost half of all rural households own no land. A World Bank evaluation noted in 1996 that the bank’s projects "provided large and unnecessary transfers of public resources to some of the rural elite."9

The top–down engineering approach to Pakistan’s water sector has also caused massive collateral damage downstream. The Indus Basin Irrigation System starves areas of Sindh province – and particularly the Indus Delta – of water and sediment. And because the sediment trapped in the reservoirs does not replenish the delta, close to 5,000 square kilometers of farm land have already been lost to the sea. Meanwhile salt water is intruding 100 kilometers upstream in the Indus. The lack of water and sediment is destroying flood plain forests that are home to hundreds of thousands of people and mangrove forests that help protect the coast against storms.

While the downstream areas suffer from a water shortage, wasteful water use is wreaking environmental and economic havoc in the command area. Over–irrigation and inadequate drainage have caused the water table to rise across a large area. As a result, about 60% of all farm plots in Sindh are plagued by water logging and salinity."

Please read here for more details.

Riaz Haq said...

Here's a BBC report about "ghost worker" costing $43m a year in Delhi city government:

The government of the Indian capital, Delhi, has been paying salaries to 22,853 civic workers who do not exist.

Salaries for the missing Municipal Corporation of Delhi workers add up to nearly $43m a year, City Mayor Kanwar Sain said in a statement.

The "gap" was discovered after the authorities introduced a biometric system of recording attendance.

Correspondents say it shows some civic officials created a list of "ghost workers" to siphon off state funds.

The Municipal Corporation of Delhi (MCD) employs more than 100,000 cleaners, gardeners, teachers and other workers.


City officials became aware there were thousands of "ghost workers" after introducing the biometric system in August last year.

Mr Sain said the civic agency has 104,241 "genuine" employees - while the records show the numbers at 127,094.

A press release issued by Mayor Sain's office said: "There is a gap of 22,853 employees in the Municipal Corporation of Delhi between the data given by drawing and disbursing officers, the head of the department and the number of employees enrolled for biometric attendance."

An "in-depth vigilance inquiry will be conducted into the matter to ascertain the facts," he said.

"Strict disciplinary action will be taken against officials who cooked the books," the mayor said.

It was long suspected that the city was being defrauded by "ghost workers", but the authorities had always denied the charge.

Riaz Haq said...

Here's a BBC report saying "the world is a more corrupt place now than it was three years ago".

Some 56% of people interviewed by Transparency International said their country had become more corrupt.

In Afghanistan, Nigeria, Iraq and India more than 50% of people said they had paid a bribe in the past year - many of them paying off the police.

Meanwhile, a BBC poll suggests that corruption is the world's most talked about problem.

About one in five of those polled for the BBC by GlobeScan said they had discussed issues relating to corruption with others in the last month, making it the most talked about concern ahead of climate change, poverty, unemployment and rising food and energy costs.

In the Transparency International survey, political parties were regarded as the most corrupt institutions with 80% of people regarding them as corrupt.

Political parties also topped the list in Transparency's 2004 barometer, with 71%.

Religious bodies experienced a sharp rise in people regarding them as corrupt - 28% in 2004 increased to 53% by 2010.

Some 50% of people believed their government was ineffective at tackling the problem of corruption.

Transparency flagged up bribery as the major problem highlighted by the survey, with one in four of those polled saying they had paid a bribe in the past year.

Some 29% of bribes went to the police, 20% to registry and permit officials, and 14% to members of the judiciary.

Robin Hodess, Transparency's policy and research director, said police involvement in such transactions was "really worrying".

"It's a figure that's grown in the past few years. It's nearly doubled, in fact, since 2006. Nearly one in three people who had contact with the police around the world had to pay a bribe," she said.

While people from Cambodia (84%) and Liberia (89%) were the most likely to have to pay a bribe, the Danish respondents reported no bribery.

By region, people in sub-Saharan Africa were the most likely to have paid a bribe (56%).

Bribe-taking was least common in EU countries and North America (both 5%) - although these were the two regions seeing the biggest increase in concern about corruption.

Analysts blame this rising concern on the global financial crisis for undermining people's faith in government, banks and economic institutions.

The lobby group interviewed 90,000 people in 86 countries to compile its corruption barometer.

The opinion poll commissioned by the BBC sampled 13,000 people in 26 nations.

One question asked people to rate which issues they saw as most serious.

Corruption was ranked as the second most important topic behind poverty.

Respondents in Brazil, Egypt, Colombia, the Philippines and Kenya were especially likely to view corruption as a very serious issue.

In Europe, Italians were the most concerned about bribe-taking.

Publication of the BBC poll coincides with anti-corruption day held by the United Nations.

Riaz Haq said...

Here's an Op Ed by Prof Anatol Lieven published in the Guardian:

If Pakistan's chief justice, Iftikhar Chaudhry, manages to press his charges of corruption against the president, Asif Ali Zardari, he will bring down the existing Pakistani government. If he extends his anti-corruption campaign to the political elites as a whole, he will bring down the entire existing political system – and replace it, his critics say, with a dictatorship made up of an unelected (and equally corrupt) judiciary.
The truth is that Pakistani politics revolves in large part around politicians' extraction of resources from the state by means of corruption, and their distribution to those politicians' followers through patronage. Radically changing this would mean gutting the existing Pakistani political system like a fish. Nor is it at all certain how popular the process would really be with most Pakistanis.

For while the greater part of this process of extraction and redistribution is illegal according to Pakistani law, how much of it is immoral in Pakistani culture is a much more complicated question. Every Pakistani politician accuses his rivals of corruption but, equally, the perception that he himself is "generous" and "honourable" to his own supporters is likely to be central to his own local prestige. If a public monument is ever erected to the Ideal Pakistani Politician, the motto "He dunks but he splashes", originally coined by Mayor Richard Daley of Chicago, should be inscribed on its pedestal.

And this is not just a matter of cynical politics. It also obeys a fundamental moral imperative of local culture to be loyal to one's followers and, above all, one's kinfolk. The politician who is really despised is the kleptocrat who both steals immoderately and does not share the proceeds. As a result, a good deal of the proceeds of corruption does get distributed through parts of society, thereby helping to maintain what until recently has been the surprising underlying stability of the Pakistani political system.

The military is widely seen as relatively immune to corruption, and when it comes to its own internal workings, this is largely true – though it usually ceases to be true when generals go into politics. However, it is vitally important to note that this is in large part because for many decades the military as a whole has acted as a kind of giant patronage network, extracting a huge share of Pakistan's state resources via the defence budget and other concessions, and spending them on itself. Because – to its credit – it has distributed the resulting benefits in an orderly if hierarchical way among its generals, officers, non-commissioned officers and even to a degree privates, it has managed to keep a lid on corruption within the military itself. However, a belief is growing among ordinary soldiers, not just that the generals' perks are immoderate but that in some cases their families are using their connections to make huge corrupt fortunes outside the military.

As for Zardari, it seems highly doubtful that he can hang on much longer. The chief justice is pursuing him with bulldog determination and the letter of the law is on his side. The military has been infuriated by what it believes are his attempts to ally with Washington against it. It does not want another military government, but it does want a civilian regime that is much more responsive to its wishes. And the opposition want him out before, not after, senate elections that might just enable him to cling to the presidency even if as expected his Pakistan People's party is defeated in general elections due by early 2013. Whether getting rid of Zardari will fundamentally change Pakistani politics, however, is a very different matter.

Riaz Haq said...

The widespread public applause following last week’s arrest of the high profile Pakistani politician Asim Hussain was a timely reminder of the South Asian country’s popular yearning for a stepped up attack on corruption.

Though granular details of the nature of the latest charges against Hussain remain a matter of speculation, it is clear that the charges eventually connect with energy related issues as Hussain previously served as the de facto minister of petroleum and natural resources.

Though a medical doctor by training, Hussain rose to fame through his widely known proximity to Pakistan’s former president Asif Ali Zardari. In fact, he continues to be seen as one of Zardari’s most loyal political lieutenants. In sharp contrast to his training as a medical doctor, Zardari’s Pakistan Peoples Party (PPP) chose Hussain in 2011 to serve as its de facto minister. At a time when energy shortages across Pakistan were acutely visible, Hussain’s appointment attracted widespread interest and subsequent criticism.

Ultimately then, many concluded that his choice for the job spoke more of the cronyism that has dominated Pakistan’s democratic politics in recent years, rather than merit. His arrest has been followed by news of the issuance of fresh non-bailable arrest warrants by a Pakistani court for the arrest of former prime minister Yusuf Raza Gilani of the PPP and former PPP minister Amin Fahim on corruption related charges.

These three initiatives involving Hussain, Gilani and Fahim however must not be seen in isolation from Pakistan’s overall direction. In recent months, an army-backed campaign in the southern port city of Karachi to restore law and order, has also targeted members of the Muttahida Qaumi Movement (MQM) as part of a long overdue clean-up.

The result has indeed been a marked improvement in Karachi’s daily atmosphere where robberies at gunpoint, purse snatching and mobile phone thefts were once a common occurrence. The PPP remains the other main political force in Karachi by virtue of ruling over the southern Sindh province of which Karachi is the local capital.

It is important to note that the cases of the three PPP politicians highlighted last week on the face of it are the work of civilian agencies. Yet, a combination of conventional wisdom along side comprehensive analysis of Pakistan’s conditions clearly reveals the obvious handprint of the army led by General Raheel Sharif.

It is clear that the Pakistan army is keen to oversee a long overdue attack on corruption. Clearly, the sudden pursuit of high profile PPP politicians by Pakistan’s anti-corruption official outfit, which for long remained complacent on the matter, has unleashed suggestions of mounting pressure from the army to push this process forward.