ON

(CORRUPTION IN INDIA & IT’S COMPARISON WITH OTHER ASIAN COUNTRIES)

Submitted in the partial fulfillment of the Degree of masters of business administration

SUBMITTED BY:- GUIDED

BY:-

Name : FARAZ ALAM MISS

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INTROUCTION : CORRUPTION

CORRUPTION IS A TYPE OF STRATEGIC ACTION IN WHICH TWO OR MORE ACTORS UNDERTAKE AN EXCHANGE
RELATION BY WAY OF A SUCCESSFUL TRANSFER OF MONEY (MATERIAL) OR POWER (POLITICAL OR STATUS ) OR
PROMOTING OF GENE (GENETIC), WHICH SIDESTEPS LEGALITY OR MORALITY OR CIVILITY TO REGULATE THE
RELATION . I T IS A STRATEGIC INTERACTION OR AN ART OF NONVIOLENT NEGOTIATION . AS MENTIONED BEFORE ,
SOCIAL ACTION IS STRATEGIC WHEN IT IS AIMED AT THE SUCCESSFUL REALIZATION OF PERSONALLY DEFINED
GOALS .
CORRUPTION THREATENS PEOPLE AND THEIR GOVERNMENTS . I T MAKES SOCIETIES UNFAIR . I T IS ARGUED THAT
BRIBERY IS A NEGOTIATED RENT , AS THE BEGINNING OF ALL ILLEGALITIES AND TYRANNY . THERE IS NO MORE
POWERFUL ENGINE OF INJUSTICE AND CRUELTY , FOR BRIBERY DESTROYS BOTH FAITH AND STATE. THE SERIOUS
CONSEQUENCE OF CORRUPTION THUS IS NOT ONLY STATE CAPTURE BUT ALSO MIND CAPTURE. CORRUPTION
IS UNIVERSAL. I T IS PRESENT IN DEVELOPED AND DEVELOPING COUNTRIES , IN THE BUREAUS OF PUBLIC OR
PRIVATE SECTORS , AND IN NONPROFIT OR CHARITABLE ORGANIZATIONS . SHIFT FROM GOVERNANCE TO
MANAGEMENT ONLY CHANGES ITS RESIDENCE. CORRUPTION IS NOT MERELY IN THE MEDIA OR IN THE MINDS OF
PEOPLE AS IT IS SOMETIMES MADE OUT .
BUT IT IS IN THE SYSTEM ALL ACROSS THE PUBLIC SERVICES , IS WHAT THIS STUDY HIGHLIGHTS . AND THE
USERS AND PROVIDERS OF THOSE PUBLIC SERVICES KNOW WHAT NEEDS TO BE DONE TO ADDRESS THE
PROBLEM AS THIS STUDY HAS BROUGHT OUT . CORRUPTION PLAYS A CENTRAL ROLE IN POLITICS THUS STATE
OBJECTIVES . RENT SEEKING AND RENT GIVING ARE MAJOR OBSTACLES IN THE PROCESS OF PLANNED CHANGE
OF ECONOMIC LAYERS . A PROMISE OF DEMOCRACY REMAINS UNDONE . HOWEVER IT DOES ALLOW SELECTIVE
CHANGE IN ECONOMIC -CYCLE OF AN INDIVIDUAL, AN INDIVIDUAL HOUSEHOLD AND A BUSINESS. CORRUPTION IS
USUALLY A KEPT SECRET AND THEREFORE THE BEHAVIOR OF THE CORRUPT AGENT NEAR IMPOSSIBLE TO
OBSERVE IN REAL LIFE. THE CHARACTER OF RENT- SEEKING HAS ALL THE QUALITIES ONE CAN ASK FOR SUCH AS
CHARM AND ACTING TALENT TO CREATE A MIRROR IMAGE OF THE TRUTH I. E ., OF AN ACTOR ; BOOK KEEPING
I . E ., OF AN ACCOUNTANT ; TO UNDERSTAND AND MANIPULATE RULES AND REGULATIONS AND ABILITY TO
PROTECT , I. E . OF A CUSTODIAN .
CAMPAIGNS AGAINST CORRUPTION HAVE NOT MET WITH MUCH SUCCESS. IT IS A WORRISOME DEVELOPMENT.
WHEN THE MAJORITY OF PEOPLE OPERATE UNDER SUCH A SYSTEM, INDIVIDUALS HAVE NO INCENTIVE TO TRY
TO CHANGE IT OR TO REFRAIN FROM TAKING PART IN IT.

Overview
Taking a worldwide perspective, countries like New Zealand and the Scandinavian
countries are "models of integrity" for the world in terms of their corruption control.

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And almost all of the most corrupt countries are developing nations and many of
them are in Asia. Among the Top 20 most corrupt states in the world, a half of them
are in Asia; Myanmar (Burma), Afghanistan, Kyrgyzstan, Turkmenistan, Tajikistan,
Indonesia, Bangladesh, Cambodia, Laos and Pakistan are all on the list, according
to the Worldwide Governance Indicators. And India and China are the two "most
corrupt trade nations" among the world's Top 30 exporting countries. Corruption is a
way of life across Asia. While talking about high-level corruption in Asia's three
largest countries -- India, China and Indonesia -- there is a saying, "In India,
corruption is under the table; in China, it is over the table; and in Indonesia,
corruption includes the table." Whichever way one may wish to read the proverb,
"what remains undeniable," says Chan Akya of Asia Times, "is that corruption is
more firmly rooted in Asian culture than is commonly acknowledged."
Take a look at today's China. As John Lee of the Center for Independent Studies in
Sydney, writes, "While the Chinese state is rich and the Chinese Communist Party
powerful, civil society is weak and the vast majority of people remain poor.
According to studies by the Chinese Academy of Social Sciences, stealing from the
public purse by officials amounts to about 2 percent of GDP each year, and it is
rising." Another China corruption watcher, Hong Kong-based Political and Economic
Risk Consultancy (PERC), painted an even gloomier picture, "Graft is endemic in
China: according to the most conservative estimates, the magnitude of corruption
ranges from 3 percent to 5 percent of annual GDP." A 5 percent of China GDP
amounts to approximately $1.5 trillion Yuan ($225 billion in U.S. dollars) or one half
of China's GDP annual growth . In today's China, it is no secret that those who have
power enjoy countless "fringe benefits." A $500 per plate dinner is done in the name
of official business, a $5,000 overseas trip is made in the name of research or study
and a $50,000 government car is purchased for private use only. If China's
authoritarian one-party state has pushed corruption ahead, India's democratic multi-
party system might be worse. As Chan Akya puts it, "Indians do not have a choice
when it comes to corruption as most of their political parties (with the notable
exception of the communists) offer simply varying levels of corruption. The choice is
therefore to vote for the communists and risk economic stagnation, or vote for
another party and hope that the benefits of growth exceed the cost of corruption." So
there is some good news for the corrupted Chinese officials or something they could
be proud of: On the PERC's Corruption Index, China is not the most corrupt country
in the region. China scored 8.33 on a scale of 10 (10 represents the worst possible
score), Indonesia topped the list with a score of 9.33, with India's 9.3 following close
behind. Even two of America's most important allies in East Asia, South Korea and
Taiwan, are not exempt from corruption. Former South Korean president Roh Moo
hyun committed suicide in late May when he was caught up in corruption
investigations. Then in September, in what the media called a "trial of the century,"

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Taiwan's former president Chen Shui-bian was sentenced to life in prison for
corruption.
Why are Asian politicians and bureaucrats so corrupt? Some analysts believe that in
Asian culture, corruption helps "grease the wheels" of an otherwise inefficient
bureaucracy and economy. Others argue that Asia's "corruption culture" is based on
traditional Asian emphasis on "rule of man," not "rule of law," and law is seen as
malleable, not absolute. Whether a cultural flaw or a symptom of a sick state,
however, the severity of corruption in Asian states and the failure to contain such
endemic corruption among political leaders and government officials poses one of
the most serious threats to Asia's future economic development and political
stability.

Corruption in India
Corruption in India is a consequence of the nexus between Bureaucracy, politics
and criminals. India is now no longer considered a soft state. It has now become
a consideration state where everything can be had for a consideration. Today,
the number of ministers with an honest image can be counted on fingers. At one
time, bribe was paid for getting wrong things done but now bribe is paid for
getting right things done at right time. IN INDIA, CORRUPTION ATTACKS THE FUNDAMENTAL
VALUES OF HUMAN DIGNITY AND POLITICAL EQUALITY OF THE PEOPLE AND HENCE THERE IS A
PRESSING NEED TO FORMULATE A FUNDAMENTAL HUMAN RIGHT TO CORRUPTION - FREE SERVICE . THE
DEVELOPMENT OF A FUNDAMENTAL HUMAN RIGHT TO A CORRUPTION -FREE SOCIETY WILL BE
OBSERVED INITIALLY FROM AN INTERNATIONAL PERSPECTIVE SO AS TO ELEVATE THE VIOLATION OF
THIS RIGHT TO THE STATUS OF AN INTERNATIONAL CRIME . THIS WOULD PROVIDE THE COMPARATIVE
BASIS TO ELEVATE THE RIGHT TO CORRUPTION - FREE SERVICE TO THE STATUS OF A FUNDAMENTAL
RIGHT WITHIN THE FRAMEWORK OF THE I NDIAN CONSTITUTION .
ONE OF THE DEFINITIONS OF THE TERM CORRUPTION IS " GIVING SOMETHING TO SOMEONE WITH
POWER SO THAT HE WILL ABUSE HIS POWER AND ACT FAVOURING THE GIVER ". ANOTHER DEFINITION
IS "THE OFFERING , GIVING , SOLICITING OR ACCEPTANCE OF AN INDUCEMENT OR REWARD , WHICH MAY
INFLUENCE THE ACTION OF ANY PERSON ". IT INCLUDES BRIBERY AND EXTORTION WHICH INVOLVE AT
LEAST TWO PARTIES , AND OTHER TYPES OF MALFEASANCE THAT A PUBLIC OFFICIAL CAN COMMIT
ALONE , INCLUDING FRAUD AND EMBEZZLEMENT . THE APPROPRIATION OF PUBLIC ASSETS FOR PRIVATE
USE AND THE EMBEZZLEMENT OF PUBLIC FUNDS BY POLITICIANS AND BUREAUCRATS HAVE SUCH
CLEAR AND DIRECT ADVERSE IMPACT ON INDIA ' S ECONOMIC DEVELOPMENT THAT THEIR COSTS DO
NOT WARRANT ANY COMPLEX ECONOMIC ANALYSIS . There are many myths about

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corruption, which have to be exploded if we really want to combat it. Some of
these myths are: Corruption is a way of life and nothing can be done about it.
Only people from underdeveloped or developing countries are prone to
corruption. We will have to guard against all these crude fallacies while planning
measures to fight corruption.
AS WITH MANY DEVELOPING NATIONS, CORRUPTION IS WIDESPREAD IN INDIA. INDIA IS RANKED 85
OUT OF A 179 COUNTRIES IN TRANSPARENCY I NTERNATIONAL 'S CORRUPTION PERCEPTIONS INDEX ,
ALTHOUGH ITS SCORE HAS IMPROVED CONSISTENTLY FROM 2.7 IN 2002 TO 3.4 IN
2008.CORRUPTION HAS TAKEN THE ROLE OF A PERVASIVE ASPECT OF INDIAN POLITICS AND
BUREAUCRACY .
THE SIZE OF INDIA’S PARALLEL ECONOMY AT 40% OF GDP DOES PROVIDE FERTILE GROUND FOR
CORRUPTION . LACK OF DETERRENCE AGAINST CORRUPTION AND IMPORTANCE TO WEALTH BEGOTTEN
BY WHATEVER MEANS ENORMOUSLY PROMOTED CORRUPTION IN I NDIA . M ORE IMPORTANT ,
CORRUPTION IN I NDIA FLOWS FROM ABOVE FROM THE POLITICAL CLASS UNDER COVERS LIKE PARTY
AND ELECTION FUNDS , AND SENIOR BUREAUCRATS WHO ARE SELD INVESTIGATED OR PUNISHED ,
EITHER THROUGH CONSPIRATORIAL SILENCE OR THROUGH CONSPIRATORIAL LEGISLATIVE
MANIPULATIONS . FURTHER, POLITICAL PATRONAGE GAVE AN AURA OF INVINCIBILITY AND
RESPECTABILITY TO CORRUPTION AND DEPRIVED IT OF ALL MORAL AND LEGAL FEARS . THE CENTRAL
BUREAU OF I NVESTIGATION IN THE CENTRE AND CRIMINAL INVESTIGATION DEPARTMENTS IN THE
STATES AND UNION TERRITORIES HAVE BECOME POLITICAL TOOLS IN THE HANDS OF THE RULING
PARTY AND GROSSLY POLITICISED THE CRIMINAL INVESTIGATION PROCESS IN THE COUNTRY . WHAT
IS WORSE , THE CONVICTION RATE IS HARDLY 6% IN CRIMINAL CASES .CORRUPTION FLOURISHES IN
INDIA BECAUSE IT IS PERCEIVED TO BE A LOW RISK AND HIGH PROFIT BUSINESS . L ACK OF
TRANSPARENCY IN ADMINISTRATION PROVIDES AN OPPORTUNITY FOR PUBLIC SERVANTS TO MISLEAD
CITIZENS AND EXTRACT BRIBES .
IT IS ONLY THE SUPREME COURT IN INDIA SEEMS WAGING A WAR AGAINST CORRUPTION. THE
GOVERNMENT OF INDIA CONVERTED THE CENTRAL VIGILANCE COMMISSION INTO A STATUTORY BODY
THROUGH AN EXECUTIVE ORDER IN 1998 ON THE DIRECTIVE OF THE SUPREME COURT . I T
RENDERED THE CVC AT LEAST STATUTORILY INDEPENDENT OF THE POLITICAL AND BUREAUCRATIC
SET- UPS . I NDIAN ADMINISTRATION IS TAINTED WITH SCANDALS . I NDIA IS AMONG 55 OF THE 106
COUNTRIES WHERE CORRUPTION IS RAMPANT , ACCORDING TO THE CORRUPTION PERCEPTION INDEX
2004 REPORT RELEASED BY TRANSPARENCY INTERNATIONAL INDIA. CORRUPTION IN INDIA LEADS
TO PROMOTION NOT PRISON . I T IS VERY DIFFICULT TO CATCH BIG SHARKS . C ORRUPTION IN I NDIA
HAS WINGS NOT WHEELS . A S NATION GROWS , THE CORRUPT ALSO GROW TO INVENT NEW METHODS
OF CHEATING THE GOVERNMENT AND PUBLIC.
THE SIGNIFICANCE OF CORRUPTION AS A FACTOR THAT ADVERSELY AFFECTS THE GROWTH OF A
COUNTRY IS BEING INCREASINGLY RECOGNIZED . C ORRUPTION , IN THE WORDS OF I NDIRA G ANDHI, IS
A WORLD PHENOMENON . I T EXISTS IN DEVELOPED COUNTRIES TOO . CORRUPTION IS
INSTITUTIONALISED AS A PART OF THE DEMOCRATIC PROCESS IN THE USA AS LOBBYING AND PUBLIC
RELATIONS ACTIVITIES AND THE COUNTRY PRIDES IN ITS MUSHROOMING LOBBYING AND PUBLIC

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RELATIONS FIRMS WITH MAJOR FOREIGN GOVERNMENTS INTER ALIOS AS ITS CLIENTS . THE FIRMS ARE
NOTHING BUT MAMMOTH BUSINESS HOUSES INDULGING IN LEGAL CORRUPTION . THIS NOHOW
JUSTIFIES CORRUPTION OTHERWHERE. I NDIAN CORRUPTION HAS SPECIAL CHARACTERISTICS THAT
MAKE IT FAR MORE DAMAGING THAN CORRUPTION IN OTHER PARTS OF THE WORLD. FIRST, PEOPLE IN
INDIA BEING POOR AND LARGELY DEPENDENT ON THE GOVERNMENT FOR DECENT LIVING AND EVEN
SURVIVAL , AND LIMITED BY ITS EXCESSIVE LAWS , RULES , REGULATIONS AND LARGESS IN ALMOST ALL
ACTIVITIES OF LIFE WITH HIGH RATES OF TAXATION ON EVERY CONCEIVABLE ITEMS AND SERVICES ,
CORRUPTION LITERALLY SUCKS LIFE OUT OF THEIR EXISTENCE UNLIKE THOSE IN DEVELOPED
COUNTRIES WHOSE DEPENDENCE ON THE GOVERNMENT IS RELATIVELY NOT SO DEEP AND PROLATE .
THIS RENDERS CORRUPTION IN I NDIA AN EXTREMELY DANGEROUS PHENOMENON WITH TERMINAL
CONSEQUENCES ON THE CULTURE , VALUE SYSTEM AND THE QUALITY AND THE CONTENT OF THE LIFE
OF THE PEOPLE . SECOND, CORRUPTION IN INDIA FLOWS DOWN FROM ABOVE . CORRUPTION AT THE
TOP AFFECTS KEY DECISIONS AND POLICIES WITH SWEEPING IMPLICATIONS WHILE CORE DECISIONS IN
DEVELOPED COUNTRIES ARE TAKEN ON MERIT THROUGH TRANSPARENT COMPETITION .
THE CHIEF ECONOMIC CONSEQUENCES OF CORRUPTION ARE THE LOSS TO THE EXCHEQUER , AN
UNHEALTHY CLIMATE FOR INVESTMENT AND AN INCREASE IN THE COST OF GOVERNMENT -SUBSIDISED
SERVICES . I NDIA STILL RANKS IN THE BOTTOM QUARTILE OF DEVELOPING NATIONS IN TERMS OF THE
EASE OF DOING BUSINESS, AND COMPARED TO CHINA AND OTHER LOWER DEVELOPED ASIAN
NATIONS , THE AVERAGE TIME TAKEN TO SECURE THE CLEARANCES FOR A STARTUP OR TO INVOKE
BANKRUPTCY IS MUCH GREATER.

RANKING OF STATES
As per the composite ranking of states on petty corruption, involving common citizen
And in the context of eleven public services, Kerala stands out as the least corrupt
State In India. Bihar, on the other hand is the most corrupt State. In fact, on all
parameters and in the context of all the eleven services, Bihar stands out as the
most corrupt State. Himachal Pradesh is less corrupt – even compared to States like
Tamil Nadu, Maharashtra or Gujarat. Madhya Pradesh, Karnataka, Rajasthan and
Assam are Afflicted with the problem and score high on the index.

States highlights

Kerala: All 11 public services considered for the study are ranked as the least
corrupt in the country.

Himachal Pradesh: Most services in the State are ranked as relatively lower corrupt
in the country.

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Gujarat: Overall the State is ranked as less corrupt in comparison to other States.
However certain services like Education, Land Administration and Judiciary are
relatively ranked as more corrupt in comparison to others services in the State.

Andhra Pradesh: Govt Hospital and Water Supply services are ranked more
corrupt in comparison to other
services in the State
.
Maharashtra: Municipal services in the State rank among the top five corrupt in the
country.

Chhattisgarh: On the corruption index all the services in the State are much better
ranked than the parent State Madhya Pradesh

Punjab: PDS, Police, Judiciary and Municipal services are ranked more corrupt in
comparison to other services in the State.

West Bengal: Water Supply service in the State is ranked as the most corrupt in the
country.

Orissa: Judiciary ranks among the top four corrupt in the country

Uttar Pradesh: Electricity, Schools and Income Tax figure high in the corruption
rankings.

Delhi: PDS in Delhi is ranked as the second most corrupt in the country

Tamil Nadu: While over all the State ranks 12th on the Corruption Index, Schools,
Hospital, Income Tax and Municipalities rank among the top corrupt in the country.
This is surprising given that the State has one of the best health infrastructure and
also ranks quite high on the Education Development Index.

Haryana: Schools, Land Administration and Police figure among the top corrupt in
the country.

Jharkhand: On the corruption index all the services in the State are much better
ranked than the parent State Bihar.

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Assam: Police is the most corrupt in the country. Electricity figures among the top
corrupt.

Rajasthan: Judiciary ranks among the less corrupt in the country

Karnataka: The state ranks fourth on the corruption index because key services like
Income Tax, Judiciary, Municipalities & RFI figure among the top corrupt services in
the country. However, Electricity & Schools rank among the least corrupt in the
country.

Madhya Pradesh: Despite initiating reforms in service delivery, the State still ranks
as third most corrupt among States included in the survey. Only Municipal services
are ranked relatively better than other services.

J&K: Except Hospital & RFI, most other services rank among most corrupt in the
country. Not surprising that it is the second most corrupt State.

Bihar: All the services are ranked among the most corrupt in the country.

Corruption and its impact on governance in India

Corruption affects India at all levels of governmental decision-making and in the
distribution of state largesse. India is ranked 72nd out of 91 countries in the
Corruption Perception Index, 2001, prepared by Transparency International (TI).
Corruption in India not only poses a significant danger to the quality of governance,
but also threatens in an accelerated manner the very foundations of its democracy
and statehood. The recent revelations of corrupt practices in defence purchases and
related contracts not only tend to undermine the security of the Indian state, but also
fundamentally shake the people's trust and belief in the Government of India and its
institutions.

The mid-1960s are perceived to be the great divide in the history of governance
administration in India. It paved the way for the blurring of the Gandhian and

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Nehruvian era of principled politics and the emergence of a new system of politics
that began to tolerate and even encourage dishonesty and corruption. The scams
and scandals of the 1990s revealed that among the persons accused of corruption
were former Prime Ministers, Chief Ministers, Governors and even members of the
judiciary. India's experience with corruption has shown that laws, rules, regulations,
procedures and methods of transaction of government business, however sound
and excellent they are, cannot by themselves ensure effective and transparent
administration if the political and administrative leadership that is entrusted with their
enforcement fails to do so and abuses its powers for personal gain (Sunil Sondhi,
2000).

Gunnar Myrdal has described Indian society as a "soft society". According to him, a
soft society is one that does not have the political will to enact laws that are
necessary for its progress and development and/or does not possess the political
will to implement the laws, even when made, and one where there is no discipline.
He has stressed that if there is no discipline in society, no real or meaningful
development or progress is possible. Corruption and indiscipline survive on each
other's willingness to accommodate, tolerate and provide encouragement.
Corruption affects governance in a significant manner and it is anti-poor. For
instance, a substantial portion of foodgrains, sugar and kerosene meant for the
public distribution system (PDS) and for welfare schemes for the poor, including the
Scheduled Castes (S.C.s) and the Scheduled Tribes (S.T.s), goes into the black
market. Hardly 16 per cent of the funds meant for the S.T.s and the S.C.s reach
them (Consultation Paper on Probity in Governance, National Commission to
Review the Working of the Constitution, 2001). The rest are misappropriated by
members of the political and official classes and unscrupulous dealers and
businessmen.

Like other social evils, the problem of corruption brings out numerous responses. As
a lawyer, my response would inevitably involve changes in the laws and in this case
an amendment to the Constitution. While I propose this amendment, I am mindful of
the inherent weaknesses of any law or legal response if the enforcement mechanism
is weak - that would only amount to paying lip service to the law. This may be the
case with several other laws, mostly criminal laws that are already in place to punish
the corrupt, or for that matter the case of anti-terrorism laws, which are available in
plenty even as the present government enacted the Prevention of Terrorism Act.
Corruption has flourished in India because of the drawbacks of the criminal justice
system. We see more and more examples of acquittals in corruption cases. Several
corruption-related cases filed in India in the recent past were poorly founded upon,
were backed by incomplete and inefficient investigation, and were followed by
delayed trials that resulted in morally ill-deserved but legally inevitable acquittals.

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Corruption in Pakistan
Two crises played a major role in the genesis of corruption in Pakistan; the second
world war and the mass migration as result of partition. World war II led to an
alarming increase in the procurement related corruption leading to the creation of the
first specialised anti corruption agency in the Sub-continent, the Special Police
Establishment. The migration resulted in vacuum in a number of areas creating
weaknesses having lasting effects that triggered the initial phase of corruption.

In 1947, Pakistan inherited a weak economy, inexperienced politicians and a

professional civil Service. Civil servants filled the vacuum created due to the lack of
experienced politicians and took over governance of the country, running ministries
even assuming the posts of Prime Minister, Governor General and President. The
British tradition of pervasive, intrusive, extractive and elitist government was
maintained. On independence, the evacuee property distribution created several
opportunities for corruption and in the following two decades corruption was
facilitated by the over-regulated Industrialization policies.

The level of temptation was enhanced by the increased inflow of foreign aid for huge
infrastructure projects under military rule from 1958. Dictatorial rule coupled with the
Press and Publications Ordinance further diminished the lack of public
accountability. This was made worse by the fact that eminent politicians were
weeded out through the Elected Bodies (Disqualification) Ordinance 1959.
Nationalisation in the seventies combined with civil services reforms and a purge of
over thirteen hundred civil servants proved a critical trigger point. The weakened and
insecure civil servants were asked to take on greater responsibility for running the
nationalised units. It was difficult for them to resist demands of political inductions
into these corporations as the state took over the role of the primary employer.
Devaluation and the oil crises eroded purchasing power. All these factors combined

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to increase incentives for, and opportunities of, corruption. The remittances from the
Gulf and resultant consumption spree had a strong demonstration effect and the
desire to become rich overnight spread across the society. However, the worst
indulgence was seen in the period 1985-99 when the political elite broke all shackles
of law and morality to indulge in rapacious loot and asset building. Five governments
were dismissed on charges of corruption during this era with no change in attitudes.
Awareness of the issue of corruption has existed, as evident from anti-corruption
drives undertaken from time to time. Legal initiatives started with the Prevention of
Corruption Act 1947. Laws like Public Representatives (Disqualification) Act 1949
and the Elected Bodies (Disqualification) Ordinance 1959 were introduced to
disqualify corrupt public representatives from holding public office. However, they
were perceived as exercises in political victimisation. Anti Corruption agencies
created after the independence include the FIA that replaced the Pakistan Special
Police Establishment (PSPE) in 1975. The provincial ACEs (initially the West
Pakistan Anti Corruption Establishment formed in 1961) were established after the
break up of one unit in 1970. Hampered by complicated procedures and political
interference, these organisations have proved totally ineffective. In fact, they are
themselves infested with corruption and lack capacity for the task assigned to them.
Despite the presence of these organisations, corruption was on the rise. The ACAs
themselves were not unaffected and became victims of the malaise they were meant
to control. In time, they were used for strong arming opponents of the government.
So widespread became corruption in ACAs that various governments had to resort
to new institutions such as Inspection Commissions. The Ehtesab Bureau was
established in 1997, supplementing the Ehtesab Commission created in 1996. The
Bureau assumed responsibilities for investigation while the Commission was given
the task of prosecution. However, despite being backed by a strong law, the
organisation failed because of its misuse for political victimisation. The Ehtesab Act
of 1997 thus lost public credibility because its focus was seen as exclusively on
leading political opponents. The Ehtesab Bureau wasted the opportunity to construct
a sustainable and fair mechanism for rooting out high level corruption. The National
Accountability Bureau (NAB) of the new government replaced the Ehtesab Bureau in
November 1999. The Ehtesab Act was also replaced by the NAB Ordinance.

Impact of corruption
The particular deadliness of the disease of corruption lies in its self-perpetuation –
any corrupt act sets in motion a vicious cycle in which the impact of corruption
becomes the source for further acts of corruption.
Direct loss to the public exchequer, in financial terms, is difficult to measure, but
is significant. According to one reliable source, estimated revenue lost by corruption

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is 64%, 48%, and 45% in income tax, customs and sales tax respectively. If this
perception is taken as true, the amount of revenue loss can go over Rs. 200 billion
per annum. Other indicative statistics are equally alarming. World Bank estimate of
revenue lost in Pakistan because of smuggling in 1992-93 was US$ 5.08 billion.
Ahmad and Ahmad (1995) estimated revenue loss in Pakistan because of black
economy at Rs.40-45 billion in 1989-90 and Rs. 104 billion in 1995-96.
The biggest casualty of corruption has been the development process. In
particular, the impact of aid received during the last 50 years has been minimal, as
grand corruption distorts key developmental decision-making with choices influenced
by private benefits and not by public needs. Pakistan’s human development
indicators such as literacy rates and infant mortality, have shown little improvement
in the past decade and are amongst the worst in the region. Furthermore, the waste
of the development aid has saddled the country with high debt which, at
approximately 40% of budgetary expenditure, squeezes out, amongst other things,
adequate remuneration for the public sector.

The private sector and commercial enterprise has been stifled by corruption.
Unnecessary, obstructive and, above all, coercive bureaucracy impedes healthy
businesses. Business depends crucially on operating in a climate where contracts
can be made and enforced, and where risks can be predicted with confidence. The
excessively intrusive public sector further reduces incentives for investment. The
legal system affords little or no protection to small and medium sized businesses
with a crippling effect on private sector development. This reduces revenue for
public purposes, encourages massive wastes and increases costs to consumers.

Corruption in the police and judiciary has contributed to the breakdown of law and
order. Laws are seen as oppressive and justified solely in the interests of those
who abuse them for their selfish interests. In the absence of inexpensive and
effective legal remedies, resort to extra-judicial methods has been on the rise.
Mafias like land grabbers, ‘Qabza Group’, timber smugglers and narcotics dealers
work through syndicates, co-opting public officials. Where the police are themselves
corrupt, the law breaker is rewarded and those who obey the law are marginalised.
The blatant disregard for law and the ostentatious asset accumulation and display by
the top public office holders has led to a decline in the moral standards and
values of the society. The corrupt are no longer ostracized and they enjoy respect in
society on the basis of wealth accumulated through illegal means, while the country
remains under developed and poverty stricken. There has been a loss of
legitimacy of state institutions in the eyes of the populace. The concept of
performance and meritocracy is subverted: 70% of the respondents who had tried

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for admission at educational institutions had not achieved this through fair practice.
When this statistic is extrapolated it is clear that Pakistan is cheating itself of
future potential.

Impact of government’s anti-corruption drive

Only on the question of whether corruption had increased did Pakistan score better
than its neighbours, which, if starting from a high baseline, is of little comfort. This is
supported by stakeholders, who believe that mega corruption appears to have
declined significantly since 1999, for three main reasons. First, the President,
Governors and Ministers are generally perceived to be men and women of integrity
who set a good example. Secondly, military rule has instilled a sense of discipline.
Thirdly, the fear of NAB has served as a deterrent to many. However, it was also
noted that although corruption had declined in the first year of military rule, the
deterrent effect of NAB in particular, seems to have diminished subsequently, as it is
realised that NAB could not possibly catch all the corrupt. Furthermore, the fear is
that mega corruption will rear its ugly head once again after the installation of the
political government. Moreover, there appears to be a consensus that the extent of
petty/middling corruption has been dented very little by the strong leadership and the
current accountability drive largely because most low ranking officials commit
corruption out of need, and operate without fear of ACAs since FIA and Anti
Corruption Establishments (ACEs) have been ineffective and NAB’s primary focus
has been on mega corruption. Essentially, current measures are seen to be
incomplete because they rely on enforcement, rather than targeting either the
underlying causes or the systemic weaknesses on which corruption thrives. There is
a general concern that government reforms have been driven purely by military rule
and, therefore, will not have become sufficiently institutionalised to withstand the
restoration of democratic processes and institutions.

Corruption in Afghanistan

Corruption, defined as “the abuse of public position for private gain” is a significant
and growing problem across Afghanistan that undermines security, development,
and state and democracy-building objectives. Pervasive, entrenched, and systemic
corruption is now at an unprecedented scope in the country’s history. Thirty years of
conflict that has weakened underdeveloped state institutions and the country’s social
fabric, Afghanistan’s dominant role in worldwide opium and heroin production, and

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the tremendous size and diversity of international security, humanitarian and
development assistance all increase Afghanistan’s vulnerability to corruption.

The Dimensions, Causes and Impact of Corruption in Afghanistan

The domestic and international consensus is that corruption has become pervasive,
entrenched, systemic and by all accounts now unprecedented in scale and reach.
This
view is apparent in the country’s declining (worsening) ranking in the Transparency
International Corruption Perception Index. Afghanistan fell from a ranking of 117th
out of 159 countries covered in 2005, to172nd of 180 countries in 2007, and finally to
176th out of 180 countries in 2008 - the fifth most corrupt country in the world.
Seven years after the fall of the Taliban government, corruption has become more
than the standard issue bribery, nepotism, and extortion in government. Corruption
has become a system, through networks of corrupt practices and people that reach
across the whole of government to subvert governance. Particularly perniciously,
these networks ensure that the guilty are not brought to justice; often the officials
and agencies that are supposed to be part of the solution to corruption are instead a
critical part of the corruption syndrome. Over and over, interview and survey
respondents noted the failure of the Afghan National Police (ANP), Attorney
General’s Office (AGO), and court system to detect, prosecute, judge, and punish
corruption at any level.
The pervasive nature of corruption and its impact on Afghan households are
apparent from surveys. The Integrity Watch Afghanistan (IWA) 2006 survey of 13
provinces reported that two-thirds of families had paid bribes within the last six
months. Although only 44 percent of respondents felt corruption had “some” to
“extremely high” impacts on their families, the average cost of bribes reached up to
$100 for all families that paid them, which more than half of respondents noted was
a “serious burden” on their families.1 One third of families paid more than that in
bribes, which is even more detrimental. IWA, Asia Foundation, and ABC/BBC/IRD
survey research shows that the sectors of government people come into contact
most often with for work or travel determines the organizations that they believe is
most prone to soliciting or accepting bribes. Afghans also overwhelmingly believe
that nepotism and/or bribes are required to gain government employment.

Corruption in China

Corruption in China is concentrated in the sectors with extensive state involvement:

infrastructural projects, sale of land user rights, real estate, government

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procurement, financial services, and heavily regulated industries. The absence of a
competitive political process and a free press in China makes these high risks
sectors even more susceptible to fraud, theft, kickbacks, and bribery. A 2006 study
of 3,067 corruption cases found that about half of the officials or individuals engaged
in corruption related to infrastructural projects and land transactions. The
pervasiveness of such corruption can be seen in the downfall of many local officials
in charge of transportation and urban planning. Half of provincial transportation
chiefs in China have been sentenced to jail terms (some have even been executed)
for corruption. Corruption is also widespread in the acquisition and transfer of land.
Typically, local officials use illegal (and sometimes violent) means to acquire
farmland at low prices and later sell the user rights of the land to developers in
exchange for bribes. A survey of sixteen cities conducted by the Ministry of Land
Resources in 2005 found that half of the land used for development was acquired
illegally. According to the head of the Regulatory Enforcement Bureau at the Ministry
of Land Resources, the government uncovered more than one million cases of
illegal acquisition of land between 1999 and 2005. China’s financial sector is
similarly beset by corruption. Kickbacks for loan approval, massive theft by insiders,
misuse of funds, and large-scale fraud are routine in Chinese banks, brokerage
houses, insurance companies, and rural credit cooperatives. In 2004, China’s
banking regulators uncovered 584 billion yuan in misused funds; in 2005, they found
767 billion yuan in misused funds. A large number of top executives in China’s
largest banks have been jailed for corruption.

In a 2003 survey of 3,561 employees in banks, state-owned enterprises, private

firms, brokerage houses, and rural households, 82 percent of respondents said that
corruption was “pervasive or quite pervasive” in financial institutions. On average,
borrowers paid bribes equal to 9 percent of the loan amount. Corruption of local
state institutions, primarily through the practice of maiguan maiguan (buying and
selling appointments in the government), is another cause for concern. Unheard of in
the 1980s, maiguan maiguan has become common, particularly in less developed
regions, since the mid-1990s. Although the Chinese government does not
provide aggregate data, frequent press reports indicate that this practice has tainted
many jurisdictions. In one extreme case, 265 senior local officials in Heilongjiang—
they included a governor, five deputy governor–level officials, and the party bosses
in half of the prefects in the province—were involved in selling and purchasing
government appointments. The chief perpetrator in this scandal, a prefect party
boss, netted 24 million yuan during 1997–2002. Like maiguan maiguan, collusion
among local ruling elites (corruption cases involving groups of officials who
cooperate and protect each other) is another sign of political decay— and is also a
post-1990 phenomenon. Sample surveys suggest that 20–65 percent of all

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corruption cases could be classified as collusive. In the worst instance, collusion has
transformed entire jurisdictions into local mafia states. Fuyang, a city with a
population of 9 million located in Anhui Province, has the dubious distinction of
producing a succession of corrupt party chiefs and mayors; some of them have even
been executed. Hundreds of local officials have been punished for corruption. Most
of the chiefs of the city’s main bureaucracies, including successive police chiefs,
have been removed for corruption. Collusive corruption appears to be most common
in the financial sector. One study found that about 60 percent of all financial
corruption and crime cases involved multiple collusive perpetrators.

Causes of Corruption

Endemic corruption in China originates in the country’s partially reformed economy,

lax enforcement efforts by the government, and the CCP’s reluctance to adopt
substantive political reforms.

PARTIALLY REFORMED ECONOMY

International experience shows that corruption is closely related to the state’s

involvement in the economy; countries where the state controls significant economic
resources and intervenes extensively in the economy tend to have more corruption.
In China, the state remains deeply and extensively entrenched in the economy
despite three decades of economic reform. Today, the state sector accounts for
more than 35 percent of GDP; controls the nation’s largest corporations;
monopolizes key industries such as banking, power generation, and natural
resources; owns trillions of dollars in fixed assets; and makes hundreds of billions of
dollars in new investments each year. In addition, the state also controls key prices
(most importantly the interest rate and land prices) and tightly regulates certain
economic activities (real estate development and infrastructure). Such a hybrid
economy creates a fertile ground for corruption because officials wielding the power
of approval can easily abuse it for illicit personal benefits.

LAX ENFORCEMENT

Casual observers are often impressed by the apparently harsh penalties (lengthy jail
terms and death sentences) imposed on corrupt officials in China. (The most recent
example was the execution of China’s chief drug regulator who took $1 million in
bribes for approving more than a thousand drugs, many of them of dubious
effectiveness and six of them outright fakes.) Yet appearances are deceiving.
Despite severe punishment against officials in high profile cases, official

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enforcement data indicate that Beijing punishes only a very small proportion of party
members and government officials tainted by corruption. For example, nearly 80
percent of the 130,000–190,000 CCP members disciplined and punished by the
CCP annually since 1982 got at most a warning. Only 20 percent were expelled from
the party. Less than 6 percent were criminally prosecuted. In recent years, half of
those convicted of corruption received suspended sentences and did not serve any
jail time. Therefore, the odds of an average corrupt official going to jail are at most 3
out of 100, making corruption a high-return, low-risk activity.

FAILURE TO ADOPT POLITICAL REFORM

In combating corruption, Beijing has favoured a top-down approach. It has routinely

issued tough-sounding directives and regulations designed to curb corruption at the
local level. The government has more than 1,200 laws, rules, and directives against
corruption on the books, but their implementation appears ineffective and spotty. In
recent years, in response to growing public outrage, Beijing has introduced new top-
down measures such as rotating provincial anticorruption chiefs, appointing central
government officials to head provincial antigraft commissions, making anticorruption
chiefs in ministries, agencies, and key state-owned enterprises report directly to the
CDIC, and dispatching inspection teams to the provinces to check up on provincial
party bosses. These centralizing initiatives, though welcome, have only limited
effects. At the same time, out of fear that a more comprehensive approach would
threaten the supremacy of the CCP, the Chinese government has consistently
resisted steps to further reduce the role of the state in the economy, increase judicial
independence, and mobilize the power of the media and civil society even though
international experience shows that only such full-fledged efforts can root out
systemic corruption.

Key Findings:

• Though the Chinese government has more than 1,200 laws, rules, and directives
against corruption, implementation is spotty and ineffective. The odds of a corrupt
official going to jail are less than three percent, making corruption a high-return, low-
risk activity. Even low-level officials have the opportunity to amass an illicit fortune
of tens of millions of yuan.

• The amount of money stolen through corruption scandals has risen exponentially
since the 1980s. Corruption in China is concentrated in sectors with extensive state
involvement, such as infrastructure projects, real estate, government procurement,

Page | 17
and financial services. The absence of competitive political process and free press
make these high-risk sectors susceptible to fraud, theft, kickbacks, and bribery. The
direct costs of corruption could be as much as $86 billion each year.

• The indirect costs of corruption (efficiency losses; waste; and damage to the
environment, public health, education, credibility and morale) are incalculable.
Corruption both undermines social stability (sparking tens of thousands of protests
each year), and contributes to China’s environmental degradation, deterioration of
social services, and the rising cost of health care, housing, and education.

• China’s corruption also harms Western economic interests, particularly foreign

investors who risk environmental, human rights, and financial liabilities, and must
compete against rivals who engage in illegal practices to win business in China.

• The U.S. government should devote resources to tracking reported cases of

corruption in China, increase legal cooperation with China (to prevent illegal
immigration by corrupt officials and money laundering), and insist on reforms to
China’s law-enforcement practices and legal procedures before tracking Chinese
fugitives in the United States and recovering assets they have looted.

Corruption in Philippines

Several anti-corruption bills have been filed in the Philippine Congress.

An amendment to section 11 of Act 3019, otherwise known as the Anti-Graft and
Corrupt Practices Act, to increase the prescription period for its violation from fifteen
to thirty years. An amendment to section 13 of Act 3019, on its non-application to
impeachable public officers: officers, including those who can be removed only by
impeachment, members of congress and members of the Supreme Court and
appeals court, are now exempt from the Anti-Graft and Corrupt Practices Act. An
amendment to section 6 of Act 1379, otherwise known as the Forfeiture Law, allows
10 per cent of the value of forfeited properties in corruption cases to be allocated to
the office of the ombudsman and for other purposes. In order to enhance
transparency in public procurement, President Gloria Macapagal-Arroyo signed
Executive Order 662-A, amending Executive Order 662, to create the Procurement
Transparency Group, headed by the Government Procurement Policy Board.
The group will evaluate, comment on, record and monitor the procurement activities
of national government agencies, government owned and -controlled corporations,

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government financial institutions, state universities and colleges and local
government. The group will be interested in the mode of procurement, budget,
volume, susceptibility to problems or anomalies and the importance of the project to
the development activities of the Philippines.

On 27 August 2008 a memorandum of understanding was signed by the

ombudsman, Meceditas Gutierrez, to establish a Center for Asian Integrity in the
Philippines, the first of its kind in Asia.3 The virtual academy will be incorporated into
the Philippine Ombudsman Academy, which trains trainers, investigators and
prosecutors about integrity. It will also incorporate a research programme to provide
qualitative and quantitative research into corruption and include a virtual library to
provide access to information on corruption and curricular support for the
development of integrity courses to be accredited by the University of the
Philippines. It will be funded by the Millennium Challenge Corporation – Philippine
Threshold Programme through the Asia Foundation.

Corruption and the private sector in the

Philippines

Graft and corruption are a fact of life in the Philippines; since liberation almost every
administration has suffered its sensational graft cases. Moreover, the private sector
has cultivated various corrupt practices in order to obtain significant and continuing
concessions and advance its private interests. A recent study by the Social Weather
Stations social research institution, based on its 2007 ‘Survey of Enterprises on
Corruption’, supplements anecdotal evidence and paints a picture of corruption
through the eyes of private sector managers. In terms of the extent of corruption in
the sector, the survey found that three out of five managers saw ‘a lot’ of corruption
in the public sector, compared to only one in twelve who saw ‘a lot’ of corruption in
the private sector. Bribery was highlighted as a particular issue, with roughly half the
managers revealing that ‘most’ or ‘almost all’ firms in their line of business give
bribes to win government contracts, compared to only one-fifth giving bribes for
private sector contracts. The survey found that, while ‘only a minority of companies
follow the basic honest business practices of demanding and issuing receipts,
keeping only one set of books, and paying taxes honestly’, there was a willingness
of managers to contribute to the fight against corruption. The survey measured
managers’ readiness to donate money to an anti-corruption fund and found that,
although in practice the amount donated has decreased in recent years, a half
intended to donate for these purposes over the next two years. Finally, the survey

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found that in the National Capital Region (Metro Manila) bribing for government
contracts has declined and best practices in record-keeping have improved. It
seems, therefore, that, while corruption in the private sector is still a big problem, the
private sector is showing some willingness to become part of the solution.

Corruption in Bangladesh

The Anti-Corruption Commission (Staffs) Service Rules 2008 were approved by the
government and came into effect on 15 June 2007. They were prepared by the
commission in order to impose these rules upon the commission staff, while earlier
efforts by the previous government were considered by stakeholders including civil
society organisations to be detrimental to their independence. On 15 July 2007 the
Public Procurement Act (Amendment) 2007 was passed. The amendment brings
procurement for any foreign or development/cooperative organisation under the
jurisdiction of the act. On 28 January 2008 the Public Procurement Rules 2008 were
enacted to ensure the transparency and accountability of the process, including
project tender and approval, the execution of work and civil servant duties.
The Local Government Commission Ordinance 2008 was promulgated on 13 May
2008 in order to institutionalise the decentralisation and empowerment of local
government. The ordinance establishes a permanent local government commission
to oversee the decentralisation process while ensuring accountability and
transparency in local government institutions. The National Identity Registration
Authority Ordinance 2008 was promulgated on 15 May 2008 to facilitate the
establishment of the national identity registration authority. The main objective of the
national identity card is to establish a digital database for preparing a credible voter
list, in order to eliminate false voting and track the records of criminal offences. The
national identity card will also facilitate transparency in transactions for various utility
services. On 16 June 2008 the government amended the Supreme Judicial
Commission Ordinance 2008. Some years earlier, on 2 December 1999, the
Appellate Division of the Supreme Court had given twelve directives to the
government in a landmark judgment in the Masdar Hossain case on the separation
of the judiciary (see the Global Corruption Report 2007 and 2008). The previous two
governments delayed implementing the directives as many as twenty-eight times.
This development represents the most significant step towards achieving full
independence of the judiciary On 11 June 2008 the Anti-Terrorism Ordinance
2008 was promulgated. Under this ordinance a wide range of crimes, including
money laundering, arms-running and financing terror attacks, have been made non-

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bailable offences. On 8 June 2008 the government promulgated the Truth and
Accountability Commission Ordinance 2008.9 The ordinance provides clemency for
corrupt individuals on the basis of voluntary disclosure and confession of guilt,
subject to the confiscation of illegally amassed wealth and property. Those granted
clemency are to be barred from election to public office for five years. The
ordinance will not apply to those already convicted. To ensure transparency and
accountability
in local government elections, the Election Commission approved the City
Corporation (Election Ethics) Rules 2008 and the Powrasava (Election Ethics) Rules
2008 on 17 June 2008. The rules include provisions to disclose basic general
information regarding candidates, such as sources of income, assets and liabilities,
election expenses and their source, and any criminal records. On 18 June 2008 the
Council of Caretaker Advisors approved in principle the Right to Information
Ordinance 2008. This ordinance would mark a significant victory for civil society
organisations in Bangladesh, which have long advocated such a law as a
prerequisite for ensuring transparency, accountability and good governance. The
draft law was circulated for public discourse and response – a unique move in the
Bangladeshi context, as laws have traditionally been passed with no engagement
with citizens The Money Laundering Prevention Ordinance 2008 provides that the
courts will not take into consideration any money-laundering case without the
sanction of the Anti-Corruption Commission. In addition, this ordinance will allow the
Bangladesh Bank to seek cooperation with financial intelligence units of other
countries or provide them with similar support.

Corruption in Indonesia

With the 2009 general election in sight, a set of regulations is being developed to
amend and regroup five different laws under a package law . The five laws relate to
political parties , general elections , tools and procedures , presidential elections
and local government and local elections . The House of Representatives (DPR)
ratified the law on political parties on 19 January 2008. Another law covering local
and general elections was ratified on 31 March 2008. The amendment of the law on
local government and local elections was adopted by parliament in April 2008 and
will take effect one month after it has been signed by the president. The laws on
presidential elections and on tools and procedures are currently being discussed in
parliament. Although such laws are urgently needed to clarify election and political
party regulations, several anti-corruption organisations have voiced concerns about
the loophole left in political parties’ financing. The new law on political parties allows
for increased individual and corporate contributions to political parties. Individuals
are now allowed to donate up to R1 billion , a tenfold increase from the previous

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limit. A significant increase was also approved for corporate contributions, from
R750 million to R4 billion – R5 billion for a general election campaign. This is of
particular concern, given that the law does not prevent different companies from the
same group, or employees of the companies, from donating to political parties.
Indeed, previous civil society monitoring initiatives revealed that the corporate
financing of political parties through employees’ accounts or through fictional
companies set up by a holding company was a common practice. Donations by
party members are unlimited, which some argue could have the effect of paving the
way for seat-buying.

According to the same law, financial management and reporting procedures now
depend on the parties’ own internal regulations. An external audit by a public
accountant is imposed only in the case of government funding to political parties,
and does not cover private donations. The law on general elections requires all
candidates and political parties to open a single account for donations within three
days of their official nomination. Although political parties are obliged to submit a
financial report to be audited by public accountants, there is no standard reporting
format. The lack of available accredited accountants, coupled with the absence of a
standard reporting format, raises concerns about the capacity of the General
Election Commission (KPU) to monitor and detect irregularities in political party
financing efficiently. Moreover, it is still unclear how donations made before the
opening of the special account or outside the campaign period can be accounted for.
The long-awaited law on freedom of information was ratified on 3 April 2008, almost
five years after the first draft was submitted to parliament. This is the first
comprehensive law regulating the public’s right to information and outlining the
obligations for public agencies in terms of information disclosure. The law regulates
the kind of information to be disclosed as well as the type of information that can be
exempted and for how long. The law has institutionalised the Information
Commission as an independent regulating agency mandated to handle disputes
related to disclosure obligations defined by the law. Several limitations have been
identified, however, including the fact that state-owned companies, notably national
oil and mining companies, are not subject to the obligations. There is also an article
on the criminalisation of misuse of public information that is perceived as an attempt
to restrain the freedom of the media, as it does not clearly define what would
constitute ‘misuse’. Nevertheless, the law has set in motion moves towards
increased transparency, and it also has a strategic role to play in complementing
existing anti-corruption laws.
A new Presidential Instruction was issued in December 2007, under Presidential
Decree no. 80/2003 on public procurement, to establish an independent National
Procurement Policies Office (NPPO). The NPPO is mandated to regulate public

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procurement and address inefficiency and under-spending of national and local
budgets. According to the Commission for the Eradication of Corruption (KPK),
around 30 per cent of the national procurement budget is lost to corruption each
year, while officials’ lack of understanding of procurement regulations and tender
procedures causes significant delays in budget implementation (20 per cent of
2007’s national procurement budget was still unspent by November 2007). The
National Development and Planning Agency expects that improved regulatory and
supervisory frameworks could help curb corruption and increase the efficiency of
public procurement by 30 to 40 per cent. The NPPO, however, has not been granted
the authority to handle complaints and arbitrate litigations. Complaints are instead
submitted to the head of the relevant public department for arbitration. The National
Ombudsman Office welcomes complaints, but can issue recommendations or report
cases only to relevant authorities.
Corruption in Japan

The Act on Prevention of Transfer of Criminal Proceeds came into force partially in
April 2007 and fully in March 2008. The act obliges financial institutions, leasing and
real estate businesses, and other operators except for lawyers to ensure client
identification and secure transaction records, as well as to report any suspicious
transactions to the financial authorities.1 Legal and accounting professionals are
subject to the former obligations but not the latter. An original draft covered all these
professions, but, faced with strong opposition especially from bar associations, the
Diet (parliament) enacted a final version that relieves legal and accounting
professionals from the reporting obligations. The legislation therefore is a step
forward, even though the complicated issue of lawyer and accountant disclosure
was not resolved. A bill for revising the Political Funds Control Law, aimed at
increasing the transparency of funding flows to lawmakers, was enacted in January
2008. The amendment mainly addresses political organisations related to Diet
members. The law as amended requires ‘Diet member-related political
organisations’ to submit receipts for expenditures greater than US$100, along with a
political funds report, to the Ministry of Internal Affairs and Communications and to
prefectural election commissions. Beginning in 2009 those political organisations will
be obliged to keep receipts for expenditures of ¥10,000 or less, and these receipts in
principle are subject to disclosure if a request is filed. The law introduces an audit
system for the financial reports of political organisations that will start in fiscal year
2009, and it sets up an expert committee to study and review the audit system.

Corruption in Malaysia

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The twelfth general election in Malaysia, held on 8 March 2008, sent shock waves
throughout the country. For the first time since 1969 the ruling party, the Barisan
Nasional (National Front) coalition, lost its two-thirds parliamentary majority. In
addition, it lost four more states to the opposition compared to the 2004 election, to
make it five in total. In 2004 the administration headed by Abdullah Ahmad Badawi
had been voted in with the strongest ever mandate for an incumbent, specifically to
clean up the decaying state of Malaysian institutions. It has failed in many areas,
however, especially in addressing corruption. The 2008 election results sent a very
clear signal to the ruling party about the level of popular dissatisfaction with, among
other things, the unbearable effects of corruption. The main opposition parties
(which
have subsequently restyled themselves as the Citizens’ Coalition – Pakatan Rakyat)
ran on the platform of transparency, accountability and good governance and were
able to capitalise on the discontent of the people. The Malaysian Anti-Corruption
Academy (MACA) was launched by the prime minister on 12 April 2007. The MACA
is intended to be the regional hub for anti-corruption capacity and capability building
to fight corruption, by promoting best practices in investigation, monitoring and
enforcement and by venturing into new areas such as forensic accounting and
forensic engineering. In a speech given at the ASEAN (Association of South East
Asian Nations) Integrity Dialogue5 on 21 April 2008, Badawi proposed the following
measures to address public concerns. First, the Anti-Corruption Agency (ACA)
would be restructured to become a fully fl edged Malaysian Commission on Anti-
Corruption (MCAC). The MCAC would report to a newly set up independent
Corruption Prevention Advisory Board, to be appointed by the Supreme Ruler (head
of state) on the advice of the prime minister. The board would advise the MCAC on
administrative and operational matters. Second, the prime minister proposed setting
up a Parliamentary Committee on the Prevention of Corruption. Finally, he
introduced a proposal to protect whistleblowers and witnesses. All these reforms
have yet to be implemented, however. The Malaysian Institute of Integrity (MII
Institut Integriti Malaysia) also stepped up its efforts when it launched two major
publications, National Integrity System: A Guiding Framework and Corporate Social
Responsibility: Our First Look.6 This was part of its ongoing collaborative effort with
UNDP Malaysia to develop the necessary human capital and knowledge resources
within the institute. Penang state has introduced several measures to improve the
regulatory environment with regard to government procurement , in what is referred
to as a CAT – a Competent, Accountable and Transparent – government. It is the
first state government to implement the open tender system for government
procurement and contracts. As an example, in civil works, contractors are able to bid
in an open tender process and to review the successful contractors and object if they

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are not satisfied. Furthermore, the Penang government has issued a directive
whereby all administrators and state executive councillors are not allowed to make
any new land applications. It has also invited professionals to serve on various
boards, such as the Penang State Appeals Board, and has established a Working
Professional Committee comprising individuals from five different professional
bodies to improve land procedures.

Corruption in Nepal

The Right to Information Act 2007 seeks to give free public access to any
information related to the public interest, thereby maintaining transparency,
accountability and respect for the people’s right to be informed. With the exception of
information specifically categorised as confidential, all Nepalese are guaranteed free
access to public information. Five categories of information are exempt from
disclosure requirements: security and foreign policy, criminal investigations,
commercial and banking privacy, ethnic or communal relations, and personal privacy
(including that
which threatens life, property, health and security). The Special Court in Nepal was
established in 2002 to handle corruption cases. Due to the slow pace of legal
proceedings, however, cases are piling up in the court. In order to speed up the
process , amendments were made to the Special Court Act 2002 allowing the court
to be flexible in determining the number of sitting judges required instead of being
limited to the existing three. The Banking Offence Act 2007 was promulgated to
control and mitigate the risks and impacts associated with, and to enhance public
trust in, banking and financial transactions. Offences punishable under the act
include unauthorised involvement in banking transactions, fraud in electronic
transactions, the misuse of bank loans and credits, tampering with accounting
books, fraud in the valuation of assets, and irregularities in banking and financial
transactions. Depending on the scale of the transaction, penalties range from three
months’ to four years’ imprisonment. The Anti-Money Laundering Act 2008 was

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enacted in January 2008. The law opens up avenues to combat corruption cases
involving property amassed through illegal means, including tax evasion, smuggling,
investment in terrorist acts and other crimes punishable under international treaties
and conventions signed by the government. The act lays the groundwork for ratifying
the UNCAC. Nepal is a signatory to the UNCAC but ratification has been pending
due to the country’s political situation.
The Good Governance Act 2008 was enacted in February 2008. The law’s objective
is to make public administration more people-oriented, accountable, transparent and
participatory. Some of the good governance and anti-corruption clauses include the
development of a code of conduct for public servants, methods for resolving conflicts
of interest, mandatory public hearings and social audits, complaint-handling
procedures and establishing Good Governance Units within each ministry. As
provided for by the new Procurement Act 2007, the government has established a
Public Procurement Monitoring Office (PPMO). The PPMO is a high-level policy-
making body designed to streamline the public procurement system. Among several
areas prone to corruption, public procurement is said to be the most susceptible.
With a score of 2.8 on a scale of 1 to 7, Nepal ranks 116th among 125 countries
assessed by the OECD for integrity in public procurement.

Conclusion

The impact of corruption continues to grow in the following Asian countries

Corruption in most of the Asian countries isn't getting much better and, indeed, in
some of the countries is intensifying--affecting virtually every aspect of life among
people. International watchdog Political and Economic Risk Consultancy queried
expatriates in 13 Asian countries and territories, and classified 10 countries as the
most severely corrupt countries in Asia.

Philippine
Expatriate businessmen in Asia perceive the Philippines as the most corrupt country
in the region. Nearly $2 billion dollars, or roughly 13 percent of the Philippines'
annual budget, is lost to corruption in the country each year, according to the United
Nations Development Program.
Its judicial system is believed to be ineffective at prosecuting and punishing
individuals for corruption when abuses are uncovered. Local corruption monitors
confirm that graft and bribery in the Philippines remain rampant. Corruption has

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penetrated every level of government, from the Bureau of Customs down to the
traffic police officers who pull over motorists to demand bribes.

Indonesia
Not only on Asia's top 10 list, Indonesia has also been categorized as the number 5
of the 96 most corrupt nations in the world. In the past two years, Indonesia has lost
more than $2bn due to corruption.
Former president Suharto, as the most corrupt political leader in the world in the past
20 years, has ruled this country with an iron fist for more than three decades. All the
leading candidates have made fighting corruption a central theme of their campaigns
but none have been clear on how they will solve the problem.

Thailand
The Problem of corruption has been around for a long time in Thailand and its roots
are deep in the culture - While huge amounts of money will be lost during the
implementation of projects due to corruption, more will be lost while trying to fight
against it and stop it. Thailand’s ex-Prime Minister Thaksin Shinawatra has used
very rough methods to control the media, which should be one of the most powerful
watchdogs against corruption.

Vietnam
A country where its light-fingered bureaucrats cream off at least 20% of
infrastructure spending. Corruption has been identified as one of the government's
main challenges. Vietnamese is now battling corruption at all levels.

India
Corruption happens because they have a system that allows such corruption to
flourish. It's a country that as high as 62 percent of citizens think that the corruption
is not a hearsay, but they in fact had the firsthand experience of paying bribe or
“using a contact” to get a job done in a public office.
It is not anymore confined to politicians or the government machinery alone. It is
prevalent amongst almost every section of the society at every level.

Korea

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Since the financial crisis of 1997, Korea’s image was radically changed from a model
developmental state with good governance to a country with rampant corruption and
cronyism

China
Corruption in China became increasingly serious during the early period of its social
transition, resulting in severe economic losses and huge challenges to China’s
government institution, as well as gradually becoming socially widespread.
Bribery has become the main accusation of corruption against China’s senior
officials. it was found that the spouse (usually the wife) and the child played an
important role in senior officials’ acts of corruption. Also, corruption cases have
shown that having a “love affair” often coincided with the first steps of corruption.

Malaysia
When we say money politics, people don’t get the real picture; it is nothing but
bribery and corruption. It is buying votes to get elected to the leadership of UMNO,
the dominant party in the Barisan National that rules the nation

Taiwan
Taiwan's problem lies in its own history. Taiwan was a notoriously violent and
lawless frontier society. Since the government could not control its tough citizens, it
granted them official titles to sustain the fiction of central control. Local government
by gangsters, vastly preferable in the eyes of the Taiwanese to no government at all.
Here we have local "muscle" being used to gain access to political and economic
spoils which are used to legitimize community standing

Japan
Asia's 3rd least corrupt country. Since the years of the bubble economy and the
ensuing economic and political turmoil after the bubble burst, political corruption in
Japan has become a major concern for the general public, the most recent case is
Abe cabinet's scandals

Hong Kong
Asia's 2nd least corrupt country

Singapore

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One of the least corrupt nations on the world. Known for strictly constraint of its
government officials

Other Asian Countries Have Severely Corruption Problems:

Myanmar

Corruption is perceived as widespread in this vicious dictatorship run with an iron

hand by a strong-willed clique of military leaders, who persist in repression of civil
society at every level. Illicit facilitation payments and informal fees are required to
access even the most basic government services.

Cambodia

Corruption is pervasive through all levels of society in this country where two-thirds
of the population earns less than $2 a month and one-third earns less than $1. No
one has ever been prosecuted under a skeleton anti-corruption law. In February,
international groups charged that judges in the trial of top former Khmer Rouge
leaders had bought their positions. International aid donors including USAID under
the Donor Coordination Group of Cambodia have warned of diversion of large
chunks of the $500 million or more in international aid provided to this nation. The
system of illicit "facilitation" payments by businesses and individuals may only
intensify as oil found off the coast replaces donor aid, removing even today's
rudimentary controls on use of public revenues.

Pakistan

Since the U.S. provides enormous aid to the country as a frontline power in the war
against terrorism, the government seems to be taking active steps to combat
corruption. But it's working in only a spotty fashion. Early this year, President Pervez
Musharraf, suddenly suspended and detained the nation's chief justice, apparently
because of his failure to sanction illegal detentions of terror suspects and
overturning corrupt privatization of steel mills. Corruption remains rife in the judiciary,
financial markets and civil service

Page | 29
ARTICLE 1

Page | 30
CORRUPTION IN CHINA: HOW BAD IS IT?
Minxin Pei, Daniel Kaufmann TUESDAY, NOVEMBER
20, 2007

On November 20, 2007, Director of China Program

Minxin Pei discussed his latest policy brief Corruption Threatens China’s
Future in a seminar hosted by the Carnegie Endowment. The presentation
was followed by a critique from Daniel Kaufmann, Director of Global
Program at the World Bank Institute and also a leading authority on
corruption and governance around the world.

Pei’s policy brief assesses corruption in China based on five key questions:
How serious is the corruption? What are the trends? What are the symptoms?
What are the causes? And finally, how have the government handled the
problem so far?

Pei first admitted that there are enormous research difficulties in attaining
high quality, reliable, and standardized survey data on the severity of
corruption in China. Nevertheless, indicators assembled from a variety of
sources presented a sobering picture of the situation. For example, various
domestic surveys conducted at both elite and mass levels have consistently
ranked corruption as one of China’s top political challenges and social
problems. A large number of anecdotal evidence collected from press reports
over the past decade also conveys the impression that the cost of corruption,
measured in monetary term, has grown, and involvement by mid-level (or
even senior) officials has increased as well.

Meanwhile, anti-corruption measures from the government remain

ineffective due to the insufficient enforcement of those laws. Lack of

Page | 31
transparency regarding the operational procedure within the Central
Commission of Discipline Inspection further complicates the picture, leaving
unclear how allegedly corrupt officials are discipline and punished.
According to data provided by the report, the odds of a corrupt official end
up in jail are less than 3 percent, therefore making corruption a high-return,
low risk activity. Such leniency of punishment has been one of the primary
factors that make corruption a very serious problem in China.

Pei’s report estimates that the direct costs of corruption in China are about 3
percents of annual GDP. Worse yet, most of the cases are concentrated in
critical sectors with extensive state involvement, such as infrastructure
projects, financial services, real estate, and government procurement. The
absence of competitive political process and free press makes these high-risk
sectors even more susceptible to fraud, theft, kickbacks, and bribery.

Pei also pointed out that corruption in China has evolved in two major ways.
First of all, in some of the cases corruptions have been taken in forms of
ostensibly legal official expenditures (or “privatized official consumption”).
For example, more and more local governments have started to build massive
administrative office buildings that resemble luxurious mansions. Secondly,
many of the corrupted local officials have transformed their jurisdictions into
virtual “mafia states,” where they collude with criminal elements and
unsavory businessmen in illegal activities

Although the central government in Beijing has constantly come up with new
laws and initiatives to battle against corruption, Pei doubted there would be
any major progresses. As long as the Central Commission of Discipline
Inspection remains in- transparent, and as long as the government continues
to limit the role of the media and NGOs in maintaining government integrity,
corruption would still be one of the largest threats to China’s future.

Daniel Kaufmann from the World Bank commented Pei’s policy brief with
three questions. First of all, how has the data been interpreted in the report,
regardless the accuracy of data itself? Interpreting data is very tricky. For
example, the top two countries with highest per capita rate of imprisonment
due to corruption are U.S and Russia. But what does this tell us? Does it
mean that the U.S has the highest crime rate in the world? In other words,
data can be interpreted in various ways to reach different conclusions.

Page | 32
Kaufmann then reminded the audience that corruption has plagued China for
decades, yet its economy continues to perform robustly. Therefore, how
much more damage could corruption do to China? Has China beaten the
odds? Finally, is corruption the root of all problems that plague China’s
political system today, or is it merely a symptom that caused by other
factors?

ARTICLE 2

CORRUPTION THREATENS CHINA’S FUTURE

Minxin Pei CARNEGIE ENDOWMENT POLICY BRIEF NO. 55, OCTOBER 2007

Resources

Failure to contain endemic corruption among Chinese officials poses one of the most
serious threats to the nation’s future economic and political stability, says a new
report from the Carnegie Endowment. Minxin Pei, an expert on economic reform
and governance in China, argues that corruption not only fuels social unrest and
contributes to the rise in socioeconomic inequality, but holds major implications
beyond its borders for foreign investment, international law, and environmental
protection.
In Corruption Threatens China’s Future, Pei paints a sobering picture of
corruption in China, where roughly 10 percent of government spending, contracts,
and transactions is estimated to be used as kickbacks and bribes, or simply stolen.
He examines the root causes for China’s rampant corruption—partial economic
reforms, lax enforcement efforts, and reluctance by the Communist Party to adopt
political reforms—and the ensuing economic losses and jeopardized financial
stability.
Key Findings:
• Though the Chinese government has more than 1,200 laws, rules, and directives
against corruption, implementation is spotty and ineffective. The odds of a corrupt
official going to jail are less than three percent, making corruption a high-return, low-
risk activity. Even low-level officials have the opportunity to amass an illicit fortune
of tens of millions of yuan.
• The amount of money stolen through corruption scandals has risen exponentially
since the 1980s. Corruption in China is concentrated in sectors with extensive state
involvement, such as infrastructure projects, real estate, government procurement,
and financial services. The absence of competitive political process and free press

Page | 33
make these high-risk sectors susceptible to fraud, theft, kickbacks, and bribery. The
direct costs of corruption could be as much as $86 billion each year.
• The indirect costs of corruption (efficiency losses; waste; and damage to the
environment, public health, education, credibility and morale) are incalculable.
Corruption both undermines social stability (sparking tens of thousands of protests
each year), and contributes to China’s environmental degradation, deterioration of
social services, and the rising cost of health care, housing, and education.
• China’s corruption also harms Western economic interests, particularly foreign
investors who risk environmental, human rights, and financial liabilities, and must
compete against rivals who engage in illegal practices to win business in China.
• The U.S. government should devote resources to tracking reported cases of
corruption in China, increase legal cooperation with China (to prevent illegal
immigration by corrupt officials and money laundering), and insist on reforms to
China’s law-enforcement practices and legal procedures before tracking Chinese
fugitives in the United States and recovering assets they have looted.
“Corruption has not yet derailed China’s economic rise, sparked a social revolution,
or deterred Western investors. But it would be foolish to conclude that the Chinese
system has an infinite capacity to absorb the mounting costs of corruption,” writes
Pei. “Eventually, growth will falter.”

ARTICLE 3

ABSTRACT

The cost of doing business in Asia

David Blecken . Media. Hong Kong: May 21, 2009. pg. 5, 1 pgs

ABSTRACT (SUMMARY)
When it comes to corruption, Asia is moving "in the direction of greater openness
and transparency", says WPP CEO Martin Sorrell. Most agencies in the mainland
operate under a US$70 'gift ceiling', which often forms part of a salary package, with
items above that value placed in a communal fund as a rebate to ensure individuals
are not accused of corruption. Other measures multinational agencies use to prevent

Page | 34
corruption include separation of reporting lines between CEOs and CFOs, internal
audits and centralization to ensure standardized procedure across the network.

ARTICLE 4

ABSTRACT
Corruption in Asia: Pervasiveness and arbitrariness

Seung-Hyun Lee , Kyeungrae Kenny Oh . Asia Pacific Journal of Management.

Singapore: Mar 2007. Vol. 24, Iss. 1; pg. 97, 18 pgs

ABSTRACT (SUMMARY)
How does one understand the differences and similarities of corruption among
various Asian countries? We use a recent framework developed by Rodriguez,
Uhlenbruck, and Eden (2005) to suggest that corruption has to be examined from
two different dimensions: pervasiveness and arbitrariness. Using this framework, we
ask why some Asian countries are able to achieve high levels of economic growth in
the midst of high level corruption while other countries suffer from economic
stagnation. We specifically suggest that more firms would bribe when pervasiveness
is high, while fewer firms would bribe when arbitrariness is high. We also look into
the implications on foreign direct investment.

ARTICLE 5
ABSRACT
Institutional Pillars and Corruption at the Societal Level

Ji Li , Jane Moy , Kevin Lam , WL Chris Chu . Journal of Business Ethics.

Dordrecht: Dec 2008. Vol. 83, Iss. 2; pg. 327, 13 pgs

ABSTRACT (SUMMARY)
This article studies the effects of social institutions on organizational corruption at
the societal level by focusing on the possible interactions between the institutional
pillars that have been identified in past research. Based on these three institutional
aspects or pillars, this article tests the interactive effects of social institutions among

Page | 35
societies throughout the world. The results suggest that the three institutional pillars
have significant interactive effects on organizational corruption at the societal level.
A discussion of the implications of the research findings for researchers and
practitioners is given.

ARTICLE 6

India 84th out of 180 on index of corruption

TNN 18 November 2009, 03:23am IST

Topics:

• India
• Corruption
NEW DELHI: Even as the Madhu Koda scam dominates headlines, the perception of
public officials and politicians in India has dipped further.

Transparency International
India's (TII) corruption
index released on Tuesday
T
Fa
Sh
has
wit ranked India 84th out
ce
ar
of
ter180 countries. A silver
bo
e
lining
ok
E
Pri
Sa
C to this dismal ranking
is that with an integrity
m
nt
ve
o
score of 3.4, India is the
ail
m
least corrupt country in
m
south Asia excluding Bhutan. Also, India has improved its credibility score from 2.7
en
in
t 2001 to 3.4 in 2009.

Speaking on the issue, TII chairman Admiral (retd) R H Tahiliani said, "The score
this year is not particularly flattering but we can take consolation from the fact that
the country's score has not gone from bad to worse.'' The evaluation of the extent of
corruption is based on opinion from country experts -- resident and non-residents --
and business leaders. The corruption index measures perceived levels of public
sector corruption in a country.

In 2009, expert analysis was sourced from African Development Bank, Asian

Page | 36
Development Bank, Bertelsmann Foundation, Economist Intelligence Unit, Freedom
House, Global Insight and World Bank. Resident business leaders whose opinions
are reflected in the survey are IMD, Political and Economic Risk Consultancy and
the World Economic Forum.

New Zealand, Denmark, Singapore, Sweden and Switzerland are the top 5 honest
countries. While China ranks 79th with a score of 3.6, Pakistan has a score of 2.4,
Bangladesh (2.4), Bhutan (5), Nepal (2.3), Maldives (2.5) and Sri Lanka

(3.1).

According to TII, nearly half of the 180 countries have scored three or even lower
points, a clear indication that corruption is perceived to be rampant. Haiti, Iraq,
Myanmar and Somalia have recorded the lowest score of less than 1.5.

Transparency International has found that there is a strong coorelation between

corruption and poverty, jeopardising the global fight against poverty. Tahiliani said
the low score could directly impact foreign direct investments in the country which
was needed for India to build infrastructure.

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