THESIS ON THE TOPIC

CORRUPTION: THE CHARACTERS CANCER

FOR THE SUBJECT

BUSINESS ETHICS & CORPORATE GOVERNANCE

SUBMITTED BY: KAUSIK D. ADHIKARI (1001, MMS-II, SEM IV)

SUBMITTED TO: PROF. NADIRSHAW K. DHONDY

MUMBAI INSTITUTE OF MANAGEMENT & RESEARCH, WADALA (E)

Brief Thesis on Corruption It is not easy to define corruption. But in a narrow sense, corruption is mostly concerned with bribery and it takes several forms. Corruption is a global phenomenon and it is omnipresent. Corruption has progressively increased and is now rampant in our society. National scenario Corruption in India is a consequence of the nexus between Bureaucracy, politics and criminals. India is now no longer considered a soft state. It has now become a consideration state where everything can be had for a consideration. Today, the number of ministers with an honest image can be counted on fingers. At one time, bribe was paid for getting wrong things done but now bribe is paid for getting right things done at right time. Effects of corruption Indian administration is tainted with scandals. India is among 55 of the 106 countries where corruption is rampant, according to the Corruption Perception Index 2004 Report released by Transparency International India. Corruption in India leads to promotion not prison. It is very difficult to catch big sharks. Corruption in India has wings not wheels. As nation grows, the corrupt also grow to invent new methods of cheating the government and public. Causes of corruption The causes of corruption are many and complex. Following are some of the causes of corruption. Emergence of political elite who believe in interest-oriented rather than nation-oriented programmes and policies. Artificial scarcity created by the people with malevolent intentions wrecks the fabric of the economy. Corruption is caused as well as increased because of the change in the value system and ethical qualities of men who administer. The old ideals of morality, service and honesty are regarded as an achronistic. Tolerance of people towards corruption, complete lack of intense public outcry against corruption and the absence of strong public forum to oppose corruption allow corruption to reign over people. Vast size of population coupled with widespread illiteracy and the poor economic infrastructure lead to endemic corruption in public life. In a highly inflationary economy, low salaries of government officials compel them to resort to the road of corruption. Graduates from IIMs with no experience draw a far handsome salary than what government secretaries draw. Complex laws and procedures alienate common people to ask for any help from government. Election time is a time when corruption is at its peak level. Big industrialist fund politicians to meet high cost of election and ultimately to seek personal favour. Bribery to politicians buys influence, and bribery by politicians buys votes. In order to get elected, politicians bribe poor illiterate people, who are slogging for two times meal.

Measures to combat corruption Is it possible to contain corruption in our society? Corruption is a cancer, which every Indian must strive to cure. Many new leaders when come into power declare their determination to eradicate corruption but soon they themselves become corrupt and start amassing huge wealth. There are many myths about corruption, which have to be exploded if we really want to combat it. Some of these myths are: Corruption is a way of life and nothing can be done about it. Only people from underdeveloped or developing countries are prone to corruption. We will have to guard against all these crude fallacies while planning measures to fight corruption. Foolproof laws should be made so that there is no room for discretion for politicians and bureaucrats. The role of the politician should be minimized. Application of the evolved policies should be left in the hands of independent commission or authority in each area of public interest. Decision of the commission or authority should be challengeable only in the courts. Cooperation of the people has to be obtained for successfully containing corruption. People should have a right to recall the elected representatives if they see them becoming indifferent to the electorate. Funding of elections is at the core of political corruption. Electoral reforms are crucial in this regard. Several reforms like: State funding of election expenses for candidates; strict enforcement of statutory requirements like holding in-party elections, making political parties get their accounts audited regularly and filing income-tax returns; denying persons with criminal records a chance to contest elections, should be brought in. Responsiveness, accountability and transparency are a must for a clean system. Bureaucracy, the backbone of good governance, should be made more citizen friendly, accountable, ethical and transparent. More and more courts should be opened for speedy & inexpensive justice so that cases dont linger in courts for years and justice is delivered on time. Local bodies, Independent of the government, like Lokpals, Lokadalats, CVCs and Vigilance Commissions should be formed to provide speedy justice with low expenses. A new Fundamental Right viz. Right to Information should be introduced, which will empower the citizens to ask for the information they want. Barring some confidential information, which concerns national and international security, other information should be made available to general public as and when required. Stringent actions against corrupt officials will certainly have a deterrent impact.

INTRODUCTION : CORRUPTION

CORRUPTION IS A TYPE OF STRATEGIC ACTION IN WHICH TWO OR MORE ACTORS UNDERTAKE AN

EXCHANGE RELATION BY WAY OF A SUCCESSFUL TRANSFER OF MONEY (MATERIAL) OR POWER

(POLITICAL OR STATUS) OR PROMOTING OF GENE (GENETIC), WHICH SIDESTEPS LEGALITY OR MORALITY OR CIVILITY TO REGULATE THE RELATION . IT IS A STRATEGIC INTERACTION OR AN ART OF NONVIOLENT NEGOTIATION. AS MENTIONED BEFORE , SOCIAL ACTION IS STRATEGIC WHEN IT IS AIMED AT THE SUCCESSFUL REALIZATION OF PERSONALLY DEFINED GOALS. CORRUPTION THREATENS PEOPLE AND THEIR GOVERNMENTS. IT MAKES SOCIETIES UNFAIR. IT IS ARGUED THAT BRIBERY IS A NEGOTIATED RENT, AS THE BEGINNING OF ALL ILLEGALITIES AND TYRANNY . THERE IS NO MORE POWERFUL ENGINE OF INJUSTICE AND CRUELTY, FOR BRIBERY DESTROYS BOTH FAITH AND STATE. THE SERIOUS CONSEQUENCE OF CORRUPTION THUS IS NOT ONLY STATE CAPTURE BUT ALSO MIND CAPTURE . CORRUPTION IS UNIVERSAL. IT IS PRESENT IN DEVELOPED AND DEVELOPING COUNTRIES, IN THE BUREAUS OF PUBLIC OR PRIVATE SECTORS, AND IN NONPROFIT OR CHARITABLE ORGANIZATIONS. S HIFT FROM GOVERNANCE TO MANAGEMENT ONLY CHANGES ITS RESIDENCE. CORRUPTION IS NOT MERELY IN THE MEDIA OR IN THE MINDS OF PEOPLE AS IT IS SOMETIMES MADE OUT. BUT IT IS IN THE SYSTEM ALL ACROSS THE PUBLIC SERVICES, IS WHAT THIS STUDY HIGHLIGHTS. AND THE USERS AND PROVIDERS OF THOSE PUBLIC SERVICES KNOW WHAT NEEDS TO BE DONE TO ADDRESS THE PROBLEM AS THIS STUDY HAS BROUGHT OUT . CORRUPTION PLAYS A CENTRAL ROLE IN POLITICS THUS STATE OBJECTIVES. RENT SEEKING AND RENT GIVING ARE MAJOR OBSTACLES IN THE PROCESS OF PLANNED CHANGE OF ECONOMIC LAYERS. A PROMISE OF DEMOCRACY REMAINS UNDONE. HOWEVER IT DOES ALLOW SELECTIVE CHANGE IN ECONOMICCYCLE OF AN INDIVIDUAL , AN INDIVIDUAL HOUSEHOLD AND A BUSINESS. CORRUPTION IS
USUALLY A KEPT SECRET AND THEREFORE THE BEHAVIOR OF THE CORRUPT AGENT NEAR IMPOSSIBLE TO OBSERVE IN REAL LIFE.

THE CHARACTER OF RENT-SEEKING HAS ALL THE

QUALITIES ONE CAN ASK FOR SUCH AS CHARM AND ACTING TALENT TO CREATE A MIRROR IMAGE OF THE TRUTH I. E., OF AN ACTOR; BOOK KEEPING I. E ., OF AN ACCOUNTANT; TO UNDERSTAND AND MANIPULATE RULES AND REGULATIONS AND ABILITY TO PROTECT, I. E. OF A CUSTODIAN .

CAMPAIGNS AGAINST CORRUPTION HAVE NOT MET WITH MUCH SUCCESS. IT IS A WORRISOME DEVELOPMENT. WHEN THE MAJORITY OF PEOPLE OPERATE UNDER SUCH A SYSTEM,
INDIVIDUALS HAVE NO INCENTIVE TO TRY TO CHANGE IT OR TO REFRAIN FROM TAKING PART IN IT .

Overview Taking a worldwide perspective, countries like New Zealand and the Scandinavian countries are "models of integrity" for the world in terms of their corruption control. And almost all of the most corrupt countries are developing nations and many of them are in Asia. Among the Top 20 most corrupt states in the world, a half of them are in Asia; Myanmar (Burma), Afghanistan, Kyrgyzstan, Turkmenistan, Tajikistan, Indonesia, Bangladesh, Cambodia, Laos and Pakistan are all on the list, according to the Worldwide Governance Indicators. And India and China are the two "most corrupt trade nations" among the world's Top 30 exporting countries. Corruption is a way of life across Asia. While talking about high-level corruption in Asia's three largest countries -India, China and Indonesia -- there is a saying, "In India, corruption is under the table; in China, it is over the table; and in Indonesia, corruption includes the table." Whichever way one may wish to read the proverb, "what remains undeniable," says Chan Akya of Asia Times, "is that corruption is more firmly rooted in Asian culture than is commonly acknowledged." Take a look at today's China. As John Lee of the Center for Independent Studies in Sydney, writes, "While the Chinese state is rich and the Chinese Communist Party powerful, civil society is weak and the vast majority of people remain poor. According to studies by the Chinese Academy of Social Sciences, stealing from the public purse by officials amounts to about 2 percent of GDP each year, and it is rising." Another China corruption watcher, Hong Kong-based Political and Economic Risk Consultancy (PERC), painted an even gloomier picture, "Graft is endemic in China: according to the most conservative estimates, the magnitude of corruption ranges from 3 percent to 5 percent of annual GDP." A 5 percent of China GDP amounts to approximately $1.5 trillion Yuan ($225 billion in U.S. dollars) or one half of China's GDP annual growth . In today's China, it is no secret that those who have power enjoy countless "fringe benefits." A $500 per plate dinner is done in the name of official business, a $5,000 overseas trip is made in the name of research or study and a $50,000 government car is purchased for private use only. If China's authoritarian one-party state has pushed corruption ahead, India's democratic multi-party system might be worse. As Chan Akya puts it, "Indians do not have a choice when it comes to corruption as most of their political parties (with the notable exception of the communists) offer simply varying levels of corruption. The choice is therefore to vote for the communists and risk economic stagnation, or vote for another party and hope that the benefits of growth exceed the cost of corruption." So there is some good news for the corrupted Chinese officials or something they could be proud of: On the PERC's Corruption Index, China is not the most corrupt country in the region. China scored 8.33 on a scale of 10 (10 represents the worst possible score), Indonesia topped the list with a score of 9.33, with India's 9.3 following close behind. Even two of America's most important allies in East Asia, South Korea and Taiwan, are not exempt from corruption. Former South Korean president Roh Moo hyun committed suicide in late May when he was caught up in corruption investigations. Then in September, in what the media called a "trial of the century," Taiwan's former president Chen Shui-bian was sentenced to life in prison for corruption. Why are Asian politicians and bureaucrats so corrupt? Some analysts believe that in

Asian culture, corruption helps "grease the wheels" of an otherwise inefficient bureaucracy and economy. Others argue that Asia's "corruption culture" is based on traditional Asian emphasis on "rule of man," not "rule of law," and law is seen as malleable, not absolute. Whether a cultural flaw or a symptom of a sick state, however, the severity of corruption in Asian states and the failure to contain such endemic corruption among political leaders and government officials poses one of the most serious threats to Asia's future economic development and political stability.

Corruption in India Corruption in India is a consequence of the nexus between Bureaucracy, politics and criminals. India is now no longer considered a soft state. It has now become a consideration state where everything can be had for a consideration. Today, the number of ministers with an honest image can be counted on fingers. At one time, bribe was paid for getting wrong things done but now bribe is paid for getting right things done at right time. IN INDIA,
CORRUPTION ATTACKS THE FUNDAMENTAL VALUES OF HUMAN DIGNITY AND POLITICAL EQUALITY OF THE PEOPLE AND HENCE THERE IS A PRESSING NEED TO FORMULATE A FUNDAMENTAL HUMAN RIGHT TO CORRUPTION- FREE SERVICE.

THE DEVELOPMENT OF A

FUNDAMENTAL HUMAN RIGHT TO A CORRUPTION- FREE SOCIETY WILL BE OBSERVED INITIALLY FROM AN INTERNATIONAL PERSPECTIVE SO AS TO ELEVATE THE VIOLATION OF

THIS WOULD PROVIDE THE COMPARATIVE BASIS TO ELEVATE THE RIGHT TO CORRUPTION- FREE SERVICE TO THE STATUS OF A FUNDAMENTAL RIGHT WITHIN THE FRAMEWORK OF THE INDIAN CONSTITUTION . ONE OF THE DEFINITIONS OF THE TERM CORRUPTION IS "GIVING SOMETHING TO SOMEONE WITH POWER SO THAT HE WILL ABUSE HIS POWER AND ACT FAVOURING THE GIVER ". ANOTHER DEFINITION IS "THE OFFERING, GIVING, SOLICITING OR ACCEPTANCE OF AN INDUCEMENT OR REWARD, WHICH MAY INFLUENCE THE ACTION OF ANY PERSON ". IT INCLUDES BRIBERY AND EXTORTION WHICH INVOLVE AT LEAST TWO PARTIES, AND OTHER TYPES OF MALFEASANCE THAT A PUBLIC OFFICIAL CAN COMMIT ALONE, INCLUDING FRAUD AND EMBEZZLEMENT. T HE APPROPRIATION OF PUBLIC ASSETS FOR PRIVATE USE AND THE
EMBEZZLEMENT OF PUBLIC FUNDS BY POLITICIANS AND BUREAUCRATS HAVE SUCH CLEAR AND DIRECT ADVERSE IMPACT ON INDIA' S ECONOMIC DEVELOPMENT THAT THEIR COSTS DO

THIS RIGHT TO THE STATUS OF AN INTERNATIONAL CRIME.

There are many myths about corruption, which have to be exploded if we really want to combat it. Some of these myths are: Corruption is a way of life and nothing can be done about it. Only people from underdeveloped or developing countries are prone to corruption. We will have to guard against all these crude fallacies while planning measures to fight corruption.
NOT WARRANT ANY COMPLEX ECONOMIC ANALYSIS.

AS WITH MANY DEVELOPING NATIONS, CORRUPTION IS WIDESPREAD IN INDIA. INDIA IS RANKED 85 OUT OF A 179 COUNTRIES IN T RANSPARENCY INTERNATIONAL' S CORRUPTION P ERCEPTIONS INDEX , ALTHOUGH ITS SCORE HAS IMPROVED CONSISTENTLY FROM 2.7 IN 2002 TO 3.4 IN 2008.CORRUPTION HAS TAKEN THE ROLE OF A PERVASIVE ASPECT OF INDIAN POLITICS AND BUREAUCRACY. T HE SIZE OF INDIAS PARALLEL ECONOMY AT 40% OF GDP DOES PROVIDE FERTILE GROUND FOR CORRUPTION. L ACK OF DETERRENCE AGAINST CORRUPTION AND IMPORTANCE
TO WEALTH BEGOTTEN BY WHATEVER MEANS ENORMOUSLY PROMOTED CORRUPTION IN

INDIA. MORE IMPORTANT, CORRUPTION IN INDIA FLOWS FROM ABOVE FROM THE POLITICAL CLASS UNDER COVERS LIKE PARTY AND ELECTION FUNDS, AND SENIOR BUREAUCRATS WHO ARE SELD INVESTIGATED OR PUNISHED, EITHER THROUGH CONSPIRATORIAL SILENCE OR THROUGH CONSPIRATORIAL LEGISLATIVE MANIPULATIONS. F URTHER, POLITICAL
PATRONAGE GAVE AN AURA OF INVINCIBILITY AND RESPECTABILITY TO CORRUPTION AND

THE CENTRAL BUREAU OF INVESTIGATION IN THE CENTRE AND CRIMINAL INVESTIGATION DEPARTMENTS IN THE STATES AND UNION T ERRITORIES HAVE BECOME POLITICAL TOOLS IN THE HANDS OF THE RULING PARTY AND GROSSLY POLITICISED THE CRIMINAL INVESTIGATION PROCESS IN THE COUNTRY. WHAT IS WORSE, THE CONVICTION RATE IS HARDLY 6% IN CRIMINAL CASES. CORRUPTION FLOURISHES IN INDIA BECAUSE IT IS PERCEIVED TO BE A LOW RISK AND HIGH PROFIT BUSINESS. L ACK OF TRANSPARENCY IN ADMINISTRATION PROVIDES AN OPPORTUNITY FOR PUBLIC SERVANTS TO MISLEAD CITIZENS AND EXTRACT BRIBES. IT IS ONLY THE S UPREME COURT IN INDIA SEEMS WAGING A WAR AGAINST CORRUPTION . T HE GOVERNMENT OF INDIA CONVERTED THE CENTRAL VIGILANCE COMMISSION INTO A STATUTORY BODY THROUGH AN EXECUTIVE ORDER IN 1998 ON THE DIRECTIVE OF THE S UPREME COURT. IT RENDERED THE CVC AT LEAST STATUTORILY INDEPENDENT OF THE POLITICAL AND BUREAUCRATIC SET -UPS. Indian administration is tainted with scandals. India is among 55 of the 106 countries where corruption is rampant, according to the Corruption Perception Index 2004 Report released by Transparency International India. Corruption in India leads to promotion not prison. It is very difficult to catch big sharks. Corruption in India has wings not wheels. As nation grows, the corrupt also grow to invent new methods of cheating the government and public. T HE SIGNIFICANCE OF CORRUPTION AS A FACTOR THAT ADVERSELY AFFECTS THE GROWTH OF A COUNTRY IS BEING INCREASINGLY RECOGNIZED . CORRUPTION, IN THE WORDS OF INDIRA GANDHI, IS A WORLD PHENOMENON. IT EXISTS IN DEVELOPED COUNTRIES TOO. CORRUPTION IS INSTITUTIONALISED AS A PART OF THE DEMOCRATIC PROCESS IN THE USA
AS LOBBYING AND PUBLIC RELATIONS ACTIVITIES AND THE COUNTRY PRIDES IN ITS MUSHROOMING LOBBYING AND PUBLIC RELATIONS FIRMS WITH MAJOR FOREIGN GOVERNMENTS INTER ALIOS AS ITS CLIENTS. T HE FIRMS ARE NOTHING BUT MAMMOTH BUSINESS HOUSES INDULGING IN LEGAL CORRUPTION. T HIS NOHOW JUSTIFIES CORRUPTION OTHERWHERE. INDIAN CORRUPTION HAS SPECIAL CHARACTERISTICS THAT MAKE IT FAR MORE DAMAGING THAN CORRUPTION IN OTHER PARTS OF THE WORLD. FIRST, PEOPLE IN INDIA BEING POOR AND LARGELY DEPENDENT ON THE GOVERNMENT FOR DECENT LIVING

DEPRIVED IT OF ALL MORAL AND LEGAL FEARS.

AND EVEN SURVIVAL, AND LIMITED BY ITS EXCESSIVE LAWS, RULES, REGULATIONS AND LARGESS IN ALMOST ALL ACTIVITIES OF LIFE WITH HIGH RATES OF TAXATION ON EVERY CONCEIVABLE ITEMS AND SERVICES, CORRUPTION LITERALLY SUCKS LIFE OUT OF THEIR EXISTENCE UNLIKE THOSE IN DEVELOPED COUNTRIES WHOSE DEPENDENCE ON THE

GOVERNMENT IS RELATIVELY NOT SO DEEP AND PROLATE. THIS RENDERS CORRUPTION IN INDIA AN EXTREMELY DANGEROUS PHENOMENON WITH TERMINAL CONSEQUENCES ON THE CULTURE, VALUE SYSTEM AND THE QUALITY AND THE CONTENT OF THE LIFE OF THE PEOPLE. SECOND , CORRUPTION IN INDIA FLOWS DOWN FROM ABOVE. CORRUPTION AT THE
TOP AFFECTS KEY DECISIONS AND POLICIES WITH SWEEPING IMPLICATIONS WHILE CORE DECISIONS IN DEVELOPED COUNTRIES ARE TAKEN ON MERIT THROUGH TRANSPARENT COMPETITION .

T HE CHIEF ECONOMIC CONSEQUENCES OF CORRUPTION ARE THE LOSS TO THE EXCHEQUER,

AN UNHEALTHY CLIMATE FOR INVESTMENT AND AN INCREASE IN THE COST OF GOVERNMENT-SUBSIDISED SERVICES. INDIA STILL RANKS IN THE BOTTOM QUARTILE OF DEVELOPING NATIONS IN TERMS OF THE EASE OF DOING BUSINESS, AND COMPARED TO

CHINA AND OTHER LOWER DEVELOPED ASIAN NATIONS, THE AVERAGE TIME TAKEN TO
SECURE THE CLEARANCES FOR A STARTUP OR TO INVOKE BANKRUPTCY IS MUCH GREATER .

RANKING OF STATES As per the composite ranking of states on petty corruption, involving common citizen And in the context of eleven public services, Kerala stands out as the least corrupt State In India. Bihar, on the other hand is the most corrupt State. In fact, on all parameters and in the context of all the eleven services, Bihar stands out as the most corrupt State. Himachal Pradesh is less corrupt even compared to States like Tamil Nadu, Maharashtra or Gujarat. Madhya Pradesh, Karnataka, Rajasthan and Assam are Afflicted with the problem and score high on the index. States highlights Kerala: All 11 public services considered for the study are ranked as the least corrupt in the country. Himachal Pradesh: Most services in the State are ranked as relatively lower corrupt in the country. Gujarat: Overall the State is ranked as less corrupt in comparison to other States. However certain services like Education, Land Administration and Judiciary are relatively ranked as more corrupt in comparison to others services in the State. Andhra Pradesh: Govt Hospital and Water Supply services are ranked more corrupt in comparison to other services in the State

. Maharashtra: Municipal services in the State rank among the top five corrupt in the country. Chhattisgarh: On the corruption index all the services in the State are much better ranked than the parent State Madhya Pradesh Punjab: PDS, Police, Judiciary and Municipal services are ranked more corrupt in comparison to other services in the State. West Bengal: Water Supply service in the State is ranked as the most corrupt in the country.

Orissa: Judiciary ranks among the top four corrupt in the country Uttar Pradesh: Electricity, Schools and Income Tax figure high in the corruption rankings. Delhi: PDS in Delhi is ranked as the second most corrupt in the country Tamil Nadu: While over all the State ranks 12th on the Corruption Index, Schools, Hospital, Income Tax and Municipalities rank among the top corrupt in the country. This is surprising given that the State has one of the best health infrastructure and also ranks quite high on the Education Development Index. Haryana: Schools, Land Administration and Police figure among the top corrupt in the country. Jharkhand: On the corruption index all the services in the State are much better ranked than the parent State Bihar. Assam: Police is the most corrupt in the country. Electricity figures among the top corrupt. Rajasthan: Judiciary ranks among the less corrupt in the country Karnataka: The state ranks fourth on the corruption index because key services like Income Tax, Judiciary, Municipalities & RFI figure among the top corrupt services in the country. However, Electricity & Schools rank among the least corrupt in the country. Madhya Pradesh: Despite initiating reforms in service delivery, the State still ranks as third most corrupt among States included in the survey. Only Municipal services are ranked relatively better than other services.

J&K: Except Hospital & RFI, most other services rank among most corrupt in the country. Not surprising that it is the second most corrupt State. Bihar: All the services are ranked among the most corrupt in the country.

Corruption and its impact on governance in India Corruption affects India at all levels of governmental decision-making and in the distribution of state largesse. India is ranked 72nd out of 91 countries in the Corruption Perception Index, 2001, prepared by Transparency International (TI). Corruption in India not only poses a significant danger to the quality of governance, but also threatens in an accelerated manner the very foundations of its democracy and statehood. The recent revelations of corrupt practices in defence purchases and related contracts not only tend to undermine the security of the Indian state, but also fundamentally shake the people's trust and belief in the Government of India and its institutions. The mid-1960s are perceived to be the great divide in the history of governance administration in India. It paved the way for the blurring of the Gandhian and Nehruvian era of principled politics and the emergence of a new system of politics that began to tolerate and even encourage dishonesty and corruption. The scams and scandals of the 1990s revealed that among the persons accused of corruption were former Prime Ministers, Chief Ministers, Governors and even members of the judiciary. India's experience with corruption has shown that laws, rules, regulations, procedures and methods of transaction of government business, however sound and excellent they are, cannot by themselves ensure effective and transparent administration if the political and administrative leadership that is entrusted with their enforcement fails to do so and abuses its powers for personal gain (Sunil Sondhi, 2000). Gunnar Myrdal has described Indian society as a "soft society". According to him, a soft society is one that does not have the political will to enact laws that are necessary for its progress and development and/or does not possess the political will to implement the laws, even when made, and one where there is no discipline. He has stressed that if there is no discipline in society, no real or meaningful development or progress is possible. Corruption and indiscipline survive on each other's willingness to accommodate, tolerate and provide encouragement. Corruption affects governance in a significant manner and it is anti-poor. For instance, a substantial portion of foodgrains, sugar and kerosene meant for the public distribution system (PDS) and for welfare schemes for the poor, including the Scheduled Castes (S.C.s) and the Scheduled Tribes (S.T.s), goes into the black market. Hardly 16 per cent of the funds meant for the S.T.s and the S.C.s reach them (Consultation Paper on Probity in Governance, National Commission to Review the Working of the Constitution, 2001). The rest are misappropriated by members of the political and official classes and unscrupulous dealers and businessmen.

Like other social evils, the problem of corruption brings out numerous responses. As a lawyer, my response would inevitably involve changes in the laws and in this case an amendment to the Constitution. While I propose this amendment, I am mindful of the inherent weaknesses of any law or legal response if the enforcement mechanism is weak that would only amount to paying lip service to the law. This may be the case with several other laws, mostly criminal laws that are already in place to punish the corrupt, or for that matter the case of anti-terrorism laws, which are available in plenty even as the present government enacted the Prevention of Terrorism Act. Corruption has flourished in India because of the drawbacks of the criminal justice system. We see more and more examples of acquittals in corruption cases. Several corruption-related cases filed in India in the recent past were poorly founded upon, were backed by incomplete and inefficient investigation, and were followed by delayed trials that resulted in morally ill-deserved but legally inevitable acquittals.

Corruption in Pakistan Two crises played a major role in the genesis of corruption in Pakistan; the second world war and the mass migration as result of partition. World war II led to an alarming increase in the procurement related corruption leading to the creation of the first specialised anti corruption agency in the Sub-continent, the Special Police Establishment. The migration resulted in vacuum in a number of areas creating weaknesses having lasting effects that triggered the initial phase of corruption. In 1947, Pakistan inherited a weak economy, inexperienced politicians and a professional civil Service. Civil servants filled the vacuum created due to the lack of experienced politicians and took over governance of the country, running ministries even assuming the posts of Prime Minister, Governor General and President. The British tradition of pervasive, intrusive, extractive and elitist government was maintained. On independence, the evacuee property distribution created several opportunities for corruption and in the following two decades corruption was facilitated by the over-regulated Industrialization policies. The level of temptation was enhanced by the increased inflow of foreign aid for huge infrastructure projects under military rule from 1958. Dictatorial rule coupled with the Press and Publications Ordinance further diminished the lack of public accountability. This was made worse by the fact that eminent politicians were weeded out through the Elected Bodies (Disqualification) Ordinance 1959. Nationalisation in the seventies combined with civil services reforms and a purge of over thirteen hundred civil servants proved a critical trigger point. The weakened and insecure civil servants were asked to take on greater responsibility for running the nationalised units. It was difficult for them to resist demands of political inductions into these corporations as the state took over the role of the primary employer. Devaluation and the oil crises eroded purchasing power. All these factors combined to increase incentives for, and opportunities of, corruption. The remittances from the Gulf and resultant consumption spree had a strong demonstration effect and the desire to become rich

overnight spread across the society. However, the worst indulgence was seen in the period 1985-99 when the political elite broke all shackles of law and morality to indulge in rapacious loot and asset building. Five governments were dismissed on charges of corruption during this era with no change in attitudes. Awareness of the issue of corruption has existed, as evident from anti-corruption drives undertaken from time to time. Legal initiatives started with the Prevention of Corruption Act 1947. Laws like Public Representatives (Disqualification) Act 1949 and the Elected Bodies (Disqualification) Ordinance 1959 were introduced to disqualify corrupt public representatives from holding public office. However, they were perceived as exercises in political victimisation. Anti Corruption agencies created after the independence include the FIA that replaced the Pakistan Special Police Establishment (PSPE) in 1975. The provincial ACEs (initially the West Pakistan Anti Corruption Establishment formed in 1961) were established after the break up of one unit in 1970. Hampered by complicated procedures and political interference, these organisations have proved totally ineffective. In fact, they are themselves infested with corruption and lack capacity for the task assigned to them. Despite the presence of these organisations, corruption was on the rise. The ACAs themselves were not unaffected and became victims of the malaise they were meant to control. In time, they were used for strong arming opponents of the government. So widespread became corruption in ACAs that various governments had to resort to new institutions such as Inspection Commissions. The Ehtesab Bureau was established in 1997, supplementing the Ehtesab Commission created in 1996. The Bureau assumed responsibilities for investigation while the Commission was given the task of prosecution. However, despite being backed by a strong law, the organisation failed because of its misuse for political victimisation. The Ehtesab Act of 1997 thus lost public credibility because its focus was seen as exclusively on leading political opponents. The Ehtesab Bureau wasted the opportunity to construct a sustainable and fair mechanism for rooting out high level corruption. The National Accountability Bureau (NAB) of the new government replaced the Ehtesab Bureau in November 1999. The Ehtesab Act was also replaced by the NAB Ordinance. Impact of corruption The particular deadliness of the disease of corruption lies in its self-perpetuation any corrupt act sets in motion a vicious cycle in which the impact of corruption becomes the source for further acts of corruption. Direct loss to the public exchequer, in financial terms, is difficult to measure, but is significant. According to one reliable source, estimated revenue lost by corruption is 64%, 48%, and 45% in income tax, customs and sales tax respectively. If this perception is taken as true, the amount of revenue loss can go over Rs. 200 billion per annum. Other indicative statistics are equally alarming. World Bank estimate of revenue lost in Pakistan because of smuggling in 1992-93 was US$ 5.08 billion. Ahmad and Ahmad (1995) estimated revenue loss in Pakistan because of black economy at Rs.40-45 billion in 1989-90 and Rs. 104 billion in 1995-96.

The biggest casualty of corruption has been the development process. In particular, the impact of aid received during the last 50 years has been minimal, as grand corruption distorts key developmental decision-making with choices influenced by private benefits and not by public needs. Pakistans human development indicators such as literacy rates and infant mortality, have shown little improvement in the past decade and are amongst the worst in the region. Furthermore, the waste of the development aid has saddled the country with high debt which, at approximately 40% of budgetary expenditure, squeezes out, amongst other things, adequate remuneration for the public sector. The private sector and commercial enterprise has been stifled by corruption. Unnecessary, obstructive and, above all, coercive bureaucracy impedes healthy businesses. Business depends crucially on operating in a climate where contracts can be made and enforced, and where risks can be predicted with confidence. The excessively intrusive public sector further reduces incentives for investment. The legal system affords little or no protection to small and medium sized businesses with a crippling effect on private sector development. This reduces revenue for public purposes, encourages massive wastes and increases costs to consumers. Corruption in the police and judiciary has contributed to the breakdown of law and order. Laws are seen as oppressive and justified solely in the interests of those who abuse them for their selfish interests. In the absence of inexpensive and effective legal remedies, resort to extra-judicial methods has been on the rise. Mafias like land grabbers, Qabza Group, timber smugglers and narcotics dealers work through syndicates, co-opting public officials. Where the police are themselves corrupt, the law breaker is rewarded and those who obey the law are marginalised. The blatant disregard for law and the ostentatious asset accumulation and display by the top public office holders has led to a decline in the moral standards and values of the society. The corrupt are no longer ostracized and they enjoy respect in society on the basis of wealth accumulated through illegal means, while the country remains under developed and poverty stricken. There has been a loss of legitimacy of state institutions in the eyes of the populace. The concept of performance and meritocracy is subverted: 70% of the respondents who had tried for admission at educational institutions had not achieved this through fair practice. When this statistic is extrapolated it is clear that Pakistan is cheating itself of future potential. Impact of governments anti-corruption drive Only on the question of whether corruption had increased did Pakistan score better than its neighbours, which, if starting from a high baseline, is of little comfort. This is supported by stakeholders, who believe that mega corruption appears to have declined significantly since 1999, for three main reasons. First, the President, Governors and Ministers are generally perceived to be men and women of integrity who set a good example. Secondly, military rule has instilled a sense of discipline. Thirdly, the fear of NAB has served as a deterrent to many.

However, it was also noted that although corruption had declined in the first year of military rule, the deterrent effect of NAB in particular, seems to have diminished subsequently, as it is realised that NAB could not possibly catch all the corrupt. Furthermore, the fear is that mega corruption will rear its ugly head once again after the installation of the political government. Moreover, there appears to be a consensus that the extent of petty/middling corruption has been dented very little by the strong leadership and the current accountability drive largely because most low ranking officials commit corruption out of need, and operate without fear of ACAs since FIA and Anti Corruption Establishments (ACEs) have been ineffective and NABs primary focus has been on mega corruption. Essentially, current measures are seen to be incomplete because they rely on enforcement, rather than targeting either the underlying causes or the systemic weaknesses on which corruption thrives. There is a general concern that government reforms have been driven purely by military rule and, therefore, will not have become sufficiently institutionalised to withstand the restoration of democratic processes and institutions.

Corruption in Afghanistan Corruption, defined as the abuse of public position for private gain is a significant and growing problem across Afghanistan that undermines security, development, and state and democracy-building objectives. Pervasive, entrenched, and systemic corruption is now at an unprecedented scope in the countrys history. Thirty years of conflict that has weakened underdeveloped state institutions and the countrys social fabric, Afghanistans dominant role in worldwide opium and heroin production, and the tremendous size and diversity of international security, humanitarian and development assistance all increase Afghanistans vulnerability to corruption.

The Dimensions, Causes and Impact of Corruption in Afghanistan The domestic and international consensus is that corruption has become pervasive, entrenched, systemic and by all accounts now unprecedented in scale and reach. This view is apparent in the countrys declining (worsening) ranking in the Transparency International Corruption Perception Index. Afghanistan fell from a ranking of 117th out of 159 countries covered in 2005, to172nd of 180 countries in 2007, and finally to 176th out of 180 countries in 2008 - the fifth most corrupt country in the world. Seven years after the fall of the Taliban government, corruption has become more than the standard issue bribery, nepotism, and extortion in government. Corruption has become a system, through networks of corrupt practices and people that reach across the whole of government to subvert governance. Particularly perniciously, these networks ensure that the guilty are not brought to justice; often the officials and agencies that are supposed to be part of the solution to corruption are instead a critical part of the corruption syndrome. Over and over, interview and survey respondents noted the failure of the Afghan National Police

(ANP), Attorney Generals Office (AGO), and court system to detect, prosecute, judge, and punish corruption at any level. The pervasive nature of corruption and its impact on Afghan households are apparent from surveys. The Integrity Watch Afghanistan (IWA) 2006 survey of 13 provinces reported that two-thirds of families had paid bribes within the last six months. Although only 44 percent of respondents felt corruption had some to extremely high impacts on their families, the average cost of bribes reached up to $100 for all families that paid them, which more than half of respondents noted was a serious burden on their families.1 One third of families paid more than that in bribes, which is even more detrimental. IWA, Asia Foundation, and ABC/BBC/IRD survey research shows that the sectors of government people come into contact most often with for work or travel determines the organizations that they believe is most prone to soliciting or accepting bribes. Afghans also overwhelmingly believe that nepotism and/or bribes are required to gain government employment. Corruption in China Corruption in China is concentrated in the sectors with extensive state involvement: infrastructural projects, sale of land user rights, real estate, government procurement, financial services, and heavily regulated industries. The absence of a competitive political process and a free press in China makes these high risks sectors even more susceptible to fraud, theft, kickbacks, and bribery. A 2006 study of 3,067 corruption cases found that about half of the officials or individuals engaged in corruption related to infrastructural projects and land transactions. The pervasiveness of such corruption can be seen in the downfall of many local officials in charge of transportation and urban planning. Half of provincial transportation chiefs in China have been sentenced to jail terms (some have even been executed) for corruption. Corruption is also widespread in the acquisition and transfer of land. Typically, local officials use illegal (and sometimes violent) means to acquire farmland at low prices and later sell the user rights of the land to developers in exchange for bribes. A survey of sixteen cities conducted by the Ministry of Land Resources in 2005 found that half of the land used for development was acquired illegally. According to the head of the Regulatory Enforcement Bureau at the Ministry of Land Resources, the government uncovered more than one million cases of illegal acquisition of land between 1999 and 2005. Chinas financial sector is similarly beset by corruption. Kickbacks for loan approval, massive theft by insiders, misuse of funds, and large-scale fraud are routine in Chinese banks, brokerage houses, insurance companies, and rural credit cooperatives. In 2004, Chinas banking regulators uncovered 584 billion yuan in misused funds; in 2005, they found 767 billion yuan in misused funds. A large number of top executives in Chinas largest banks have been jailed for corruption. In a 2003 survey of 3,561 employees in banks, state-owned enterprises, private firms, brokerage houses, and rural households, 82 percent of respondents said that corruption was pervasive or quite pervasive in financial institutions. On average, borrowers paid bribes equal to 9 percent of the loan amount. Corruption of local state institutions, primarily through the practice of maiguan maiguan (buying and selling

appointments in the government), is another cause for concern. Unheard of in the 1980s, maiguan maiguan has become common, particularly in less developed regions, since the mid1990s. Although the Chinese government does not provide aggregate data, frequent press reports indicate that this practice has tainted many jurisdictions. In one extreme case, 265 senior local officials in Heilongjiangthey included a governor, five deputy governorlevel officials, and the party bosses in half of the prefects in the provincewere involved in selling and purchasing government appointments. The chief perpetrator in this scandal, a prefect party boss, netted 24 million yuan during 19972002. Like maiguan maiguan, collusion among local ruling elites (corruption cases involving groups of officials who cooperate and protect each other) is another sign of political decay and is also a post-1990 phenomenon. Sample surveys suggest that 2065 percent of all corruption cases could be classified as collusive. In the worst instance, collusion has transformed entire jurisdictions into local mafia states. Fuyang, a city with a population of 9 million located in Anhui Province, has the dubious distinction of producing a succession of corrupt party chiefs and mayors; some of them have even been executed. Hundreds of local officials have been punished for corruption. Most of the chiefs of the citys main bureaucracies, including successive police chiefs, have been removed for corruption. Collusive corruption appears to be most common in the financial sector. One study found that about 60 percent of all financial corruption and crime cases involved multiple collusive perpetrators. Causes of Corruption Endemic corruption in China originates in the countrys partially reformed economy, lax enforcement efforts by the government, and the CCPs reluctance to adopt substantive political reforms. PARTIALLY REFORMED ECONOMY International experience shows that corruption is closely related to the states involvement in the economy; countries where the state controls significant economic resources and intervenes extensively in the economy tend to have more corruption. In China, the state remains deeply and extensively entrenched in the economy despite three decades of economic reform. Today, the state sector accounts for more than 35 percent of GDP; controls the nations largest corporations; monopolizes key industries such as banking, power generation, and natural resources; owns trillions of dollars in fixed assets; and makes hundreds of billions of dollars in new investments each year. In addition, the state also controls key prices (most importantly the interest rate and land prices) and tightly regulates certain economic activities (real estate development and infrastructure). Such a hybrid economy creates a fertile ground for corruption because officials wielding the power of approval can easily abuse it for illicit personal benefits.

LAX ENFORCEMENT Casual observers are often impressed by the apparently harsh penalties (lengthy jail terms and death sentences) imposed on corrupt officials in China. (The most recent example was the execution of Chinas chief drug regulator who took $1 million in bribes for approving more than a thousand drugs, many of them of dubious effectiveness and six of them outright fakes.) Yet appearances are deceiving. Despite severe punishment against officials in high profile cases, official enforcement data indicate that Beijing punishes only a very small proportion of party members and government officials tainted by corruption. For example, nearly 80 percent of the 130,000190,000 CCP members disciplined and punished by the CCP annually since 1982 got at most a warning. Only 20 percent were expelled from the party. Less than 6 percent were criminally prosecuted. In recent years, half of those convicted of corruption received suspended sentences and did not serve any jail time. Therefore, the odds of an average corrupt official going to jail are at most 3 out of 100, making corruption a highreturn, low-risk activity.

FAILURE TO ADOPT POLITICAL REFORM In combating corruption, Beijing has favoured a top-down approach. It has routinely issued tough-sounding directives and regulations designed to curb corruption at the local level. The government has more than 1,200 laws, rules, and directives against corruption on the books, but their implementation appears ineffective and spotty. In recent years, in response to growing public outrage, Beijing has introduced new top-down measures such as rotating provincial anticorruption chiefs, appointing central government officials to head provincial antigraft commissions, making anticorruption chiefs in ministries, agencies, and key stateowned enterprises report directly to the CDIC, and dispatching inspection teams to the provinces to check up on provincial party bosses. These centralizing initiatives, though welcome, have only limited effects. At the same time, out of fear that a more comprehensive approach would threaten the supremacy of the CCP, the Chinese government has consistently resisted steps to further reduce the role of the state in the economy, increase judicial independence, and mobilize the power of the media and civil society even though international experience shows that only such full-fledged efforts can root out systemic corruption.

Key Findings: Though the Chinese government has more than 1,200 laws, rules, and directives against corruption, implementation is spotty and ineffective. The odds of a corrupt official going to jail are less than three percent, making corruption a high-return, low-risk activity. Even lowlevel officials have the opportunity to amass an illicit fortune of tens of millions of yuan. The amount of money stolen through corruption scandals has risen exponentially since the 1980s. Corruption in China is concentrated in sectors with extensive state involvement, such

as infrastructure projects, real estate, government procurement, and financial services. The absence of competitive political process and free press make these high-risk sectors susceptible to fraud, theft, kickbacks, and bribery. The direct costs of corruption could be as much as $86 billion each year. The indirect costs of corruption (efficiency losses; waste; and damage to the environment, public health, education, credibility and morale) are incalculable. Corruption both undermines social stability (sparking tens of thousands of protests each year), and contributes to Chinas environmental degradation, deterioration of social services, and the rising cost of health care, housing, and education. Chinas corruption also harms Western economic interests, particularly foreign investors who risk environmental, human rights, and financial liabilities, and must compete against rivals who engage in illegal practices to win business in China. The U.S. government should devote resources to tracking reported cases of corruption in China, increase legal cooperation with China (to prevent illegal immigration by corrupt officials and money laundering), and insist on reforms to Chinas law-enforcement practices and legal procedures before tracking Chinese fugitives in the United States and recovering assets they have looted.

Corruption in Philippines

Several anti-corruption bills have been filed in the Philippine Congress. An amendment to section 11 of Act 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, to increase the prescription period for its violation from fifteen to thirty years. An amendment to section 13 of Act 3019, on its non-application to impeachable public officers: officers, including those who can be removed only by impeachment, members of congress and members of the Supreme Court and appeals court, are now exempt from the Anti-Graft and Corrupt Practices Act. An amendment to section 6 of Act 1379, otherwise known as the Forfeiture Law, allows 10 per cent of the value of forfeited properties in corruption cases to be allocated to the office of the ombudsman and for other purposes. In order to enhance transparency in public procurement, President Gloria Macapagal-Arroyo signed Executive Order 662-A, amending Executive Order 662, to create the Procurement Transparency Group, headed by the Government Procurement Policy Board. The group will evaluate, comment on, record and monitor the procurement activities of national government agencies, government owned and -controlled corporations, government financial institutions, state universities and colleges and local government. The group will be interested in the mode of procurement, budget, volume, susceptibility to problems or anomalies and the importance of the project to the development activities of the Philippines.

On 27 August 2008 a memorandum of understanding was signed by the ombudsman, Meceditas Gutierrez, to establish a Center for Asian Integrity in the Philippines, the first of its kind in Asia.3 The virtual academy will be incorporated into the Philippine Ombudsman Academy, which trains trainers, investigators and prosecutors about integrity. It will also incorporate a research programme to provide qualitative and quantitative research into corruption and include a virtual library to provide access to information on corruption and curricular support for the development of integrity courses to be accredited by the University of the Philippines. It will be funded by the Millennium Challenge Corporation Philippine Threshold Programme through the Asia Foundation.

Corruption and the private sector in the Philippines

Graft and corruption are a fact of life in the Philippines; since liberation almost every administration has suffered its sensational graft cases. Moreover, the private sector has cultivated various corrupt practices in order to obtain significant and continuing concessions and advance its private interests. A recent study by the Social Weather Stations social research institution, based on its 2007 Survey of Enterprises on Corruption, supplements anecdotal evidence and paints a picture of corruption through the eyes of private sector managers. In terms of the extent of corruption in the sector, the survey found that three out of five managers saw a lot of corruption in the public sector, compared to only one in twelve who saw a lot of corruption in the private sector. Bribery was highlighted as a particular issue, with roughly half the managers revealing that most or almost all firms in their line of business give bribes to win government contracts, compared to only one-fifth giving bribes for private sector contracts. The survey found that, while only a minority of companies follow the basic honest business practices of demanding and issuing receipts, keeping only one set of books, and paying taxes honestly, there was a willingness of managers to contribute to the fight against corruption. The survey measured managers readiness to donate money to an anti-corruption fund and found that, although in practice the amount donated has decreased in recent years, a half intended to donate for these purposes over the next two years. Finally, the survey found that in the National Capital Region (Metro Manila) bribing for government contracts has declined and best practices in record-keeping have improved. It seems, therefore, that, while corruption in the private sector is still a big problem, the private sector is showing some willingness to become part of the solution.

Corruption in Bangladesh The Anti-Corruption Commission (Staffs) Service Rules 2008 were approved by the government and came into effect on 15 June 2007. They were prepared by the commission in order to impose these rules upon the commission staff, while earlier efforts by the previous government were considered by stakeholders including civil society organisations to be detrimental to their independence. On 15 July 2007 the Public Procurement Act (Amendment) 2007 was passed. The amendment brings procurement for any foreign or development/cooperative organisation under the jurisdiction of the act. On 28 January 2008 the Public Procurement Rules 2008 were enacted to ensure the transparency and accountability of the process, including project tender and approval, the execution of work and civil servant duties. The Local Government Commission Ordinance 2008 was promulgated on 13 May 2008 in order to institutionalise the decentralisation and empowerment of local government. The ordinance establishes a permanent local government commission to oversee the decentralisation process while ensuring accountability and transparency in local government institutions. The National Identity Registration Authority Ordinance 2008 was promulgated on 15 May 2008 to facilitate the establishment of the national identity registration authority. The main objective of the national identity card is to establish a digital database for preparing a credible voter list, in order to eliminate false voting and track the records of criminal offences. The national identity card will also facilitate transparency in transactions for various utility services. On 16 June 2008 the government amended the Supreme Judicial Commission Ordinance 2008. Some years earlier, on 2 December 1999, the Appellate Division of the Supreme Court had given twelve directives to the government in a landmark judgment in the Masdar Hossain case on the separation of the judiciary (see the Global Corruption Report 2007 and 2008). The previous two governments delayed implementing the directives as many as twenty-eight times. This development represents the most significant step towards achieving full independence of the judiciary On 11 June 2008 the AntiTerrorism Ordinance 2008 was promulgated. Under this ordinance a wide range of crimes, including money laundering, arms-running and financing terror attacks, have been made non-bailable offences. On 8 June 2008 the government promulgated the Truth and Accountability Commission Ordinance 2008.9 The ordinance provides clemency for corrupt individuals on the basis of voluntary disclosure and confession of guilt, subject to the confiscation of illegally amassed wealth and property. Those granted clemency are to be barred from election to public office for five years. The ordinance will not apply to those already convicted. To ensure transparency and accountability in local government elections, the Election Commission approved the City Corporation (Election Ethics) Rules 2008 and the Powrasava (Election Ethics) Rules 2008 on 17 June 2008. The rules include provisions to disclose basic general information regarding candidates, such as sources of income, assets and liabilities, election expenses and their source, and any criminal records. On 18 June 2008 the Council of Caretaker Advisors approved in principle the Right to Information Ordinance 2008. This ordinance would mark a

significant victory for civil society organisations in Bangladesh, which have long advocated such a law as a prerequisite for ensuring transparency, accountability and good governance. The draft law was circulated for public discourse and response a unique move in the Bangladeshi context, as laws have traditionally been passed with no engagement with citizens The Money Laundering Prevention Ordinance 2008 provides that the courts will not take into consideration any money-laundering case without the sanction of the Anti-Corruption Commission. In addition, this ordinance will allow the Bangladesh Bank to seek cooperation with financial intelligence units of other countries or provide them with similar support. Corruption in Indonesia With the 2009 general election in sight, a set of regulations is being developed to amend and regroup five different laws under a package law . The five laws relate to political parties , general elections , tools and procedures , presidential elections and local government and local elections . The House of Representatives (DPR) ratified the law on political parties on 19 January 2008. Another law covering local and general elections was ratified on 31 March 2008. The amendment of the law on local government and local elections was adopted by parliament in April 2008 and will take effect one month after it has been signed by the president. The laws on presidential elections and on tools and procedures are currently being discussed in parliament. Although such laws are urgently needed to clarify election and political party regulations, several anti-corruption organisations have voiced concerns about the loophole left in political parties financing. The new law on political parties allows for increased individual and corporate contributions to political parties. Individuals are now allowed to donate up to R1 billion , a tenfold increase from the previous limit. A significant increase was also approved for corporate contributions, from R750 million to R4 billion R5 billion for a general election campaign. This is of particular concern, given that the law does not prevent different companies from the same group, or employees of the companies, from donating to political parties. Indeed, previous civil society monitoring initiatives revealed that the corporate financing of political parties through employees accounts or through fictional companies set up by a holding company was a common practice. Donations by party members are unlimited, which some argue could have the effect of paving the way for seatbuying. According to the same law, financial management and reporting procedures now depend on the parties own internal regulations. An external audit by a public accountant is imposed only in the case of government funding to political parties, and does not cover private donations. The law on general elections requires all candidates and political parties to open a single account for donations within three days of their official nomination. Although political parties are obliged to submit a financial report to be audited by public accountants, there is no standard reporting format. The lack of available accredited accountants, coupled with the absence of a standard reporting format, raises concerns about the capacity of the General Election Commission (KPU) to monitor and detect irregularities in political party financing efficiently. Moreover, it is still unclear how donations made before the opening of the special account or outside the campaign period can be accounted for.

The long-awaited law on freedom of information was ratified on 3 April 2008, almost five years after the first draft was submitted to parliament. This is the first comprehensive law regulating the publics right to information and outlining the obligations for public agencies in terms of information disclosure. The law regulates the kind of information to be disclosed as well as the type of information that can be exempted and for how long. The law has institutionalised the Information Commission as an independent regulating agency mandated to handle disputes related to disclosure obligations defined by the law. Several limitations have been identified, however, including the fact that state-owned companies, notably national oil and mining companies, are not subject to the obligations. There is also an article on the criminalisation of misuse of public information that is perceived as an attempt to restrain the freedom of the media, as it does not clearly define what would constitute misuse. Nevertheless, the law has set in motion moves towards increased transparency, and it also has a strategic role to play in complementing existing anti-corruption laws. A new Presidential Instruction was issued in December 2007, under Presidential Decree no. 80/2003 on public procurement, to establish an independent National Procurement Policies Office (NPPO). The NPPO is mandated to regulate public procurement and address inefficiency and under-spending of national and local budgets. According to the Commission for the Eradication of Corruption (KPK), around 30 per cent of the national procurement budget is lost to corruption each year, while officials lack of understanding of procurement regulations and tender procedures causes significant delays in budget implementation (20 per cent of 2007s national procurement budget was still unspent by November 2007). The National Development and Planning Agency expects that improved regulatory and supervisory frameworks could help curb corruption and increase the efficiency of public procurement by 30 to 40 per cent. The NPPO, however, has not been granted the authority to handle complaints and arbitrate litigations. Complaints are instead submitted to the head of the relevant public department for arbitration. The National Ombudsman Office welcomes complaints, but can issue recommendations or report cases only to relevant authorities. Corruption in Japan The Act on Prevention of Transfer of Criminal Proceeds came into force partially in April 2007 and fully in March 2008. The act obliges financial institutions, leasing and real estate businesses, and other operators except for lawyers to ensure client identification and secure transaction records, as well as to report any suspicious transactions to the financial authorities.1 Legal and accounting professionals are subject to the former obligations but not the latter. An original draft covered all these professions, but, faced with strong opposition especially from bar associations, the Diet (parliament) enacted a final version that relieves legal and accounting professionals from the reporting obligations. The legislation therefore is a step forward, even though the complicated issue of lawyer and accountant disclosure was not resolved. A bill for revising the Political Funds Control Law, aimed at increasing the transparency of funding flows to lawmakers, was enacted in January 2008. The amendment mainly addresses political organisations related to Diet members. The law as amended requires Diet member-related political organisations to submit receipts for expenditures greater than US$100, along with a political funds report, to the Ministry of Internal Affairs

and Communications and to prefectural election commissions. Beginning in 2009 those political organisations will be obliged to keep receipts for expenditures of 10,000 or less, and these receipts in principle are subject to disclosure if a request is filed. The law introduces an audit system for the financial reports of political organisations that will start in fiscal year 2009, and it sets up an expert committee to study and review the audit system.

Corruption in Malaysia The twelfth general election in Malaysia, held on 8 March 2008, sent shock waves throughout the country. For the first time since 1969 the ruling party, the Barisan Nasional (National Front) coalition, lost its two-thirds parliamentary majority. In addition, it lost four more states to the opposition compared to the 2004 election, to make it five in total. In 2004 the administration headed by Abdullah Ahmad Badawi had been voted in with the strongest ever mandate for an incumbent, specifically to clean up the decaying state of Malaysian institutions. It has failed in many areas, however, especially in addressing corruption. The 2008 election results sent a very clear signal to the ruling party about the level of popular dissatisfaction with, among other things, the unbearable effects of corruption. The main opposition parties (which have subsequently restyled themselves as the Citizens Coalition Pakatan Rakyat) ran on the platform of transparency, accountability and good governance and were able to capitalise on the discontent of the people. The Malaysian Anti-Corruption Academy (MACA) was launched by the prime minister on 12 April 2007. The MACA is intended to be the regional hub for anti-corruption capacity and capability building to fight corruption, by promoting best practices in investigation, monitoring and enforcement and by venturing into new areas such as forensic accounting and forensic engineering. In a speech given at the ASEAN (Association of South East Asian Nations) Integrity Dialogue5 on 21 April 2008, Badawi proposed the following measures to address public concerns. First, the Anti-Corruption Agency (ACA) would be restructured to become a fully fl edged Malaysian Commission on Anti-Corruption (MCAC). The MCAC would report to a newly set up independent Corruption Prevention Advisory Board, to be appointed by the Supreme Ruler (head of state) on the advice of the prime minister. The board would advise the MCAC on administrative and operational matters. Second, the prime minister proposed setting up a Parliamentary Committee on the Prevention of Corruption. Finally, he introduced a proposal to protect whistleblowers and witnesses. All these reforms have yet to be implemented, however. The Malaysian Institute of Integrity (MII Institut Integriti Malaysia) also stepped up its efforts when it launched two major publications, National Integrity System: A Guiding Framework and Corporate Social Responsibility: Our First Look.6 This was part of its ongoing collaborative effort with UNDP Malaysia to develop the necessary human capital and knowledge resources within the institute. Penang state has introduced several measures to improve the regulatory environment with regard to government procurement , in what is referred to as a CAT a Competent, Accountable and Transparent government. It is the first state government to implement the open tender system for government procurement and

contracts. As an example, in civil works, contractors are able to bid in an open tender process and to review the successful contractors and object if they are not satisfied. Furthermore, the Penang government has issued a directive whereby all administrators and state executive councillors are not allowed to make any new land applications. It has also invited professionals to serve on various boards, such as the Penang State Appeals Board, and has established a Working Professional Committee comprising individuals from five different professional bodies to improve land procedures.

Corruption in Nepal The Right to Information Act 2007 seeks to give free public access to any information related to the public interest, thereby maintaining transparency, accountability and respect for the peoples right to be informed. With the exception of information specifically categorised as confidential, all Nepalese are guaranteed free access to public information. Five categories of information are exempt from disclosure requirements: security and foreign policy, criminal investigations, commercial and banking privacy, ethnic or communal relations, and personal privacy (including that which threatens life, property, health and security). The Special Court in Nepal was established in 2002 to handle corruption cases. Due to the slow pace of legal proceedings, however, cases are piling up in the court. In order to speed up the process , amendments were made to the Special Court Act 2002 allowing the court to be flexible in determining the number of sitting judges required instead of being limited to the existing three. The Banking Offence Act 2007 was promulgated to control and mitigate the risks and impacts associated with, and to enhance public trust in, banking and financial transactions. Offences punishable under the act include unauthorised involvement in banking transactions, fraud in electronic transactions, the misuse of bank loans and credits, tampering with accounting books, fraud in the valuation of assets, and irregularities in banking and financial transactions. Depending on the scale of the transaction, penalties range from three months to four years imprisonment. The Anti-Money Laundering Act 2008 was enacted in January 2008. The law opens up avenues to combat corruption cases involving property amassed through illegal means, including tax evasion, smuggling, investment in terrorist acts and other crimes punishable under international treaties and conventions signed by the government. The act lays the groundwork for ratifying the UNCAC. Nepal is a signatory to the UNCAC but ratification has been pending due to the countrys political situation. The Good Governance Act 2008 was enacted in February 2008. The laws objective is to make public administration more people-oriented, accountable, transparent and participatory. Some of the good governance and anti-corruption clauses include the development of a code of conduct for public servants, methods for resolving conflicts of interest, mandatory public hearings and social audits, complaint-handling procedures and establishing Good Governance Units within each ministry. As provided for by the new Procurement Act 2007, the

government has established a Public Procurement Monitoring Office (PPMO). The PPMO is a high-level policy-making body designed to streamline the public procurement system. Among several areas prone to corruption, public procurement is said to be the most susceptible. With a score of 2.8 on a scale of 1 to 7, Nepal ranks 116th among 125 countries assessed by the OECD for integrity in public procurement.

Conclusion

The impact of corruption continues to grow in the following Asian countries Corruption in most of the Asian countries isn't getting much better and, indeed, in some of the countries is intensifying--affecting virtually every aspect of life among people. International watchdog Political and Economic Risk Consultancy queried expatriates in 13 Asian countries and territories, and classified 10 countries as the most severely corrupt countries in Asia. Philippine Expatriate businessmen in Asia perceive the Philippines as the most corrupt country in the region. Nearly $2 billion dollars, or roughly 13 percent of the Philippines' annual budget, is lost to corruption in the country each year, according to the United Nations Development Program. Its judicial system is believed to be ineffective at prosecuting and punishing individuals for corruption when abuses are uncovered. Local corruption monitors confirm that graft and bribery in the Philippines remain rampant. Corruption has penetrated every level of government, from the Bureau of Customs down to the traffic police officers who pull over motorists to demand bribes. Indonesia Not only on Asia's top 10 list, Indonesia has also been categorized as the number 5 of the 96 most corrupt nations in the world. In the past two years, Indonesia has lost more than $2bn due to corruption. Former president Suharto, as the most corrupt political leader in the world in the past 20 years, has ruled this country with an iron fist for more than three decades. All the leading candidates have made fighting corruption a central theme of their campaigns but none have been clear on how they will solve the problem. Thailand The Problem of corruption has been around for a long time in Thailand and its roots are deep in the culture - While huge amounts of money will be lost during the implementation of projects due to corruption, more will be lost while trying to fight against it and stop it.

Thailands ex-Prime Minister Thaksin Shinawatra has used very rough methods to control the media, which should be one of the most powerful watchdogs against corruption.

Vietnam A country where its light-fingered bureaucrats cream off at least 20% of infrastructure spending. Corruption has been identified as one of the government's main challenges. Vietnamese is now battling corruption at all levels. India Corruption happens because they have a system that allows such corruption to flourish. It's a country that as high as 62 percent of citizens think that the corruption is not a hearsay, but they in fact had the firsthand experience of paying bribe or using a contact to get a job done in a public office. It is not anymore confined to politicians or the government machinery alone. It is prevalent amongst almost every section of the society at every level. Korea Since the financial crisis of 1997, Koreas image was radically changed from a model developmental state with good governance to a country with rampant corruption and cronyism China Corruption in China became increasingly serious during the early period of its social transition, resulting in severe economic losses and huge challenges to Chinas government institution, as well as gradually becoming socially widespread. Bribery has become the main accusation of corruption against Chinas senior officials. it was found that the spouse (usually the wife) and the child played an important role in senior officials acts of corruption. Also, corruption cases have shown that having a love affair often coincided with the first steps of corruption. Malaysia When we say money politics, people dont get the real picture; it is nothing but bribery and corruption. It is buying votes to get elected to the leadership of UMNO, the dominant party in the Barisan National that rules the nation Taiwan Taiwan's problem lies in its own history. Taiwan was a notoriously violent and lawless frontier society. Since the government could not control its tough citizens, it granted them official titles to sustain the fiction of central control. Local government by gangsters, vastly preferable in the eyes of the Taiwanese to no government at all. Here we have local "muscle" being used to gain access to political and economic spoils which are used to legitimize community standing

Japan Asia's 3rd least corrupt country. Since the years of the bubble economy and the ensuing economic and political turmoil after the bubble burst, political corruption in Japan has become a major concern for the general public, the most recent case is Abe cabinet's scandals Hong Kong Asia's 2nd least corrupt country Singapore One of the least corrupt nations on the world. Known for strictly constraint of its government officials

Other Asian Countries Have Severely Corruption Problems:

Myanmar Corruption is perceived as widespread in this vicious dictatorship run with an iron hand by a strong-willed clique of military leaders, who persist in repression of civil society at every level. Illicit facilitation payments and informal fees are required to access even the most basic government services.

Cambodia Corruption is pervasive through all levels of society in this country where two-thirds of the population earns less than $2 a month and one-third earns less than $1. No one has ever been prosecuted under a skeleton anti-corruption law. In February, international groups charged that judges in the trial of top former Khmer Rouge leaders had bought their positions. International aid donors including USAID under the Donor Coordination Group of Cambodia have warned of diversion of large chunks of the $500 million or more in international aid provided to this nation. The system of illicit "facilitation" payments by businesses and individuals may only intensify as oil found off the coast replaces donor aid, removing even today's rudimentary controls on use of public revenues.

Pakistan Since the U.S. provides enormous aid to the country as a frontline power in the war against terrorism, the government seems to be taking active steps to combat corruption. But it's working in only a spotty fashion. Early this year, President Pervez Musharraf, suddenly suspended and detained the nation's chief justice, apparently because of his failure to sanction

illegal detentions of terror suspects and overturning corrupt privatization of steel mills. Corruption remains rife in the judiciary, financial markets and civil service

ARTICLE 1

CORRUPTION IN CHINA: HOW BAD IS IT? Minxin Pei, Daniel Kaufmann TUESDAY, NOVEMBER 20, 2007

On November 20, 2007, Director of China Program Minxin Pei discussed his latest policy brief Corruption Threatens Chinas Future in a seminar hosted by the Carnegie Endowment. The presentation was followed by a critique from Daniel Kaufmann, Director of Global Program at the World Bank Institute and also a leading authority on corruption and governance around the world. Peis policy brief assesses corruption in China based on five key questions: How serious is the corruption? What are the trends? What are the symptoms? What are the causes? And finally, how have the government handled the problem so far? Pei first admitted that there are enormous research difficulties in attaining high quality, reliable, and standardized survey data on the severity of corruption in China. Nevertheless, indicators assembled from a variety of sources presented a sobering picture of the situation. For example, various domestic surveys conducted at both elite and mass levels have consistently ranked corruption as one of Chinas top political challenges and social problems. A large number of anecdotal evidence collected from press reports over the past decade also conveys the impression that the cost of corruption, measured in monetary term, has grown, and involvement by mid-level (or even senior) officials has increased as well. Meanwhile, anti-corruption measures from the government remain ineffective due to the insufficient enforcement of those laws. Lack of transparency regarding the operational procedure within the Central Commission of Discipline Inspection further complicates the picture, leaving unclear how allegedly corrupt officials are discipline and punished. According to data provided by the report, the odds of a corrupt official end up in jail are less than 3 percent, therefore making corruption a high-return, low risk activity. Such leniency of punishment has been one of the primary factors that make corruption a very serious problem in China. Peis report estimates that the direct costs of corruption in China are about 3 percents of annual GDP. Worse yet, most of the cases are concentrated in critical sectors with extensive state involvement, such as infrastructure projects, financial services, real estate, and government procurement. The absence of competitive political process and free press makes these high-risk sectors even more susceptible to fraud, theft, kickbacks, and bribery. Pei also pointed out that corruption in China has evolved in two major ways. First of all, in some of the cases corruptions have been taken in forms of ostensibly legal official

expenditures (or privatized official consumption). For example, more and more local governments have started to build massive administrative office buildings that resemble luxurious mansions. Secondly, many of the corrupted local officials have transformed their jurisdictions into virtual mafia states, where they collude with criminal elements and unsavory businessmen in illegal activities Although the central government in Beijing has constantly come up with new laws and initiatives to battle against corruption, Pei doubted there would be any major progresses. As long as the Central Commission of Discipline Inspection remains in- transparent, and as long as the government continues to limit the role of the media and NGOs in maintaining government integrity, corruption would still be one of the largest threats to Chinas future. Daniel Kaufmann from the World Bank commented Peis policy brief with three questions. First of all, how has the data been interpreted in the report, regardless the accuracy of data itself? Interpreting data is very tricky. For example, the top two countries with highest per capita rate of imprisonment due to corruption are U.S and Russia. But what does this tell us? Does it mean that the U.S has the highest crime rate in the world? In other words, data can be interpreted in various ways to reach different conclusions. Kaufmann then reminded the audience that corruption has plagued China for decades, yet its economy continues to perform robustly. Therefore, how much more damage could corruption do to China? Has China beaten the odds? Finally, is corruption the root of all problems that plague Chinas political system today, or is it merely a symptom that caused by other factors?

ARTICLE 2 CORRUPTION THREATENS CHINAS FUTURE Minxin Pei CARNEGIE ENDOWMENT POLICY BRIEF NO. 55, OCTOBER 2007 Resources Failure to contain endemic corruption among Chinese officials poses one of the most serious threats to the nations future economic and political stability, says a new report from the Carnegie Endowment. Minxin Pei, an expert on economic reform and governance in China, argues that corruption not only fuels social unrest and contributes to the rise in socioeconomic inequality, but holds major implications beyond its borders for foreign investment, international law, and environmental protection. In Corruption Threatens Chinas Future, Pei paints a sobering picture of corruption in China, where roughly 10 percent of government spending, contracts, and transactions is estimated to be used as kickbacks and bribes, or simply stolen. He examines the root causes for Chinas rampant corruptionpartial economic reforms, lax enforcement efforts, and reluctance by the Communist Party to adopt political reformsand the ensuing economic losses and jeopardized financial stability.

Key Findings: Though the Chinese government has more than 1,200 laws, rules, and directives against corruption, implementation is spotty and ineffective. The odds of a corrupt official going to jail are less than three percent, making corruption a high-return, low-risk activity. Even lowlevel officials have the opportunity to amass an illicit fortune of tens of millions of yuan. The amount of money stolen through corruption scandals has risen exponentially since the 1980s. Corruption in China is concentrated in sectors with extensive state involvement, such as infrastructure projects, real estate, government procurement, and financial services. The absence of competitive political process and free press make these high-risk sectors susceptible to fraud, theft, kickbacks, and bribery. The direct costs of corruption could be as much as $86 billion each year. The indirect costs of corruption (efficiency losses; waste; and damage to the environment, public health, education, credibility and morale) are incalculable. Corruption both undermines social stability (sparking tens of thousands of protests each year), and contributes to Chinas environmental degradation, deterioration of social services, and the rising cost of health care, housing, and education. Chinas corruption also harms Western economic interests, particularly foreign investors who risk environmental, human rights, and financial liabilities, and must compete against rivals who engage in illegal practices to win business in China. The U.S. government should devote resources to tracking reported cases of corruption in China, increase legal cooperation with China (to prevent illegal immigration by corrupt officials and money laundering), and insist on reforms to Chinas law-enforcement practices and legal procedures before tracking Chinese fugitives in the United States and recovering assets they have looted. Corruption has not yet derailed Chinas economic rise, sparked a social revolution, or deterred Western investors. But it would be foolish to conclude that the Chinese system has an infinite capacity to absorb the mounting costs of corruption, writes Pei. Eventually, growth will falter.

ARTICLE 3 ABSTRACT The cost of doing business in Asia David Blecken. Media. Hong Kong: May 21, 2009. pg. 5, 1 pgs ABSTRACT (SUMMARY) When it comes to corruption, Asia is moving "in the direction of greater openness and transparency", says WPP CEO Martin Sorrell. Most agencies in the mainland operate under a US$70 'gift ceiling', which often forms part of a salary package, with items above that value placed in a communal fund as a rebate to ensure individuals are not accused of corruption. Other measures multinational agencies use to prevent corruption include separation of reporting lines between CEOs and CFOs, internal audits and centralization to ensure standardized procedure across the network.

ARTICLE 4 ABSTRACT Corruption in Asia: Pervasiveness and arbitrariness Seung-Hyun Lee, Kyeungrae Kenny Oh. Asia Pacific Journal of Management. Singapore: Mar 2007. Vol. 24, Iss. 1; pg. 97, 18 pgs ABSTRACT (SUMMARY) How does one understand the differences and similarities of corruption among various Asian countries? We use a recent framework developed by Rodriguez, Uhlenbruck, and Eden (2005) to suggest that corruption has to be examined from two different dimensions: pervasiveness and arbitrariness. Using this framework, we ask why some Asian countries are able to achieve high levels of economic growth in the midst of high level corruption while other countries suffer from economic stagnation. We specifically suggest that more firms would bribe when pervasiveness is high, while fewer firms would bribe when arbitrariness is high. We also look into the implications on foreign direct investment.

ARTICLE 5 ABSRACT Institutional Pillars and Corruption at the Societal Level Ji Li, Jane Moy, Kevin Lam, WL Chris Chu. Journal of Business Ethics. Dordrecht: Dec 2008. Vol. 83, Iss. 2; pg. 327, 13 pgs

ABSTRACT (SUMMARY) This article studies the effects of social institutions on organizational corruption at the societal level by focusing on the possible interactions between the institutional pillars that have been identified in past research. Based on these three institutional aspects or pillars, this article tests the interactive effects of social institutions among societies throughout the world. The results suggest that the three institutional pillars have significant interactive effects on organizational corruption at the societal level. A discussion of the implications of the research findings for researchers and practitioners is given.

ARTICLE 6 India 84th out of 180 on index of corruption TNN 18 November 2009, 03:23am IST Topics:
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India Corruption

NEW DELHI: Even as the Madhu Koda scam dominates headlines, the perception of public officials and politicians in India has dipped further. Transparency International India's (TII) corruption index Twitter Facebook Share released on Tuesday has ranked India 84th out of 180 countries. A silver lining to this dismal ranking is that with an integrity EmailPrint SaveComment score of 3.4, India is the least corrupt country in south Asia excluding Bhutan. Also, India has improved its credibility score from 2.7 in 2001 to 3.4 in 2009. Speaking on the issue, TII chairman Admiral (retd) R H Tahiliani said, "The score this year is not particularly flattering but we can take consolation from the fact that the country's score has not gone from bad to worse.'' The evaluation of the extent of corruption is based on opinion from country experts -- resident and non-residents -- and business leaders. The corruption index measures perceived levels of public sector corruption in a country. In 2009, expert analysis was sourced from African Development Bank, Asian Development Bank, Bertelsmann Foundation, Economist Intelligence Unit, Freedom House, Global Insight and World Bank. Resident business leaders whose opinions are reflected in the survey are IMD, Political and Economic Risk Consultancy and the World Economic Forum. New Zealand, Denmark, Singapore, Sweden and Switzerland are the top 5 honest countries. While China ranks 79th with a score of 3.6, Pakistan has a score of 2.4, Bangladesh (2.4), Bhutan (5), Nepal (2.3), Maldives (2.5) and Sri Lanka

According to TII, nearly half of the 180 countries have scored three or even lower points, a clear indication that corruption is perceived to be rampant. Haiti, Iraq, Myanmar and Somalia have recorded the lowest score of less than 1.5. Transparency International has found that there is a strong coorelation between corruption and poverty, jeopardising the global fight against poverty. Tahiliani said the low score could directly impact foreign direct investments in the country which was needed for India to build infrastructure.

Conclusion Corruption is an intractable problem. It is like diabetes, can only be controlled, but not totally eliminated. It may not be possible to root out corruption completely at all levels but it is possible to contain it within tolerable limits. Honest and dedicated persons in public life, control over electoral expenses could be the most important prescriptions to combat corruption. Corruption has a corrosive impact on our economy. It worsens our image in international market and leads to loss of overseas opportunities. Corruption is a global problem that all countries of the world have to confront, solutions, however, can only be home grown. We have tolerated corruption for so long. The time has now come to root it out from its roots.

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