Global Policy Forum

By Indrani Bagchi

A recent move by the IMF to link external assistance to elimination of corruption is unlikely to find favour in the corridors of government here.

Addressing a conference in Washington, deputy managing director Stanley Fischer and advisor Ratna Sahay made a strong case for developing governments to undertake political reform programmes which would not merely improve governance but take care of the scourge of corruption.

"External assistance can encourage transparency and strengthen institutions by making future assistance conditional on progress in these areas," they said.

India has always preferred to keep a rather low profile on such international exhortations, preferring to let these storms blow over.

Featuring near the bottom of the pile on corruption indexes by Transparency International, most governments would rather shut the whole thing out of the collective consciousness.

On principle though, India has always opposed linkages to development assistance, as it opposes linkages between trade and labour standards.

However, the IMF's declared stand has made Indian policymakers wonder whether corruption would find a place in the agenda of the forthcoming autumn meeting of the Fund/Bank, which would actually necessitate a declared Indian position.

In such a scenario, government sources aver, the full force of Indian diplomatese would come into play — with India opposing any move on grounds of technical definitions, quantification of corrupt practices and criteria for definition, even taking recourse to sovereignty issues.

India will also question the legitimacy and ability of external agencies to pressure domestic institutions to tread the straight and narrow.

It is hardly a pioneering effort by the IMF. It was on August 4, 1997 that IMF started its crusade against corruption with its paper, The Role of the IMF in Governance Issues. They were quickly followed by the World Bank (Helping Countries Combat Corruption) and the OECD (Combating Bribery in International Business Transactions).

So far it has been possible to put restraints on transnational companies, especially of US origin, to adhere to the 1977 US Foreign Corrupt Practices Act which prosecutes companies found bribing in foreign lands.

Last year's OECD convention eliminating a practice of writing off bribery as business expenses was a result of sustained lobbying by successive US governments to follow the same route.

US companies have complained bitterly over the years against the FCPA and a study by the US department of commerce estimated that US business lost about $45 billion in contracts lost due to international corruption.

However, in 1999's Bribe Payer's Index by TI, the US ranked ninth, a glaring instance of the near impossibility in policing noble intentions unilaterally.

The World Bank has tried, beginning by defining corruption as "using public office for private gain." In 1996, while awarding road-building contracts in India, the World Bank made transparent bidding procedures a mandatory pre-requisite for disbursing loans.

The developed world, which has been approached often enough to bail out poor countries especially in Asia, sub-Saharan Africa and Latin America have railed against the rampant corruption that has rendered all such action useless.

However, developing countries have a different story to tell. They say rich countries are increasingly feeling the constraints of tighter money supply which makes the spare cash for poorer nations more difficult to access as well as justify to their own people.

Hence the fallback options of corruption and poor governance is used to kill aid efforts. This, according to sources, even goes against a UN resolution that asks richer countries to commit 1 per cent of their GNP as assistance to poor countries.

Even in poor countries, there is a greater clamour for cleaner public life as forces of democracy and globalisation sweep the developing world. This was endorsed by Stan Fischer.

"Much remains to be done, particularly in restructuring industrial and banking sectors, eliminating problems of non-payment, reforming the tax system, strengthening the social safety net, and reforming agriculture."

The exact scale of bribery and its impact on global economic activity is unknown. The World Bank says that if bribes equalled 5 per cent of inward direct investment and imports into developing countries they would total almost $80 billion annually.

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