Corruption: Concept, Theories, Risk

Assessment, Methods and Cases

A Half-Day Training Prepared for Haromaya University Ethics and Anti

Corruption Student Club

Prepared by: Abey Doni

Objectives of The TrainingTo define the concept of Corruption;To Explain the Types of Corruption;Train the Trainee on Risk assessment

techniques and ways to prevent Corruption;

Explain different ways to combat corruption;

Show cases of corruption in the Construction Sector Globally through Examples.

Deliverables :At the end of the Training the

trainee will be able to:◦Define the concept of Corruption;◦Explain the types of Corruption;◦Work on the ways to identify

corruption risk areas;◦Know the different methods to fight

corruption;◦See the impact of corruption in the

construction Sector Globally.

Content of The Training1. Definition of the concept of Corruption2. Theories and View points about

corruption3. Types of Corruption4. Methods to identify corruption

vulnerable areas5. Methods to fight Corruption6. Cases of Corruption in the

Construction Sector7. Conclusion– the ultimate cost

Definition of the concept of Corruption

Joint work of Shah and Schacter(2004) defined Corruption as the exercise of official powers against public interest or the abuse of public office for private gains.

The term ‘corruption’ came from Latin word called ‘corruptio’ and it means that bribe and destroy.

Theories and View points about corruptionWe will see two major theories

and view points from reputed model builders, which include;◦Klitgaard Model,◦Jeff Huther and Anwar Shah from The

World Bank.

a. Klitgaard ModelKlitgaard (1996) has developed a

simple model to explain the dynamics of corruption.◦ C(Corruption)=M (Monopoly Power)+D (Discretion) – A

(Accountability)

Hence Corruption depends on the amount of Monopoly power and Discretionary power that an official exercises.

Continued- KlitgaardThus, Corruption will prevail when:

◦High Monopoly power –large in highly regulated Economies

◦High Discretionary Power – in developing countries and transitional Economies, where; administrative rules and regulations are often poorly defined.

◦Low Accountability- Poorly defined Ethical Standards of public

service Weak administrative and financial systems Ineffective Watchdog Agencies

b. Jeff Huther and Anwar ShahBoth Believed a Self-interested individual

will seek out or accept corruption if the Expected gains outweigh the cost.

Mathematically Speaking◦E(B)= n*E(G) – Prob (P)*P >0

Where:◦E – is the Expectation operator◦N – is the number of corrupt transactions◦G – is the gain from the corrupt transaction◦Prob (P) – is the probability of paying penalty◦P – the Penalty for the corrupt activity

Continued- Huther J. & A. ShahHence, to reduce the corrupt

behavior using the cost benefit Analysis we can use the following methods:◦Reducing Expected Gross Benefit◦Reducing the number of corrupt

practice◦Increasing the probability of paying a

penalty◦Increasing the penalty for corrupt

behavior

Continued- Huther J. & A. Shah

The Influence of Anti-Corruption Programs on officials Cost-benefit Analysis

Number of corrupt Practices

Gross gains from Corruption

Probability of Paying penalty

Magnitude of Penalty

Bureaucratic Culture Economic Reform-Improving competitive Environment

Anti-Corruption Agencies

Rationalization of LawsRaising public service

standardsParliamentary Oversight

Reducing Public Employment

Ombudsman

Reducing Public Sector Size

Financial Accountability

Financial sector Liberalization

Scaling down individual Public Projects

Media Independence

Increasing Transparency Judicial Independence

Decentralization of public Services

Citizen participation

Rule of Law

Economic reforms Ethics Office

Types of Corruption

The Types of Corruption is based on the dynamics we intend to use. Hence, the following represent some:◦The Act of Corruption

Unilateral Bilateral Multilateral

◦Agents Involved High level officials Low level Officials Private Agents

Types-Continued …◦Budgetary Functions

Expenditures Revenues

◦Size of the Corruption Grand Corruption Petty Corruption

◦Nature of the Corruption Political Corruption Economic Corruption Academic Corruption

Methods to identify corruption vulnerable areas

is a (diagnostic) tool which seeks to identify weaknesses within a system which may present opportunities for corruption to occur.

As a general rule most corruption risk assessments take an institutional approach

the conceptualization of risk varies from tool to tool, for example:

Methods-Continued…Corruption risk is equated with the set of

institutional vulnerabilities within a system or process which might favor or facilitate corrupt practices

Measures of institutional vulnerability are combined with data on perceptions and/or experience of corruption as a proxy for corruption risk

Risk is expressed as a factor of the likelihood of corruption multiplied by the impact of corruption

Corruption risk is understood as a factor of the level of transparency and level of fairness in a process

Methods-Continued…Basic Risk Matrix

◦The Likelihood of Corruption Occurrence

◦The Impact of CorruptionMedium

RiskHigh Risk High Risk

Low Risk Medium Risk High Risk

Low Risk Low Risk Medium Risk

Low Impact of Corruption High

High

Likelihood of

Corruption

Low

Methods to fight Corruption

There are different ways to combat Corruption that are used by different countries.

Here for our training purpose we will consider three ways including:◦Penal-Administrative Approach◦National Integrity System◦The Hong Kong Model

a. Penal-Administrative Approach

Strengthen National law and administrative Structure in order for unveiling leakages from the system.

Betterment of institutional toolsFirm punishment of those cases

by strict laws and regulations

b. National Integrity SystemSuggested by Ibrahim Seushi (President

of Transparency International-Tanzania 1998)

Refers to Eight Pillar Model including:◦Political Will;◦Administrative reforms◦Watch Dogs-Like Anti-Corruption◦Parliaments◦Public Awareness/Involvement◦The Judiciary◦The Media◦The Private Sector

c. The Hong Kong ModelThe Model integrates three basic

pillars◦Education◦Prevention◦Deterrence/law Enforcement

The Ethiopian Ethics and Anti-Corruption Commission has adopted the Hong Kong Model and its Objectives include

Continued …Basic Objectives of the FEACCIn cooperation with relevant bodies, to

strive to create awareness in Ethiopian society that corruption will not be tolerated by promoting Ethics and Anti-Corruption Education;

In cooperation with relevant bodies, to prevent corruption offences and other improprieties, and;

To Expose, Investigate and prosecute corruption offences and other improprieties.

Cases of Corruption in the Construction Sector

Corruption in the construction sector is one of the most difficult problems due to◦Its High Spending nature◦Ease with which many corrupt

practices can be hidden◦Any lack of Capacity, Transparency

or accountability tends to accentuate the risk by Increasing the opportunities for corrupt

practices and Strengthening the drivers of corrupt

behavior.

Bangladesh

Bangladesh-Continued …‘Rana Plaza’ :- An eight-storey building

collapsed in Savar, on the outskirts of Dhaka.a complex that included a shopping centre

and six garment factories.At least 250 people were killed The building violated applicable building

codes. According to reports its foundation was

unstable; part of the complex had been built on a pond filled with sand. (Bangladesh’s home minister, Muhiuddin Khan Alamgir, )

Bangladesh-Continued …

TanzaniaIn 2006, a three-storey building

collapsed in the outskirts of Dare Salaam, injuring several people.

Two years later, a 10-storey building collapsed in the city centre, injuring scores of people. Yet another team was formed to investigate the mayhem, but the findings never came out.

Tanzania-Continued …

Tanzania-Continued … Again on March 28, 2013. a 14-storey 

building was collapsed,  in Dare Salaam The building was being constructed under

a joint scheme between a private investor and the public agency, the National Housing Corporation.

President Kikwete, for example, has said corruption is so endemic that public tenders are not won by the most competent firms but by the most corrupt.

killing more than 36 people and crushing several cars.

Conclusion – the ultimate costAll in all Corruption :

◦Claims the Life of peoples◦The Cost of replacement and repairing◦The Opportunity cost of damage-Time

value◦Breeds Artificial Inefficiency◦Competition and Ability will be replaced

with Financial Muscle◦Rule of Law disappears and so On.

Thus Fight Corruption and let Fight Others

Miscellaneous Pictures-Procurement

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Thank You