Select Committee on International Development Minutes of Evidence

Examination of Witnesses (Questions 100 - 119)



  100. Thank you very much. I think all those points will actually come up during the course of the questions which we would like you to probe and discuss in more detail. Perhaps I can ask the first question. How does such a corrupt system become established? We are referring to your special study of Bangladesh, (which I know has been carried out at great risk, from talking to Mr Hasan) by Transparency International in Bangladesh. As that review shows, corruption has very serious effects on all aspects of life in Bangladesh. You find it particularly in security—that is to say, the police and armed forces, presumably, justice, health care, education, basic utilities and business opportunities. I remember, Mr Hasan, you telling me that somebody wishing to pay their electricity bill early had to pay an additional fee to the clerk in the electricity office. Is that correct?
  (Mr Hasan) It is correct, and it is not just confined to someone trying to pay their bills early but even when they want to pay their bills on time. When they get their bills they have a lot of problems in terms of paying because the person who is receiving the money will not receive it if a percentage is not given to that person. Another thing which is brought out by our survey is that there can be a colluding kind of relationship or arrangement whereby a customer may not have to pay the full amount if a certain percentage is paid on the side to the person who is receiving the bill or to a middle person. Therefore, the state or a company—mostly state-owned companies—is deprived of revenue. This is certainly happening and this is what I would say could be described as petty corruption. However, petty corruption which happens on a very wide scale can become quite grand. So I suppose, in a way, it is very difficult to put it in terms of petty and grand because where petty ends grand can start. So it is really very much intertwined, and both the state and the ordinary people are affected by this. So I would say that one has to be very careful when looking at the situation in Bangladesh to look at both the pictures that we find: at micro level petty but endemic and which translates into a very grand type of corruption, at the end of the day.

  101. So how does such a corrupt system become established? Is such corruption simply a product of greed, or is there an economic need which corruption attempts to meet? What economic relationship is there between petty and grand corruption? You began to talk about that. In fact, has grand corruption, in terms of paying electricity bills, come from the Government itself which does not pay its electricity bills either on time, if at all, I believe? That is true in Bangladesh as it is elsewhere. Also, of course, big private companies do not pay their electricity bills. So there is, as you say, a relationship. To what extent do corrupt payments intrude on the works of NGOs and donors in developing countries?
  (Mr Hasan) I have touched on that in my submission. One of the sectors that I have looked at is the energy sector, and it is page 1 of the written submission entitled Bangladesh Power Development Board and on page 2 I have talked about the genesis of corruption. We see, again, from that study that at one level you have the petty corruption which is taking place, but then it becomes quite grand when it comes to procurement. So this situation has developed over a long period of time. Again, I look at the history and say that it has really been something which has developed, I would say, at a very fast rate since 1971. It has been reinforced over the years—

  102. 1971, you say? Why 1971?
  (Mr Hasan) That is the year of the independence of Bangladesh. Prior to that it was part of Pakistan and known as East Pakistan. So I start from that point and see that as a kind of dividing line and assess the development of this. It started, I would say, with the human resource that we had. There was a massive vacuum in terms of people who were involved in these sectors. Then junior officers were promoted and went up to higher levels but did not know how to do their job and did not have the training or qualifications. Really, the governance of these institutions started to fall apart, at the same time, I would say, with the intervention of politicians meddling in the affairs of these organisations, which has made the situation worse. What we find now is that, for example, there is a huge system loss within the energy sector which varies from 25 to 40 per cent. By "system loss" we are talking about, basically, theft of electricity from the grid. If this money could be saved, according to one calculation that I have put in my submission, we could actually deal with the energy shortage of the capital city, Dhaka, and in a couple of years we could probably tackle the whole of the country's energy shortage, if just the governance of these organisations could be addressed. I think there you have a direct relationship in terms of aid money which is going in, how it is being used and the fact that we still have this problem. Precious, scarce resources going into some of these sectors are not being utilised properly, and this is something of great concern to the citizens of Bangladesh, organisations working in this sector and, also, donor agencies.

  Chairman: It has massive repercussions. It is very important.

Mr Rowe

  103. It has been argued that, for example, in India the change from an elitist suburb to a much more widespread catchment area has been facilitated by the fact that substantial numbers of Members of Parliament expect not only to recoup the costs of getting elected but, also, to improve their standard of living through corruption. I just wondered to what extent you see the expense of elections and the consequences of that as fuelling corruption?
  (Mr Hasan) I would say that this is a very significant factor within the context of Bangladesh. If you look at the composition of the Parliament you will find that a huge percentage—I would say around 70 per cent—of people are from business and trading communities, whereas before 1971 (and I use that date because it is a convenient watershed) they were predominantly people from the professions—lawyers, teachers and others. What we also find is that since that change in composition Parliament is seen as a place where people can go to and spend money to get elected and recoup that money, and not just that money which has been spent in terms of election expenditure but a lot more than what they have spent for election campaigning. This is certainly a major factor, I would say, in terms of the corruption and patronage which politicians provide when it comes to these corrupt institutions that we have talked about—for example energy. There are many more, and I have referred to those other institutions just as a sample in my submission. This is evidence we have collected and first-hand research that Transparency International-Bangladesh has done. So I would say that is a very, very significant factor. An election is very much seen as a one-day exercise—for people to be elected—and then totally divorced from the people; people's participation is not there. As you say, it is more or less a business for many of these politicians.

  Mr Rowe: It sounds deeply alluring!

Mr Robathan

  104. My question is a simple one. We have had some trouble getting people to talk to us about corruption because people work immersed in the system which you have described; therefore, they are—"tainted" is the wrong word, but they have to work and live within the system as it exists, not as they might wish it to be. This is not a question designed to embarrass you, but here is the TI in Bangladesh working. If you want to pay your electricity bill do you have to pay an extra bribe as well? Is that the way it works? Or can one stand above it? Can one resist? For instance, we have just heard of a colleague having to wait months and months for a telephone if you do not pay extra money to get it within a week. How does it work for you?
  (Mr Hasan) You do not have to pay, but if you do not pay the cost of that is that you wait, and that is exactly what we have to do. When we, for example, wanted our telephone line at the Transparency International-Bangladesh office we had to wait.


  105. How long?
  (Mr Hasan) For about three months before we got our telephone line. For the second telephone line we had to wait for something like nine months, and the reason was that, obviously, we cannot pay. So you can do your job but what it will mean is that you have to wait, and when it comes to businesses they cannot afford to. They think they cannot afford to and they think that the cost of getting that telephone line in a day or in seven days is pretty negligible in terms of the kind of return that they would get if they had that telephone line. So people, in a way, are put in a very difficult situation; you either pay (and it is not a huge amount of money) and get your line, do your job and get the business rolling and make a profit, or you just wait. So that is the choice that people have. I think when we say that people are very tolerant, I think one has to also remember that they are tolerant because, in a way, they do not have any choice—they do not have an exit. If there were private telephone companies (and there are now mobile telephones coming in) people would not have to wait for that government telephone line; they can go for a mobile telephone and do their job. So the situation is improving because there is an exit route. From what I have read in the papers, the telephone organisation will be privatised; they are about to sign a contract with Singapore Telecommunications. I think that is probably the way forward—to give people the choice in terms of where they can go, and that undermines the position of these individuals who hold public posts.

  106. Mr Cockcroft, do you draw some more general conclusions from the experience of Bangladesh?
  (Mr Cockcroft) Yes, I think, as you have already implied, Chairman, and as the questioners have implied, this is a recognised phenomenon, unfortunately, in very many countries. It also relates to the question of people taking a stand. I know it is extremely easy to say that, from one's kind of UK perspective, but what I would like to say, in addition to what Mr Hasan has said, is that there is some evidence that people who take a stand are recognised as such and can get results. So I would take the view that this is partly a question of the attitude of the person from whom the bribe is being solicited. However, of course, this also interfaces with the question of facilitation payments in relation to international business—which, I have no doubt, you will want to come on to later. The question of whether or not a large corporate player really needs to make these payments in order to do business, I think, is a rather different question. I would like to suggest we might compartmentalise that, but I expect you will want to return to that.

Ann Clwyd

  107. Can you tell me about Transparency International? You say you have got 80 branches in various parts of the world. Who actually funds Transparency International?
  (Mr Cockcroft) I would like to stress that we are a network of international chapters and each international chapter is self-standing—a self-standing legal entity—which raises its own funds from whatever local resources it is able to raise. In the south and in transition economies there is often an involvement from donors, and that is also true in the north to a large extent. There is, in order to make all this network function, an international secretariat in Berlin which has an annual budget of about $5 million and which employs about 25 people—of which the sources of funding are roughly one-third bilateral donors, one-third foundations and one-third the private sector.

  108. Would that be the same in the UK?
  (Mr Cockcroft) In the UK our annual budget is about £35,000, of which half comes from the DFID and half from about 17 large, UK-based companies.

  109. How many work for Transparency International in the UK?
  (Mr Cockcroft) Two-thirds of a person who is in front of you here.

  110. Two-thirds of you. Where does the other third go?
  (Mr Cockcroft) We are in a voluntary organisation and everybody in TI-UK, other than our Co-ordinator, who puts in a inordinate amount of personal time, does so on a voluntary basis.

  111. I have just been looking at your opening statement. You make the point that where corruption is endemic and the Government which is in receipt of aid displays no real willingness to confront it, intergovernmental aid should be suspended. Would that include humanitarian aid?
  (Mr Cockcroft) I would say no, because that statement goes on to say that in those cases we believe that an increasing proportion of aid should be channelled through NGOs and civil society. Of course, these days, by far the largest proportion of humanitarian aid is channelled through NGOs anyway, so that would not really affect that particular point.

  112. Like most of us, you probably saw the two programmes on Africa last Sunday and the Sunday before.
  (Mr Cockcroft) I was in Africa at the time, so I am afraid I did not.

  113. Probably some of your staff have seen it.
  (Mr Cockcroft) Sure. We have discussed it.

  114. What was your view of that?
  (Mr Cockcroft) In our text we do, as it were, identify and underline the problem that in some civil conflict situations—in Africa and elsewhere—the continuation of food relief has, in some cases, been used to sustain conflicts, especially where that relief is being diverted. Angola and Southern Sudan are examples of that which are fairly well-documented.

Mr Rowe

  115. My wife teaches international students from all over the world and I hear all the time that the NGOs themselves are not corrupt but they are corrupting. For example, they will come into an area and simply denude the local NGOs of staff because they pay too much and they have brand new vehicles which they are extraordinarily protective of and will not allow local people to use. It seems to me that although that is a different form of corruption from what our inquiry is about today, it puts a question mark over the wisdom of channelling aid through NGOs rather than through civil society.
  (Mr Cockcroft) I think, as your question implies, one has to break down both the NGO community and civil society. In our text we do offer a breakdown of different kinds of civil society organisations. In relation to a breakdown between the NGO world, clearly one has to make a difference between the large international NGOs—like World Vision, CARE, Oxfam and so on—and the indigenous, local organisations. From the TI perspective, our interest is in indigenous NGOs and, again, at an international level one has to make a distinction between an organisation like Christian Aid, which works through 350 indigenous local NGOs and the big players like World Vision, which works, basically, through its own staff in the field. I think it is the latter case in which there is a real risk of local NGOs being denuded of staff in support of larger organisations. In practice, this is obviously a very delicate balance, and if one is talking about channelling quite significant sums of money through the NGO sector then, obviously, that requires a great deal of thought, and the mechanism by which that is done would have to be very carefully defined. Maybe it could be done through a trust fund which was directed by a board of trustees selected both locally and internationally.

Ann Clwyd

  116. There is another point that you make in your opening statement which I would like to raise with you, and that is about your own bribe payers index, conducted by Gallup in 13 emerging market economies. It found that senior officials polled stated that the civil construction and arms industries in the major exporting countries were conspicuous in their willingness to pay bribes. I notice the UK comes halfway down that list. Have you any particular examples of the UK actually being guilty of those charges?
  (Mr Cockcroft) The World Bank certainly thinks so. Of the first 50 companies to be blacklisted by the World Bank for behaving corruptly in relation to World Bank contracts, 38 have a UK domicile. I am well aware that one should not talk about court cases as they are under way, but anybody who has read any account of the case unfolding in the Maseru High Court in relation to the Lesotho Highlands Water Project is aware that 16 international companies have been indicted in relation to paying bribes in that context. One can certainly say, because the ownership of some of those companies is multinational, that several of them have UK ownership.

  117. Would you say that petty corruption is the same the world over, or does it manifest itself and affect the poor differently in different places?
  (Mr Cockcroft) I think it would be extremely dangerous to say that it is the same everywhere. I think one would clearly wish to avoid that. However, the kinds of information that the TI-Bangladesh survey did throw up are instantly recognisable in, for example, an African context. There is an organisation you may be aware of called CIET which has done similar polling in Tanzania and Uganda and come up with a remarkably similar set of results. If one wants to avoid statistics, the Warioba report in Tanzania, which is now four years old, is a very excellent and moving description of the impact of corruption on the poor. One can see, as it were, personalised illustrations of the statistics which lie both behind the TI-Bangladesh survey and information which comes out in a more structured way from CIET surveys. As a matter of fact, as I am sure you are aware, the World Bank has now commissioned this kind of survey in about 20 countries, which does throw up obvious national distinctions but still, as it were, portrays this picture in which poor people who might be expected to have access to a public service for free—or, possibly, for a structured fee—are actually paying an informal, unstructured fee to the individuals concerned. So there is, I think one can safely say, an international pattern in a lot of countries.


  118. Is the report to which you refer in Tanzania by the Chief Justice?
  (Mr Cockcroft) He is actually the former Prime Minister. He is a Judge on the International Law Court, so he has international credentials. He was Prime Minister in the mid-80s in Tanzania, and is now working both in relation to the anti-corruption effort in Tanzania at the request of the President, and at the International Court.

  119. His name is?
  (Mr Cockcroft) Judge Warioba.

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