Chapter 6 Corruption in Bangladesh: Review and Analysis

Chapter 6

Corruption in Bangladesh: Review and Analysis

M. A. B. Siddique*

UWA Business School

Abstract

Corruption is understood by the majority to be harmful to a country although the reason why is rarely understood. For this reason, economists have endeavored to determine the causes and consequences of corruption. Corruption is an important issue for Bangladesh since it is widely spread throughout the country and can lead to many unwanted consequences. Li et al. (2000) found that corruption, for example, can lead to misallocation of resources. Once bribing becomes an integrated part of the market, it will no longer be equal to bidding for scarce resources. They also found that corruption can be harmful to innovation; entrepreneurs have to get licenses and permits to start up new businesses and are often subjected to corruption. This is a consequence of corruption that could be detrimental to Bangladesh’s growth. The quality of goods may also be adversely affected, with decisions about the issuing of permits and licenses being determined by the largest bribe paid rather than the highest quality of goods (Lambsdorff, 2007).

This chapter is divided into 4 parts: Part I discusses the concept and various quantitative measures of corruption. As far as this author is aware the PRS Group was the first to score countries based on corruption. Since then a multitude of indices have been produced by

* I wish to thank Rebecca Doran-Wu, UWA Business School, for her excellent research assistance in writing this chapter.

well-known institutions such as Transparency International, the World Bank and PricewaterhouseCoopers.

Part II deals with the magnitude of corruption in Bangladesh and more specifically looks at the effectiveness of anti-corruption agencies within the country. The causes of corruption in Bangladesh are also explored, with particular emphasis on banking, customs and telecommunications sectors. In addition, Part II looks at the consequences of corruption on economic growth.

Part III discusses five possible remedies for corruption in Bangladesh and Part IV provides a conclusion.

Keywords: Corruption, measurement of corruption, corruption in Bangladesh, consequences of corruption, remedies for corruption.

The Concept and Measurement of Corruption The concept of corruption

Corruption refers to “the misuse of public power, office, or authority for private benefit — through bribery, extortion, influence peddling, nepotism, fraud, speed money or embezzlement” (United Nations Development Programme, 1999, New York, UNDP). When corruption is thus defined, it has a distinct moral and qualitative connotation. No matter what, corruption is immoral and therefore it has to be routed out.

Corruption is by no means confined to public officials. Individuals in private companies may also take bribes to provide goods and services if these are in short supply. Scarcity leads to rationing and rationing encourages corruption. If all services and goods were available in plenty, there would be less room for both taking and giving bribes.

Corruption at all levels of government — the executive, the legislature and the judiciary — are now relatively uncommon in most developed countries, although some public officials are still brought to justice for acting corruptly. But in many of the developing countries corruption exists at all levels of government, and it is sometimes very difficult to get a job done, such as procuring a license for an activity without offering bribes, in cash or in kind, to layers of public officials.

Now, the question is: does corruption have an inhibitive impact on economic growth and development? The question has been widely

examined in economic literature in the past three decades. For the first few years, opinions of the experts were divided; but in more recent years, there has been a growing consensus that high levels of continuing corruption tend to be inimical to long-term growth.

However, it is possible to argue the other way round. Most developed countries seem to experience much lower levels of corruption in both government and non-government agencies than in comparable agencies in developing countries. If this is so we could argue that corruption is a by-product of poverty and underdevelopment, and that development itself provides an automatic mechanism to reduce (or eliminate) corruption. It is certainly arguable that when the general population in a country becomes more and more affluent with economic growth and development, they are less tempted towards ‘petty’ levels of corruption.

The measurement of corruption

There exists currently six popular measures of corruption, the; Corruption Perceptions Index (CPI); Global Corruption Barometer (GCB); Bribe Payers Index (BPI); World Bank Control of Corruption Index (CCI); International Country Risk Guide (ICRG) Corruption Score; and the Opacity Index.

The CPI was created in 1995 by a Berlin-based organization known as Transparency International (TI). Since then, the index has grown to include more than 180 countries and is produced annually. TI gathers its intelligence from its own network of personnel as well as other institutions such as the Economist Intelligence Unit, Freedom House and Political and Economic Risk Consultancy. In order to be eligible to be ranked in the CPI a total of 3 or more sources must be available for that particular country. The CPI gives participating countries a score out of 10, with 0 the highest level of corruption and 10 the lowest. TI then ranks the countries accordingly.

In more recent years TI has developed two other corruption measures: (1) the Bribe Payers’ Index (BPI) which seeks to assess the supply side of corruption and ranks corruption by source country and industry sector and (2) the more recently developed is the Global Corruption Barometer

(GCB) which systematically surveys public opinion in order to assess the general public’s perception and experience of corruption in more than 60 countries.

The CCI, along with other governance indicators, has been produced by the World Bank since 1996 for 213 countries. The World Bank views good governance and control of corruption as the main strategy for the alleviation of poverty. The World Bank seeks to minimize corruption on World Bank funded projects; and it also offers all technical assistance to countries in improving governance and controlling corruption.

The International Country Risk Guide has been published on a monthly basis by The PRS Group since 1980. It provides political, economic and financial risk ratings for those countries that are deemed to be important for international business. An index is created for each of the three categories; the Political Risk index is based on 100 points, while the remaining two are both based on 50 points. The scores are then summed and divided by two in order to obtain the weights for inclusion in the composite country score, where 0−49.9 and 80−100 points denotes Very High Risk and Very Low Risk respectively. One and five-year forecasts are made and projections are based on “best” and “worst” case scenarios.

PricewaterhouseCoopers created a new opacity index in 2001 which deals with five crucial pillars of the economy that affect business prospects, including corruption. While initially relying on surveys conducted by employees within the countries in question, it has since evolved into an index which is reliant on a comprehensive list of resources including the Global Competitiveness Report and the Index of Economic Freedom.

Corruption in Bangladesh How corrupt is the country?

What becomes obvious when reading through the literature, is the extent of corruption within Bangladesh. Perhaps the most scandalous, but not surprising, is the magnitude of corruption in the Bangladesh police department. A survey conducted by Transparency International Bangladesh (TIB) discovered that the police department is the most corrupt public

institution within the country; 84% of people who had dealings with police reported corruption and 75% paid bribes while seeking services (Wattad, 2003). Despite the extent of corruption within Bangladesh the number of people convicted for this crime still remains at a minimum. The number of cases actually filed, compared to those reported, is low due to lengthy bureaucratic procedures. Between 1972 and 1998, the annual proportion of cases filed with respect to the number reported was approximately 75% with only 32% of those resulting in conviction (Zafarullah and Siddiquee, 2001). The low conviction rate is the result of lack of evidence and determination of public prosecutors.

While there exists many different types of corruption, in 2003 TI found that the number one type of corruption in Bangladesh was the abuse of power, with 1336 cases, followed by bribery, 441, and asset stripping, 382 (Transparency International, 2003). Knox (2009) surveyed households and found that within the previous 12 month period 96.6% of households had experienced corruption within the law enforcement sector; 52.7% of which was in land administration while 47.7% was in judiciary sub-sectors. He also found that within the education sector 51% of corruption was due to negligence while embezzlement and bribery accounted for 21% and 20% respectively. In addition, 41.8% of households experienced corruption within the health sector with bribery and negligence accounting for 42 and 43% of total corruption within the division respectively.

Despite the lack of convictions, the extent of corruption that exists in Bangladesh cannot be disputed. Not only is it a hindrance to the operations of daily life it is also extremely costly to the Bangladeshi government; between 1999 and 2000 the government lost US$757.2 million (1.85% of GDP) due to corruption (Transparency International, 2003).

The indicators as discussed earlier allow us to draw conclusions on the level of corruption in Bangladesh based on quantitative measures. While Bangladesh is not included in the GCB, BPI or Opacity Index, it is included in the remaining 3 indices. Table 6.1 shows the 2010 percentile rank of Bangladesh in 2010 for the CPI, CCI and ICRG.

Since its introduction into the Transparency International Corruption Perception Index in 2001, Bangladesh has managed to move up the ranks