Nathaniel
Global Integrity's Suha Ma'ayeh breaks down the history of the mobile communications market in Jordan -- and the rich opportunities that were created by privatizing a national telecom with limited public oversight.
Call Your Wasta
By Suha Philip Ma'ayeh
In 2005 Umniah Mobile Communications (UMC) entered the Jordan's booming telecommunications sector. It became the country's third mobile operator and broke the market's duopoly, ushering in lower tariffs in a country where mobile phone usage stands at 47.9 percent. But when UMC was sold in 2006 to a Bahraini company for US$415 million — a much inflated price compared with its initial 8 million dinar (US$11.3 million) license fee — questions arose over the licensing procedure.
Lawmakers investigated the deal for corruption, believing that there were officials who benefited from the sale. However, corruption is easy to allege and hard to prove.
Lawmakers received unconvincing answers from the government when they asked it to clarify the huge difference between the license fee and the selling price of the company. In March 2007, Parliament asked the general prosecutor to investigate the case. In August, King Abdullah of Jordan dissolved Parliament.
A leaked government report into the allegations found that the deal was in accordance with the law. However, the lawmakers and commentators saw the report as an attempt by the government to influence the judiciary's investigation. Former lawmaker Mamdouh Abbadi, who headed the Anti-Corruption Committee at the lower house of Parliament, said, "this is unconstitutional because when the court is looking into the case, no single institution — not even Parliament — is allowed to carry out investigations."
Successive governments in Jordan have vowed for years to fight corruption, but many Jordanians share the feeling that the disclosed corruption cases are just the tip of the iceberg. According to officials, administrative corruption outweighs financial corruption. One official described the office of the prime minister as a dumping ground for high-level government employees who are no longer needed in their previous posts. They are appointed as advisers without job descriptions.
Advisers' salaries are at least 1,000 dinars a month (US$1,412), in a country where the annual per capita income stands at 1,082 dinars (US$1,528).
A poll conducted by the Center for Strategic Studies at the University of Jordan in 2006 surveyed a random sample of 1,148 people and another of 626 opinion leaders. The study reavealed that 46 percent of Jordanians said they believe corruption has increased during the last three to four years. Some 65 percent of respondents said they believed that corrupt practices such as bribery, embezzlement, fraud, extortion, favoritism and nepotism exist to varying degrees in the public sector, while 52 percent said they believed that corruption was widespread in the private sector.
But if anything serves as the symbol of corruption in Jordan, it is what is known as Wasta. Wasta literally means favoritism — the use of family, business or personal connections to advance personal interests. Although Wasta is culturally rooted, the vast majority of Jordanians believe that it is a prevalent form of corruption. At the same time, there is a public perception that citizens must have some sort of Wasta in order to run their day-to-day affairs smoothly, in a country largely ruled by bureaucracy.
For example, if you have an acquaintance at the Department of Civil Service who could act as your Wasta, he could simply help you skip the line to renew your passport or ID. Not only that, your Wasta can help you get appointed at a governmental institution, avoiding the ranks of the unemployed in Jordan. Currently, 15.4 to 30 percent of the country's 5.6 million are jobless. Such was the case for the son of an influential member of Parliament. The son became the director of one of the Jordanian government's business development institutions in September 2006. Needless to say, the son of this MP didn't have to prove himself or his credentials to obtain this position.
An Anti-Corruption Commission Law endorsed by Parliament in September 2006 defined corruption as any act that violates official duties and all acts related to Wasta and nepotism that could deprive others of their rights, as well as economic crimes and misuse of power. Alghad, a private newspaper, played on the theme to attract readers by running ads that featured a serious middle-aged businessman clad in a suit, with a sentence that read, "In Jordan, there is no Wasta."
Journalists themselves are not immune from corruption, which is also encouraged by officials. At least a handful of journalists were appointed as media advisers in several ministries, where they draw a salary while remaining on their papers' payroll. "These advisers try to influence their colleagues to overlook certain stories, or avoid criticizing a certain minister," said Fahed Kheitan, an editor at Arab Alyawm, a daily newspaper in Amman.
Such self-censoring is the reason why a story about the Amman Municipality expropriating the corporate buildings of businessman Talal Abu-Ghazaleh to serve the interests of regional investors was absent from the leading newspapers in which the government is a strong shareholder. Abu-Ghazaleh has since spent millions to fight the order, and he took the municipality to court. Economists and lawmakers spoke out about the abuse of power and illegal expropriation. They charge that the US$1.5 billion project is a private investment, so expropriating the buildings does not serve the public interest. However, the expropriation could not be proven illegal either.
Like members of the press, judges are often subject to undue interventions and pressures, leaving the judiciary open to corruption and abuse of power. Since June 2006, the judiciary has been looking into seven cases of alleged corruption.
One such case implicated a former minister of municipalities, Abdul Razzak Tubeishat, who was charged for allegedly sanctioning the purchase of waste-management vehicles from Germany for an estimated 4.5 million dinars (US$6.3 million).The required specifications for the equipment were not met, but the purchase was approved anyway. Tubeishat was a serving minister when the alleged practice took place, so he could not be tried in a regular court. In December 2006, a special parliamentary committee formed to investigate the allegations later acquitted the former minister from any wrong doing. However, a parliamentary session designed to discuss the committee's decision did not muster the needed quorum and accordingly was canceled. So when parliament was dissolved, Tubeishat's case remained unresolved.
With the exception of a former chief of intelligence who was tried under house arrest in 2002, rarely are high-ranking official charged in Jordan.
Other cases the courts are looking into involve alleged financial violations by the Islamic Center Charity Society and suspicious accounting procedures by the General Union for Voluntary Societies.
In compliance with the UN Convention Against Corruption, Jordan has created an anti-corruption committee whose members were appointed on March 19, 2007. The committee's president, Abed Shekhanbeh, said he will concentrate on investigating the misuse of public funds, among other things, and will ensure that ministers and lawmakers are charged if there are witnesses and sufficient evidence.
Parliament also passed a Financial Disclosure Law in November 2006 and an Access to Information Law in April 2007. However, access to information remains hindered by State Secret and Documents Law (Provisional Law No. 50 of 1971), which violates internationally recognized principles of access to information. To combat corruption effectively, the country needs free media, a Parliament that is not based on tribal affiliations, and a strong judicial system. This is not the case in Jordan.
Jordan's only TV station is under state control. A new, private TV station was scheduled to start broadcasting in July 2007 but has been put on hold due to financial irregularities. Additionally, with parliamentary elections scheduled for November 2007, the government is waging a campaign against the Islamic Action Front — with 17 seats, the only opposition in Parliament. The rest of the 34 political parties are fragmented and weak.
Corruption is like cancer, and Jordan needs to eliminate the causes that lead to cancer before it starts fighting the disease itself.
"Even if there are serious efforts to combat corruption, there are limits," said Abdul Rahim Malhas, a former member of Parliament and health minister who was vocal against corruption. "You can find corruption, but you cannot fight those who are corrupt because they are powerful."
More on Jordan here.
Saturday, June 21, 2008
Jordan: Call Your Wasta
Wednesday, June 4, 2008
Azerbaijan: Border Patrol
Last week we reported on corruption cases in the United States border patrol. The solitary and remote nature of border crossings, plus the authority inherent in the border police, creates a classic scenario of "Opacity + Discretion = Corruption". Here, Global Integrity's Farid Abbasov looks at corruption on the borders of Azerbaijan.
Azerbaijan: Border Patrol
By Farid Abbasov
In July 2007, Vladimir R., a Georgian businessman, traveled by car from Tbilisi to Baku for business. The 400-kilometer drive from the Georgian-Azerbaijani border to Baku made his pocket lighter by 180 new manat (US$211). He said he paid numerous small bribes to Azerbaijani customs and road police officials. "All that started at the customs on the Azerbaijani side," Vladimir explained. Although Vladimir's documents were in order, a customs officer demanded a 60-manat (US$70) bribe before he would allow him to cross the border. "We argued a lot and I finally paid 40 (US$47)," Vladimir said.
20 kilometers further along, Vladimir's jeep was stopped by road police on the highway. "I did not violate any rules. As I understood later, the police are used to stopping all cars with foreign plates there," Vladimir said.
The officer first sought reasons to delay Vladimir's trip, and then asked for a 100-manat bribe (US$117). A bargaining session full of shouting ended with a 45-manat (US$53) deal.
At the next police post, Vladimir tried a new tactic: "I stretched my documents with five-manat (US$6) banknotes before giving them to policemen every time they stopped me." By the time he reached Baku, Vladimir paid a total of 140 manat (US$164) in bribes to policemen along the way.
"Corruption remains a major problem in Azerbaijan, affecting all levels of society and threatening the economic, social and political development of the country," reported the Parliamentary Assembly of the Council of Europe. The road police are just one of the corrupt state agencies affecting daily lives of ordinary people. After a significant increase in road police wages in 2005, some improvements were notable. However, they didn't last long. Now Azerbaijanis can easily escape the official penalty, including cash payment and withdrawal of a driver's license, by paying a five- to 40-manat (US$6 to $47) bribe right on the street. Variations of the amount depend on the severity of traffic violation and the size of the driver's pocket.
Bribery among road police is ubiquitous. For the price of a 400- to 500-manat bribe (US$470 to $597) a driver's license can be obtained within two days without any exams and tests. The annual mandatory technical test of your car will cost you 50 manat (US$59); if you refuse to pay, obscure criteria will be applied to deny your car proper authorization.
If you buy a car, it will go nowhere until you pay 400 manat (US$470) as an illegal "installation" fee to the road police's registration department. The booming car purchase statistics imply that illegal road police revenue obtained via documentation of car purchases and mandatory tests is a lucrative multi-million business.
The government often fails to adjust its policies toward behavior that stimulates corruption. For instance, owners of luxury cars are always ready to pay from 50 (US$59) to several thousand manat for so-called "prestigious" number plates, and the government takes no action to benefit from the demand for these plates. As a result, corrupt road police officers take advantage of the situation.
Corruption in Azerbaijan is endemic. Government institutions, especially in the area of procurement of goods and services, are not transparent. "Every third manat from the country's consolidated budget in 2006-2007 is being spent on ambitious government projects on infrastructure improvement. Meanwhile, there are serious problems with this spending while the system is not transparent [selection of projects, choosing of contractors and implementation]," says Inqilab Ahmadov, director of the Baku-based Public Finance Monitoring Center (Ictimayi Maliya Monitorinq Markazi).
In July 2007, Elxan Salaxov, correspondent of the local Gun Sahar weekly, received the "Media Key" (Media Açari) journalist award for a series of articles called "Bridge-eaters." He investigated the transparency of the government's spending on the construction of traffic bridges in Baku between 2006 and 2007. According to Salaxov, tens of millions of manat were allocated from the budget without detailed descriptions of costs, and then spent without any public bidding. "According to the government, each bridge cost in average 7 million manat (US$8.2 million). However, the public in Azerbaijan is not aware of the procedures for selection of contractors and procurement for those construction works," the journalist said.
Azerbaijanis traditionally face corruption when dealing with education, health care, courts and public utility services. Bribery in the education system begins in kindergarten and ends at university graduations. Parents have to pay extra 10 to 20 manat (US$12 to $23) per month per child to kindergarten teachers. During high school, parents pay 300 to 400 manat (US$352 to $470) a year to school directors to falsify attendance records while their children study with private tutors to prepare for university admission exams. At the universities, every semester costs the lazy student from 200 to 1,000 manat (US$235 $1,175).
In the state health care system, patients or their relatives have to "thank" the heavily underpaid doctors and nurses for services. Each surgery has a "fixed" price depending on its complexity.
The judiciary remains among the most corrupt institutions in Azerbaijan. According to Alimamed Nuriyev, coordinator of NGO Cooperation Network Against Corruption (Korrupsiyaya qarsi QHT sabakasi), judges wages have increased four times since 1999, but the largest number of citizens' complaints about corruption still involve the courts. Corruption in the country's Economic Court (entrepreneurs often call it the "Economic Exchange") is a serious obstacle to investment growth in Azerbaijan.
Business circles complain even more about corruption in customs, where total bribes may reach 35 percent of the value of imported goods. Another headache for local and foreign entrepreneurs is the newly (2006) established Ministry of Emergencies. Its unclear, complex and frequently changing standards interfere in all kinds of business activities. The only way to satisfy the ministry is a bribe or the purchase of an item (like obligatory fire safety equipment) from a company personally affiliated with its top officials.
The government does recognize the existence of corruption and is making efforts to reduce it. On March 12, 2007, the top-level government commission against corruption published a report about implementation of the state program in the fight against corruption from 2004 to 2006. Legislative improvements in the criminal code and other key laws made corruption a heavier crime and defined it with more detail. The hiring of government employees is increasingly managed on competitive grounds.
President Ilham Aliyev introduced "The National Strategy on Increasing Transparency and Strengthening the Fight Against Corruption in Azerbaijan in 2007-2011." The strategy engages a broad range of government agencies in a systematic approach and envisions a broad range of measures aimed at reducing corruption. For example, some of the measures will simplify businesses registration procedures.
According to Prosecutor General Zakir Garalov, 150 people have faced corruption charges since 2005. 56 cases have been taken to courts by his agency's Anti-Corruption Department and another 258 people have been found guilty for corruption by the courts.
The completed trial of former Health Minister Ali Insanov and the ongoing trial of former Economic Development Minister Farhad Aliyev are the most telling corruption cases in recent years. Both ex-ministers were arrested in October 2005 on coup charges, but later only faced charges of "economic crimes." The ex-ministers turned their trials into a political show, revealing the subtle corruption network of the Azerbaijani government. Still, not a single law enforcement agency has set up investigations based on the revelations.
The Council of Europe's Group of States Against Corruption recently published a report calling Azerbaijan a country "where the scale of corruption is threatening its economic and political development." So far, the Azerbaijani government has taken very modest and inconsequential steps toward fighting corruption in its country. As a result, Azerbaijan continues to be criticized for corruption by the global community.
Read critical reactions to this piece here.
Read more about corruption and anti-corruption in Azerbaijan.
Wednesday, May 21, 2008
Egypt: Bad Blood
Sameh Fawzy tells a grisly story of how cozy relationships between business and politics threatened to infect -- literally -- the people of Egypt.
Egypt: Bad Blood
By Sameh Fawzy
In January of 2007, an employee of the Egyptian Ministry of Health, Sohier El Sharkawi, claimed to have found 200,000 contaminated bags used to package donated blood in the ministry's storage area. The bags, she alleged, were infected with bacteria and fungi likely to cause hepatitis or cancer. The bags' manufacturer was a company owned by Dr. Hany Srour, a member of the People's Assembly (national parliament) with the ruling party.
Dr. Srour was interrogated by the general prosecutor after his parliamentary immunity was lifted and was officially charged with profiteering — it is unconstitutional for members of parliament to do business with the government — along with six other people, including his sister and employees in both his private company and within the Ministry of Health. The trial began on June 12 and lasted throughout 2007. The case revives unpleasant memories of the corruption of the Assembly's members, mostly within the ruling party, and casts doubt on the relationships between politics and business. Moreover, to date, the whole affair has received little attention from the watchdog agencies that are supposed to monitor public corruption.
The corruption of assistants to ministry-level officials seems to be a pattern in Egypt. In August 2007, the Administrative Control Authority (ACA), which tracks corruption within government agencies, arrested two aides to the minister of Culture on charges of corruption. The first was Ahmed Hussein, caught red-handed with a bribe of 10,000 Egyptian pounds (US$1,800) from a contractor competing for a contract for the restoration of the Nubian Museum, while the second, Ayman Abdel-Moneim, was accused of collecting bribes from contractors working for the Ministry of Culture. The investigations revealed that both defendants have been on the take for some time, collecting bribes ranging from meals of fish to luxurious apartments.
The minister of Culture, Farouk Hosni, is the Egyptian nominee for the post of director-general of UNESCO (United Nation's Educational, Scientific and Cultural Organization), with elections slated for 2009 in Paris. Hosni defended his aides, stating that they were competent in their work, but insisted that he would not protect any corrupt employee.
Some commentators have tried to link the revelation of the Ministry of Culture scandal with infighting by political elites. Although this argument has been totally dismissed by the minister, it has emerged that some of the corruption cases in the government have been disclosed by rival government officials.
Over the last decade, a number of corruption cases involving ministers' aides have erupted, especially in the Ministries of Information and Agriculture. The cases have resulted in lengthy trials, occasionally leading to the conviction of several government officials. Some opponents of this process insist that these cases are politically motivated, designed to distract attention from far larger and more important corruption concerning privatization and profit-making partnerships between businesspersons and the ruling elite.
In 2006, the Egyptian Movement for Change, widely known as Kafaya (Enough), published a report entitled "Corruption in Egypt: A Black Cloud That Never Passes." The report contained a detailed description of corruption at different levels. Most importantly, it detailed the close relationship between politicians and business interests within the elite strata of Egyptian society. The report mentioned that "the only way common people can deal with the government is through bribery."
In fact, ordinary Egyptians echo stories about profit-sharing deals between high-ranking politicians and members of the Egyptian business community. Yacoubian Building, a controversial movie released mid-2006, portrayed a society in which corruption had become a way of life, a society sinking in the mire of poverty and social disintegration. In the movie, a corrupt minister cuts a deal with a drug dealer who becomes a member of Parliament.
Bribery is systematically entwined in Egyptian daily life. People bribe public employees to get both legal and illegal services. Public employees, in turn, are usually looking for small cash tips from people to offset extremely small salaries.
Corruption among municipal-level officials in Egypt is especially rampant. The situation is described by Dr. Zakareya Azmy, the chief of staff to the Egyptian president, as "sinking up to its ears in corruption." Local authorities enjoy enormous power over people's day-to-day lives in Egypt. They license shops, monitor markets and issue building and remodeling permits. Generally speaking, it is difficult to get the license required to conduct any of these activities without paying off local employees, who sometimes create networks of power based on their ability to distribute favors.
A new law governing local administration is expected before local elections are due in April 2008. Many Egyptians hope that the law will curb corruption at the municipal level and improve the quality of local services. In 2007, the government openly acknowledged that corruption is a real problem and contributes to Egyptian poverty, as well as the lack of foreign investment.
The Ministry of Administrative Development lists six fields in which bribery is rampant: unjustified payments to get lawful public services, evasion of customs and taxes, erasing criminal records, careless management of public utilities, recruiting and procurement.
In July 2007, Prime Minister Ahmed Nazif held a high-profile meeting, including his ministers of Interior, Justice and Administrative Development, along with his attorney general and the chairman of the Administrative Control Authority. His goal: to focus his cabinet on the war on corruption. In this meeting, which came at the behest of President Hosni Mubarak himself, the prime minister promised a sustained war on bribery.
At the meeting, the prime minister stressed that the government would pursue the war on three fronts: first reviewing and modifying the laws and bylaws governing the work of a number of different watchdogs; second, taking more steps toward "electronic government," a process that replaced a number of state employees with technology, reducing the opportunity for government officials to exercise corruption; third increasing the level of transparency in government purchases and official regulations. The government, according to the prime minister, will push a package of new laws to the Parliament later this year, which will help harmonize the work of watchdog agencies, reduce redundancy and energize their work. One of these laws concerns "public function."
Over the last three years, some laws, such as the Egyptian Tax Code, have been modified in the interests of fighting corruption. But the Egyptian people continue to have their pocketbooks raided by corrupt officials, and the government has done nothing beyond adopting strong rhetoric.
Read critical feedback on this essay here.
Tuesday, May 13, 2008
Tanzania: The Influence Grid
Global Integrity's Sebastian Sanga writes from Tanzania with a review of last year's electrical power crisis, and the political powers that let it happen. The report, in the words of a peer reviewer, "gives a vivid picture of the gravity of the corruption cankerworm in Tanzania."
Tanzania: The Influence Grid
By Sebastian Sanga
Image: Dar Es Salaam (Julienne/Flickr)
My mind reels whenever I think of the electricity crisis that plagues Tanzania. The nights are the worst: Frequent outages enable thieves and bandits to ply their trade, terrorizing the citizens. The risk of deadly fires is high as people opt for candles and oil lamps to light their houses.
Rolling blackouts are now the rule rather than the exception. In the process, many industrial and domestic appliances are damaged. Fires are rampant in many areas of the city. And there is little hope of lasting change — because of the problem of corruption.
Across the country, the air is thick with fumes from generators. The hum of their motors is heard everywhere in the cities and towns. The pollution is compounded by the smoke that emanates from thousands and thousands of chimneys and windows, as firewood and charcoal have replaced electricity for domestic use. And 99 percent of the rural population — nearly 28 million people — have no access to electricity at all.
This causes unprecedented deforestation rates, with over 91,000 acres of forests vanishing annually due to the voracious demand for firewood. Wood biomass accounts for 90 percent of total energy consumption. Meanwhile, the imposition of strict rules on charcoal businesses — originally put in place for environmental reasons — prove nearly impossible to enforce, due to the lack of alternative sources of power. Instead, the price of charcoal keeps rising, affecting the standard of living of the majority of ordinary Tanzanians. A bag of charcoal now sells for 25,000 shillings (US$20.04) — a considerable burden on low income earners.
Power outages have a variety of spillover effects. For instance, water crises in Dar es Salaam are endemic due to the electricity required to keep the city's water pumps operating. Residents often are forced to drink water from unhygienic sources, leading to deadly cases of diarrhea and other diseases.
The poor are hardest hit. Meanwhile, the powerful are capitalizing on the tragedy to accumulate wealth with which to contract defective and controversial power projects. Meanwhile, the lack of rainfall reduced electricity production at the hydroelectric plants from their installed capacity of 650 megawatts to as low as 200.
To counter the crisis, the government tried various strategies, including signing contracts to lease gas turbines from, among others, the U.S.-based Richmond Development Co. (RDC). The government planned to lease a 100-megawatt power plant, for US$172 million. Construction was planned for December of 2006 at the latest. The contract, unfortunately, was a scam. RDC turned out to be a "mailbox company" that had no record of credentials in the United States. Mohammed Hugue, an economist from Pakistan, and a Tanzanian-born businessman, Mohamed Gire, were behind the project.
Investigations revealed that RDC had links to a number of powerful local interests but had no experience or capacity in the energy sector. Furthermore, there were other allegations that Mohamed Gire had improperly leveraged connections with a number of friends who were ministers and other government elites.
The project approval process was also questionable: big shots wielded undue influence on procurement projects on behalf of RDC, despite a previous evaluation report by a technical team of the Tanzania Electric Supply Co. (TANESCO). The report found that RDC was incapable of executing the project. Other informants linked ministers to the firm. The prime minister, Edward Lowassa, who personally formed the committee to negotiate the power deal with RDC, contrary to the position of the technical team, was at the center of the talks about the controversial project.
Production was to start within 60 days, between Sept. 18 and Nov. 18, 2006. But the deadlines passed with nothing but excuses. While RDC's country manager, Naeem Gire, claimed his firm had difficulty shipping the turbine from North Carolina, TANESCO said RDC was trying, in vain, to raise US$10 million from the local sources to pay for lease and air freight charges.
Guarantee was a problem: RDC had lately transferred the offer to a third party, Dowans Holdings of the United Arab Emirates, for an undisclosed amount. Dowans Holdings, for its part, had managed to pocket US$102 million from the government, despite complaints by the public to stop the deal so as to launch an independent parliamentary committee to carry out investigations.
Opposition legislators pressed for an independent parliamentary committee to investigate widespread allegations of corruption in the deal,within the executive branch. In April 2007, ministers blocked the matter to be discussed in the House and passed the issue to the Prevention and Combating of Corruption Bureau (PCCB), a pro-state anti-corruption agency.
A tug-of-war emerged between PCCB and Parliament. The PCCB criticized the legislators for their demands to probe into the power deal, saying the issue was under its jurisdiction. This assertion was challenged by the speaker of Parliament, but he was unable to bring the topic to the floor — which forced Parliament to drop the whole issue, following the negative reaction from the executive and from a cross-section of legislators from the ruling party, which occupied over 85 percent of the seats. The prime minister is alleged to have summoned parliamentarians from the ruling Chama Cha Mapinduzi (CCM) party and instructed them to abandon the RDC issue for the sake of party solidarity. The PCCB prepared its own investigative report, which conveniently cleared the executive in the scam. PCCB is accountable to the president, and the bureau's director is a presidential appointee. Efforts to make PCCB an entity independent from the executive proved futile in April 2007, when the government opposed the idea.
In July 2007, members of Parliament raised fresh concerns over the scandals in the power sector, including the PCCB report on the RDC deal. Parliament wanted to gain access to other contracts pertaining to other questionable projects. But their efforts hit a snag for the second time as ministers, including the new minister for energy and minerals, Nazir Karamagi, were adamant that the contracts were the exclusive preserve of the executive branch.
Corruption in the energy sector is making life difficult not only for Tanzania's poor, but also for its investment community. Households and industries connected to the national grid face exorbitant tariffs coupled with an unreliable power supply. Viable power sources like coal and other new hydropower sources are neglected. They include the Kiwira coal plant, with the capacity to produce up to 200 megawatts and the Mchuchuma coal plant, with a 400-megawatt capacity. Hopes that the new government would be able to curb corruption are evaporating as disputed projects continue to gain approval from the executive.
Existing Independent Power Projects (IPPs), including Independent Power Tanzania Ltd. (IPTL) and Songas, are but a burden to the taxpayers. IPTL costs Tanzanians dearly. Studies have found IPTL to be more expensive than 16 similar diesel projects in developing countries. In 2005, charges to TANESCO by IPPs averaged US$13 million per month, equivalent to 68 percent of utility revenue. By 2006, charges reached US$17.5 million per month, more than 95 percent of total utility revenue, making it impossible for TANESCO to be a sustainable venture to finance investment as part of improving reliability or expanding electrification.
The power sector drama is just the tip of the iceberg of corruption in Tanzania. The Bank of Tanzania (BoT) is now embroiled in financial scandals. BoT has lately paid some US$30.8 million to a suspicious company, Kagoda Agriculture Ltd. (KAL) which claimed to have been "assigned" to collect debts owed to twelve foreign creditors from Europe, Japan, and the U.S. The money was paid to KAL, which presented deeds of assignment "signed" between Sept. 10 and Nov. 3, 2005. The company managed to raise this huge amount in a very short time after its registration. The foreign creditors have denied that they appointed KAL to collect the funds on their behalf.
Furthermore, a document circulating on Internet message boards fans the flames of the BoT scandals. The unconfirmed report claims that an organized crime network involving Indians, law firms and Tanzanian civil service employees continues to embezzle resources from the central bank. The International Monetary Fund (IMF) has instructed the government to appoint an accredited firm to audit the Bank of Tanzania's accounts. Parliament has demanded a parliamentary probe of the allegations, but the Ministry of Finance has rejected the idea.
The KAL drama and the alleged formation of an organized crime network is just the beginning. Other scandals involve the construction of the Bank of Tanzania Twin Towers, whose overall cost is said to have been so inflated that it now stands at a staggering US$340 million. Experts say one could construct four similar buildings in London or Tokyo with the same amount of money. Other reports of poor governance have emerged in the mining, hunting and timber export industries. Some reports estimate that 96 percent of logging revenue is lost due to corruption.
A lack of checks and balances in the system is partly to blame. Abuse of power continues to thwart efforts to promote sound governance, while Parliament has proven nearly useless in its oversight role and as a check on executive power. Democratic governance is elusive as powerful and self-interested economic actors gain control over the executive branch and wield its powers to their own advantage. Annual auditing of public funds by the Controller and Auditor General, capacity building for the PCCB, awareness campaigns on corruption, donor-supported governance initiatives as well as the formation of the sector Parliamentary Committee are not effective enough.
This is partly due to state capture, a process in which powerful elites from the private sector buy off politicians and bureaucrats to twist laws, budgets, projects, policies and regulatory environments in their own interest. The majority of parliamentarians are little more than rubber-stamp legislators, who approve defective plans from the executive branch with little due diligence or scrutiny. Political patronage dilutes governance-building initiatives.
Thanks to political stability, there have been no riots to date. But unless a comprehensive effort is made across all branches of government to promote sound governance and integrity in government, Tanzania's infrastructure and resource challenges will be here to stay.
Read critical peer review of this report.
Monday, May 5, 2008
"Koun Bonega Crorepati?" in Bangladesh
Global Integrity's Mohammed Syful Islam writes in from Bangladesh with his take on the future of corruption in his government. Corruption is everywhere, he says, but change may be coming.
"Koun Bonega Crorepati?" in Bangladesh
By Mohammed Syful Islam
On "Koun Bonega Crorepati" ("Who Will Be The Owner of Crore of Taka"), a popular game show on India's Zee TV, participants answer general knowledge questions to win one crore taka [one crore is equal to 10 million taka (US$145,571)].
But Bangladeshi politicians -- regardless of name or seniority -- do not need a TV game show to quickly earn several crores of taka. Thanks to a recent anti-corruption drive by the interim government that has revealed hundreds of cases of corruption, the Bangladeshi people now know that politicians and government officials have deceived them and earned crores of taka by abusing power.
Public opinion surveys from 2001 through 2006 show that people perceive Bangladesh as one of the most corrupt countries in the world, much to the denial of political leaders.
"Under the political governments of two ladies-Sheikh Hasina and Begum Khaleda Zia-corruption was made a way of life at all levels, particularly at the corridors of power," says Golam Haider, a senior journalist at The New Nation newspaper . "It was openly patronized and practiced across the table.
Despite the interim government's anti-corruption efforts, corruption still exists; now it's happening under the table. The anti-corruption drive is not running on the right track. Corrupt people cannot fight corruption, Haider says.
Jasmin Rahman, a master's student at a government university, says corruption begins at the school level. "A student who fails in school-level examinations still becomes eligible to sit for examinations under the education board, after she or he or their parents pay some bribe to the school authorities in the name of donation," Rahman says. "What can you expect from a student but corruption in professional life, whose school life is full of corrupt practices?" Rahman says she had to pay a bribe to board officials to gain admission to college.
At the very least, the interim government's anti-corruption drive has exposed several cases of government officials corruptly receiving money and property.
One example is the modern prince of Bangladesh, Tarique Rahman, and his younger brother, Arafat Rahman. The brothers are the sons of former President Ziaur Rahman and former Prime Minister Begum Khaleda Zia, and they reportedly amassed vast resources worth many crores of taka at home and abroad, thanks to power politics and their nexus with corruption, as perceived by many Bangladeshis.
Tarique and Arafat have known corruption most of their lives. In 1977, Ziaur Rahman, a former chief of army staff, became president of Bangladesh by overthrowing Justice Abu Sadat Mohammad Sayem. But in the early hours of May 30, 1981, a group of army officers assassinated Zia, along with six bodyguards and two aides. During the assassination, family members struggled to survive. The then-government allotted a house in Dhaka, the capital, to Zia's wife, Begum Khaleda Zia, and their sons, Tarique and Arafat.
In 1991 and later in 2001, Begum Khaleda Zia's Bangladesh Nationalist Party (BNP) came into power, and her two sons reportedly began committing massive acts of corruption through misuse of their mother's office.
An investigation of Warid Telecom, a cell phone company that entered the Bangladesh market, revealed that Arafat Rahman purchased property in Dubai and put US$2 million in two Hong Kong banks-his kickbacks for assisting Warid Telecom in obtaining a licence, newspaper reports say.
The two brothers also failed to legalize their undeclared and questionable 1.68 crore taka (US$244,559) under an amnesty by paying 44 lakh taka (US$0.64) as a fine. After the National Board of Revenue (NBR) rejected their plea, it began the process of filing a tax evasion case against the two brothers under the Tax Ordinance of 1984. Their mother, Khaleda Zia, and a former finance minister in her cabinet, M Saifur Rahman, also failed to what is popularly called "whiten their black (untaxed) money" of 1 crore taka (US$145,571) and 1.30 crore taka (US$189,242) respectively.
Tarique Rahman is now in prison on several charges, while Arafat Rahman is free after being interrogated by the army-led joint forces. In his wealth statement to the Anti-Corruption Commission, Tarique Rahman said he owns a house in the capital, 2.01 acres of land worth 345,000 taka (US$5,022) in Bogra, savings certificates worth 20,000 taka (US$291) and 134,000 taka (US$1,951) in different banks, shares of different companies worth 7,170,000 taka (US$104,374) and five tolas (US 58 grams) of gold. His wife and daughter own assets valued around 1.40 crore taka (US$203,799). The common people believe that is only a small portion of what they actually own.
On July 16, 2007, also under the pretext of the war against corruption, police arrested Sheikh Hasina Wazed, former prime minister and president of the Bangladesh Awami League. Hasina Wazed—one of the two key leaders of the two main political parties-faces extortion charges. She is accused of extorting about 3 crore taka (US$436,713) from a businessman in return for allowing his company to set up a power plant during her tenure between 1996 and 2001. She is being held in a special jail as she awaits prosecution.
Several ministers of the Khaleda Zia cabinet have been sentenced to various prison terms in the last few weeks, while most of the senior ministers and politicians of the country are awaiting verdicts in corruption cases. The present interim government now detains hundreds of politicians, former ministers, government officials and businessmen on different corruption charges.
Amanullah Aman, a former state minister, was handed 10 years of rigorous imprisonment and three years of simple imprisonment and asked to pay a fine of 10 lakh taka (US$0.15) in a corruption case for earning huge money through illegal means. His wife, Sabera Aman, also was sentenced to suffer three years in jail, as the court found her guilty of assisting her husband in unlawfully obtaining money.
Another official, Mir Mohammad Nasiruddin, the ex-junior minister for civil aviation and tourism, was sentenced to suffer 13 years in prison for committing rampant corruption. The minister was found guilty of amassing wealth through misuse of power and illegal means. In the same case, his son, barrister Mir Mohammad Helaluddin, was given three years of imprisonment.
In yet another judgement, the court sentenced former lawmaker Wadud Bhuian to 20 years in jail for acquiring land and property worth 6 crore taka (US$873,426) through corruption and abuse of power. The court also ordered Bhuiyan to deposit his illegally obtained assets with the national exchequer.
Considering these examples, it's no wonder that Bangladeshi people widely believe that files in government offices never move from one table to another without fuel (a bribe or speed money). Through this means, scores of class-III and class-IV government employees "earn" crores of taka. For example, the anti-crime division found a Land Ministry petty officer possessing three multi-story buildings in Dhaka and huge tracts of land throughout the country. He obtained this wealth by misusing power and maintaining close relationships with ministers and political bigwigs.
There are many examples in this impoverished country of government leaders living as tenants in the houses of their class-III or class-IV employee subordinates.
Police unearthed 1 crore taka (US$145,571) in cash from the house of the chief forest officer, breaking all records of corruption. This government official earned a salary of only 20,000 taka (US$291) a month. The joint forces later found more than 1,000 acres of government land occupied by him and his family members. His wife changed cars twice a year and possessed 400 bhoris (US 4,000 grams) of gold ornaments.
Recently, I have been following the story of a corrupt businessman who has a long history of evading taxes and power tariffs. Customs authorities suspended his license for paying a fine with a fake treasury note. Some of my journalist colleagues, who benefit from the unscrupulous businessman, are pressuring me to not publish reports against him.
Yes corruption still exists, but since the interim government has declared a crusade against it, the situation in Bangladesh is beginning to change. People are very hopeful that the country will be able to break free from corruption's grip.
More local reporting on Bangladesh in the Global Integrity Report: Bangladesh
Thursday, April 10, 2008
The Ugly Death of an Empire
Kalkali El-Hadi tells the story of the fall of Algeria's largest private bank, and the corporate shell game that hid the truth of its shaky finances from its investors, regulators and its customers. In the end, it was all too good to be true.
The Ugly Death of an Empire
By Kalkali El-Hadi
In early 2007, Algeria opened its "trial of the century," a three-month spectacle that followed the biggest financial corruption scandal in the history of the country: the stunning collapse of Khalifa Bank, the country's largest private bank.
The trial was the result of a three-year investigation that ensnared 4,000 people. Eventually 118 people, including executives, were arrested, but the man at the top, Abdelmoumen Rafik El Khalifa, was not one of them. He fled to Britain in 2003 when the scandal broke. The Algerian court tried him in absentia, along with 103 others. Khalifa and dozens of others were convicted. Khalifa was sentenced to life in prison and in late 2007 was awaiting extradition to Algeria.
The Khalifa trial came at a time when President Abdelaziz Bouteflika was trying to crack down on corruption. A tough law enacted in February 2006 provides that anyone charged with corruption, regardless of their official rank, would lose the traditional immunity from prosecution enjoyed by public officials.
Despite such measures, corruption remains a basic part of life for Algerians. Financial corruption remains almost daily front-page news in the Algerian press, dealing blows to the government efforts. Among the scandals:
* The Agricultural and Rural Development Bank (BADR — Banque de l'Agriculture et du Développement Rural), a state bank that reaches into many sectors of Algeria's economy, misappropriated more than two billion dinars (US$30 million) in a series of banking scams.
* In the wilaya (province) of El Tarf, a financial scandal ended with El Tarf's governor, Djillali Arar, in prison.
These affairs had so shaken the Algerian society that corruption had become the key domestic issue. But none of the scandals — indeed, no corruption scandal since the country's independence in 1962 — was as big as the Khalifa affair.
The trial opened on Jan. 7, 2007, in a court in Blida, 30 miles west of Algiers. The 104 defendants were accused of more than 30 serious charges, among them theft, fraud, forging official and bank documents, bribery and abuse of power. However, the star defendant, the Khalifa business empire's founder Abdelmoumen Rafik Khalifa, was in Britain, jailed on immigration and money laundering charges. An extradition agreement between the two countries was worked out just too late for Khalifa to be sent back to face justice in Algeria. Six other key defendants were also tried in absentia, after they fled to various European countries.
Khalifa, 40, is the son of a Cabinet minister in the administration of Algeria's first president, Ahmed Ben Bella. Rafik Khalifa worked as a small-time chemist in Cheraga district before rapidly and mysteriously ascending to lead an empire of 10 companies. Between 1998 and 2003, Khalifa's companies hired some 20,000 employees; the collapsed Khalifa Bank - the only Khalifa unit charged with wrongdoing — had 7,000 workers. It was a meteoric rise, and in hindsight, it was too good to be true.
The scandal began in 2003 with the arrest of three Khalifa Bank executives who were allegedly trying to smuggle two million euros (US$2.9 million) in a suitcase through Houari Boumediene Airport in Algiers. By June 2003, Khalifa Bank, the largest in Algeria, was bankrupt.
The collapse of Khalifa tore a hole in the public treasury. Hundred of thousands of Algerians lost their Khalifa accounts — accounts which were offering interest rates of up to 17 percent before the bank's seemingly inevitable collapse. The government has insured the accounts, but only up to 9,200 euro (US$13,495). The majority of Khalifa Bank accounts were held by public institutions and state-owned companies. Thus the financial collapse reached not only Khalifa Bank customers, but all Algerian taxpayers.
The money is believed to have been siphoned from the Khalifa Bank accounts to fund the crumbling Khalifa business empire, which a leaked French intellegence report estimated was losing 500 million euro (US$733 million) a year. After suspicious Algerian regulators restricted money transfers from Khalifa Bank, Khalifa executives were left with less reliable methods of illegally moving money to their European subsidiaries, setting the stage for the dramatic airport arrest.
In April 2003, the authorities began their investigation. Of the 4,000 people who were investigated in some way, only 104 were officially charged. Two of those defendants — Abdelwaheb Keramane, former governor of Khalifa Bank, and his brother, Abdenour Keramane, former Algerian Industry minister — refused to stand before the court in the trial, saying the charges against them were politically motivated.
Even the lesser defendants in the case had relatively high profiles. Among them were executives of state-owned real estate agencies, general and national secretaries in the Algerian general labor union, officials from the national welfare office, employment-benefit and national-security organizations and celebrities from the arts and sports worlds.
The testimony was star-studded, with a parade of previous and acting ministers in the Algerian government called to the stand. The most prominent witnesses were Mourad Meddilsi, former Financial minister and the acting Foreign Affairs minister and Karim Djoudi, acting Financial minister. Two high-power witnesses who were called by the court but did not testify were former Housing Minister Abdelmadjid Taboune and Aboudoujora Sultani, leader of the political party Movement of Society for Peace.
After more than three months of very complicated proceedings, the court issued a sentence of life in prison for Khalifa and sentences ranging from one year to 20 years for others.
Afterward, the court was criticized for neglecting to charge enough of the key players in the construction of Khalifa's financial empire — dubbed the "big fish" by the Algerian press. Among those critics was Algerian lawyer Saad Djebbar. "It is certain that big fishes escaped the net of Algerian justice," he said. "Consequently, these sentences aren't the end in this affair. Other prominent people were behind Khalifa's cartoon empire, among them generals in the intelligence community."
At the same time, relatives of the defendants expressed their disappointment in the sentences and in the lack of transparency of the trial, drawing a parallel to the trial of deposed Iraqi President Saddam Hussein. "Our relatives were tried quickly and in a less-than-open way. We don't know about the progress of the trial. In this way, ours will go... as was done for President Saddam." One of the defense attorneys criticized the court for breaking judicial procedure laws by opening the case in the Blida court and by limiting the window for appeal to three months.
The Khalifa trial became known as the "trial of the century" in Algeria. Considering the results, it has been a real test for the Algerian justice system and the rule of law, as well as a revealing look at the corruption reform begun four years ago.
Read more about Algeria...
Tuesday, April 1, 2008
Reporter's Notebook: Vanuatu
By Bob Makin
Vanuatu is a very small country (pop. 200,000), and the capital city is tiny (30,000). Yet bad news travels as fast as the trade wind — which frequently carries with it the smell of corruption.
In 2006, a resident of an area adjacent to the spring supplying water to the capital, Port Vila, noticed that a farmer down below had constructed a dwelling of some permanence. Believing this building to be inside an area protected by law to prevent contamination of the city's drinking water, the resident made further inquiries. Indeed, the farmer had built where no structure was allowed, and where he had permission to farm only crops unlikely to present a hazard to the aquifer.
The observant resident notified the authorities, but he found out that the matter was not all that straightforward...
Read More at the Global Integrity Report...
Friday, March 14, 2008
Reporter's Notebook: Russia
By Galina Stolyarova
One day in April 2007, human rights lawyer Olga Tseitlina got a sudden call to a St. Petersburg police station. She had been asked to represent a client detained and fined for allegedly swearing in public. She soon discovered that police had used similar evidence against nearly 100 others.
They had all been rounded up during an April 15 demonstration called by an opposition group, The Other Russia Coalition. In theory, the right to protest is guaranteed by the Constitution of the Russian Federation, but Tseitlina alleges that Russian police use any means they have to suppress such events.
"One police statement ordering a person's detention for swearing in a public place may not look suspicious. But if we collect more than 50 identical statements… then it becomes clear that the evidence was contrived," Tseitlina said.
Read more in the Global Integrity Report: Russia...
Image: Street protest in Moscow, April 2007, by Dave Pyle.
Thursday, February 28, 2008
Reporter's Notebook: Turkey
By Burak Bekdil
Winston Churchill once described Russia as "a riddle wrapped in mystery inside an enigma." Today, that description is perfectly applicable to 21st century Turkey. One of Europe's poorest economies — with the Old Continent's youngest and second-largest population — Turkey has a unique combination of demographics, politics and economics. Annual population growth is 1.5 percent; crime rates are around 40 percent and rising; 80 percent evade their taxes; a quarter of households use stolen electricity; half of the economy is "underground" and corruption is endemic. Yet, few Turks complain.
When Recep Tayyip Erdogan launched his Justice and Development Party (AKP) in 2002, parliamentary elections were only a few months away, and he based his election campaign on solid pledges to fight corruption. In November 2002, the AKP won a landslide election victory, earning an unusual two-thirds majority in Turkey's 550-seat Parliament, despite getting only one-third of the national vote. The discrepancy is a quirk of Turkey's peculiar election laws, which include a 10 percent national threshold for parliamentary representation.
But even from the AKP's early days in power, there were hints that the party's pre-election commitment to fight corruption came with no genuine desire to fulfill it...
Read More at the Global Integrity Report: Turkey...
Monday, February 25, 2008
Reporter's Notebook: Costa Rica
By Giannina Segnini
Early in the morning of July 12, 2005, nurse Patricia Fallas sacrificed her life while guiding dozens of patients to safety as flames engulfed the Calderon Guardia Hospital. The appalling state of the building — the lack of emergency devices and signs — was among the leading reasons for the fire that caused the death of 16 patients and three nurses, who heroically struggled to save the lives of those for which they were caring.
Days after the tragedy, officials from the Costa Rican Social Security Institution (CCSS—Caja Costarricense de Seguro Social) said that there had been insufficient funds to pay for the hospital's necessary safety renovations, which several studies had labeled urgent during the past few decades. The story of this fire shows the direct effect of corruption on the life of Costa Ricans.
Read More in the Global Integrity Report: Costa Rica...
Thursday, February 21, 2008
Reporter's Notebook: Malawi
By Suzanne Marmion
If you thought your old school desk was uncomfortable, consider the classroom in Malawi just outside the commercial capital of Blantyre. The "schoolhouse" is simply a tree. Beneath its sheltering branches, children have arranged a circle of rocks. Some stones are barely bigger than a fist. Imagine teetering on one of those through an arithmetic lesson.
Here, in one of the poorest countries in the world, children often learn in crumbling mud-and-grass structures, or as in this case, no structure at all. Yet just behind the scattering of "chair" stones, there stands a new school building built of tidy red bricks. Inside, rows of sanded wooden desks and chairs face an empty blackboard. A heavy padlock on the door keeps the children and their teachers locked out.
Read more in the Global Integrity Report: Malawi...
Wednesday, February 13, 2008
Reporter's Notebook: China
"Anytime people come across the trouble," my father, a peasant in Anhui province, said, "the first thing they have to consider is not 'Am I right?' but 'Do I know someone who is in charge? How much money must I spend to avoid the unfair treatment?'"
Read more in the Global Integrity Report...
Friday, February 1, 2008
Reporter's Notebook: Canada
By Lisa Fitterman
Until early this year, Jean Lafleur was a suave ad man on the lam, living it up in Belize. A Montreal businessman who had his own company and socialized with Canada's top Liberal Party movers and shakers, he was renting a luxurious two-bedroom home set amid bougainvillea and hibiscus bushes near the beach. He owned a 22-foot-long motorboat that was moored nearby, and he had a habit of spending up to 600 Canadian dollars (US$567) a week at a local gourmet shop on fine wines and cheeses. He loved to travel, taking off on occasion for places as far-flung as Italy, Brazil, France and Mexico.
Lafleur's good life abruptly ended just before Easter, when the Royal Canadian Mounted Police issued an international warrant for his arrest on charges related to nearly 1.6 million Canadian dollars (US$1.51 million) he received from the federal government as payment for work he had never done. Rather than be chased down, he decided to come home of his own volition. Sporting a deep tan and handcuffs, he was ignominiously escorted into the prisoner's dock of a Montreal courtroom and remanded into custody.
Read the rest here...