On January 13, The Hindu reported that the World Bank has unearthed serious cases of fraud and corruption in five projects in India receiving Bank aid relating to malaria control ($114 million), Orissa health systems development ($82.1 million), food and drug capacity building ($54 million), national HIV/AIDS control ($193.7 million) and tuberculosis control ($124.8 million).

The fraud and corruption came to light during a detailed implementation review by the World Bank last year with the support of the Government of India. Commenting on the finding, Bank President Robert B. Zoellick said the Government of India had promised to take "exemplary" action against those found guilty of these "unacceptable indicators" of fraud and corruption. On the Bank's side, the probe had shown up "systemic flaws" and "weaknesses in project design, supervision and evaluation." On the Indian side, Mr. Zoellick expressed appreciation of the government's "resolute commitment in pursuing criminal wrong-doing."

If we pause to reflect for a moment on the five health projects identified in the international investigation, we can understand, as argued previously by C. Raj Kumar in these pages, why corruption is an assault on human rights, in this case the right to health. Staying with the medical metaphor, it is also a cancer that will kill development unless drastic surgery is performed to rid it from the Indian body politic.

With the signing of the U.N. Convention against Corruption in Merida, Mexico, on December 9, 2003, the issue of the drag of corruption on economic growth and development gained fresh relevance. The Global Compact Leaders Summit in New York on June 24, 2004, chaired by U.N. Secretary General Kofi Annan, incorporated the fight against corruption as the 10th principle of the U.N. Global Compact.

Corruption robs civic life of public virtue. The World Bank estimates that corruption amounts to 5 per cent of the world economy, well over $1.5 trillion. The effects of corruption are most destructive and savage in developing countries. Not coincidentally, the top 20 countries - the 20 least corrupt - in Transparency International's annual survey tend to be dominated by the Western industrialised countries, especially the northern Europeans, Canada and New Zealand. The generally high rankings of Singapore and Hong Kong merely underline the fundamental importance of public probity in escaping the poverty trap.

In many Asian countries, the No. 1 issue fuelling public anger is public sector corruption involving politicians, civil servants and law-enforcement officers. In Transparency International's list of the top 10 corrupt leaders of the last quarter century, eight were from the developing countries of Asia, Africa and Latin America, with the other two being from the transition economies of eastern Europe.

The global affliction is especially acute in India and, within the country, particularly acute in Bihar. In several independent international surveys by disinterested and reputable organisations, China, India and Indonesia are usually among the worst on corruption scores while Singapore and Japan tend to rank among the least corrupt in Asia and indeed in the world. The bottom-ranking countries in the above survey are notorious for influence-peddling politicians, money-seeking bureaucrats and bribe-dispensing entrepreneurs. Time was when businesses seeking deals in Indonesia went to a one-shop corruption counter in the form of the Suharto family. Since then there has been a democratisation of corruption, with lawmakers and provincial powerbrokers all demanding their share yet not being able to guarantee delivery of their end of the deals as during the Suharto era.

Bribery is especially pernicious and institutionalised in defence deals. In an environment of pervasive corruption, arms deals are exceptionally enticing. They often involve large sums of money. Negotiations take place in secrecy. Tricky questions can be fobbed off on grounds of "national security." Arms dealers are skilled at winning favours, at the cost of transparent and competitive bidding. The Tehelka expose in India showed politicians, military officers and civilian bureaucrats accepting substantial sums of money to influence a fictitious arms deal. While this took place during the tenure of the Bharatiya Janata Party-led government in New Delhi, the nation still awaits closure on the corruption scandal in the purchase of the Bofors howitzers from Sweden during the prime ministership of Rajiv Gandhi.

Graft is said to lubricate the wheels of government, to bring the costs of services in line with market prices. Is bribery an efficient mechanism for rationing goods and services in short supply? Not so. Even from the perspective of economic logic, public corruption is bad because it distorts markets and encourages inefficiency. Managers have built-in incentives to distort and disrupt markets because this increases their market power.

The biggest cost is political. It would be difficult to exaggerate the revulsion of ordinary citizens to the ubiquitous and institutionalised venality of public life. Petty corruption is especially endemic at the lower, clerical levels of administration - precisely the point at which the ordinary citizen comes into daily contact with officialdom. People are forced to pay bribes for securing virtually any service connected with the government, even that which is theirs by right and law. People naturally tend to judge the entire structure of government on the basis of their own direct experiences with the agents of government.

In the Philippines, a wave of public anger against corruption swept the then President Joseph Estrada from office eight years ago and replaced him with his deputy, Gloria Macapagal Arroyo. In Japan, successive stories of corruption have gradually undermined trust in the bureaucracy and the ruling Liberal Democratic Party. In China, Indonesia, South Korea and Thailand in recent years, senior officials have been forced to resign or face criminal charges for abusing public office for private gain and Prime Minister Thaksin Shinawatra was overthrown in a military coup not the least because of widely believed allegations of abuse of power for personal political and financial gain. In Pakistan, the equally widely held perceptions of corruption by the civilian governments of Benazir Bhutto and Nawaz Sharif helped to establish the initial acceptability and legitimacy of army chief Pervez Musharraf's military regime. In turn, the failure to stem the rot of public venality and the military itself being infected by it steadily undermined the public legitimacy of the Musharraf rule.

Because corruption reaches to the very top in so many societies, a bottom-up strategy for weeding it is unlikely to work. Instead, a top-down approach is needed. In Malaysia, when Abdullah Badawi became Prime Minister, he gained public support for trying to tackle corruption. In India, Manmohan Singh began his prime ministership with the huge advantage of widespread public perception that he is clean and incorruptible. For all his other faults and failings, quite remarkably in the Indian context, his public perception of probity remains intact.

Threat to democracy

Pervasive corruption not only threatens democracy but also undermines the war on international terrorism. Terrorists, like drug traffickers, gunrunners and people smugglers, can move between countries with the help of poorly paid, ill-disciplined and corrupt border officials who are open to bribery.

Reasonable salaries are a necessary condition and will help, but they are not a sufficient condition for eradicating corruption. They must be backed by better standards of training and discipline that inculcate the ethic of public-sector probity and a commitment to integrity in public life.

Nor can the war on corruption be left just to governments. The role of civil society and the press is vital in lobbying for better laws and law-enforcement, monitoring performance by politicians, civil servants and police officers, highlighting examples of corruption, reshaping attitudes and reversing public apathy toward corruption.

On October 31, 2003, the U.N. General Assembly adopted a historic treaty, the U.N. Convention against Corruption, to fight global corruption. The treaty, completed in Vienna on October 1 after two years of negotiations by experts from about 130 countries, calls on governments to outlaw bribery, embezzlement and other similar practices, to cooperate with one another in investigating and prosecuting offenders, and, most importantly, to return assets obtained through corruption to the countries from which they were stolen. As a result of the last part, corrupt officials will have fewer opportunities to hide their illicit gains.

Corruption is first and foremost a governance issue - a failure of institutions and stewardship of public life, a lack of capacity to manage social, economic and political affairs by the rules of the game and with the help of effective checks and balances. As the U.N. Convention indicates, however, it is a problem of global as well as national governance. The U.N. treaty should mark a milestone in the institutionalisation of the rule of law and good governance. It reaffirms the importance of core values such as honesty, accountability and transparency.

In recent years, the globalisation of vices has outpaced that of virtue. It is time to redress the balance.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.