Question

The International Monetary Fund (IMF) has hired you as an economist. Your assignment is to travel to several countries in the Middle East (e.g., Iran, Iraq, Qatar, UAE, and Saudi Arabia) to study the problem of corruption. Your assignment is to write a comprehensive report to address the following issues:

a)   Corruption and consequences of corruptive behavior
b)   Lack of success on tackling corruption
c)   Corruption as a regressive tax
d)   Need for honest governments (the rule of law vs. per capita income)
e)   Policy measures to reduce corruption

Answer 1

The Middle East is a region which has frequently seen violent protests, regime change, etc. and all sorts of revolution. One of the most prominent reason is said to be corruption.

The comprehensive report to address the following issues.

( a ). The economy is unfortunately largely dependent on politics and often reflects the rule of law; various options for eliminating competition are exploited in the mid-east.

he region as a whole fares poorly on the Transparency International’s Corruption Perception Index — in 2015, it received a score of 39 on a 0-to-100 scale, where 100 indicates the absence of corruption. (The global average is 43.) War-torn countries like Syria, Yemen, Iraq, Libya, and Sudan are perceived to be especially corrupt. Although the Gulf monarchies seem to do much better, with Qatar and the United Arab Emirates scoring respectively a rather clean 71 and 72 (the United States scores 76), they may be receiving high ratings largely because they do not draw clear lines between what belongs to the state and what belongs to the ruling family. In such cases, the conversion of public goods for private gain may go unseen and not even be regarded as corrupt.

Citizens complain loudly, but what they really mean by corruption, and what forms of corruption they want to be fought, is a highly confused and confusing matter. People appear to believe that the responsibility for fighting corruption lies elsewhere, and that they are neither part of the problem nor part of the solution, even when they evade taxes or ask for bribes before they will discharge their duty.

( b )

Lack of high-level government commitment — or, worse, the facilitation of corruption by governments — frustrates attempts to curb the problem. Egypt offers stunning examples. The military controls most of the desert land in Egypt, including increasingly valuable property on the edge of cities and towns that is badly needed for expansion. The military sells this land in deals that are rarely transparent, for example by selling parcels to businessmen at below-market prices, with kickbacks disappearing into private pockets or being recycled into the murky military economy.

More so, the transparency International ranking reflects the sorry state of affairs in regards to corruption in the region.

( c )

Saudi Arabia recently saw arrests of rich and influential people, from princes to leaders to businessman. The reason was falling oil prices which stopped the flow of easy money to the government forcing the government to collect revenues by regressive policies. These arbitrary regressive policies not only aims at institutionalizing corruption but also motivates similar other regimes to pursue such policies.

( d )

Barring few exceptions for oil rich countries the data suggests that as per capita income of a country increases so does the demand for a clean and honest government. For e.g. Western European countries with high per capita income have honest and clean governments. The clean governments are needed so that every penny of public fund is accounted for and is well- spent.

( e )

Following are the policies suggested by Transparency to reduce corruption:

1. END IMPUNITY

Effective law enforcement is essential to ensure the corrupt are punished and break the cycle of impunity, or freedom from punishment or loss.

2. REFORM PUBLIC ADMINISTRATION AND FINANCE MANAGEMENT

Reforms focussing on improving financial management and strengthening the role of auditing agencies have in many countries achieved greater impact than public sector reforms on curbing corruption.   

3. PROMOTE TRANSPARENCY AND ACCESS TO INFORMATION

Countries successful at curbing corruption have a long tradition of government openness, freedom of the press, transparency and access to information. Access to information increases the responsiveness of government bodies, while simultaneously having a positive effect on the levels of public participation in a country.

4. EMPOWER CITIZENS

Strengthening citizens demand for anti-corruption and empowering them to hold government accountable is a sustainable approach that helps to build mutual trust between citizens and government. For example, community monitoring initiatives have in some cases contributed to the detection of corruption, reduced leakages of funds, and improved the quantity and quality of public services

5. CLOSE INTERNATIONAL LOOPHOLES

Without access to the international financial system, corrupt public officials throughout the world would not be able to launder and hide the proceeds of looted state assets. Major financial centres urgently need to put in place ways to stop their banks and cooperating offshore financial centres from absorbing illicit flows of money.