Sunanda K Datta-Ray: Transnational corruption

WHERE MONEY TALKS

While Kunwar Natwar Singh's innocence of complicity in Iraqgate Two must be assumed until disproved, the furore is a reminder that parliamentary democracy would languish if opposition parties cannot go to town on scandals that do not cease to be exciting because they are commonplace. Perhaps that is why the law does not come down more heavily on corruption. That is ultimately the only cure but it would rob politics of fun, as in Singapore.

It's another paradox that if globalisation means more development projects, it also implies more hands in the till. Indian friends of the US, which naturally has the lion's share of contracts, will hotly deny the suggestion, arguing that the 1977 Foreign Corrupt Practices Act forces Americans to be honest. Not so. But no matter how squeaky clean they might be at home "" which is not very credible after Enron and Arthur Anderson "" the World Bank believes it's a misconception that "transnational bribery laws ... have led to higher standards of probity in overseas public procurement." Apparently, one-third of US companies that do business in former Soviet republics hand out commissions. According to the same survey, 42 per cent of American companies overall pay bribes.

Of course, expatriate CEOs do not slip the cash to contacts in plain envelopes. They engage middlemen or entrust the dirty work to joint venture partners and foreign subsidiaries. Transparency International found that if anyone offers more inducements than the Americans, it's the Italians. French, Spanish, German and British companies offer far less. Where, one wonders, does Sweden figure?

The controversies surrounding Dabhol have to be viewed in this context of agents. So, too, Pakistani allegations that Hubco added a cool $400 million to the bill for the power plant it built. Indonesians complained that power project costs were inflated by an average of 37 per cent in the Suharto era when, moreover, tenders were not competitive. As a result, one of south-east Asia's least developed countries was saddled with one of the highest electricity bills.

This is the most pernicious outcome. Moral condemnation alone does not usually have a practical impact, but a reaction becomes inevitable when the poor have to pay through the nose for the greed of the rich and the unscrupulous who factor illicit disbursements into official costs. Kickbacks also often add substantially to the indebtedness of developing countries.

Authorities like the United Kingdom Export Credits Guarantee Department try to prevent such abuses but political hurdles can be insuperable. Malaysia's Pergau Dam was a case in point. Whether or not Mahathir Mohamed took a cut, as the British papers reported and he denied vigorously, the Thatcherite government's £234 million aid was not charity. It was to enable Malaysia to buy arms from British firms that were known to be Conservative party donors. One of them, Trafalgar House, gave more than half a million pounds between 1979 and 1993. The £100-billion Al-Yamamah arms deals that Margaret Thatcher signed in 1985 and 1988 resulted in a spectacular £30-million bonanza for the Tories.

Iraqgate One was similarly a mix of politics and finance. Involving Ronald Reagan, George Bush Sr, James Baker and Donald Rumsfeld, it took place between 1980 and 1994 but was vehemently denied. Only after Bill Clinton became president did the justice department indict an American firm, Teledyne Industries, for allegedly selling cluster bombs to Chile's Carlos Cardoen to be sold in turn to Saddam Hussein. Such deals may not be financial corruption in the sense of Iraqgate Two, as detailed in the Volcker report, but just as effectively destroy public confidence in governments.

These episodes expose the nexus between giver and recipient, rich and poor, North and South. "Politicians and public officials from the world's leading industrial countries are ignoring the rot within their own backyards and the criminal bribe-paying activities of the multinational firms headquartered in their countries," lamented Transparency International's chairman, Peter Eigin. The irony is that, in 1997, 34 countries, including members of the Organisation for Economic Cooperation and Development (OECD), signed a major international convention on combating bribery. But 70 per cent of OECD signatories were believed to have given bribes in 400 international contracts worth $200 billion between 1994 and 2001.

Transparency International Kenya's John Gethongo rightly believes the answer lies in prosecution and punishment. "Until people are brought before the courts, the OECD convention will not make a difference to the developing world." One is tempted to argue otherwise, citing the venerable Chanakya's belief that it's easier for a man with honey on his tongue not to taste of its sweetness than for an official not to keep back some of the money that trickles through his fingers.

But even if the old Adam can't altogether be suppressed, strict laws, impartial implementation and deterrent punishments can keep him in check.

Only because the Singapore system is so exemplary that Lee Kuan Yew can afford to frankly admit that he can accept a discount "" for a stent, a Mercedes or a flat "" without compromising his integrity because the seller of the discounted goods benefits from the publicity.