Measuring corruption in Africa: The international dimension matters Francis Nguendi Ikome, Ph.D Chief, Governance and Public Sector Management Section, Macroeconomic Policy Division UNECA Johannesburg 20 th February 2017 AFRICAN GOVERNANCE REPORT IV 2016
PRESENTATION ORGANIZED IN SIX SECTIONS 1) Key messages 2)Econs governance, institutions, corruption and structural transformation 3) Perception-based indices & their inadequacies in measuring corruption 4)Critical review of non-perception-based measures/mixed indices of corruption 5)International dimensions of corruption 6)Conclusions and Policy recommendations AFRICAN GOVERNANCE REPORT IV
Key Messages 1. Corruption has many facets and is often conducted in secrecy, which makes it difficult to measure in a precise and objective manner. 2. Definitional ambiguity of Corruption affects rankings and cross- country comparisons. 3. Corruption indices have grown exponentially, to raise awareness among policymakers and the general public. 4. The types and quality of data make corruption measurement difficult, given that objective data are difficult to obtain. AFRICAN GOVERNANCE REPORT IV 2016
Key messages (cont …) 5. There is need to move beyond present indicators to assess corruption within a broader African governance context. 6. Survey bias towards one group of society over another, undermines the quality of the measurement outcome. 7. Measuring types of corruption and their occurrence (without aggregation) can provide a better picture of corruption. 8. Any measurement that does not take into account the international dimension would be incomplete. AFRICAN GOVERNANCE REPORT IV 2016
PART 1 Economic Governance Institutions, Corruption and Structural Transformation (ST) Good governance remains a key requisite for Africa’s ST Principles of good governance have been articulated by many players (UNDP 1997, NEPAD 2003 & re-affirmed in Agenda 2063). Good governance facilitates the interaction between the public sector and other actors in the economy. There is a positive correlation between good governance and economic growth (Engjell, 2015) AFRICAN GOVERNANCE REPORT IV 2016
Economic governance impacts a country’s structural transformation Good economic governance entails: public financial management & accountability; integrity of the monetary and financial system; and an adequate regulatory framework (ECA 2002). Economic governance is mainly about public institutions with capacity to manage resources efficiently; formulate, implement and enforce sound policies and regulations. Economic governance institutions have an overall effect and influence on the quality of economic governance and ultimately on structural transformation AFRICAN GOVERNANCE REPORT IV 2016
AFRICAN GOVERNANCE REPORT IV
Corruption is a governance challenge & an impediment to Africa’s Development Grand corruption – esp ’ in extractive sectors - is a major governance challenge & an impediment to development in Africa. Weak governance institutions exacerbate corruption, threatening prospects for structural transformation. Poor accountability, weak audit and oversight institutions and influence from the executive are some of the underlying institutional deficiencies (AGR I) Yet, measures of the magnitude of corruption in Africa often neglect the institutional & external dimensions. AFRICAN GOVERNANCE REPORT IV 2016
PART 2 Perception-based indices of corruption are inadequate for measuring corruption in Africa Measurement Methodology Critique Control of Data source: Combines different sources & Does not use primary data Corruption Index surveys, depending on availability Only Measures corruption from a (COC) public sector perspective. Survey informants: business leaders, general public and country analysts. Corruption Data source: Country surveys Irregular country coverage Perception Index Narrow definition of corruption, (CPI) cannot capture trends since Survey Informants: Public officials (misuse sources of survey and countries of public power for private benefit (bribery change each year. of public officials, kickbacks) or strength of anti-corruption policies) Global Integrity Data source: Surveys assess both de jure Does not measure the full Index & de facto corruption prevention measures. magnitude of corruption (GII) Only focuses on the effectiveness of anti-corruption policies. Survey Informants: independent social scientists, researchers and investigative journalists. AFRICAN GOVERNANCE REPORT IV 2016
Although very prevalent, perception-based measures of corruption have significant limitations Do not present a reliable picture of corruption in Africa. Data • reflects peoples’ perceptions and opinions (victimization surveys) These indices are underpinned by sample bias (survey • respondents are not homogenous) Ill-suited for cross-country comparisons over time due to data • constraints. Most data not useful for policy-reform and institutional building. • Indicators do no capture the international dimension of • corruption. AFRICAN GOVERNANCE REPORT IV 2016
PART 3 Critical Review of Non-perception Measures and Mixed Indices of Corruption Several indices are credited for rigor, broad baseness • and objective approach. These are essentially composite indicators which combine fact-based surveys/data with perception-based surveys. These indices provide periodical assessments of • governance, with a focus on corruption. The four indices reviewed include : The African Governance • Report (AGR) ; Ibrahim Index for African Governance (IIAG) ; Global Competitiveness Index (GCI) ; Country Policy and Institutional Assessment (CPIA) AFRICAN GOVERNANCE REPORT IV 2016
Critical Review of Non-perception Measures and Mixed Indices of Corruption (c ont…) • Data source : ECA data + Country . Reports AGR • Methodology: National expert surveys (sample size 100); Household surveys (2000 – 3100 per country); Desk research • Data source : 33 external sources • Methodology : Desk-based reviews IIAG of collated data, aggregated into a composite index. The data for each of 93 indicators are put on a standardized range of 0 – 100 AFRICAN GOVERNANCE REPORT IV 2016
Limitations of Non-perception Measures and Mixed Indices of Corruption Despite creating awareness of the governance challenge, there are major limitations in the methodologies of these indices: High likelihood of correlation of errors among the sources used Do not measure what they purport to measure Lack transparency Suffer from sample bias Completely ignore the international dimension of corruption which is attributed to the phenomenon of Illicit Financial Flows in Africa Not “actionable” for policy purposes AFRICAN GOVERNANCE REPORT IV 2016
Part 4 International Dimension of Corruption The international dimension of corruption in Africa cannot be neglected. The international character of corruption in Africa is linked to historical factors (colonial trading and political relations). Foreign assistance, sometimes, has worsened democratic & bureaucratic performance resulting in high levels of corruption (Charron, 2011) Foreign aid channeled through governments’ consumption expenditure increases corruption (Asongu & Jell, 2013) Foreign assistance is an outlet by which the political elite in recipient countries engage in rent-seeking behaviors. AFRICAN GOVERNANCE REPORT IV 2016
Part 4 International Dimension of Corruption Cross-border corruption involving foreign firms has escalated in Africa. From 1995 – 2014 out of 1,080 corruption cases in Africa, 99.5 % involved non-African firms (Escresa & Picci, 2015) Illicit Financial Flows are a significant component of cross-border corruption AFRICAN GOVERNANCE REPORT IV 2016
International Dimension of Corruption (cont..) Entry Modes for Multinational Corporations in Corruption AFRICAN GOVERNANCE REPORT IV 2016
Part 5 Conclusions and Policy Recommendations Conclusions Africa needs improvement in overall governance performance, e.g. through reforms in public financial management & anti- corruption initiatives. Good governance remains critical for structural transformation. Corruption in Africa is not exclusively the making of Africans. Current indices, which continue to rank African countries poorly, are misguiding to policymakers and investors. Corruption indices misrepresent the contextual realities of African countries The indices ignore the international dimension of corruption. AFRICAN GOVERNANCE REPORT IV 2016
Policy Recommendations i. Improve transparency and accountability (e.g. fiscal transparency and good public financial governance) in order to reduce corruption. ii. Enhance ownership & participation in development planning (multi-stakeholder participation, CSOs, media) iii. Build and strengthen credible governance institutions (e.g. accountability and oversight institutions). iv. African countries and partners should focus on approaches to measuring corruption that are fact-based with more objective quantitative criteria. v. Rethink the nature of development cooperation including prioritising combatting IFF and enhancing assets recovery vi. Improve regional and global governance architecture AFRICAN GOVERNANCE REPORT IV 2016
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