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Global Corruption Report 2005 Transparency International Pluto P Press TRANSPARENCY LONDON • ANN ARBOR, MI INTERNATIONAL GC2005 00 pre 3 13/1/05 2:45:10 pm First published 2005 by Pluto Press 345 Archway Road, London N6 5AA and 839 Greene Street, Ann Arbor, MI 48106 www.plutobooks.com in association with Transparency International Alt Moabit 96, 10559 Berlin, Germany www.globalcorruptionreport.org © Transparency International 2005 The right of the individual contributors to be identified as the author of this work has been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 0 7453 2397 9 hardback ISBN 0 7453 2396 0 paperback Library of Congress Cataloging in Publication Data applied for. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Edited by Diana Rodriguez, Gerard Waite and Toby Wolfe Contributing editors: Michael Griffin and Sarah Blair Every effort has been made to verify the accuracy of the information contained in this report, including allegations. All information was believed to be correct as of September 2004. Nevertheless, Transparency International cannot guarantee the accuracy and the completeness of the contents. Nor can Transparency International accept responsibility for the consequences of its use for other purposes or in other contexts. Contributions to the Global Corruption Report 2005 by authors external to Transparency International do not necessarily reflect the views of Transparency International or its national chapters. 10 9 8 7 6 5 4 3 2 1 Designed and produced for Pluto Press by Chase Publishing Services, Fortescue, Sidmouth, EX10 9QG, England Typeset from disk by Stanford DTP Services, Northampton, England Printed and bound in Malta by Gutenberg Press Ltd GC2005 00 pre 4 13/1/05 2:45:10 pm Contents Acknowledgements ix Foreword xi Francis Fukuyama Introduction 1 Peter Eigen Transparency International’s Minimum Standards for Public Contracting 4 Part one: Corruption in construction 1 The costs of corruption 9 Blowing the whistle on corruption: one man’s fatal struggle 9 Raj Kamal Jha The economic costs of corruption in infrastructure 12 Paul Collier and Anke Hoeffler The environment at risk from monuments of corruption 19 Peter Bosshard Earthquake destruction: corruption on the fault line 23 James Lewis The Italian mafia’s legacy of high-rise death traps 26 David Alexander Turkish homeowners demand an end to earthquake devastation 27 William A. Mitchell and Justin Page 2 Corruption in practice 31 Case study: Lesotho puts international business in the dock 31 Fiona Darroch Exposing the foundations of corruption in construction 36 Neill Stansbury A business perspective: promoting integrity in consulting engineering 40 Jorge Diaz Padilla Integrity Pact sheds light on Mexican electricity tender 43 Transparencia Mexicana GC2005 00 pre 5 13/1/05 2:45:10 pm WEF task force adopts the Business Principles for Countering Bribery 49 Transparency International Case study: Oversized incinerator burns up Cologne’s cash 51 Hans Leyendecker 3 International finance and corruption 55 Financing corruption? The role of multilateral development banks and export credit agencies 55 Susan Hawley Blacklisting corrupt companies 59 Juanita Olaya 4 Recommendations 65 Transparency International Part two: Special feature – Corruption in post-conflict reconstruction 5 Overcoming corruption in the wake of conflict 73 Philippe Le Billon Reconstruction and the construction sector 74 Aid and corruption 80 Case study: Corrupting the new Iraq 82 Reinoud Leenders and Justin Alexander Part three: Country reports 6 Key developments in corruption across countries 93 Cobus de Swardt 7 Country reports Argentina Laura Alonso, Pilar Arcidiácono, María Julia Pérez Tort and Pablo Secchi 96 Azerbaijan Rena Safaralieva 100 Bangladesh Md. Abdul Alim 103 Bolivia Jorge González Roda 106 Brazil Ana Luiza Fleck Saibro 109 Britain Michael James Macauley 112 Burkina Faso Luc Damiba 116 Cambodia Christine J. Nissen 119 Cameroon Talla Jean-Bosco 122 Canada Maureen Mancuso 125 China Guo Yong and Liao Ran 129 Colombia Rosa Inés Ospina 133 Congo (DRC) Anne-Marie Mukwayanzo Mpundu and Gaston Tona Lutete 136 vi Global Corruption Report 2005 GC2005 00 pre 6 13/1/05 2:45:10 pm Costa Rica Roxana Salazar and Mario Carazo 139 Croatia Ana First 141 Czech Republic David Ondrácka and Michal Šticka 144 Georgia Johanna Dadiani 147 Germany Carsten Kremer 150 Greece Markella Samara 154 India P. S. Bawa 156 Indonesia Emmy Hafild 159 Ireland Gary Murphy 162 Japan TI Japan 165 Kenya Parselelo Kantai 169 Latvia Inese Voika 172 Nicaragua Roberto Courtney 176 Norway Jan Borgen, Henrik Makoto Inadomi and Gro Skaaren-Fystro 179 Palestinian Authority Jamil Hilal 183 Panama Angélica Maytín Justiniani 186 Peru Samuel Rotta Castilla 189 Poland Julia Pitera 193 Romania Adrian Savin 196 Russia Marina Savintseva and Petra Stykow 199 Serbia Nemanja Nenadic 202 Slovakia Emília Sicáková-Beblavá and Daniela Zemanovicová 206 Sri Lanka Anushika Amarasinghe 209 Turkey Ercis Kurtulus 211 Vanuatu Anita Jowitt 214 Vietnam Danny Richards 218 Zimbabwe Idaishe Chengu and Webster Madera 221 Part four: Research on corruption 8 Introduction 229 Robin Hodess 9 Corruption Perceptions Index 2004 233 Johann Graf Lambsdorff 10 Global Corruption Barometer 2004 239 Marie Wolkers 11 National Integrity Systems in the Pacific island states 242 Peter Larmour 12 Kenya Bribery Index 2004 245 Mwalimu Mati and Osendo Con Omore 13 Measuring corruption in public service delivery: the experience of Mexico 248 Transparencia Mexicana Global Corruption Report 2005 vii GC2005 00 pre 7 13/1/05 2:45:10 pm 14 The Public Integrity Index: assessing anti-corruption architecture 252 Marianne Camerer and Jonathan Werve 15 A survey of governance in 30 underperforming states 255 Sarah Repucci 16 Global Index of Bribery for News Coverage 258 Dean Kruckeberg, Katerina Tsetsura and Frank Ovaitt 17 Trust and corruption 262 Eric M. Uslaner 18 Experimental economics and corruption: a survey of budding research 265 Jens Chr. Andvig 19 International determinants of national corruption levels 268 Wayne Sandholtz and Mark Gray 20 Corruption in transition economies 271 Cheryl Gray and James Anderson 21 Transparency and accountability in the public sector in the Arab region 275 UN Department of Economic and Social Affairs 22 Latin American Index of Budget Transparency 278 Helena Hofbauer 23 The Latin American Public Opinion Project: corruption victimisation, 2004 282 Mitchell A. Seligson 24 Corruption and crime 285 Omar Azfar 25 Measuring corruption: validating subjective surveys of perceptions 289 Rodrigo R. Soares 26 How far can we trust expert opinions on corruption? An experiment based on surveys in francophone Africa 292 Mireille Razafindrakoto and François Roubaud 27 Gender and corruption: in search of better evidence 296 Hung-En Sung 28 Corruption, pollution and economic development 299 Heinz Welsch 29 Firm responses to corruption in foreign markets 302 Klaus Uhlenbruck, Peter Rodriguez, Jonathan Doh and Lorraine Eden 30 The effect of corruption on trade and FDI 305 Mohsin Habib and Leon Zurawicki 31 Firms, bureaucrats and organised crime: an empirical examination of illicit interactions 308 Larry Chavis Index 311 viii Global Corruption Report 2005 GC2005 00 pre 8 13/1/05 2:45:11 pm Acknowledgements The editors of the Global Corruption Report 2005 would like to thank the many individuals who were instrumental in the development of this year’s report, above all our authors. We are particularly grateful to our Editorial Advisory Committee for their ongoing commitment to the Global Corruption Report and in particular for their large contribution to the thematic section of this year’s report: Zainab Bangura, Merli Baroudi, Peter Bosshard, John Bray, Sarah Burd-Sharps, Laurence Cockcroft, Jorge Díaz Padilla, Dennis de Jong, John Makumbe, Devendra Raj Panday, Anthony Sampson, Emilia Sicáková- Beblavá, Neill Stansbury, Frank Vogl and Michael Wiehen. Many thanks are due to the countless colleagues across the Transparency International movement, from the Secretariat in Berlin to national chapters around the world, who made our challenging task easier with their ideas and advice. TI national chapters deserve special mention for making a tremendous contribution to the expanded country-reports section. Outside the TI network, thanks are also due to the many people who generously devoted their time and energy to the report: David Abouem, Susan Rose-Ackerman, Ulrich von Alemann, Mahaman Tidjani Alou, Rosenthal Calmon Alves, Jens Chr. Andvig, Claude Arditi, Hans Herbert von Arnim, Sérgio Gregório Baierle, Sultan Barakat, Boris Begovic, Predrag Bejakovic, Peter Birle, Vesna Bojicic-Dzelilovic, Emil Bolongaita, Jermyn Brooks, Martin Brusis, Justin Burke, Rowan Callick, Florence Chong, Dimitris Christopoulos, Neil Collins, Neil Cooper, Sheila S. Coronel, Marcus Cox, Fiona Darroch, Vera Devine, Phyllis Dininio, Sara Rich Dorman, Gideon Doron, Kirsty Drew, Sophal Ear, Aleksandar Fatic, Mark Findlay, Charles Manga Fombad, Maureen Fordham, Arturo Grigsby, Åse Grødeland, Miren Gutiérrez, Andreas Harsono, Omar Al Hassan, Sue Hawley, Marion Hellman, Clement Henry,
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