Integrity Corruption and Development in Arab Countries A

Integrity, Corruption and Development in Arab Countries A Systemic Perspective Ahmed Sakr Ashour April 2006

The Anticorruption Scene in the Arab Region. q q q q Interest in combating corruption in the Arab Countries has been rising over the last decade. Chapters of TI were established in almost half of counties of the region. A number of regional conferences were held on the subject. A regional anticorruption organization headed by Dr. Selim Al-Huss was established and held its first conference in Beirut last year. Another regional organization of Parliamentarians Against Corruption along with national chapters were also established two years ago. Arab states are starting to join the UN convention against corruption. An increasing number of Arab countries are taking a set of measures to confront corruption including establishing anticorruption entities (e. g. . Jordan)

National and Pan Arab activist organizations and groups are bringing the issue of corruption in Arab Countries under the lime light. q The independent media in a growing number of Arab countries are focusing on and publishing about corruption incidents, cases and issues. q Regional and international organizations (e. g. ARADO, TI, UNDP, POGAR of UNDP, World Bank, World Economic Forum) have held meetings and published studies on the issue in the region. q

The Reform Scene Various Initiatives have been taken over the last two decades: q Economic restructuring and reform policies including privatization have been adopted by almost all countries of the region. q Various political liberalization and democratization initiatives have been taken over the last five years. q The public sector have been the focus of various administrative modernization and reform initiatives. q Some of them were with the support of international organizations.

Why Interest in Reform and in Combating Corruption is Rising? The Arab region has been experiencing stagnation in development and growth over the last two decades, and has been lagging behind in economic performance compared to the rest of the world. For Example: q Annual growth in per capita income was 0. 5 % which is less than sub-Sahara Africa. This rate was 5% for East Asia. q Export performance grew by 1. 5 during the 1990 s , compared to 6% for the world. q The share in foreign investment during the last decade was less than 1% of FDI in developing countries. This percentage was 59 % for East Asian countries. q Indicators of unemployment , productivity and poverty point to the slow and sluggish development performance.

q To what extent is the slow and sluggish development performance of the Arab region a function of: Ø Corruption Ø Reform Deficiency q Answering this question sheds a great deal of light on the importance of combating corruption and of engaging in a set of profound and comprehensive reforms for unleashing the forces for development and growth in the region. q Tackling corruption and reform deficiency are related. As will be illustrated later, the effective combating of corruption require the uprooting and tackling of its causes and underlying factors.

A look at the Corruption Scene in the Arab Region Country World Rank Arab Region Rank Score Oman 28 1 6. 3 Syria 70 10 3. 4 United Arab Emirates 30 2 6. 2 Morocco 78 11 3. 2 Qatar 32 3 5. 9 Lebanon 83 12 3. 1 Bahrain 36 4 5. 8 Algeria 97 13 2. 8 Jordan 37 5 5. 7 Yemen 103 14 2. 7 Tunisia 43 6 4. 9 Palestine 107 15 2. 6 Kuwait 45 7 Corruption Perception Index(2005): 4. 7 Libya 117 16 2. 5 Egypt 70 8 3. 4 Iraq 137 17 2. 2 Saudi Arabia 70 9 3. 4 Sudan 144 18 2. 1

Looking at the CPI q Most Arab countries fall below the median (median = 80). q Some Arab countries had a score and a rank close to other countries: Ø Ø q Oman is equal to Israel and close to Portigue and Astonia. EAU is close to Slovenia. Qatar is equal to Botswana, Taiwan and Uruguay. Jordan is equal to Cyprus and close to Malaysia. The magnitude and seriousness of corruption is in some cases greater than what CPI indicates. This has to do mostly with grand corruption which is likely to be hidden. Grand state capture corruption is a great problem in many Arab countries. The CPI methodology mostly reflects administrative/petty corruption

Relationship Between Corruption, its Infrastructure and Development Results from an ongoing project supported by POGAR on combating corruption. Development/Governance Indicator Simple Correlation Number of Countries Human Development Index (HDI) 0. 701 (**) 142 GDP Per Capita 0. 875 (**) 139 Economic Growth Rate -0. 366 (**) 139 Poverty Index -0. 522 (**) 101 Unofficial Economy -0. 674 (**) 69 Foreign Direct Investment as Percentage of World Flows 0. 412 (**) 146 Competitiveness Index 0. 917 (**) 104 Spending on Education and Health as Percentage of GDP 0. 571 (**) 107 Spending on Education as Percentage of GDP 0. 334 (**) 107 Spending of Health as Percentage of GDP 0. 690 (**) 140 Governance Indicators: Voice and Accountability Political Stability Government Effectiveness Regulatory Quality Rule of Law Control of Corruption 146 0. 684 (**) 0. 790 (**) 0. 935 (**) 0. 827 (**) 0. 920 (**) 0. 962 (**)

Competiti -veness (R = 0. 917) Expenditure On Health (R = 0. 690) GDP Per Capita (R = 0. 875) Unofficial Economy (R = 0. 674) Share in FDI (R = 0. 412) Poverty (R = 0. 522) Expenditure on Health and Education (R = 0. 571) Corruption Control of Corruption (R = 0. 962) Government Effectiveness (R = 0. 935) Rule of Law (R = 0. 920) Regulatory Quality (R = 0. 827) Political Stability (R = 0. 790) Governance/Institutional Infrastructure Voice and Accountability (R = 0. 684)

Institutional and Legal Reforms Against Corruption that Have Been Taken by Most Countries of the Region q Arab government have transformed their address from denial to admission of the problem of corruption. q Anticorruption reforms in the region have mostly been legalistic and institutional in nature. q The measures commonly taken are: Ø Ø Ø Ø Activating and strengthening the role of control agencies and extending their out reach. Establishing anticorruption bodies reporting to the government. Passing a set of anticorruption laws. Prosecuting and trying corruption cases involving high state officials. Declaring that the government is adopting anticorruption posture. Introducing modernization and reforms to the civil service system and government administration. Introducing other institutional reforms (e. g. The Judiciary)

The legal and Institutional Initiatives Against Corruption Have Been Mostly Cosmetic q Corruption continues to thrive in virtually all domains of economic, administrative and political activity across the Arab region. q The legal and institutional reforms were: Ø Not attacking the system under which corruption thrives. Ø Not integrated into a comprehensive plan and a strategy. Ø Not backed by strong political support.

There is More to the Reform Against Corruption Than the Legal and Institutional Measures, Even if They Represent a Comprehensive All Out Attack q Corruption in the region is high in both types: Ø Ø Grand/ state capture Petty/ administrative q Grand corruption is widespread in all countries of the region. q Petty corruption (especially bribes) is more common in the middle and low income countries.

The Underlying Factors of Corruption in the Region: q Governance: Countries of the region suffer from governance deficiency or gab. This has been well documented (World Bank, 2003). q Broadly speaking, governance has two fronts: Ø Ø q Political Infrastructure of the state. The institutional Infrastructure of the public sector. The governance gap the region suffers from is on both fronts.

But There is More to the Underlying Factors of Corruption in the Region: q The Economic Infrastructure: Ø Most countries of the region have economies that rely greatly on rent. Ø Rent-seeking is a common economic activity in the region. Ø Non productive sectors (rent seeking, rent-based and a sizeable portion of the government) represent a significant segment of the region’s economies. Ø The public sector remains to overwhelm the economic life in most countries of the region. Ø Many economic sectors of these countries are monopoly-based.

The Social/ Cultural Infrastructure (Societal and Administrative Ethics) q The tribes and the nucleus family is a powerful social force in most Arab societies. This explains the spread of nepotism. q The spread of corruption in various spheres of life made people tolerant and accustomed to corruption. q Cultural and ethical reform is not part of the official reform address or agenda in all countries of the region.

Corruption is Much More Complex and Deeply Rooted in the Region Than the Implicit Assumptions Underlying the Reforms Adopted or Applied so Far Effective combating requires: q Integrated multidimensional reform. q Political reform represent the obstacle and the real solution, especially for grand corruption. q Crafting a strategy that tackles the causes and that fits the governance conditions of each country. q Establishing a broad coalition among anticorruption and pro-integrity forces/ stakeholders including invigorating of the civil society. q Monitoring the program/measures. q Tackling the sectors and institutions infected by corruption the most and critically impacting on development (e. g. legislature, judiciary, police, election system, political parties, financial sector) success and progress of the anticorruption