Financial Transparency Coalition

For any act of corruption, there is a demand—that is, a venal official who is willing to accept a bribe—but there is also a supply—an individual or business willing to supply it. The dualistic nature of corruption is a headache, particularly for public individuals and institutions interested in stemming the harmful practice. For example, India’s environment minister, Jairam Ramesh has commented on the difficulty for environmental regulators inIndia to check violations of green controls. He noted “I can control the demand for corruption but someone has to control the supply of corruption too. I cannot stop that.”

Fortunately, as a result of efforts by organizations like the Center for International Private Enterprise, international aid and development organizations have increasingly understood the importance of addressing both the supply and the demand of corruption.

The OECD 2009 Anti-Bribery Convention, for example, specifically addressed the issue of the supply of corruption, while also attempting to addressing demand. The OECD notes:

It is clear that there are two sides to bribery. As the largest exporters of trade and investment in the world, multinationals represent, by far, the greatest potential source of bribe money. The supply side was a logical place for our countries to start, notably given that these countries are home to most multinational enterprises. However, the problem of the demand for bribes is not being neglected. The OECD promotes cooperation with a number of other regions of the world, and other international instruments also offer sound strategies to combat the demand side.

The World Bank (WBG), like the OECD, has become concerned with the supply of corruption, particularly as it applies to WBG operations. In 2007 the Bank adopted a new Governance and Anticorruption (GAC) Strategy in March and an Implementation Plan in October. The Strategy shows promise, but has experienced an interesting limitation. A recent audit by the Independent Evaluation Group shows that since adoption of the GAC, the World Bank has remained too focused on improving its own resources and reputation in dealing with those issues. That is to say, the Bank has been so careful about providing a potential supply of money for corruption that it has overlooked other important elements of anticorruption.

What are those other elements? According to the Navin Girishankar, the study’s main author, the Bank needs to focus on institutions and policies within borrowing countries that will make them more accountable. And while the Bank has made a lot of promises to help countries strengthen their public sector, they have yet to show results in any concrete projects. As Girishankar put it: “The bank has to focus on helping countries develop the capacities to govern… There is a gap between the plans and the follow-through that needs to be filled.”

It’s true. It is easy to become overly focused on the micro-interactions that take place in a corrupt exchange. Those are important and powerful factors, but so are the surrounding institutions that allow the exchange to take place. Or as an economist might see it: there is a demand of corruption, a supply of corruption, and a set of “market” conditions that drive the transaction. Those market conditions are the nation’s institutions.

Joachim von Amsberg, vice president for the Bank’s operations policy and country services, responded that he could “live with a criticism that we have spent too much time protecting our own money.” And it’s good to hear the Bank is being careful. But now it’s time to solve the problem.