Global Policy Forum

By Anthony Ogus

Corruption is deeply embedded in the political culture and poverty of many less developed countries (LDCs). Regulatory bodies are particularly vulnerable to corruption as they have the power to make key decisions on profit-making activities. Corrupt regulatory bodies can thus dangerously impede economic development.

How can LDCs tackle corruption? International organisations usually recommend one of three traditional remedies:

• The criminal justice system
The World Bank and the International Monetary Fund have promoted attempts to suppress corruption in LDCs through the criminal justice system - by catching and punishing illegal behaviour. However, as most LDC criminal justice systems lack both the capacity to find the culprits and the judges to condemn them, the process is largely futile.

• Administrative law reform
Attempts at administrative law reform focus on depoliticising the civil service, improving the quality of officials through better training, pay and conditions; making decision-making more transparent and; better account auditing. Whilst such reforms should be welcomed, they depend on both the availability of resources and vitally, the existence of political will to make administrative processes more accountable.

• Rewarding lawful behaviour
It is often presumed that lawful behaviour can be encouraged by increasing the salaries of officials and giving better rewards to ‘whistleblowers' who report corruption. However, this is not necessarily correct. High paid government officials might still be tempted by bribes and the existence of high rewards might itself be a further incentive for criminals to frame innocent officials.

The problem with all these remedies is that they are too ambitious. Corruption is likely to remain a factor in many LDCs until substantial changes in their political cultures and economic structures have been achieved. Instead of trying to eliminate corruption altogether, LDCs should act now to redesign their regulatory structures and procedures so as to reduce the opportunities for corruption to flourish and take over. The following possibilities could be explored in the redesign of LDC regulatory structures:

1. Decision-making by committees rather than individuals
Although this adds to the cost of regulation, it may eventually save money by facilitating mutual monitoring and accountability.

2. Competition between officers/offices
Some competition can be introduced into the regulatory process by providing the same service through alternative individual officers or offices. However this should not mean adding further layers of bureaucratic decision-making: that would simply make the problem worse.

3. Centralisation of decision-making
A "once-for-all" payment to secure the co-operation of a single corrupt centralised decision-maker may be better than having to pay bribes to a number of officials operating under a multi-layered system of decision-making.

4. Abolition of unnecessary licensing requirements
Many forms of business create no significant risks for the community and controlling entry by requiring a licence often creates an unnecessary opportunity for corruption.

5. More rules, less discretion
Discretion creates more opportunities for corruption than where regulatory requirements are laid out through clear, precise and formal rules.

Not all these suggestions marry well with models of regulation common in industrialised countries which often favour decentralised decision-making, less specific rules and more discretion. However, if these policies were transplanted to LDCs, they would enhance, rather than reduce, the opportunities for corruption.

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