Integrity, Corruption and Integrity, Corruption and Development in Arab CountriesDevelopment in Arab Countries

A Systemic PerspectiveA Systemic Perspective

Ahmed Sakr AshourAhmed Sakr Ashour

April 2006April 2006

The Anticorruption Scene The Anticorruption Scene in the Arab Region.in the Arab Region.

Interest in combating corruption in the Arab Countries has been rising Interest in combating corruption in the Arab Countries has been rising over the last decade.over the last decade.

Chapters of TI were established in almost half of counties of the region.Chapters of TI were established in almost half of counties of the region. A number of regional conferences were held on the subject.A number of regional conferences were held on the subject.

A regional anticorruption organization headed by Dr. Selim Al-Huss A regional anticorruption organization headed by Dr. Selim Al-Huss was established and held its first conference in Beirut last year.was established and held its first conference in Beirut last year.

Another regional organization of Parliamentarians Against Corruption Another regional organization of Parliamentarians Against Corruption along with national chapters were also established two years ago.along with national chapters were also established two years ago.

Arab states are starting to join the UN convention against corruption.Arab states are starting to join the UN convention against corruption. An increasing number of Arab countries are taking a set of measures to An increasing number of Arab countries are taking a set of measures to

confront corruption including establishing anticorruption entities (e.g.. confront corruption including establishing anticorruption entities (e.g.. Jordan)Jordan)

National and Pan Arab activist organizations and groups are National and Pan Arab activist organizations and groups are

bringing the issue of corruption in Arab Countries under the lime bringing the issue of corruption in Arab Countries under the lime

light.light. The independent media in a growing number of Arab countries are The independent media in a growing number of Arab countries are

focusing on and publishing about corruption incidents, cases and focusing on and publishing about corruption incidents, cases and

issues.issues. Regional and international organizations (e.g. ARADO, TI, UN, Regional and international organizations (e.g. ARADO, TI, UN,

UNDP, POGAR of UNDP, World Bank, World Economic Forum) UNDP, POGAR of UNDP, World Bank, World Economic Forum)

have held meetings and published studies on the issue in the region.have held meetings and published studies on the issue in the region.

The Reform SceneThe Reform Scene

Various Initiatives have been taken over the last two decades:Various Initiatives have been taken over the last two decades:

Economic restructuring and reform policies including privatization Economic restructuring and reform policies including privatization have been adopted by almost all countries of the region.have been adopted by almost all countries of the region.

Various political liberalization and democratization initiatives have Various political liberalization and democratization initiatives have been taken over the last five years.been taken over the last five years.

The public sector have been the focus of various administrative The public sector have been the focus of various administrative modernization and reform initiatives.modernization and reform initiatives.

Some of them were with the support of international organizations.Some of them were with the support of international organizations.

Why Interest in Reform and Why Interest in Reform and in Combating Corruption is in Combating Corruption is

Rising?Rising? The Arab region has been experiencing stagnation in development and The Arab region has been experiencing stagnation in development and

growth over the last two decades, and has been lagging behind in growth over the last two decades, and has been lagging behind in economic performance compared to the rest of the world.economic performance compared to the rest of the world.

For Example:For Example: Annual growth in per capita income was 0.5 % which is less than sub-Sahara Annual growth in per capita income was 0.5 % which is less than sub-Sahara

Africa. This rate was 5% for East Asia.Africa. This rate was 5% for East Asia.

Export performance grew by 1.5 during the 1990s , compared to 6% for the Export performance grew by 1.5 during the 1990s , compared to 6% for the world.world.

The share in foreign investment during the last decade was less than 1% of The share in foreign investment during the last decade was less than 1% of FDI in developing countries. This percentage was 59 % for East Asian FDI in developing countries. This percentage was 59 % for East Asian

countries.countries.

Indicators of unemployment , productivity and poverty point to the slow and Indicators of unemployment , productivity and poverty point to the slow and sluggish development performance.sluggish development performance.

To what extent is the slow and sluggish development performance of the Arab To what extent is the slow and sluggish development performance of the Arab region a function of:region a function of:

CorruptionCorruption Reform DeficiencyReform Deficiency

Answering this question sheds a great deal of light on the importance of Answering this question sheds a great deal of light on the importance of combating corruption and of engaging in a set of profound and comprehensive combating corruption and of engaging in a set of profound and comprehensive

reforms for unleashing the forces for development and growth in the region.reforms for unleashing the forces for development and growth in the region.

Tackling corruption and reform deficiency are related. As will be illustrated Tackling corruption and reform deficiency are related. As will be illustrated later, the effective combating of corruption require the uprooting and tackling later, the effective combating of corruption require the uprooting and tackling

of its causes and underlying factors. of its causes and underlying factors.

A look at the Corruption A look at the Corruption Scene in the Arab RegionScene in the Arab Region

Corruption Perception Corruption Perception Index(2005):Index(2005):

CountrCountry y

World World

RankRank

Arab Arab Region Region

RankRankScore Score CountrCountr

y y World World

RankRank

Arab Arab Region Region

RankRankScore Score

Oman Oman 2828 11 6.36.3 Syria Syria 7070 1010 3.43.4

United United Arab Arab

EmiratEmirateses

3030 22 6.26.2 MoroccMorocco o

7878 1111 3.23.2

Qatar Qatar 3232 33 5.95.9 LebanoLebanon n

8383 1212 3.13.1

BahraiBahrain n

3636 44 5.85.8 Algeria Algeria 9797 1313 2.82.8

Jordan Jordan 3737 55 5.75.7 Yemen Yemen 103103 1414 2.72.7

Tunisia Tunisia 4343 66 4.94.9 PalestiPalestine ne

107107 1515 2.62.6

Kuwait Kuwait 4545 77 4.74.7 Libya Libya 117117 1616 2.52.5

EgyptEgypt 7070 88 3.43.4 Iraq Iraq 137137 1717 2.22.2

Saudi Saudi ArabiaArabia

7070 99 3.43.4 Sudan Sudan 144144 1818 2.12.1

Looking at the CPILooking at the CPI

Most Arab countries fall below the median (median = 80).Most Arab countries fall below the median (median = 80).

Some Arab countries had a score and a rank close to other countries:Some Arab countries had a score and a rank close to other countries: Oman is equal to Israel and close to Portigue and Astonia.Oman is equal to Israel and close to Portigue and Astonia.

EAU is close to Slovenia.EAU is close to Slovenia. Qatar is equal to Botswana, Taiwan and Uruguay.Qatar is equal to Botswana, Taiwan and Uruguay.

Jordan is equal to Cyprus and close to Malaysia.Jordan is equal to Cyprus and close to Malaysia.

The magnitude and seriousness of corruption is in some cases greater The magnitude and seriousness of corruption is in some cases greater than what CPI indicates. This has to do mostly with grand corruption than what CPI indicates. This has to do mostly with grand corruption

which is likely to be hidden. Grand and state capture corruption is a which is likely to be hidden. Grand and state capture corruption is a great problem in many Arab countries. The CPI methodology mostly great problem in many Arab countries. The CPI methodology mostly

reflects administrative/petty corruptionreflects administrative/petty corruption

Relationship Between Corruption, Relationship Between Corruption, its Infrastructure and its Infrastructure and

DevelopmentDevelopmentResults from an ongoing project supported by POGAR on combating corruption.Results from an ongoing project supported by POGAR on combating corruption.

Development/Governance IndicatorDevelopment/Governance Indicator Simple Simple CorrelationCorrelation

Number of Number of CountriesCountries

Human Development Index (HDI)Human Development Index (HDI) 0.701 (**) 0.701 (**) 142142

GDP Per CapitaGDP Per Capita 0.875 (**) 0.875 (**) 139139

Economic Growth RateEconomic Growth Rate -0.366 (**) -0.366 (**) 139139

Poverty IndexPoverty Index -0.522 (**)-0.522 (**) 101101

Unofficial EconomyUnofficial Economy -0.674 (**) -0.674 (**) 6969

Foreign Direct Investment as Percentage of Foreign Direct Investment as Percentage of World FlowsWorld Flows

0.412 (**) 0.412 (**) 146146

Competitiveness IndexCompetitiveness Index 0.917 (**) 0.917 (**) 104104

Spending on Education and Health as Spending on Education and Health as Percentage of GDPPercentage of GDP

0.571 (**) 0.571 (**) 107107

Spending on Education as Percentage of GDPSpending on Education as Percentage of GDP 0.334 (**) 0.334 (**) 107107

Spending of Health as Percentage of GDPSpending of Health as Percentage of GDP 0.690 (**) 0.690 (**) 140140

Governance Indicators:Governance Indicators:

Voice and AccountabilityVoice and Accountability

Political StabilityPolitical Stability

Government EffectivenessGovernment Effectiveness

Regulatory QualityRegulatory Quality

Rule of LawRule of Law

Control of CorruptionControl of Corruption

0.684 (**)0.684 (**)

0.790 (**)0.790 (**)

0.935 (**)0.935 (**)

0.827 (**)0.827 (**)

0.920 (**)0.920 (**)

0.962 (**) 0.962 (**)

146146

Competiti-veness

(R = 0.917)

Expenditure on

Health and Education

(R = 0.571)

Share in FDI

(R = 0.412)

Poverty(R = 0.522)

GDP Per Capita

(R = 0.875)

Expenditure On

Health(R = 0.690)

Unofficial Economy

(R = 0.674)

Corruption

Control of Corruption(R = 0.962)

Government Effectiveness(R = 0.935)

Voice andAccountability

(R = 0.684)

Rule of Law

(R = 0.920)

Regulatory Quality

(R = 0.827)

Political Stability

(R = 0.790)

Governance/Institutional Infrastructure

Institutional and Legal Reforms Institutional and Legal Reforms Against Corruption that Have Against Corruption that Have Been Taken by Most Countries Been Taken by Most Countries

of the Regionof the Region Arab government have transformed their address from denial to admission of Arab government have transformed their address from denial to admission of

the problem of corruption.the problem of corruption.

Anticorruption reforms in the region have mostly been legalistic and Anticorruption reforms in the region have mostly been legalistic and institutional in nature.institutional in nature.

The measures commonly taken are:The measures commonly taken are: Activating and strengthening the role of control agencies and extending their out Activating and strengthening the role of control agencies and extending their out

reach.reach. Establishing anticorruption bodies reporting to the government.Establishing anticorruption bodies reporting to the government.

Passing a set of anticorruption laws.Passing a set of anticorruption laws. Prosecuting and trying corruption cases involving high state officials.Prosecuting and trying corruption cases involving high state officials.

Declaring that the government is adopting anticorruption posture.Declaring that the government is adopting anticorruption posture. Introducing modernization and reforms to the civil service system and government Introducing modernization and reforms to the civil service system and government

administration.administration. Introducing other institutional reforms (e.g. The Judiciary)Introducing other institutional reforms (e.g. The Judiciary)

The legal and Institutional The legal and Institutional Initiatives Against Corruption Initiatives Against Corruption Have Been Mostly CosmeticHave Been Mostly Cosmetic

Corruption continues to thrive in virtually all domains of economic, Corruption continues to thrive in virtually all domains of economic,

administrative and political activity across the Arab region.administrative and political activity across the Arab region.

The legal and institutional reforms were:The legal and institutional reforms were:

Not attacking the system under which corruption thrives.Not attacking the system under which corruption thrives.

Not integrated into a comprehensive plan and a strategy.Not integrated into a comprehensive plan and a strategy.

Not backed by strong political support.Not backed by strong political support.

There is More to the Reform Against There is More to the Reform Against Corruption Than the Legal and Corruption Than the Legal and

Institutional Measures, Even if They Institutional Measures, Even if They Represent a Comprehensive All Out Represent a Comprehensive All Out

AttackAttack Corruption in the region is high in both types:Corruption in the region is high in both types:

Grand/ state captureGrand/ state capture Petty/ administrativePetty/ administrative

Grand corruption is widespread in all countries of the Grand corruption is widespread in all countries of the region.region.

Petty corruption (especially bribes) is more common Petty corruption (especially bribes) is more common in the middle and low income countries.in the middle and low income countries.

The Underlying Factors of The Underlying Factors of Corruption in the Region:Corruption in the Region:

Governance: Countries of the region suffer from governance Governance: Countries of the region suffer from governance deficiency or gab. This has been well documented (World Bank, 2003).deficiency or gab. This has been well documented (World Bank, 2003).

Broadly speaking, governance has two fronts:Broadly speaking, governance has two fronts:

Political Infrastructure of the state.Political Infrastructure of the state.

The institutional Infrastructure of the public sector.The institutional Infrastructure of the public sector.

The governance gap the region suffers from is on both fronts.The governance gap the region suffers from is on both fronts.

But There is More to the But There is More to the Underlying Factors of Underlying Factors of

Corruption in the Region:Corruption in the Region: The Economic Infrastructure:The Economic Infrastructure:

Most countries of the region have economies that rely greatly on rent.Most countries of the region have economies that rely greatly on rent.

Rent-seeking is a common economic activity in the region.Rent-seeking is a common economic activity in the region.

Non productive sectors (rent seeking, rent-based and a sizeable portion of Non productive sectors (rent seeking, rent-based and a sizeable portion of the government) represent a significant segment of the region’s economies.the government) represent a significant segment of the region’s economies.

The public sector remains to overwhelm the economic life in most The public sector remains to overwhelm the economic life in most countries of the region.countries of the region.

Many economic sectors of these countries are monopoly-based.Many economic sectors of these countries are monopoly-based.

The Social/ Cultural The Social/ Cultural Infrastructure Infrastructure

(Societal and Administrative (Societal and Administrative Ethics)Ethics)

The tribes and the nucleus family is a powerful social force in most The tribes and the nucleus family is a powerful social force in most Arab societies. This explains the spread of nepotism.Arab societies. This explains the spread of nepotism.

The spread of corruption in various spheres of life made people The spread of corruption in various spheres of life made people tolerant and accustomed to corruption.tolerant and accustomed to corruption.

Cultural and ethical reform is not part of the official reform address Cultural and ethical reform is not part of the official reform address or agenda in all countries of the region.or agenda in all countries of the region.

Corruption is Much More Complex and Corruption is Much More Complex and Deeply Rooted in the Region Than the Deeply Rooted in the Region Than the Implicit Assumptions Underlying the Implicit Assumptions Underlying the Reforms Adopted or Applied so FarReforms Adopted or Applied so Far

Effective combating requires:Effective combating requires: Integrated multidimensional reform.Integrated multidimensional reform.

Political reform represent the obstacle and the real solution, especially for Political reform represent the obstacle and the real solution, especially for grand corruption.grand corruption.

Crafting a strategy that tackles the causes and that fits the governance Crafting a strategy that tackles the causes and that fits the governance conditions of each country.conditions of each country.

Establishing a broad coalition among anticorruption and pro-integrity Establishing a broad coalition among anticorruption and pro-integrity forces/ stakeholders including invigorating of the civil society.forces/ stakeholders including invigorating of the civil society.

Monitoring the success and progress of the anticorruption Monitoring the success and progress of the anticorruption program/measures.program/measures.

Tackling the sectors and institutions infected by corruption the most and Tackling the sectors and institutions infected by corruption the most and critically impacting on development (e.g. legislature, judiciary, police, critically impacting on development (e.g. legislature, judiciary, police,

election system, political parties, financial sector)election system, political parties, financial sector)