Friday, February 29, 2008

A Look at Corruption and How to Combat It

Transparency International (TI) released its latest report on the Global Corruption Barometer for the year 2007. Cambodia appears on place 162 out of 179, with several countries sharing the same place. As in past years it is again among the lowest-ranked countries in the world.

As usual, outcries of outrage from all quarters of the Cambodian Diaspora and other observers of the conditions in Cambodia accompanied the release of the report. The common people in Cambodia probably haven’t taken notice at all. Unfortunately, they have accepted corruption as a fact of life. They don’t like it, but they have come to live with it. In part they understand the reasons and the causes at least for those ‘petty’ bribes in commune offices or the shakedowns by the policeman on the corner.

When people hear figures of $320 to $500 million lost due to corruption they believe all this money disappears in government officials’ pockets. A detailed substantiation, however, has yet to be published. At the present time these figures are nothing but pure guesswork, plus it needs to be taken into account that this figure would include both the private and the public sector. This is not to say, though, that there is no substance to this claim, but concrete evidence needs to be presented to credibly make the case.

TI does noble work and nobody can or should level any criticism at the organization. TI’s work is objective and impartial and there is no reason at all to question the results as shown in their indices.

But people tend to just skim such reports without looking into the implications of why and how certain countries have such a low corruptions perception index (CPI). One needs to understand the causes and the contributing factors to corruption in order to combat it. Condemnation alone won’t remedy the situation. Berating a government for the endemic proportions of corruption is for all intents and purposes a disservice and won’t solve the problem. Quite the opposite might happen. The government feels attacked and only further digs into its foxhole defending its record, notwithstanding its apparent failures.

If it is any consolation, Cambodia is in the company of some very powerful, much larger, and economically more advanced countries, e.g. Russia or Argentina. Of course, this can be no justification for letting up on the fight against corruption. But this just goes to show, and a look at the world map demonstrates this more than aptly, that corruption is a disease afflicting all but a few countries in the world. Only 8 out of some 200 countries reach a CPI between 9.0 to 10.0, and a further 7 achieved a CPI between 8.0 and 9.0.

When comparing the ranks of individual countries and looking at their past record, it appears that the longer corruption persists in a society the harder it is to root it out. After all, it is easy income for the ones benefiting from it. A culture of corruption has developed on those societies. In the case of Cambodia, corruption has been part of the culture for centuries (David Chandler ‘A History of Cambodia’, John Tully ‘A Short History of Cambodia’).

But another look at the world-map will also reveal that greed is not the only driving force, the fundamental cause is poverty. But since greed is a significant factor, it is sad, though, to see that the poorest countries have the worst CPI, in other words, greed there is most pronounced.

When looking at corruption a distinction between the two basic types must be made – corruption born of greed, and corruption born of poverty.

Although corruption has been around for a long time, the means to pursue it became virtually non-existent during the Pol Pot era; money had been abolished. The subsequent Vietnamese-style Communist regime saw a resurgence on a limited scale. But with the big money rolling in after the 1993 elections, the people in power couldn’t resist the temptation to sideline a good chunk of it into their own pockets, and corruption took off big time.

A typical form involves the awarding of public works or purchase of equipment for public use. The person or persons in charge of procurement ask the supplier to over-bill the government by a certain amount, which is then paid back to the official in cash. If the supplier does not oblige the official(s) they will just turn to a competitor that will oblige.

Government officials also routinely form companies, which are owned by their wives, children, or other family members. With insider knowledge these companies then vie for lucrative government business deals. By the same token, the ‘connected’ businesses and people are the ones holding the best pieces of land, which they bought for next to nothing and are now selling off at huge profits.

Another form involves the awarding of a concession, a land lease, or the sale of a government enterprise. The applying company pays an outright bribe in cash to the official in exchange for favorable terms. The same system applies to government contract bidding processes.

Naturally, corrupt judges who will pass verdicts based on the amount of bribes are one of the most egregious and despicable part of corruption.

Quote from TI’s report:

Cambodians view the police and judiciary as more corrupt than other government and non-government agencies

The second form is the more understandable type caused by poverty.

Quoted from TI’s report:

More than half of Cambodian interactions with police and registry and permit services in 2007 resulted in bribes paid.

Government employees make about $65 - $85 on average per month. The example of a low-ranking policeman will make this abundantly clear. But he is interchangeable with soldiers, nurses, postal workers, employees at the Sangkat, schoolteachers, etc.

He makes $40 a month, on which he needs to support his wife and 2 children. His rent for a typical, rather run-down Cambodian flat is already $45 a month. He also spends about $15 on gas for his moped per month. His food bill runs to about $50 a month. If someone falls ill they don’t go to a doctor, they go to the neighborhood nurse who can provide cheap medicine, or they turn to traditional, oftentimes Chinese, medicine. They buy new clothes only at the time of the Khmer New Year.

His duties vary. Mostly he is posted as traffic police. He shakes down mototup drivers for making wrong turns, or stops right-hand driven vehicles, which are officially banned, and for a little money just lets them go. He said he doesn’t ask for money but takes whatever they give him. His take is about $50 a month.

His wife also has a job. She leaves the house at daybreak to sell cosmetics at the local market, putting in a 12-hour day. She buys these from a supplier who smuggles them in from Thailand, often selling them with a mark-up of only 2-3%, ending up with about a $30 - $50 profit a month; in good months, it can even be $80-$100. She has developed a steady clientele of more well-to-do women. But out of that she needs to pay rent for her very small stall of $25 a month and electrical power of $5-$10 a month to the market operator.

Altogether, this family can barely make ends meet every month. There is nothing left over for savings, for family trips to the beach, for picnics. For fun they go to the riverside, or just stay home and watch TV.

If he didn’t have this extra ‘income’, they would be in dire straits indeed. They don’t have a comfortable life by any stretch in the first place. So given the circumstances he is more or less forced to take those bribes. Morally, he has no compunction about taking them either. Everybody else does it, and it has been a long-standing practice in Cambodia society. People grumble but they live with it.

So would the easiest and simplest solution be just to raise the salaries of all government employees to a level so they could support their families and live a halfway decent life? Yes and no. For a start, though, this would alleviate the most pressing problems the underpaid civil servants face. But it goes without saying that the culture of corruption must be eliminated by a vigorous educational campaign in Cambodian society parallel to the introduction of any reform, otherwise it will produce only a fraction of the intended goal. Before any such measure is to have any effect the creation of a legal framework and environment must precede it to form the foundation from which to work.

But how to pay for it? Currently the government spending equals about 13.9% of the GDP, or (2007) $1,127,000,000.

This breaks down into the following items:

Central administration: $957,932,000
Provincial administration: $169,460,000

According to the projected budget for 2008 wages will constitute

about 3.2% of the GDP or $265,600,000.

Many an observer will quickly point to a possible cut in defense expenditures. With about 6% in defense spending there may be room for some savings, but then, demobilizing a large number of soldiers will only add to the problems in other areas, as most of the de-mobbed soldiers won’t find work elsewhere.

Here are the numbers for the security sector:

Defense and Security: $123,739,000
(Defense Ministry: $ 78,171,000)
(Interior Ministry: $ 45,561,000)

There are no reliable sources on the number of public employees. An inquiry with the government remained unanswered. Sometimes the number of 166,000 civil servants is mentioned, but then there was a report for a pay hike for about 400,000 public workers. The 400,000 would be about 5.7% of the work force. This is a number one can find in countries with highly developed bureaucracies, as in the EU. It appears somewhat high for a country like Cambodia. The 166,000 may not include the military. So if we add 100,000 for the military, we will arrive at 266,000, which we will use in our estimates.

Using the figures above a public employee makes $998 a year on average, or $83 a month. (In comparison a bank teller can make about $200 - $300 a month, in some banks up to $500.)

An adequate take-home pay in order to support a family of 4 used to be $100 a month in the year 2002/3. But those times are long past. With the cost of living increased by an inflation rate of 4.4% through 2007, though personal experience would put this rate more in the vicinity of 10%, $150 - 200 a month would appear to be a reasonable number. Using an increase of roughly $100 or $1200 per year per employee, this would absorb a whopping $319,200,000 of the budget, or roughly 21% of a total national budget of only $1.5 billion. Together with the salaries/wages set forth in the budget already we are looking at $ 585 million. Clearly, this would need to be done in stages.

As it happens, the additional amount is equal to the estimate of money lost to corruption once mentioned by the U. S. Ambassador. If it only were that easy. It would be really naïve to believe that corruption could be eliminated overnight. But, nonetheless and ideally, if the high-level corruption could at minimum gradually be decreased this could largely pay for the overdue increase of public salaries and stop corruption at the lower levels of government.

Poor pay is an ideal breeding ground for corruption – not only in Cambodia. This is why ministerial employees are paid rather handsomely in developed countries. They must remain objective and neutral when it comes to managing other people’s, namely the taxpayer’s, money. By that logic, ministers and state secretaries, and the next level in the hierarchy are paid salaries commensurate with their responsibilities. In comparison, a president of a private enterprise managing about $100 million easily makes $200,000 to $300,000 in industrialized countries.

By that measure, ministers in Cambodia should also make this kind of money, perhaps adjusted according to purchasing power parity, which is roughly 3:1. With all the fringe benefits of their office, their income would then be more than adequate and ought to be an incentive to forgo all other temptations.

There are 31 ministries with 100 ministers and state secretaries in the Cambodian government, including the prime minister. If each earned $200,000 on average, that payroll would be $20 million altogether. Together with the overall government salaries, roughly $600 million will have to be doled out to government employees. That’s a frightening number.

However, if the whole range of measures are taken and enforced firmly, there is a presumption that donor nations will chip in considerably beyond the present $615 million they hand over per year in grants, foreign aid, and long-term loans. Combined with the funds available from the reduction and eventual elimination of corruption and further healthy growth of the economy and increased tax revenues it appears as a feasible undertaking.

With the projected oils revenues as a sort of collateral, persuading and convincing foreign governments will also be so much easier if they are approached with a feasible and practicable plan. But it all hinges on the government’s willingness to go forward with those drastic, in high circles very unpopular, measures.

These remedies are in brief:

· Ensure absolute independence of the judiciary.
· Pass the Anti-Corruption Law with adequate penalty provisions.
· Institute minimum qualifications for each level of government.
· Institute a fair and equitable pay scale according to responsibility.
· Pay normal wages and salaries for government employees, starting at a minimum of $150 a month to be annually adjusted according to the inflation index.
· Pay salaries to state secretaries and ministers comparable to Western salaries adjusted for purchasing power parity.
· Issue strict regulations for the use of discretionary funds by personnel with appropriate authority.
· Institute an Anti-Corruption Government Task Force to enforce, investigate and prosecute violations of the law.
· Abolish cash transactions in public offices, e.g. customs office, and cash payment of salaries.
· Abolish redundant advisory positions for ministers and state secretaries.
· Establish computerized accounting systems in all government offices.
· Establish computerized official documents locked into the accounting system.

Clearly, these remedies require the support of the current nomenclature, that is, the ministers, state secretaries, generals, and big businesspeople, which now all gain from corruption. Although Hun Sen is seen as the strongman in Cambodia, there are two rival factions in his party that are in a sort of Mexican standoff for power. They divided the ministries and staffed them accordingly. So one ministry might have a Hun Sen-loyal minister, but a Chea Sim-loyal state secretary, another one might be staffed the other way around. The powerful and very influential military is equally divided and nothing can be passed and enforced without their tacit consent.

Consequently, even if Hun Sen took the initiative to pass all these necessary measures he would still need the support of the other faction of his party. Conventional wisdom holds that Hun Sen himself really does have the desire and ambition to stop corruption, because his goal is to enter Cambodian history as the founding father of a new nation of prosperity and freedom.

But it remains doubtful whether he even has the support of his own faction for those reforms. This is the simple reason why the long-slumbering law on corruption is still mired in the committees. There is simply too much resistance from the people lining their own pockets.

Watchdog and human rights organizations always call on donor nations to put more pressure on the government to pass those reforms - to no avail so far. Although it is cynical, the donors have come to accept that foreign aid benefits the powers that be first, and the population second; they just can’t cut their foreign aid because that would enhance the plight of an already poverty-stricken people. So they continue to give in the hope that increased material well-being that comes with economic development will eventually lead to better living conditions and the observance and respect of and for human rights.

To paraphrase Barack Obama’s campaign slogan, ‘Yes, it can be done’, or another old saying, ‘Where there is a will, there is way.’


Anonymous said...

All the articles in this block are hardly objective at all. They all seemed to laud Hun Sen with praises, even in areas such as corruption. The writer, whom I assume to be an expatriate working to improve the democratic and good governance in Cambodia, seemed to be an apologist for Hun Sen's failures and this blog is serving as a mouthpiece of Hun Sen's propaganda, as if the huge media under his disposal is not enough to spread Hun Sen's mesaage of lies. When I read the first article, I think it is not too bad. The second, may be alright. But when I read the third I think, wait, this is a Hun Sen's propaganda machine. I feel so sad for the writer that he has fallen for Hun Sen's spell and has been hypnotized by Hun Sen's perceived charms and 'limitless' capability. No personal attack is intended here, are you married to a daughter of any of the CPP's officials?

Liberal Free-Thinker said...

Well, I am not married to a CPP official's daughter (smile). But I don't think you read the article correctly. You obviously don't live in Cambodia and you probably are one of those overseas Khmer who are completely removed from the reality in Cambodia. You think everyone not condemning the present government in harsh terms must be for Hun Sen. That just isn't so.